Media Moves

BP allowed to drill again

March 14, 2014

Posted by Liz Hester

BP is back. After nearly four years of suspension after a disastrous Gulf of Mexico oil spill in 2010, the company is now able to sign new drilling leases.

Here’s the story from Politico by Darren Goode:

BP will be allowed to sign new leases to drill for oil and gas in the Gulf of Mexico under a deal announced Thursday with the U.S. government that resolves outstanding issues tied to the British giant’s role in the 2010 Deepwater Horizon disaster.

The agreement settles “all suspension and debarment actions against BP” that prevented the company from doing business with the federal government, the EPA announced. The suspension stemmed from the April 2010 accident that killed 11 workers and gushed nearly 5 million barrels of oil, fouling miles of Gulf bottom, beaches and coastal marsh.

The announcement came just six days before the Interior Department is scheduled to hold a lease sale for 40 million acres in the Gulf. BP will now be eligible to participate, Senate Energy and Natural Resources Chairwoman Mary Landrieu (D-La.) said in a statement welcoming the agreement.

The Wall Street Journal added these details of BP’s new deal in a story by Tom Fowler:

Under the terms of the deal announced Thursday, BP has agreed to heightened safety, operations, ethics and corporate governance requirements, the company said.

BP must pay an independent auditor for the next five years to conduct annual reviews and report back to the government on compliance with the agreement, according to the EPA. The agency also said it can take corrective action if it believes BP breaches the agreement.

Thursday’s agreement means BP will be eligible to bid in the next auction of Gulf of Mexico oil and gas leases, which will be held on Wednesday.

The EPA blocked BP from obtaining new government contracts beginning in November 2012, shortly after the company and the U.S. Justice Department entered into a $4.5 billion settlement of all criminal and some civil charges related to the oil spill.

At the time, BP said it expected the suspension would be brief. But in August 2013, BP sued the agency for refusing to lift the ban even after the criminal case against the company had been closed.

In court filings, EPA officials said BP’s extended contract ban was because of the company’s conduct during the criminal investigation of the oil spill, as well as past safety pledges that were broken in the wake of a deadly refinery explosion in Texas and oil pipeline leaks in Alaska.

Clifford Krauss wrote in the New York Times that environmental groups were not happy about the new arrangement:

BP had sued to have the suspension lifted, and now the agreement will mean hundreds of millions of dollars of new business for the company. But even more important, oil analysts said, it signifies an important step in the company’s recovery from the accident, which has been costly to its finances and reputation.

“After a lengthy negotiation, BP is pleased to have reached this resolution, which we believe to be fair and reasonable,” said John Mingé, chairman and president of BP America. “Today’s agreement will allow America’s largest energy investor to compete again for federal contracts and leases.”

That prospect elicited sharp criticism from environmental groups. “It’s kind of outrageous to allow BP to expand their drilling presence here in the gulf,” said Raleigh Hoke, a spokesman for the Gulf Restoration Network, based in New Orleans.

The Washington Post story by Steven Mufson pointed out that BP pleaded guilty to criminal charges in 2012:

The EPA first suspended BP from new federal contracts on Nov. 28, 2012, citing its “lack of business integrity.” After BP pleaded guilty to criminal charges in a $4.5 billion settlement with the Justice Department, the EPA extended its ban. On Nov. 26, the agency again extended its ban on BP and 25 of its subsidiaries.

The five-year agreement announced Thursday requires BP to retain an independent auditor approved by that EPA who will conduct an annual review of BP’s compliance with a set of safety, ethics and corporate governance guidelines. The EPA said the agreement gives it the authority to “take appropriate corrective action in the event the agreement is breached.”

The suspension did not affect BP’s existing agreements with the government, and BP said it has invested $50 billion throughout the United States over the past five years.

But the agreement Thursday allows BP to add to its extensive lease holdings. In addition, BP can now bid on military fuel-supply contracts; previously the company was one of the U.S. military’s leading suppliers of fuel.

It looks like BP is out of the penalty box. The ability to bid on new business should help stop the earnings decline the company has experienced. On Feb. 4, BP reported a 25 percent drop in fourth-quarter profit. While shareholders are likely to cheer the new revenue potential, let’s hope BP is able to execute without damaging the environment.

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