Transocean is to pay US $1.4 Bn to resolve certain outstanding civil and potential criminal claims in connection with the 2010 Deepwater Horizon disaster in the Gulf of Mexico.

The Switzerland-based rig contractor company is to plead guilty to one misdemeanour violation of the Clean Water Act for negligent discharge of oil into the GoM and pay $1.4 Bn in fines, recoveries and penalties, excluding interest.

The company confirmed it had reached agreement with the U.S. Department of Justice on the Deepwater Horizon claims, and said this resolution would result in the Department of Justice concluding its criminal investigation of Transocean and settle its claims for civil penalties against the company relating to the Macondo oil spill.

Transocean said it intends to satisfy its payment obligations over a period of 5 years, using cash on hand and cash flow from operations. At 30 September, 2012, Transocean had accrued an estimated loss contingency of $1.5 Bn associated with claims made by the Department of Justice.

In more detail, the misdemeanour violation of the CWA pertains to well monitoring in connection with specific operations during the temporary abandonment procedure on 20 April, 2010. Pursuant to the agreement, Transocean will pay a fine in the amount of $100m within 60 days of this agreement receiving U.S. federal court approval. Transocean will also be subject to a statutory-maximum term of 5 years of probation.

Additionally it will pay $150m to the National Academy of Sciences (NAS) over a 5-year period, and $150m to the National Fish and Wildlife Foundation (NFWF) over a 3-year period. The funds paid to the NAS will be for the purposes of oil spill prevention and response in the GoM; funds paid to the NFWF will be directed to natural resource restoration projects and coastal habitat restoration, including restoration of the barrier islands off the coast of Louisiana and diversion projects on the Mississippi and Atchafalaya Rivers.

To address the government’s pending civil claims, Transocean agreed to pay $1 Bn in CWA civil penalties over a period of 3 years. Additionally it has agreed to implement certain measures to prevent a recurrence of an uncontrolled discharge of hydrocarbons.

Transocean has agreed to consult with the United States in preparing a performance plan for these improvement measures, which must be submitted for the government’s approval within 120 days of this agreement taking effect.

Any potential claims associated with the Natural Resources Damage Assessment (NRDA) process are excluded from the agreement with the Department of Justice. However, the district court previously held that Transocean is not liable under the Oil Pollution Act for damages caused by subsurface discharge from the Macondo well. Assuming that this ruling is upheld on appeal, Transocean’s NRDA liability would be limited to any such damages arising from the above-surface discharge.

The Department of Justice has agreed that it will not pursue further prosecution of Transocean and certain of its subsidiaries for any conduct regarding any matters under investigation by the Deepwater Horizon Task Force relating to or arising out of the Macondo well blowout, explosion, spill or response. Transocean has agreed to continue to operate with the Deepwater Horizon Task Force in any ongoing investigation related to or arising from the accident.

Pursuant to the agreements, Transocean will pay the fines, penalties and recoveries over a 5-year period according to the following schedule:

-2013 - payments totalling $560m
-2014 - payments totalling $460m
-2015 - payments totalling $260m
-2016 - payments totalling $60m
-2017 - payments totalling $60m.

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