BP Temporarily Banned from New US Government Contracts

on Nov 29, 2012

On 28 November 2012, the US Environmental Protection Agency (EPA) announced that it had temporarily suspended the UK oil giant BP (LON:BP) from new contracts with the US government. The temporary suspension comes less than two weeks after the energy company agreed to pay record fines to resolve civil and criminal charges over the Gulf of Mexico oil spill.

**BP Temporarily Suspended from Bidding for New US Contracts**
In a press release, the US EPA noted that it was taking the action on account of “BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response.” The suspension is expected to last “until the company can provide sufficient evidence to EPA demonstrating that it meets Federal business standards.”

The Agency notes that the temporary ban does not affect the existing contracts which the oil giant already has with the US government. The Financial Times, however reports that BP will not be able to participate in future lease sales in the Gulf of Mexico, which are essential to energy companies wanting to drill new wells in the oil-rich region.
Bloomberg quotes Charles Tiefer, a law professor at the University of Baltimore as saying that the EPA decision “sends the signal to BP, and incidentally to the whole oil and gas drilling industry, that the United States will take strong steps to protect itself against a recurrence of that tragedy.”

**BP Working to Have Suspension Lifted**
BP, which on November 15 reached an agreement with the US government to pay $4.5 billion (£2.8 billion) to resolve federal criminal charges and claims by the Securities and Exchange Commission, said that it was working to have the suspension lifted. “BP has been in regular dialogue with the EPA,” the company noted in a statement adding that it had already provided the Agency with a statement of more than 100 pages as part of its efforts to demonstrate “present responsibility”.

The British oil giant also noted that it was informed by the EPA that the Agency was preparing an “administrative agreement” which could resolve and lift the temporary suspension. The FT reports that under US government regulations, such suspensions generally last no more than 18 months.
**Defence Contracts**
!m[](/uploads/story/929/thumbs/pic1_inline.png)BP, however, will lose the right to bid for new fuel contracts from the US Department of Defence. Bloomberg reports that in fiscal year 2011, BP was the Defence Department’s biggest fuel supplier with awards valued at about $1.35 billion. In addition, the company’s defence contracts for 2011 were 49 percent more than those of the number two fuel supplier, Valero Energy Corp (NYSE:VLO).

Bloomberg quotes Scott Amey, general counsel for the non-profit organisation Project on Government Oversight, as doubting whether the US government could put BP “in timeout” because of its position as a top federal contractor supplying petroleum products to the Pentagon. “Let’s see how long the suspension lasts or if the military grants any waivers,” notes Mr Amey, as quoted by Bloomberg.


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