BP 2015 Annual Report Download - page 123

2. Significant event – Gulf of Mexico oil spill – continued
Other payables
BP reached an agreement with the US government in 2012, which was approved by the court in 2013, to resolve all federal criminal claims arising from
the incident. At 31 December 2015, $2,432 million remains in Other payables in relation to this agreement, of which $530 million falls due in 2016. In
addition, Other payables at 31 December 2015 includes the remaining $219 million for BP’s commitment to fund the Gulf of Mexico Research
Initiative, which is a 10-year research programme to study the impact of the incident on the marine and shoreline environment of the Gulf of Mexico.
Provisions and contingent liabilities
Provisions
BP has recorded provisions relating to the Gulf of Mexico oil spill in relation to environmental expenditure (including spill response costs), litigation and
claims, and Clean Water Act penalties that can be measured reliably at this time.
Movements in each class of provision during the year and cumulatively since the incident are presented in the tables below.
$ million
2015
Environmental
Litigation
and claims
Clean Water
Act Total
At 1 January 1,141 3,954 3,510 8,605
Increase in provision 5,393 5,832 661 11,886
Unwinding of discount 94 50 68 212
Change in discount rate (149) (74) (110) (333)
Reclassified to other payables (459) (125) – (584)
Utilization – paid by BP (23) (234) – (257)
– paid by the trust fund (78) (2,944) – (3,022)
At 31 December 5,919 6,459 4,129 16,507
Of which – current 227 2,849 – 3,076
– non-current 5,692 3,610 4,129 13,431
$ million
Cumulative since the incident
Environmental
Litigation
and claims
Clean Water
Act Total
Net increase in provision 19,992 32,427 4,171 56,590
Unwinding of discount 107 56 68 231
Change in discount rate (130) (74) (110) (314)
Reclassified to other payables (459) (4,408) – (4,867)
Utilization – paid by BP (11,710) (4,314) – (16,024)
– paid by the trust fund (1,881) (17,228) – (19,109)
At 31 December 2015 5,919 6,459 4,129 16,507
Environmental
The environmental provision at 31 December 2015 includes amounts payable for natural resource damage costs under the proposed Consent Decree.
These amounts are payable in instalments over 16 years commencing one year after the court approves the Consent Decree; the majority of the
unpaid balance of this natural resource damages settlement accrues interest at a fixed rate. During 2011, BP entered into a framework agreement with
natural resource trustees for the United States and five Gulf states, providing for $1 billion to be spent on early restoration projects to address natural
resource injuries resulting from the oil spill, to be funded from the $20-billion trust fund. Remaining amounts payable under this framework agreement,
that are not yet allocated to specific projects, are also included in environmental provisions.
Litigation and claims
The litigation and claims provision includes amounts that can be estimated reliably for the future cost of settling claims by individuals and businesses
for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources (‘Individual and
Business Claims’), and amounts provided under the Agreements in relation to state claims that have not yet been paid. Claims administration costs and
legal costs have also been provided for.
Litigation and claims – PSC settlement
The Economic and Property Damages Settlement Agreement (EPD Settlement Agreement) with the PSC provides for a court-supervised settlement
programme, the Deepwater Horizon Court Supervised Settlement Program (DHCSSP), which commenced operation on 4 June 2012. A separate
claims administrator has been appointed to pay medical claims and to implement other aspects of the Medical Benefits Class Action Settlement. For
further information on the PSC settlements, see Legal proceedings on page 239. BP has provided for its best estimate of the cost associated with the
PSC settlement agreements with the exception of the cost of business economic loss claims, which are provided for where an eligibility notice had
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.
Management believes that no reliable estimate can currently be made of any business economic loss claims not yet processed or processed but not
yet paid, except where an eligibility notice had 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.
The submission deadline for business economic loss claims passed on 8 June 2015; no further claims may be submitted. A significant number of
business economic loss claims have been received but have not yet been processed and it is not possible to quantify the total value of the claims.
A revised policy for the matching of revenue and expenses for business economic loss claims was introduced in May 2014 and, of the claims
assessable under the revised policy, the majority have not yet been determined at this time. Uncertainties regarding the proper application of the
revised policy to particular claims and categories of claims continue to arise as the claims administrator has applied the revised policy. Only a small
proportion of claim determinations have been made under some of the specialized frameworks that have been put in place for particular industries,
namely construction, agriculture, professional services and education, and so determinations to date may not be representative of the total population
BP Annual Report and Form 20-F 2015 119
Financial statements