BP Would Be Barred From New U.S. Leases in House Bill

BP Plc would be barred from new U.S. offshore leases to drill for oil or natural gas because of past safety violations under an amendment approved by a House panel.

The House Natural Resources Committee adopted the amendment by voice vote today while considering legislation to toughen safety standards for offshore drilling after the BP spill in the Gulf of Mexico.

“It’s a question of whether or not they get to exercise the privilege of being able to drill going forward,” said Representative George Miller, a California Democrat who sponsored the amendment. “One of the things you should bring to this game is a safety record. You have a company that had an egregious safety record, a fatal safety record.”

Companies with violations of federal or state safety standards more than five times the industry average going back seven years would be barred under the amendment. The measure would also ban leases to companies that have received fines of $10 million or more for violating the Clean Water Act as well as those that have more than 10 fatalities at their facilities over the period.

BP is the only company that would fail those standards, Miller said. The new rules wouldn’t affect BP’s current leases, and the company could continue to participate as a minority partner on future leases, Miller said.

Refinery, Pipeline

Before the explosion at BP’s Gulf of Mexico well, which killed 11 workers, a 2005 explosion at the company’s refinery in Texas City, Texas, killed 15 workers, and a 2006 pipeline leak dumped 200,000 gallons of crude at Prudhoe Bay, Alaska.

Miller said those incidents all figured into his amendment. BP has been hit with more than 800 “egregious” violations at its facilities over the past seven years compared with none by most other operators, Miller said.

Current rules have “allowed an operator with a horrendous and lethal safety record to go out and” drill on public lands, Miller said.

Representative Doc Hastings of Washington, the senior Republican on the House committee, said it’s too soon to enact such changes before probes into the BP disaster are complete. Texas Republican Louie Gohmert said he could support Miller’s bar on BP.

“It sounds like an amendment I’d want to vote for,” Gohmert said. “It does need some tweaking.”

Forcing Out Operator

Under current rules, the administration has the power to force out BP as the operator of existing leases. The operator, typically the partner with a majority interest, is designated before drilling begins.

The Interior Department tracks each operator’s performance and may “disapprove or revoke your designation as operator” based on accidents, pollution events or other cases of noncompliance, according to federal regulations.

BP is the largest producer of oil and gas in the Gulf of Mexico, with capacity of 500,000 barrels a day in March, Andy Inglis, chief executive officer for exploration and production, told investors in March. The blowout came about six months after BP announced Tiber, a Gulf field it said would enable it to raise production to the equivalent of 600,000 barrels a day. also operates the Prudhoe Bay oil field on Alaska’s North Slope.

U.S. Interior Secretary Kenneth Salazar wants to put into legislation the government’s authority over energy production on federal property. Last month, the Senate Energy and Natural Resources Committee adopted a bill setting safety and environmental standards for offshore drilling with a provision to bar companies that have failed to meet “due diligence, safety, or environmental requirements” from new leases.

‘Cozy’ Relationship

President Barack Obama has called on Salazar and Congress to beef up oversight of offshore drilling and end the “cozy” relationship between the industry and regulators.

Measures being debated in Congress would by place into statute Salazar’s decision to eliminate the Minerals Management Service, the agency formerly charged with promoting energy development and enforcing safety standards, and replace it with three new agencies.

The House panel also approved today an amendment by Representative Ed Markey, a Massachusetts Democrat, affecting companies with deep-water leases in the Gulf that don’t require royalty payments to the government. Holders of such leases would be barred from bidding on new tracts if they decline to renegotiate and pay fees on the disputed contracts.

The U.S. Supreme Court rejected last year an Obama administration appeal and refused to clear the federal government to collect an estimated $20 billion in royalties from Anadarko Petroleum Corp. and other oil and gas companies. The dispute turned on a 1995 law that limited royalties in an effort to promote drilling in the gulf.

“We know that at $80 a barrel, we don’t have to provide incentives to drill for free on public lands,” Markey said. “It gives us a chance to collect this money and use it to reduce the federal deficit.”

To contact the reporter on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.

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