BP 2015 Annual Report Download - page 46

Financial update
1
6
2
3
4
5
■
2. Environmental 8.6■
1. Spill response 14.3
■ 3. Litigation and claimsb
■ 4. Clean Water Act penalties
■ 5. Other fines 4.5
a The cumulative income statement charge does not include
amounts that BP considers are not possible to measure
reliably at this time.
b The litigation and claims cost is net of recoveries of $5.7 billion.
Analysis of cumulative $55.5 billiona charge to the
income statement
($ billion)
22.6
4.1
■ 6. Functional costs 1.4
Total55.5
The group income statement for 2015 includes a pre-tax charge of
$12.0 billion in relation to the incident. The charge for the year reflects the
amounts provided for the proposed Consent Decree; the Settlement
Agreement with the five Gulf states and local government claims as
described above; additional provisions made for business economic loss
claims under the PSC settlement and other items. As at 31 December
2015, the total cumulative charges recognized to date amounted to $55.5
billion. The total amounts that will ultimately be paid by BP in relation to all
the obligations relating to the incident are subject to uncertainty, and the
ultimate exposure and cost to BP and the timing of such costs will be
dependent on many factors, including in relation to any new information or
future developments. These could have a material impact on our
consolidated financial position, results and cash flows.
BP has provided for spill response costs, environmental expenditure,
litigation and claims and Clean Water Act penalties that can be measured
reliably. There continues to be uncertainty regarding the extent and timing
of the remaining costs and liabilities not covered by the proposed Consent
Decree and Settlement Agreement, including:
• Claims asserted in civil litigation, including any further litigation by parties
excluded from, or parties who opted out of, the PSC settlement, and the
private securities litigation pending in MDL 2185.
• The cost of business economic loss claims under the PSC settlement
not yet processed or processed but not yet paid (except where an
eligibility notice has been issued before the end of the month following
the balance sheet date and is not subject to appeal by BP within the
claims facility).
• Any obligation that may arise from securities-related litigation.
Payments made out of the $20-billion Deepwater Horizon Oil Spill Trust
(the Trust) during 2015 totalled $3.2 billion. As at 31 December 2015, the
aggregate cash balances in the Trust and the associated qualified
settlement funds amounted to $1.4 billion, nearly all of which was
committed to specific purposes including the seafood compensation fund
and natural resource damage early restoration projects. As of January
2016, payments in respect of claims and other costs previously funded
from the Trust are now being made by BP.
More details regarding the impacts and uncertainties relating to the
Gulf of Mexico oil spill can be found in Risk factors on page 53, Legal
proceedings on page 237 and Financial statements – Note 2.
Plaintiffs’ Steering Committee settlements
The Plaintiffs’ Steering Committee (PSC) was established to act on
behalf of individual and business plaintiffs in the multi-district litigation
proceedings in federal court in New Orleans (MDL 2179). In 2012 BP
reached settlements to resolve the substantial majority of legitimate
individual and business claims and medical claims stemming from the
incident. Approximately $2.3 billion was paid out under the PSC
settlements during 2015. Claims continue to be assessed and paid.
The medical benefits class action settlement provides for claims to be paid
to qualifying class members. The deadline for submitting claims under the
settlement was 12 February 2015.
Securities litigation and other legal proceedings
The multi-district litigation proceedings pending in federal court in
Houston (MDL 2185), including a purported class action on behalf of
purchasers of American depositary shares under US federal securities
law, are continuing. A jury trial is scheduled to begin in July 2016.
In MDL 2179, claims by individuals and businesses that opted out of the
PSC settlements or whose claims were excluded from them, including
claims for recovery of losses allegedly resulting from the 2010 federal
deepwater drilling moratoria and the related permitting processes, are
continuing.
BP is subject to additional legal proceedings in connection with the
incident. For more information see Legal proceedings on page 237.
Environmental restoration
In April 2011 BP committed to provide $1 billion in early restoration
funding to expedite recovery of natural resources injured as a result
of the incident. By the end of 2015 BP had provided approximately $762
million to support restoration projects, with the remaining $238 million
expected to be funded in 2016. The federal and state settlements referred
to above include more than $7 billion to resolve all natural resource damage
claims, which is in addition to this $1 billion.
In May 2010 BP committed $500 million over 10 years to fund independent
scientific research through the Gulf of Mexico Research Initiative. BP had
contributed $278 million to the programme by the end of 2015.
See bp.com/gulfofmexico for further information on environmental and
economic restoration.
Process safety and ethics monitors
Two independent monitors – an ethics monitor and a process safety
monitor – were appointed under the terms of the criminal plea agreement
BP reached with the US government in 2012. Under the terms of the
agreement, BP is taking additional actions to further enhance ethics and
compliance and the safety of its drilling operations in the Gulf of Mexico.
The ethics monitor delivered an initial report early in 2015. He delivered a
second report later in the year under a separate administrative agreement
with the US Environmental Protection Agency. Recommendations from
the two reports largely relate to BP’s ethics and compliance programme
and code of conduct, including its implementation and enforcement. The
recommendations have been agreed and BP is now in the process of
implementing them. The ethics monitor is meanwhile conducting a
follow-up review as the next phase of his engagement.
The process safety monitor reviews and provides recommendations
concerning BPXP’s process safety and risk management procedures for
deepwater drilling in the Gulf of Mexico. BPXP is the BP group company
that conducts exploration and production operations in the Gulf of Mexico.
The process safety monitor also submitted a report in 2015. Following
discussions between BPXP, the process safety monitor and the US
Department of Justice, the recommendations have now been finalized and
implementation by BPXP is underway.
BP Annual Report and Form 20-F 201542