BP has been chastised by the U.S. Environmental Protection Agency (“EPA”) for its “lack of business integrity” with a temporary suspension on getting new federal contracts announced on November 28, 2012. Although the ban will not affect BP and its affiliates’ existing contracts with the federal government, it is suspended from seeking “new federal government contracts, grants or other transactions.” The EPA, which is the lead agency for “suspension and disbarment actions” related to the Deepwater Horizon investigation, noted that suspensions are a standard practice in response to “responsibility questions” arising from criminal cases.
As discussed in our previous blog post, BP announced in mid-November that it would plead guilty to several criminal charges and pay $4 billion in fines related to the 2010 Deepwater Horizon explosion, and resulting oil spill. We noted that BP faced risks of additional future fines and penalties. Since companies cannot be punished in the same way as individuals, fines, penalties and suspensions from activities are noteworthy punitive measures.
While the allegation of a “lack of business integrity” may sound weighty, we will have to await further EPA announcements to know if this temporary ban solely reflects this stage of the investigation, or if it may be followed by additional suspension actions. According to the Financial Times, the suspension could be lifted if BP provided evidence of its meeting federal business standards, and U.S. government regulations make it unlikely the ban would exceed 18 months. BP’s response to the temporary suspension revealed that BP has already submitted a responsibility statement to the EPA and expects to receive a draft administrative agreement soon which, if agreed upon, could lift the suspension. Meanwhile though, BP will be unable to participate in activities such as lease sales in the Gulf of Mexico, a key operational area where BP notes it is the largest deepwater lease holder.
BP will go to court on civil claims related to Deepwater Horizon in February 2013, which could result in civil penalties in the billions of dollars if BP is found guilty.