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EPA Lifts BP Contract Suspension

Monday, March 17, 2014

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Nearly four years after 11 oil-rig workers perished in BP’s Deepwater Horizon explosion in the Gulf of Mexico, the British oil giant is fully back in business with the U.S. government.

The U.S. Environmental Protection Agency and BP announced Thursday (March 13) that they had resolved suspension and debarment actions that had barred the company from new business with the federal government.

Deepwater Horizon
U.S. Coast Guard

Eleven workers lost their lives in the explosion aboard the Deepwater Horizon. BP later pleaded guilty to criminal charges, including 11 counts of manslaughter.

The 49-page Administrative Agreement, effective immediately, details safety, ethics, reporting and compliance mandates for BP p.l.c., BP America Inc., BP Exploration and Production Inc., BP Products North America Inc., and BP Exploration (Alaska) Inc.

Criminal Pleas

EPA announced the debarment action in November 2012, two weeks after BP pleaded guilty to 14 criminal charges, including 11 counts of manslaughter, in the April 2010 Gulf disaster, which also triggered the worst oil spill in U.S. history.

As part of the plea agreement, BP agreed to pay a $4.5 billion fine, the largest criminal penalty in U.S. history. Two BP supervisors and one vice president were also indicted at that time.

Citing a "lack of business integrity," EPA ultimately suspended 25 BP entities and disqualified BP Exploration and Production Inc. from new federal contract work.

"Suspensions are issued where there is an immediate need to protect the public interest supported by adequate evidence," EPA said.

The indefinite suspension did not affect BP's existing agreements with the government.

BP Fights Back

In August 2013, BP sued the EPA to lift the ban. The suit, filed in U.S. District Court in Texas, contended that the ban unfairly penalized affiliated companies that had had nothing to do with the Deepwater Horizon disaster.

The suit detailed steps BP had taken since the disaster to prevent a future recurrence and called the debarment "unlawful, artibrary, capricious, and an abuse of EPA's discretion."

BP safety

BP sued to lift the contract ban, saying it had taken numerous steps to improve safety since the April 2010 Deepwater Horizon disaster.

The suit called BP "one of the largest fuel suppliers to the government," with contracts worth more than $1.34 billion. BP also holds more than $224 million in international contracts with the U.S. government, the company said.

Settlement Terms

On Thursday, an EPA official called the new settlement “a fair agreement that requires BP to improve its practices in order to meet the terms we’ve outlined together.”

“Many months of discussions and assessments have led up to this point, and I’m confident we’ve secured strong provisions to protect the integrity of federal procurement programs," Craig Hooks, assistant administrator for EPA's Office of Administration and Resources Management, said in announcing the settlement.

The agreement requires BP to retain an independent auditor, approved by EPA, to conduct an annual review and report on BP’s compliance with the agreement. There are also specific provisions addressing ethics compliance, corporate governance, and process safety.

The agreement also gives EPA "the authority to take appropriate corrective action in the event the agreement is breached," the agency said.

The settlement was also coordinated wiith the Department of Interior, Defense Logistics Agency, and U.S. Coast Guard.

BP's Gulf Presence

BP's role in the Gulf economy would be hard to overstate.

Thunder Horse - BP

Thunder Horse is currently the largest deepwater producing field in BP's vast Gulf of Mexico portfolio.

BP has been at work in the Gulf of Mexico since the 1950s, including more than 25 years in deepwater exploration. The company has been the largest investor in the Gulf in the last 10 years.

With more than 650 oil and gas leases, BP is currently the leading acreage holder in the deepwater Gulf, with some operations more than 7,000 feet deep. A new start-up, the Galapagos development, was announced in June 2012.

Operating a company-record 10 rigs and four large construction platforms, BP currently employs more than 2,300 people in the region.

Lifting the debarment will allow BP to enter into new contracts with the federal government, including new deepwater leases in the Gulf.

'Fair and Reasonable'

“After a lengthy negotiation, BP is pleased to have reached this resolution, which we believe to be fair and reasonable,” John Mingé, Chairman and President of BP America Inc., said in a statement.

“Today’s agreement will allow America’s largest energy investor to compete again for federal contracts and leases."


Tagged categories: BP; Enforcement; Environmental Protection Agency (EPA); Government contracts; Laws and litigation; Oil and Gas

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