NEW YORK — BP's multibillion-dollar settlement deal with people and businesses harmed by its 2010 oil spill removes some uncertainty about the potential financial damages it faces. It also may help the company restore its all-important relationship with the federal government.
Although the company still has a few major legal and financial hurdles to overcome nearly two years after the spill in the Gulf of Mexico, the tentative settlement with plaintiff's lawyers sends important signals to investors, Gulf Coast states and federal regulators.
Where once it seemed conceivable that BP's spill-related costs could reach $200 billion, lawyers and industry analysts now say that figure will likely be less than a quarter that amount.
Another important element of the settlement deal — which BP estimates will cost $7.8 billion — is that it shows a willingness to pay a huge sum in order to resolve issues related to the spill. That may improve its standing with the federal government, which controls access to oil reserves that are critically important to BP's future.
Kenneth Feinberg, who has administered BP's compensation fund, said the deal "avoids a lengthy, complex trial and uncertain appeals."
Feinberg, whose fund has evaluated more than 1 million claims from nearly 600,000 people and businesses, has paid out $6.1 billion to more than 225,000 of them, the New York Times reported.
The settlement agreement announced Friday would apply to tens of thousands of victims across the Gulf Coast but does not resolve lawsuits with federal, state and local governments or address environmental damage. Those other claims could total up to $25 billion.
The settlement with the victims still needs approval of a federal court in New Orleans overseeing the case.
BP expects the settlement to be paid out of the remainder of a trust that the company had established to pay these types of claims. The trust now has $9.5 billion in assets left out of an initial $20 billion. Whatever remains in the trust after claims are paid out would return to BP. BP, which is based in London, says it will not have to increase the total of $37.2 billion it has set aside to fund the trust and pay for other spill costs.
The settlement does not fully resolve the claims by businesses and people covered by the settlement or put a final cost on them. The settlement creates a new fund that will pay all claims, but the total amount is not capped. It could ultimately add up to more or less than what BP estimates.
Also, individual victims are not required to accept it and could choose to bring separate cases.
BP is facing Clean Water Act fines of $5.4 billion to $21.1 billion, depending on whether BP is judged to have been grossly negligent in its design, construction and operation of the well.
Eric Schaeffer, who investigated oil spills for the Environmental Protection Agency as a former head of civil enforcement, said a settlement could reduce those charges by half.
The proposed settlement could also help BP work with the government in the future as it drills for oil in the federally controlled waters in the Gulf, one of the most important drilling regions in the world for BP. It's especially important for BP because its reputation was already tarnished from other recent environmental disasters, including a Texas City refinery fire in 2005 that killed 15 people and pipeline spills in 2006, 2009 and 2011 in Alaska.