More than five years after the explosion of its Gulf of Mexico Macondo well that killed 11 workers and dumped millions of barrels of crude oil into the sea, BP PLC (NYSE: BP) announced Thursday morning that it had agreed in principle to settle all federal and state legal claims related to the disaster for a total of up to $18.7 billion. As of the end of April, the company had booked charges of nearly $44 billion for damages caused by the explosion.

The company said that the impact of the agreements will increase its cumulative pretax charges by around $10 billion. The amount of charges taken in the second quarter also will include unspecified charges for “additional business economic loss determinations.”

Here is the breakdown of payments:

• A civil penalty of $5.5 billion related to violations of the Clean Water Act, payable over 15 years
• A natural resources damages payment of $7.1 billion to the federal government and five Gulf states — Alabama, Florida, Louisiana, Mississippi and Texas — also payable over 15 years
• A total of $4.9 billion over a period of 18 years to settle other claims from the five Gulf states
• Up to $1 billion to resolve claims from more than 400 local governments

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While this is a truckload of money, BP faced a possible fine of up to $18 billion for violations of the Clean Water Act alone. Had the company been found grossly negligent and had a court accepted the government estimate of 4.2 million barrels spilled, BP could have paid $4,300 per barrel. As it is, the company is paying about $1,300 per barrel, much closer to the lower limit of the Clean Water Act’s $1,100 per barrel negligence penalty than to the $4,300 per barrel maximum. In January of this year, a federal judge set the total number of barrels spilled at 3.19 million, which could have led to a penalty payment of $13.7 billion under the Clean Water Act.

BP’s chief financial officer said:

For BP this will provide certainty with respect to BP’s financial obligations for the matters settled, particularly with the ability to spread payments smoothly over many years.

The impact of the settlement on our balance sheet and cashflow will be manageable and enables BP to continue to invest in and grow its business, underpinned by a resilient and robust financial framework.

The agreements still need to be made definitive and issued as a consent decree that will be subject to public comment and final judicial approval. But for now, BP has survived, and there were many observers who didn’t think that would ever happen.

BP’s stock traded up 5% at $41.26 at its high for the day earlier, and now trades up about 4.9% at $41.19, in a 52-week range of $34.88 to $53.24.

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