BP Plc has won the right to again compete for U.S. contracts and new leases in the Gulf of Mexico, after lingering deficiencies tied to its 2010 oil spill there prompted regulators to bar it from new government business.
The agreement with the Environmental Protection Agency will allow BP, which had been the Pentagon’s biggest fuel supplier, to seek lucrative federal contracts again and bid for oil exploration leases. Next week, a U.S. auction is set for the right to drill in the Gulf, where the London-based company is the second-largest producer.
The end of the suspension is a milestone in BP’s recovery from the worst-ever U.S. offshore oil spill, which forced BP to sell about $38 billion in assets to meet the costs of cleaning up pollution and compensating victims. A judge in New Orleans is considering BP’s degree of responsibility for the disaster and the scale of fines to impose under the federal Clean Water Act.
“It marks another step, in our view, toward the rehabilitation of BP’s reputation,standing and position in the key North American market,” analysts at Deutsche Bank AG said Friday in a note to clients. The timing is “helpful” given the forthcoming licensing round, they said.
Tyson Slocum, director of the Public Citizen’s Energy Program in Washington, said the decision was premature.
This “lets a corporate felon and repeat offender off the hook for its crimes against people and the environment,” Slocum said in a statement. BP “was on criminal probation at the time of the 2010 Deepwater Horizon disaster, and it has failed to prove that it is a responsible contractor.”
The U.S. Bureau of Ocean Energy Management, part of the Interior Department, on Wednesday plans to auction leases covering more than 40 million acres on the Gulf for oil and gas exploration.
Bob Dudley, BP’s chief executive officer, said this month that the Gulf is one of four “key regions” for growth. It took 63.6 million barrels of oil from the Gulf in 2013, second only to Royal Dutch Shell Plc, according to Interior Department data.
The company declined to comment on whether it will participate in the auction next week.
“After a lengthy negotiation, BP is pleased to have reached this resolution, which we believe to be fair and reasonable,” John Minge, chairman and president of BP America, said in a statement.
The company’s 45-page administrative agreement with the EPA announced Thursday will last five years. It obliges BP to comply with a set of safety, ethics and corporate governance requirements. The company will also retain an independent auditor who will conduct an annual compliance review and report to the agency.
“This is a fair agreement that requires BP to improve its practices in order to meet the terms we’ve outlined together,” Craig Hooks, an EPA assistant administrator, said in a statement.
The settlement with the government over the contracting ban won’t have any effect on other lawsuits over the 2010 spill, said Carl Tobias, who teaches mass-tort law at the University of Richmond in Virginia.
A judge in New Orleans is weighing how to assess blame for the disaster among the three main companies involved - BP; Transocean Ltd., the owner of the drilling rig that burned and sank;and oilfield services provider Halliburton Co.
U.S. District Judge Carl Barbier also must determine how much oil spilled, a key measure for determining how much BP will eventually have to pay in Clean Water Act penalties. The oil company could be facing more than $17 billion in fines.
The EPA imposed the contract suspension in 2012 after determining that BP hadn’t fully corrected deficiencies that led to a fatal explosion aboard the Deepwater Horizon rig.
In August, BP sued the EPA in federal court in Houston seeking to lift the suspension. The company’s request was backed by the British government and U.S. Chamber of Commerce, the biggest business lobbying group in Washington. As part of the deal Thursday, BP said it would drop that lawsuit.
The EPA’s lawyers asked a judge Thursday for a “stay pending dismissal” of BP’s lawsuit over the ban, according to court records.
The company pleaded guilty to 11 counts of felony seaman’s manslaughter, two pollution violations and one count of lying to Congress in connection with the spill.
BP agreed to pay $4.5 billion in related criminal and civil penalties and faces additional fines, as well as thousands of claims by individuals and companies. It’s also agreed to resolve most private-party lawsuits as part of an uncapped settlement BP now values near $9.2 billion.
In addition to the spill, the EPA cited the 2005 explosion at a BP-owned Texas City, Texas, refinery and two oil spills in Prudhoe Bay, Alaska, as grounds for the 2012 debarment.
At the time of the April 2010 spill, BP was on probation after pleading guilty in 2007 to a felony air-pollution charge and paying a $50 million fine for the explosion in Texas City that killed 15 workers.
Information for this article was contributed by Jonathan D. Salant, Kathleen Miller, Harry R. Weber and Laurel Brubaker Calkins of Bloomberg News.
Business, Pages 29 on 03/15/2014