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BP Suspended From New Federal Contracts

WASHINGTON, D.C. -- The U.S. Environmental Protection Agency (EPA) has temporarily suspended BP Exploration and Production Inc., BP plc and named affiliated companies (BP) from new contracts with the federal government.

According to the EPA, the agency is taking this step "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 criminal information." There was no word from the EPA on how long the suspension will last.

The suspension means BP and the named affiliates will be temporarily prevented from getting new federal government contracts, grants or other covered transactions until the company can provide sufficient evidence to the EPA demonstrating that it meets federal business standards. The suspension does not affect existing agreements BP may have with the government.

The move comes two weeks after BP agreed to plead guilty to 11 counts of Misconduct or Neglect of Ship Officers, one count of Obstruction of Congress, one misdemeanor count of a violation of the Clean Water Act, and one misdemeanor count of a violation of the Migratory Bird Treaty Act, all arising from its conduct leading to the April 2010 Deepwater Horizon disaster that killed 11 people and caused the largest environmental disaster in U.S. history.

As part of the Deepwater Horizon investigation, the EPA was designated as the lead agency for suspension and debarment actions. According to the agency, "federal executive branch agencies take these actions to ensure the integrity of federal programs by conducting business only with responsible individuals or companies. Suspensions are a standard practice when a responsibility question is raised by action in a criminal case."

According to Reuters, BP affiliates are major suppliers of fuel to the U.S. military. As recently as September, BP affiliates won two fuel supply contracts with the U.S. military worth as much as $1.37 billion to supply fuel to the U.S. Defense Logistics Agency, the Pentagon's procurement arm, according to a U.S. website that tracks military contracts.

However, according to the news agency, the suspension will have a "minimal direct financial impact," and will not impair BP's ability to produce oil and gas from existing U.S. assets, said Pavel Molchanov, an analyst with Raymond James & Associates Inc in Houston.

"BP's supply contract of fuels to the Pentagon might be at risk, but of course BP could supply other customers if this supply contract is not renewed," Molchanov said in a research note.

The EPA's suspension comes one day after BP officials were in federal court in New Orleans on Tuesday for a brief arraignment hearing. BP lawyer Mark Filip said the company's board had authorized him to enter a not guilty plea as a procedural matter, but the company still intends to plead guilty later, the Houston Chronicle reported. U.S. District Judge Ivan Lemelle set a trial date for Feb. 4, another procedural matter that would be relevant only if the court doesn't accept the plea deal and the case goes to trial.

On Nov. 15, BP also agreed to pay $4.5 billion to settle the criminal charges and related Securities and Exchange Commission charges.


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