BP loses some federal contracts due to spill

BP was ineligible for new contracts worth up to $1.9 billion to provide fuel to the federal government this year because of the suspension imposed over the company’s conduct in connection with the 2010 Gulf of Mexico oil spill, records show.

BP has been a major supplier of fuel to the U.S. military, but the Environmental Protection Agency suspended it from government contracts in November after prosecutors socked BP with criminal charges, including a Clean Water Act violation, related to the spill.

A BP spokeswoman declined to comment on the contracts that were awarded to other companies.

The contracts were with the Defense Logistics Agency, a combat support unit that provides the Army, Navy, Air Force, Marine Corps and other federal agencies with logistics, acquisition and technical services.

Under one contract, BP Singapore had been delivering military diesel fuel until Jan. 30. New contracts covering the current year for delivery of fuel were awarded on Dec. 5, while BP was on suspension. They went to Refinery Associates of Texas for a maximum of about $1.3 billion and S-Oil Corp. for $578 million, Defense Logistics Agency spokeswoman Michelle McCaskill said Monday.

She said BP Singapore submitted a bid, and noted that BP had no guarantee it would get the contract even if it had not been under the suspension.

Another contract involves fuel deliveries by BP affiliate Arco that also ended on Jan. 30. The contract period was extended to May 31, but because of BP’s suspension, Chevron Corp. was awarded the deliveries Arco would have made during the extension period, McCaskill said. She could not immediately provide the value of those deliveries.

The suspension and contract ineligibility are a black eye politically for BP, but may be little more than a mild headache financially. Analysts say the company, which generated about $1 billion in revenue a day last year, can sell other customers the fuel it can’t sell to the U.S. government.

“They always want to do business with the government because they think it helps them establish relations,” Oppenheimer & Co. analyst Fadel Gheit said.

Still, he said he expects the contracts issue to have little impact on BP’s operations.

And even with the suspension, the Pentagon has some latitude to enter new fuel contracts with BP by citing national security needs.

The suspension from new federal contracts, also referred to as a debarment, does not affect existing contracts.

The EPA said its move to suspend BP from new contracts was based on a “lack of business integrity” and said BP must prove its “present responsibility” to conduct business with the U.S. government.

BP said in November that it was working to get the suspension lifted and expected a quick resolution, but reported last week that “it may take some time” to resolve the necessary issues.

BP pleaded guilty Jan. 29 to manslaughter and other criminal charges stemming from the well blow-out and rig explosion in the Gulf off Louisiana nearly three years ago.

It was ordered to pay a $4 billion criminal penalty that it negotiated with the Justice Department.

It also was sentenced to five years probation and will be subject to independent monitoring. The guilty plea keeps the suspension in place until BP can work out an administrative agreement with the EPA.

BP owned the undersea well that blew out, leading to the worst offshore oil spill in U.S. history. It also was leasing the Deep-water Horizon drilling rig that exploded, killing 11 workers.

Besides the criminal penalty, the company already has spent more than $24 billion on clean-up, compensation to victims and other spill-related costs.

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Read ongoing FuelFix coverage of the BP’s legal woes stemming from the Gulf of Mexico oil spill:

BP completes $2.4B sale of Texas City refinery (Feb. 1)
Guilty: BP admits to causing deaths in spill disaster (Jan. 29)
Some parties appeal spill settlement ruling (Jan. 25)
BP, Justice Department say Gulf plea deal fair and appropriate (Jan. 16)
Judge gets sentence recommendation for BP (Jan. 14)
Rig victim’s widow says Gulf disaster caused ‘inferno of grief’ (Jan. 11)
Transocean to pay government $1.4B to settle fed’s spill claims (Jan. 3)
Government accuses BP of being evasive on Gulf spill flow rate (Dec. 28)
Judge approves BP class action settlement (Dec. 21)