U.S. temporarily bans BP from new federal contracts
EPA action over ’10 Gulf spill bars energy giant from offshore lease sale
WASHINGTON — The Obama administration has temporarily banned energy giant BP from new federal contracts, citing the company’s “lack of business integrity as demonstrated” by the April 2010 Gulf of Mexico disaster.
The decision by the Environmental Protection Agency comes two weeks after BP entered into a wide-ranging settlement agreement with the Justice Department over criminal charges in connection with the explosion of the Deepwater Horizon, which killed 11 men and spewed an estimated 4.9 million barrels of oil into the Gulf, resulting in the country’s worst offshore environmental catastrophe.
The impact of the ban on BP’s financial health would depend on its duration and whether it kept the company from bidding on lucrative federal leases to tap oil and gas in places like the Gulf of Mexico, said Philip Weiss, senior energy analyst for Argus Research.
Hours after the ban was issued, the Interior Department announced a lease sale on more than 20 million offshore acres in the western Gulf, which the department said attracted $133 million in bids. BP did not participate. The next sale is in March.
“If it happens once, it’s inconvenient for BP, but not that big of a deal,” Weiss said. “If it happens twice, three times, then the impact starts to escalate. The best way to do deep-water is to get the acreage before it has been explored, when it is cheapest. Deep-water drilling is very important to
MEXICO BP, and that would have a big impact.”
The EPA said such suspensions are “a standard practice when a responsibility question is raised by action in a criminal case.” It said the suspension would be lifted when “the company can provide sufficient evidence to EPA demonstrating that it meets federal business standards.”
In separate statements, the EPA and BP underscored that the temporary suspension would only affect future contracts, not existing leases to develop oil and gas in the United States, where BP’s holdings are vast.
The company issued a statement that suggested it is working with the EPA to have the ban lifted soon. “The EPA’s action is pursuant to administrative procedures providing for discretionary suspension until a company can demonstrate ‘present responsibility’ to conduct business with the U.S. government,” BP said. “BP has been in regular dialogue with the EPA and has already provided both a present responsibility statement of more than 100 pages and supplemental answers to the EPA’s questions based on that submission.”
A separate federal civil lawsuit over possible violations of the Clean Water Act is set to proceed in February and could bring penalties in the billions of dollars against BP.
The idea of a temporary suspension of BP’s access to federal contracts emerged during the early days of the oil spill crisis, and BP has likely been in talks with the EPA since 2010 about the penalties it could face, said David Uhlmann, a former chief of the Justice Department’s Environmental Crimes Section and a law professor at the University of Michigan.
Uhlmann said that the EPA suspension could not occur until criminal charges were filed. On Nov. 15, BP agreed to a settlement with the Justice Department under which it would plead guilty to 11 felony counts in connection with the deaths of the 11 rig workers and pay a record $4.5 billion fine.
Uhlmann said EPA suspensions are meant to give companies time to fix their problems, not punish them for past actions. Because the suspension comes almost three years after the spill, BP has already had time to fix many problems, he said, which could mean the company could see the ban lifted soon.