The Oilers would have sent Dustin Penner, Andrew Cogliano and Ladislav Smid to the Senators in exchange for Heatley.
According to the Ottawa Sun, who first reported the news on Tuesday, representatives for Heatley and Senators owner Eugene Melnyk have finally come to a settlement.
Exact terms of the agreement have not been released, but two separate league sources told the Sun a deal has been reached and paperwork had been wrapped up in the last few days.
The Senators, Melnyk specifically, were upset over paying Heatley $14 million over 12 months after he signed a six-year extension less than a year before requesting a trade -- he was eventually dealt to the San Jose Sharks in September 2009.
Melnyk argued that Heatley gave the Senators permission to speak with the Oilers, and nixing the team not only cost them the bonus but the ability to properly sell season tickets.
Heatley, who has two assists in 10 games with the Minnesota Wild, is in the final year of his contract and is scheduled to become an unrestricted free agent next summer.