BP Continued Suspension From New U.S. Contracts Sought

Photographer: Derick E. Hingle/Bloomberg

A controlled burn of oil near the source of the BP Plc Deepwater Horizon oil spill in the Gulf of Mexico off the coast of Louisiana, on July 15, 2010. Close

A controlled burn of oil near the source of the BP Plc Deepwater Horizon oil spill in... Read More

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Photographer: Derick E. Hingle/Bloomberg

A controlled burn of oil near the source of the BP Plc Deepwater Horizon oil spill in the Gulf of Mexico off the coast of Louisiana, on July 15, 2010.

BP Plc (BP/)’s suspension from new government contracts and oil leases after the 2010 Gulf of Mexico oil spill should continue because the company hasn’t demonstrated it’s a responsible contractor, the U.S. said.

BP is fighting a 2012 ban imposed on 20 affiliates by the U.S. Environmental Protection Agency, which prevents all BP entities from bidding on any new government supply contracts or oil leases. The suspension, which doesn’t affect BP’s earlier government contracts, was imposed after the agency determined the London-based company hadn’t fully corrected problems that led to the fatal explosion aboard the Deepwater Horizon drilling rig and the worst offshore spill in U.S. history.

“Given this history, it was wholly reasonable” for the agency to “conclude that BP’s latest round of plans and promises is insufficient to demonstrate that BP is a responsible federal contractor,” Robert G. Dreher, acting assistant attorney general of the Justice Department’s environmental division, said yesterday in a court filing.

BP pleaded guilty last January to 11 counts of felony seaman’s manslaughter, two pollution violations and one count of lying to Congress in connection with the 2010 oil spill. The company pleaded guilty in 2007 to one felony air pollution violation and agreed to a $50 million fine after a 2005 explosion at its Texas City, Texas, refinery killed 15 workers. BP was still on probation for the Texas City blast when the Deepwater Horizon burned and sank.

Measures ‘Insufficient’

“BP had previously been allowed to continue doing business with the federal government even after its affiliates were convicted of environmental violations based on promises that adequate systemic corrective measures would be taken –- and yet, those measures had proved insufficient,” Dreher said in the filing in federal court in Houston.

BP claims the EPA is unfairly punishing it in violation of U.S. law, by failing to consider improvements made after the Gulf spill and the refinery explosion. Both disasters resulted in BP pleading guilty to U.S. environmental crimes.

“Those convictions happened years ago,” company lawyers said in a Jan. 24 court filing. There wasn’t “an immediate need to suspend” BP in late 2012 to protect the public and the environment, as the agency said at the time, they said.

The government continued to do business with BP after the convictions and repeatedly found it to be a responsible contractor, Geoff Morrell, a BP spokesman, said in an e-mail.

Suspension Capricious

‘BP believes that the EPA’s disqualification and suspension should be invalidated,’’ Morrell said. “They are arbitrary and capricious, contrary to the law and an abuse of discretion.”

BP sued the EPA in August to lift the suspension, which the company contends should have ended with its 2012 guilty plea and payment of $5.26 billion to resolve federal criminal charges and related securities-law violations.

In December, lawyers for the U.K. asked the EPA to lift the suspension, saying keeping it in placed might jeopardize the U.S.’s reputation for having a fair international business climate.

The case is BP Exploration & Production v. McCarthy, 4:13-2349, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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