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Gulf Crimes to Cost BP New US Contracts

Thursday, November 29, 2012

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Citing a “lack of business integrity,” the U.S. Environmental Protection Agency announced Wednesday (Nov. 28) that it was temporarily suspending BP Exploration and Production Inc. and its affiliated companies from new contracts with the federal government.

“EPA is taking this action due to BP’s lack of business integrity as demonstrated by the company's conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response, as reflected by the filing of a criminal information,” EPA said in a statement.

No time frame for lifting the suspension was announced.

Guilty Pleas, Indictments

The announcement came 13 days after the U.S. Justice Department announced that BP would plead guilty to 14 criminal charges, including manslaughter, and pay $4.5 billion for the April 2010 offshore explosion that killed 11 workers and unleashed the worst oil spill in U.S. history.

The 14 charges include 11 felony counts of Misconduct or Neglect of Ships Officers relating to the loss of the 11 lives. The criminal penalty was the largest in U.S. history.

BP Deepwater Horizon
U.S. Coast Guard

EPA cited "BP’s lack of business integrity as demonstrated by [its] conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response, as reflected by the filing of a criminal information.”

The settlement agreement includes the appointment of two monitors who will be scrutinizing BP’s processes and ethics over the next four years.

At the same time, the Justice Department announced a 23-count criminal indictment—including charges of seaman’s and involuntary manslaughter—against Robert Kaluza, 62, and Donald Vidrine, 65, the two top-ranking BP supervisors on the Deepwater Horizon. BP vice president David Rainey was also charged with lying to law enforcement and hiding information from Congress after the accident.

Suspension and Debarment

Left unanswered at the time of the announcement was the fate of BP’s future federal contracts. The company has been a major supplier of fuel to the Defense Department. Under U.S. law, companies convicted of certain criminal acts can be debarred from contracting with the federal government.

BP said at the time that it had “not been advised of the intention of any federal agency to suspend or debar the company in connection with this plea agreement.”

On Wednesday, however, EPA noted that it had been designated as the lead agency for suspension and debarment actions for the Deepwater Horizon investigation.

“Federal executive-branch agencies take these actions to ensure the integrity of federal programs by conducting business only with responsible individuals or companies,” EPA’s statement said.

“Suspensions are a standard practice when a responsibility question is raised by action in a criminal case.”

The indefinite suspension will prevent BP Exploration and Production Inc., BP PLC and other affiliated companies “from getting new federal government contracts, grants or other covered transactions until the company can provide sufficient evidence to EPA demonstrating that it meets federal business standards,” EPA said.

“The suspension does not affect existing agreements BP may have with the government.” The agency offered no additional details.

BP Response

In a prepared statement, BP emphasized that the action did not affect its current contracts and said it was working to get the suspension lifted. The statement suggested that BP had long expected the action.

"BP has been in regular dialogue with the EPA and has already provided both a present responsibility statement of more than 100 pages and supplemental answers to the EPA's questions based on that submission," the statement said.

BP said that the Justice Department had agreed to advise debarment authorities that the company "has accepted criminal responsibility for its conduct." In fact, BP said, the EPA is already preparing a proposed agreement to lift the suspension.

"As BP’s submissions to the EPA have made clear, the company has made significant enhancements since the accident," BP said.

BP also said it:

  • Invested more than $52 billion in the United States over the past five years—"more than any other oil and gas company, and more than it invests in any other country where it operates";
  • Employed 23,000 Americans;
  • Spent more than $14 billion in response and cleanup costs;
  • Committed $1 billion to early restoration projects;
  • Established a $20 billion trust for claims and settlements from the disaster;
  • Had paid more than $9 billion in settlments and claims; and
  • Anticipated paying $7.8 billion in additional claims.

Scapegoats or Criminals?

Meanwhile this week, lawyers for Kaluza and Vidrine contended that their clients were being scapegoated for the disaster. They noted multiple third-party investigations that have revealed widespread lapses at BP—from the rig to corporate offices—that contributed to the disaster.

Deepwater Horizon medevac - US Coast Guard
Petty Officer 3rd Class Tom Atkeson / U.S. Coast Guard

Emergency medical technicians rush a gurney to an awaiting HH-60 rescue helicopter to medevac survivors from the Deepwater Horizon drilling rig after the explosion and fire in April 2010.

"Every investigative report has said there were multiple failures at multiple levels at multiple companies," Shaun Clarke, Kaluza's attorney, told the Washington Post. “So it is difficult for me to understand why the federal government decided to single out two guys working on a rig.”

Vidrine’s attorney, Bob Habans, said of his client: “It is almost inconceivable that any fair-minded person would blame this hardworking and diligent man for one of the most catastrophic events in the history of the oil business.”

Both lawyers told the newspaper that their clients would plead not guilty in the case.

Fines and Sales

The criminal case and fines announced Nov. 15 still require court approval.

Meanwhile, still pending is a multibillion-dollar civil case that is set to go to trial in February in New Orleans. BP could face fines of $1,100 to $4,400 for each of the estimated four million barrels of oil that were not captured, skimmed or burned after the spill.

Coincidentally or not, BP has been selling off a series of assets recently. In October, it announced a $2.5 billion sale of its Texas City, TX, refinery, where 15 employees perished in a 2005 series of explosions.

Last week, BP announced a deal with Rosneft, the Russian government-owned petroleum company, that will net BP $12.3 billion in cash and an 18.5 percent stake in that company.

And on Wednesday (Nov. 28), BP said it would sell its interests in a number of central North Sea oil and gas fields to TAQA for $1.058 billion, plus future payments that it expects will exceed $250 million over three years.


Tagged categories: Accidents; BP; EPA; Fatalities; Government; Government contracts; Laws and litigation; Lawsuits; Offshore; Oil and Gas

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