Feds lift ban blocking BP from new offshore drilling contracts

WASHINGTON — BP and the Obama administration have agreed to a deal freeing the company to do business with the federal government nearly four years after the Deepwater Horizon disaster, lifting a suspension that had barred the oil giant from entering lucrative new contracts to supply the Pentagon with fuel and drill in U.S. waters.

Under the terms of the agreement with the Environmental Protection Agency announced Thursday, BP is pledging to be monitored by an independent auditor assessing its ethics compliance, safety and corporate governance over the next five years.

The deal ends a legal cloud that has hung over BP since November 2012, when the EPA suspended the oil giant from entering new federal government contracts. The move, formally called debarment, came shortly after BP pleaded guilty to manslaughter, obstruction of Congress and other criminal charges in connection with the 2010 Deepwater Horizon disaster, which killed 11 workers and unleashed the nation’s worst oil spill.

Although the 16-month debarment did not affect BP’s existing government contracts, the oil company lost out on potentially billions of dollars of business with the U.S. government, including the chance to bid on new offshore oil and gas leases and to win lucrative contracts supplying the military with fuel.

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The London-based company now will be free to present bids to the Pentagon and bid for Gulf of Mexico drilling rights during a March 19 auction in New Orleans. The company currently has 10 rigs working in the Gulf, generally on leases BP bought before the debarment.

BP America President John Minge called the final deal “fair and reasonable.”

“Today’s agreement will allow America’s largest energy investor to compete again for federal contracts and leases,” he said in a statement.

EPA Assistant Administrator of Administration and Resources Craig Hooks said the agreement was the result of “many months of discussions and assessments.”

““This is a fair agreement that requires BP to improve its practices,” Hooks said. “I’m confident we’ve secured strong provisions to protect the integrity of federal procurement programs.”

During its five-year probation, BP will have to implement corrective action plans from independent ethics and process safety monitors, with any violations subject to court action.

The 53-page agreement requires BP:

  • to sustain an ethics and compliance division that is separate from its operating businesses.
  • maintain a “code of conduct” dictating safety requirements, outlining how employees should handle difficult ethical decisions and insisting that workers should report violations.
  • provide leadership training for its senior leadership, defining ethical behavior and highlighting ways they can encourage a culture that “speaks up” about problems.
  • to bar retaliation or harassment against whistleblowers – whether employees or contractors – who raise good faith questions or concerns.

Under the terms of the deal, BP is dropping its legal challenge against the contract suspension.

Separately, BP has had little success in court challenging the terms of its $9.2 billion settlement with victims of the oil spill and payments made under the agreement. Most recently, on Tuesday, U.S. District Judge Carl Barbier denied the company’s request to halt payments so that administrators could implement better accounting safeguards and protections against fraudulent claims.

Because contract suspensions are relatively rare against large companies, legal experts had speculated the debarment was partly designed as a tool to prod BP to cooperate in oil spill negotiations and other dealings with the federal government. But in court filings and the agreement disclosed Thursday, EPA recited a series of previous accidents at the company’s facilities, including a spill from one of its Alaska pipelines and the lethal March 2005 explosion at its Texas City refinery.

Under current law, the debarment process is not designed as a punishment — but rather a formal way to protect the public interest and keep taxpayers from doing business with companies that engage in fraudulent, reckless or criminal conduct.

In BP’s case, the suspension extended to 25 separate entities.

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