BP’s Back: EPA Lifts Ban on Gulf Operations For Oil Giant
Oil and gas supermajor BP plc (NYSE:BP) appears to be back in the good graces of the U.S. government. On Thursday, the Environmental Protection Agency agreed to lift a ban on BP’s ability to seek new oil leases in the Gulf of Mexico that was implemented in 2012 as a result of the 2010 Deepwater Horizon disaster, the largest oil spill in U.S. history. The agreement resolves “all matters related to the suspension, debarment, and statutory disqualification of BP following the Deepwater Horizon accident and oil spill.” The new agreement will last for five years and is subject to new safety, ethics, and corporate governance requirements.
Importantly, the agreement will allow BP to once again enter into new contracts with the U.S. government. BP was banned from winning new contracts with the federal government in 2012 as the EPA accused the company of a “lack of business integrity.” That year, before the ban went into effect, BP was awarded more than $2.5 billion in government contracts, according to data compiled by Bloomberg. The next year, BP reported a net loss related to federal contracts of $654 million.
The agreement comes in the wake of a lawsuit filed by BP aimed at lifting the EPA’s ban. “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, Inc., in a statement. BP agreed to drop the suit in light of the agreement.
The news was good, but not a short-term windfall for the oil and gas company. Shares were flat in early afternoon trading after the announcement. In the long-term, however, the agreement will allow BP to remain competitive in the Gulf Region and in the U.S. market, where the government is a major consumer of energy products. In BP’s absence, Royal Dutch Shell (NYSE:RDSA)(NYSE:RDSB) rose to become the largest supplier of fuel to the government, landing contracts worth $2.86 billion in 2012.
It’s not all sunshine and happiness for BP, though. Earlier this week, the oil company was once again denied its request to halt payments of its $9.2 billion settlement with victims of the 2010 Gulf of Mexico oil spill. BP requested the delay so that it could propose and implement new accounting safeguards aimed at reducing fraud at the court-supervised claims administration, but U.S. District Judge Carl Barbier denied the request without further explanation on Tuesday, according to Bloomberg. BP was previously denied a similar request on the grounds that the current accounting standards were ones that both the company and claimants had agreed to when they first settled.
According to Patrick Juneau, the court-appointed settlement fund administrator, BP has so far paid out about $3.81 billion of the $9.2 billion class-action settlement it reached with Gulf-area victims of the spill.