Bloomberg BNA

BP, affiliates sue EPA for suspending contracting privileges following spill

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Courtesy of Bloomberg BNA

BP Exploration & Production Co. Inc. and several other affiliates, along with BP plc, sued the Environmental Protection Agency Aug. 12, challenging the agency's decision to suspend the company from federal contracts following the 2010 Deepwater Horizon explosion and oil spill (BP Exploration & Production Co. Inc. v. McCarthy, S.D. Tex., No. 13-cv-2349, 8/12/13).

In the lawsuit filed in the U.S. District Court for the Southern District of Texas, BP said it was negotiating an administrative agreement with EPA to resolve issues stemming from the oil spill when the agency broke off discussions and suspended 21 BP affiliates under from federal contracting on Nov. 28, 2012, and Jan. 4, 2013, using its authority under Section 1368 of the Clean Water Act.

The company claims most of those affiliates had no relation to the Deepwater Horizon accident and asked the court to overturn the suspensions.

“EPA's decision to suspend did not address the overwhelming evidence and record of BP's present responsibility as a government contractor and leaseholder, and did not attempt to explain how or why immediate suspension was necessary to protect the public interest, as federal law requires,” the company said in its complaint.

BP agreed in November 2012 to pay $4.5 billion in a settlement the Justice Department called the largest resolution of a criminal case in U.S. history (221 DER A-43, 11/16/12).

The settlement requires BP to pay a fine of $1.25 billion and make $2.7 billion in additional payments for environmental restoration projects and research. The company also must undertake a number of safety-related reforms, including hiring an independent auditor to conduct safety reviews and an ethics monitor to enforce the company's code of conduct. BP also agreed to pay a civil penalty of $525 million to the Securities and Exchange Commission to resolve charges related to reports on the amount of oil flowing from the Macondo well that the company filed with the SEC in the weeks after the April 2010 accident.

No Ongoing Investigation of BP

The company argued that EPA only has the authority to suspend it from contracting for the duration of an ongoing investigation, which was closed as part of BP's settlement with the Justice Department.

“EPA had long known of the events and conduct alleged to be the basis for suspension and, despite this, spent several months in the summer and fall of 2012 negotiating an administrative Agreement with BP to resolve any and all potential suspension and debarment issues,” BP said. “EPA also chose to suspend Plaintiffs even though EPA knew that nearly all of the suspended BP entities had no involvement in the Deepwater Horizon accident or its aftermath.”

EPA has not explained why it has suspended the various BP affiliates from contracting or what those entities need to do to have the suspension lifted, BP said.

BP also argues that EPA inappropriately designated BP Exploration & Production's Houston headquarters as the site of the Clean Water Act violation the triggered the suspension rather than the facilities in the Gulf of Mexico.

BP Defends Business Record

BP said it has a “long-standing business relationship with the federal government” and that suspending its contracting privileges is not warranted.

EPA said BP displayed a “lack of business integrity” in its response to the Deepwater Horizon accident when it suspended the company from receiving new federal contracts in November 2012 (229 DER A-35, 11/29/12).

However, the federal government has repeatedly purchased fuel from the company and awarded it drilling leases in the Gulf of Mexico since the April 20, 2010, oil spill, and each time BP was determined to be a responsible contractor, the company said in its complaint.

“BP immediately accepted responsibility for its role in the accident and promptly implemented numerous remedial and corrective measures to improve its operations and prevent a similar occurrence,” the company said. “As a result, the federal government continued to do business with BP.”

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