BP Can Again Bid for U.S. Leases, Contracts After Spill

BP Plc (BP/) won the right to again compete for U.S. contracts and for new leases in the Gulf of Mexico, where its massive 2010 oil spill prompted regulators to bar it from new government business. BP’s agreement with the Environmental Protection Agency will allow Europe’s third-largest oil company to seek lucrative federal contracts and leases for oil exploration on federal lands or waters. Next week, a U.S. auction is set for the right to drill in the Gulf, where the spill occurred. The end of the suspension may help BP expand its foothold in the Gulf, where its existing leases have let it remain the region's second-biggest oil producer. The U.S. Bureau of Ocean Energy Management, part of the Interior Department, on March 19 plans to auction leases covering more than 40 million acres on the Gulf for oil and gas exploration. BP’s 63.6 million barrels produced in the Gulf in 2013 was second only to Royal Dutch Shell Plc (RDSA), according to Interior Department data. Bob Dudley, BP’s chief executive officer, said this month the Gulf is one of four “key regions” for production growth. The company is targeting the Gulf for future oil and natural gas exploration and production, he said. The company declined to comment yesterday 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 Mingé, chairman and president of BP America, said in an e-mailed statement.

Agreement Terms

The company’s 45-page administrative agreement with the EPA announced yesterday will last five years. It requires 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, Carl Tobias, who teaches mass-tort law at the University of Richmond inVirginia, said in an e-mail yesterday. “This settlement of the government-contract ban is apart from the rest of the litigation over the spill and wasn’t contingent on the outcomes in the other parts of the case,” Tobias said.

Transocean, Halliburton

A judge in New Orleans is weighing how to assess blame for the disaster among the three main companies involved -- BP, Transocean Ltd. (RIG), the owner of the drilling rig that burned and sank, and oil-field services provider Halliburton Co. (HAL) 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 drilling rig, triggering the largest U.S. offshore oil spill. Tyson Slocum, director of Public Citizen’s Energy Program, said in a statement that lifting the suspension was premature. The “announcement lets a corporate felon and repeat offender off the hook for its crimes against people and the environment,” said Slocum, of the.health and safety advocacy group in Washington. “This is a company that 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 deserving of lucrative taxpayer deals.”

‘Last Thing’

“If I lived on the coast of Alabama or Louisiana, the last thing I’d want is for BP to have the opportunity to bid” on new drilling leases in the Gulf, David Berg, a Houston lawyer who has tracked the litigation and isn’t involved in it, said in a phone interview. “You just do not want BP free to drill in the very waters they’ve destroyed.” 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 yesterday, BP said it would drop that lawsuit. The EPA’s lawyers asked a judge yesterday for a “stay pending dismissal” of BP’s lawsuit over the ban, according to court records.

Lawsuit Dismissal

The EPA and BP have “entered into an administrative agreement that resolves the suspension and statutory disqualifications challenged by BP in this action, rendering this matter moot,” Robert Dreher, a lawyer in the Justice Department’s environmental division, said in the filing. Dreher said the parties “will execute a stipulation of dismissal” within seven days. The government suspended BP’s rights to seek federal contracts after 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, based in London, agreed to pay $4.5 billion in related criminal and civil penalties and faces additional fines, in addition to thousands of claims by individuals and companies. It’s also agreed to resolved most private-party lawsuits as part of an uncapped settlement BP now values at about $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.

Texas City Explosion

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. BP has four major producing hubs in the Gulf -- Mad Dog, Thunder Horse, Atlantis and Na Kika. The company has boosted the number of drilling rigs in the region to 10 from six before the Deepwater Horizon accident. Underlying production grew for the first time since 2009 in the Gulf last year. The push into the Gulf comes as BP has struggled to make its onshore U.S. business profitable. It announced plans last week to separate the unit that handles output in the lower-48 states to try and make it more competitive with smaller producers. The company, once the U.S. Defense Department’s top fuel supplier, sold $38 billion in assets to shore up its balance sheet after the Gulf spill. It plans another $10 billion in divestitures by the end of 2015, selling less profitable fields to focus on bigger returns instead of volume targets. BP’s fourth-quarter profit fell from a year earlier on declining output and refining margins. The case is BP Exploration & Production Co. Inc. v. McCarthy, 4:13-cv-O2349, U.S. District Court, Southern District of Texas (Houston). To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Jim Snyder in Washington at jsnyder24@bloomberg.net; Jef Feeley in Wilmington, Delaware atjfeeley@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Jon Morgan at jmorgan97@bloomberg.net Tina Davis Source :  http://www.bloomberg.com/news/2014-03-13/u-s-lifts-bp-s-ban-on-contracting-imposed-after-spill.html