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BP May Be Barred From U.S. Contracts Under Plan Weighed by EPA

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May 21 (Bloomberg) -- The Obama administration may prohibit BP Plc from getting government contracts after it obtains more information about the company’s oil spill polluting the Gulf of Mexico.

The Environmental Protection Agency was already in talks with BP about its conduct, such as past convictions for violating the Clean Air Act, before the explosion on a BP-leased oil rig on April 20, the agency said today in a statement. After the spill that followed, the discussions were put on hold, the agency said.

BP would lose billions of dollars in revenue should the U.S. freeze the entire London-based company out of all government contracts. Such a move would prohibit BP from drilling for oil and gas in federally controlled areas.

“Potentially, BP could be prevented from having any contracts with the federal government at all, which is quite far-reaching,” John Pendergrass, a senior attorney with the Washington-based Environmental Law Institute, said in an interview.

In addition to drilling leases, London-based BP’s contracts with the U.S. have involved services such as a $1.1 billion contract awarded in 2008 to supply aviation fuel to the Defense Department.

Among past incidents cited by the EPA in the statement were the 2005 explosion at a BP refinery in Texas City, Texas, that killed 15 workers and leaks in 2006 on oil lines at the company’s Prudhoe Bay unit in Alaska.

After the oil-rig explosion, the EPA “temporarily suspended any further action involving BP pending the receipt of information from ongoing federal investigations into the oil spill,” the agency said in the statement.

BP spokesman David Nicholas in Houston didn’t immediately respond to requests for comment.

ProPublica, a New York-based, not-for-profit news service, reported the suspension of EPA talks with BP earlier today.

To contact the reporter on this story: Kim Chipman in Washington at kchipman@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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