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BP Suspended By EPA From New Contracts With Federal Government

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AP File
AP File

BP has been barred from doing new business with the United States government for misdeeds during the 2010 Gulf of Mexico rig disaster and oil spill, the Environmental Protection Agency said Wednesday.

Earlier this month, BP pleaded guilty to more than a dozen felony counts related to the Deepwater Horizon disaster, including 11 counts of manslaughter for negligence that caused the deaths of 11 workers on the doomed Deepwater Horizon rig. The company also pleaded guilty to felony obstruction of justice for lying to Congress over the amount of oil spilling into the ocean from its runaway undersea well.

"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," the agency said in a statement on its website.

The ruling will temporarily bar BP from winning any new federal oil leases, the Interior Department said in a statement. The Defense Department did not immediately respond to a request for comment on the impact of the ruling on BP's military fuel contracts. BP is one of the largest holders of federal oil leases and has deep ties to the U.S. military, with an estimated $1.35 billion in military fuel contracts for 2011.

The EPA's decision came the same day that the Interior Department planned to auction off roughly 20 million new acres of federal waters in the Gulf of Mexico for oil exploration. BP will not be allowed to bid on those parcels, the department said.

The ban will last until BP can provide "sufficient evidence" that it meets federal business standards, the EPA said.

Rep. Ed Markey (D-Mass.), who harshly criticized BP's safety and environmental record during the 2010 spill, applauded the contract suspension. BP's guilty plea included admissions that a company executive deliberately provided false information to Markey's congressional inquiry into the size of the undersea leak.

"When someone recklessly crashes a car, their license and keys are taken away," Markey said in a statement.

In a statement Wednesday, BP says it had been in "regular dialogue" with the EPA over how to meet the EPA's business standards and avoid the ban. The company said it has instituted significant reforms in response to the spill, including making "key leadership changes," and creating a new internal safety and risk management division.

BP noted that the federal government already has granted it more than 50 new offshore leases in the Gulf of Mexico since the end of the spill, and that the company has seven rigs in the gulf that are "drilling safely." BP said it has invested more than $52 billion in the U.S. over the past five years and employs 23,000 Americans.

"As BP's submissions to the EPA have made clear, the company has made significant enhancements since the accident," the BP statement says.

The EPA declined to comment on its negotiations with BP. But the agency said in a statement that the government contract ban could continue until the government concludes its civil litigation against the company. Earlier this month, BP settled federal criminal charges over the spill for $4.5 billion.

In its civil suit against BP, the federal government is seeking additional penalties for environmental damages and safety violations related to the blowout and spill that could exceed $20 billion. If the case continues to trial, a full resolution could be months or years away.

In a statement earlier this month, BP chairman Carl-Henric Svanber vowed that the company would "vigorously defend" itself against the remaining civil claims.

Analysts said a lengthy government contract ban could seriously damage BP's bottom line. Phil Flynn, a senior energy analyst with the Price Futures Group, said that BP has signaled an intention to ramp up their U.S. production -- a move that could be badly undercut by a ban on new lease sales.

"If this lasts an extended period of time, I really do think it's going to hurt BP," Flynn said.

Conservation groups and others who have clashed with BP in the past over its safety and environmental record, meanwhile, hailed the EPA decision as a major step in the right direction.

Brent Coon, a Houston attorney who filed a class-action suit against BP on behalf of victims of a 2005 refinery explosion in Texas City, Texas, that killed 15 and injured more than 170, said BP has repeatedly flouted safety regulations but never faced serious consequences for its behavior.

"BP has long been known as a serial violator of state and federal safety regulations," Coon said in an email to The Huffington Post. "These repeated offenses have left dozens of dead workers and injuries to hundreds more, yet the United States government has never undertaken any action other than fining them, time and time again."

BP pleaded guilty to felony charges of negligence in the Texas City explosion, and was fined $50 million by federal safety regulators. No individuals were prosecuted for negligence and the company's government contracts were not impacted.

Wednesday's debarment action, together with the criminal charges filed against BP rig managers and a senior vice president for negligence and obstruction of justice, represent much tougher measures than in the past, Coon said.

"Had these types of actions been taken in years past, as our firm had urged in the Texas City disaster, BP may have altered their behavior sooner and the Deepwater Horizon tragedy would have never occurred," he said. "Hopefully denying business opportunities to a company which flagrantly ignores safety will not only change their behavior, but set an example for the industry, which as a whole has much room for improvement."

UPDATE: 12:44 p.m. -- This story has been updated to include a response from BP.

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