BP (LON: BP) Banned from U.S. Contracts and Leases

Written By Brianna Panzica

Posted November 28, 2012

The U.S. government announced today that oil and gas giant BP (LON: BP) is suspended from new federal contracts until further notice.

The news follows on the heels of BP’s guilty pleas to manslaughter and obstruction of Congress, among other things, and an agreement to pay $4.5 billion in penalties. It’s also the day of arraignment for the three BP employees facing criminal charges.

And today is the day of a sale for roughly 20 million offshore acres in the Gulf of Mexico. BP was notified of the ban this morning and was not allowed to participate as it had planned.

From CNNMoney:

“EPA is taking this action due to BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout,” the EPA said in a statement. “Suspensions are a standard practice when a responsibility question is raised by action in a criminal case.”

The ban will not affect any leases or contracts BP currently has in the U.S. At the beginning of the year, the company completed a round of contracts that will remain immune to the ban and should hold the company over for the time being.

BP is also a major supplier to the U.S. military, earning two supply contracts worth around $1.37 billion just two months ago.

And company officials have expressed optimism that the ban will not hold for too long. After all, it has invested in the U.S. more than any other oil and gas company, and it is responsible for over 23,000 American jobs.

But the EPA has stated that the ban will not be removed “until the company can provide sufficient evidence to EPA demonstrating that it meets federal business standards.”

How long this will take is a matter of the EPA’s judgment. And that will affect how much more it affects the company.

From the Washington Post:

“How big this is depends on how long it lasts,” said Phil Weiss, an analyst at Argus Research. “It’s a negative that they can’t participate in (today’s sale), but it’s not a big concern. If it happens two times, or three times, or ten times, it’s a much bigger concern.”

BP has already lost over 32% since the start of 2010, the year of the oil spill. It’s been recovering slowly, but it’s still down more than 8% this year alone.

Today, following the news, the company closed down 2.25% in London.

BP said it was working closely with the EPA to figure how to solve the problems that sparked the suspension.

The ban may seem a little delayed, since little was done in the last two years to halt BP’s drilling efforts immediately following the blowout, when the company was at its worst and the individuals responsible for the mistakes were still with the company.

But some see it as a long time coming, and the recent criminal charges seem to solidify the necessity for some course of action.

As Rep. Ed Markey, a Democrat from Massachusetts, told the Washington Post:

“When someone recklessly crashes a car, their license and keys are taken away. The wreckage of BP’s recklessness is still sitting at the bottom of the ocean, and this kind of time out is an appropriate element of the suite of criminal, civil and economic punishments that BP should pay for their disaster.”

And now BP is paying, in both lost funds and lost time.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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