On Wednesday, the U.S. government banned BP Plc from new federal contracts. The reason for the ban? BP’s “lack of business integrity” in the 2010 Deepwater Horizon oil spill. The following is the announcement by the Environmental Protection Agency:
The U.S. Environmental Protection Agency (EPA) today announced that it has temporarily suspended BP Exploration and Production, Inc., BP PLC and named affiliated companies (BP) 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. On November 15, 2012, BP agreed to plead guilty to eleven 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 2010 Deepwater Horizon disaster that killed 11 people and caused the largest environmental disaster in U.S. history.
For the Deepwater Horizon investigation, EPA was designated as the lead agency for suspension and debarment actions. 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.
The BP suspension will temporarily prevent the company and the named affiliates 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. The suspension does not affect existing agreements BP may have with the government.
The British energy conglomerate has agreed to pay $4.5 billion in penalties, including a record $1.256 billion criminal fine.
So what does this mean for BP? The Company is currently the largest investor and leaseholder of deep water tracts in the Gulf of Mexico. Moreover, BP is both the number one supplier of fuel to the United States military and the single largest buyer of oil in the entire world. In the event that civil courts find BP to be grossly negligent, the Company could incur costs of an additional $20 billion to settle ongoing federal and state civil litigation.
We believe that BP’s corporate actions in handling Deepwater Horizon disaster will provide a model case study for corporate investment in business integrity. While it’s always painful to have to disclose significant corporate expenditures to the financial community, the loss of future business for BP could very well make it very difficult for the company to recover.