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Saturday 26 July 2014

BP banned from new US contracts in fallout over major oil spill

Roberta Rampton and Timothy Gardner

Published 29/11/2012|05:00

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THE US government has banned BP from new federal contracts over its "lack of business integrity" in the Deepwater Horizon oil spill in 2010, a move that could imperil the British energy giant's US footing.

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The suspension, announced by the US Environmental Protection Agency, comes on the heels of BP's November 15 agreement with the US government to plead guilty to criminal misconduct in the Gulf of Mexico disaster, the worst offshore oil spill in US history.

BP agreed to pay $4.5bn (€3.5bn) in penalties, including a record $1.256bn criminal fine.

BP and its affiliates are barred from new federal contracts until they demonstrate they can meet federal business standards, the EPA said yesterday. The suspension is "standard practice" and BP's existing US government contracts are not affected, it said.

The EPA's suspension of contracts could push BP to settle civil litigation brought by the US government and states from the spill. An EPA official said government-wide suspensions generally did not exceed 18 months, but could continue longer if there were ongoing legal cases.

Dialogue

In a statement, BP said it had been in "regular dialogue" with the EPA, and that the agency had informed BP that it was preparing an agreement that "would effectively resolve and lift this temporary suspension."

BP said the EPA had notified it that the draft agreement would be available soon.

The suspension could threaten BP's dominance in the Gulf of Mexico, where it is one of the largest producers of oil and natural gas and the largest lease-holder.

US operations accounted for more than 30pc of BP's pre-tax profits in the third quarter, and the US accounts for about a fifth of BP's global oil production.

The suspension could also hamper BP's ability to maintain its position as a top supplier of jet fuel and other refined products to the US military, the largest single buyer of oil in the world.

As recently as September, BP affiliates won two fuel supply contracts with the US military worth as much as $1.37bn.

The suspension is a sign that all federal contractors will be held to high standards, said Scott Amey, general counsel for the Project on Government Oversight, a federal watchdog group.

"BP had years to improve its business ethics and is paying the price for its inaction," Mr Amey said.

(Reuters)

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