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BP Sues U.S. Over Contract Suspensions BP Sues U.S. Over Contract Suspensions
(about 15 hours later)
LONDON — BP has filed suit against the United States government to overturn the temporary suspension of most BP entities, including its exploration arm, from federal contracts. LONDON — BP has sued the United States government to overturn the suspension of most BP entities, including its exploration arm, from federal contracts.
The suit, filed Tuesday in federal court in Texas, seeks to overturn the ban, which was imposed in November by the Environmental Protection Agency. The agency cited BP for “lack of business integrity” as demonstrated by its role in the 2010 Gulf of Mexico disaster. The suit, filed on Tuesday in federal court in Texas, seeks to overturn a ban imposed in November by the Environmental Protection Agency. The agency cited BP for “lack of business integrity” as demonstrated by its role in the disastrous oil spill in 2010 in the Gulf of Mexico. The agency said the suspension would be in force “until the company can provide sufficient evidence to E.P.A. that it meets federal business standards.”
The ban’s most significant impact is preventing BP from gaining new oil and gas leases in the United States. That suspension, for instance, is likely to be hampering the company’s activities in the Gulf of Mexico, where it has been unable to bid on new leases since the ban was imposed. The ban’s most significant impact is that it prevents BP from gaining new oil and gas leases in the United States. That suspension, for instance, is likely to be hampering the company’s activities in the Gulf of Mexico. The company is the leader in deepwater gulf leases with 719, it says.
BP’s output in the Gulf of Mexico, a key profit center, has dropped sharply because of divestments of oil and gas fields there, as well as the moratorium on drilling that was imposed after the spill and has now been lifted. BP’s output in the Gulf of Mexico, a crucial profit center, has dropped sharply to 219,000 barrels a day in 2012, from about 338,00 in 2010, because it divested itself of oil and gas fields there, as well as the temporary moratorium on drilling that was imposed after the spill.
Robert W. Dudley, BP's chief executive, says that although BP has enough leases in the gulf, not being able to participate in acreage auctions limits the company’s ability to maneuver and keep pace with rivals like Royal Dutch Shell and Chevron. Robert W. Dudley, BP’s chief executive, said that although BP had enough leases in the gulf, not being able to bid on new ones limited its ability to maneuver and keep pace with rivals like Royal Dutch Shell and Chevron.
“We believe that the EPA’s action here is inappropriate and unjustified as a matter of law and policy, and we are pursuing our right to seek relief in federal court. At the same time, we remain open to a reasonable settlement with the EPA,” BP said Tuesday. The E.P.A. also disqualified BP’s exploration and production unit from federal contracts in February 2013.
The EPA move came after BP reached an agreement with the United States Department of Justice last November to plead guilty to criminal charges and pay $4.5 billion in penalties. BP’s complaint names Gina McCarthy, the E.P.A. administrator, and Richard A. Pelletier, the agency’s official in charge of such suspensions, or “debarment,” as well as the agency as defendants.
Taking the United States government to court appears to be part of an overall shift to a tougher approach by the oil giant, which is based in London. BP executives believe the company has already paid a very stiff price for the spill — in addition to the penalties paid, it has already taken $42.4 billion in provisions — and they are frustrated that new issues keep cropping up. The company’s chief financial officer, Brian Gilvary, said on July 30 that BP wanted to reach “closure” on the episode. “We believe that the E.P.A.’s action here is inappropriate and unjustified as a matter of law and policy, and we are pursuing our right to seek relief in federal court,” BP said in a statement. “At the same time, we remain open to a reasonable settlement with the E.P.A.”
BP executives appear to be concluding that their conciliatory approach has not been working as well as they had hoped. “We want everyone to know that we are digging and well prepared for the long haul on legal matters,” Mr. Dudley said on July 30. In an e-mail, Wyn Hornbuckle, a spokesman for the United States Department of Justice, declined to comment.
Taking the United States government to court is part of a shift to a tougher approach by the oil giant, which is based in London. BP executives think the company has already paid a very stiff price for the spill — in addition to the penalties paid, it has set aside $42.4 billion in reserve for costs and claims related to the spill — and they are frustrated that new issues and claims for more money continue to arise.
The company’s chief financial officer, Brian Gilvary, said on July 30 that BP wanted to obtain closure on the episode.
BP executives appear to have concluded that their conciliatory approach did not work as well as they had hoped.
The E.P.A. move came after BP reached an agreement with the Justice Department in November to plead guilty to criminal charges and pay $4.5 billion in penalties.
Some BP executives say the November agreement should have precluded the suspension by the E.P.A., although there was no formal agreement to that effect.
Civil claims against BP are also mounting despite the company’s efforts to settle them. BP said that administrators of the settlement had made excessive payments to businesses, including some that did not suffer damage. BP originally estimated that the settlement would cost $7.8 billion, but it increased that estimate on July 30 to $9.6 billion, and it said the final cost would most likely be “significantly higher.”
“We want everyone to know that we are digging in and are well prepared for the long haul on legal matters,” Mr. Dudley said.
Whether BP’s new approach will succeed is open to question. Fadel Gheit, an oil analyst at Oppenheimer in New York, worried that BP risked a further backlash. “You need to be aggressive but not too aggressive,” he said. “The regulators will put you in the penalty box.”
BP’s legal brief against the E.P.A. is a remarkable catalog of the company’s grievances. BP called the suspension and disqualification of the exploration unit “punitive, arbitrary and capricious” and said the court should declare the bans “null, void and unenforceable.”
The company said it had done business with the federal government for two and a half years after the 2010 oil spill. It also said that federal regulators “publicly expressed their confidence in BP as a safe and reliable operator” after the disaster, allowing it to win dozens of leases in the Gulf of Mexico and issuing drilling permits to the company.
BP also noted that it had received 84 licenses for drilling in 12 countries since 2010.
BP asserted that it had been “a longstanding business partner” of the United States government and employed more than 20,000 people in the United States. It said it had invested $52 billion on energy development in America — $20 billion more than its nearest competitor.
The brief includes statements from United States officials, including Michael R. Bromwich, the official responsible for awarding drilling licenses, saying that BP had demonstrated that it was a safe operator. “BP has met all of the enhanced safety requirements that we have implemented and applied consistently over the past year,” Mr. Bromwich said after approving a drilling permit for BP in 2011.