BP’s U.S. Suspension Allows Airport-Fuel Exception for Pentagon

Photographer: Ron Jenkins/Fort Worth Star-Telegram/MCT via Getty Images

A C-17 Globemaster is refueled at the Naval Air Station Fort Worth Joint Reserve Base in Fort Worth, Texas. The military may buy fuel at certain commercial airports where BP is the sole provider. Close

A C-17 Globemaster is refueled at the Naval Air Station Fort Worth Joint Reserve Base... Read More

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Photographer: Ron Jenkins/Fort Worth Star-Telegram/MCT via Getty Images

A C-17 Globemaster is refueled at the Naval Air Station Fort Worth Joint Reserve Base in Fort Worth, Texas. The military may buy fuel at certain commercial airports where BP is the sole provider.

BP Plc (BP/)’s temporary ban from new U.S. government work now includes a bit of wiggle room for the Defense Department.

The military may buy fuel at certain commercial airports where BP is the sole provider or “when no other refueling option will meet the mission requirements,” Mark Harnitchek, director of the Defense Logistics Agency, wrote in a Dec. 7 memo obtained by Bloomberg.

The Environmental Protection Agency last month temporarily banned BP from winning new business with the government because of the company’s “lack of business integrity” in the 2010 Deepwater Horizon well blowout in the Gulf of Mexico, the biggest oil spill in U.S. history.

The exception suggests the London-based company is “too big to suspend,” said Charles Tiefer, a University of Baltimore law professor who specializes in government contracting.

“New purchases from BP were supposed to stop cold during the suspension,” Tiefer said in a phone interview. “This defense agency ’get-out-of-jail-free’ pass for BP has no deadline and no procedure for reducing over time the government fuel purchases at airports.”

Scott Dean, a BP spokesman in Chicago, declined to comment.

Mimi Schirmacher, a spokeswoman for the Defense Logistics Agency, said it was premature to estimate the value of fuel purchases that might be allowed under the exception. BP received $6.2 million in such payments in the fiscal year that ended Sept. 30, according to the document.

Temporary Ban

The fueling locations “are the least preferred means of refueling aircraft,” Schirmacher said in an e-mail. “When mission planning, aircrews use military bases first and contract airports second.”

While the fuel purchases at the commercial airports aren’t contracts, they still fall under the U.S. government’s suspension. The temporary ban doesn’t affect existing work.

BP on Nov. 15 agreed to plead guilty to criminal charges tied to the oil spill, which killed 11 people.

The EPA didn’t say how long the ban would be in place, though suspensions generally last for fewer than 18 months or until the end of legal proceedings. BP and the government are still in a dispute over civil charges.

In fiscal 2012, there were 469 instances of the fuel purchases at commercial airports from BP, according to the defense memo.

“The government purchases are like your average motorist driving into a BP service station and loading up with 13,000 bucks worth of fuel at a pop,” said Tiefer, who served on the U.S. Commission on Wartime Contracting.

Biggest Supplier

The company was the Defense Department’s biggest fuel supplier in 2011, the year following the Gulf explosion. That year, it won awards valued at about $1.35 billion, a 33 percent boost from $1.02 billion the previous year, according to data compiled by Bloomberg.

The British oil company has at least 11 defense awards, with a potential value of more than $2 billion that will be up for competition in the next two years.

The company last month reached a settlement with the Justice Department, agreeing to pay $4.5 billion to end all criminal charges and resolve securities claims relating to the Gulf explosion. At the time, the company said it hadn’t been advised of any U.S. action on contracts.

BP produces about 770,000 barrels of oil equivalent a day in the U.S., more than 20 percent of the company’s global output. The company had revenue of $131 billion in U.S. last year, more than a third of its global total.

Schirmacher said the Defense Logistics Agency doesn’t have plans to obtain waivers to award new contracts to BP. She said the agency’s recent determination differs from a waiver.

“A compelling reasons determination acts as an exception to the policy of not doing business with a suspended contractor,” she said. “A waiver is not the term used for this determination.”

To contact the reporter on this story: Danielle Ivory in Washington at divory@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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