Obama Administration Suspends New Contracts with BP

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By Glynn Wilson

The Obama administration has suspended all new contracts with the British petroleum giant BP for “lack of business integrity” due to its actions that caused the worst environmental disaster in history two years ago in the Gulf of Mexico and for the way the company responded to the crisis.

The U.S. Environmental Protection Agency announced the action in a press release and said it was temporarily suspending BP Exploration and Production, Inc., BP PLC and named affiliated companies (BP) from new contracts with the federal government.

The agency said it took the action “due to 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, as reflected by the filing of a criminal information.”

On November 15, 2012, BP agreed to plead guilty to eleven counts of Misconduct or Neglect of Ship Officers, one count of Obstruction of Congress, one misdemeanor count of a violation of the Clean Water Act, and one misdemeanor count of a violation of the Migratory Bird Treaty Act, all arising from its conduct leading to the 2010 Deepwater Horizon disaster that killed 11 people and caused the largest environmental disaster in U.S. history.

This contracting ban comes on the heals of the company’s agreement to settle criminal charges for negligence in the disaster for $4.5 billion, the largest payment in a criminal settlement ever with the U.S. Department of Justice.

For the Deepwater Horizon investigation, EPA was designated as the lead agency for suspension and debarment actions.

“Federal executive branch agencies take these actions to ensure the integrity of federal programs by conducting business only with responsible individuals or companies,” the agency said. “Suspensions are a standard practice when a responsibility question is raised by action in a criminal case.”

The BP suspension will temporarily prevent the company and the named affiliates from getting new federal government contracts, grants or other covered transactions until it can provide sufficient evidence demonstrating that it meets federal business standards. The suspension does not affect other existing agreements BP has with the government.

As of last year, BP was the largest supplier of gasoline to the U.S. military with contracts worth about $1.35 billion. While these contracts will not be affected, the company will be prevented from bidding on new contracts.

The London-based oil company is the largest holder of deep-water leases in the Gulf of Mexico, with more than 700 active leases. It is also the largest producer of oil and gas from more than 20 fields in the Gulf.

The contract suspension will also prevent BP from bidding in new federal offshore lease sales.

So far, the Department of Interior, which is planning a new round of lease sales in the western Gulf of Mexico, has not commented on EPA’s action. BP has also not issued a response yet.

While the EPA did not say how long the contract ban would last, regulations generally limit suspensions to 18 months. In the case of legal proceedings a ban can last longer. BP and the Obama administration are still at loggerheads in a dispute over civil charges from the Gulf oil disaster.

© 2012, Glynn Wilson. All rights reserved.

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