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Latest Sanction Against BP Goes Beyond Gulf Spill

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The broad sanctions announced Wednesday reflect a mistrust for BP's operations that has been growing over more than a decade.

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When the Obama administration temporarily banned BP (NYSE:BP) from federal contracts Wednesday, it pointed to BP's "lack of business integrity" and conduct relating to the 2010 Deepwater Horizon explosion and spill.

The sanction, however, has been years in the making.
BP has been criminally convicted in four previous cases - including a 2005 explosion in Texas that killed 15 workers - and the EPA has been considering broader debarment proceedings against the company since at least 2005. The agency had actually been nearing a decision on a contract ban in January 2010, just a few months before the Deepwater Horizon tragedy unfolded, killing 11 workers and sending more than 200 million gallons of oil into the Gulf of Mexico.

"This is not just about the Deepwater Horizon, but about a whole lot of things and a whole lot of parts of BP," said a former government official familiar with the debarment process. "It wasn't just narrowly scoped... they are looking at it as a systemic corporate-wide issue."
A limited suspension of government contracts for a specific facility or subsidiary operations, called suspension and debarment, is standard practice after a criminal conviction.

BP pleaded guilty on November 15 to federal criminal charges of manslaughter and lying to Congress and agreed to pay more than $4 billion in fines relating to the Deepwater Horizon accident. Three of the company's managers have also been criminally charged.

But the broad sanctions announced Wednesday target the BP corporation writ large - the British-based parent company and 21 international subsidiaries are included - and reflect a mistrust for BP's operations that has been growing over more than a decade.
In this case, experts close to the case say, the timing of the government's announcement was significant.

It came just hours before the government sold new rights to drill in the Gulf of the Mexico and seems intended to prevent BP, the largest leaseholder in the Gulf, from expanding its operations there until all of its problems are resolved.

"Suspensions are always timed to prevent something from happening," said Jeanne Pascal, a former EPA debarment attorney who led the government's investigation into BP from 1997 until she retired in 2010.

"A debarment says you have chronic bad behavior, and we think you present chronic risk for the government and that you will continue this behavior," said Pascal. "The immediate need was the issuance of new leases (Wednesday) in the Gulf of Mexico."

Wednesday's actions represent the government's effort to protect its fiscal resources and protect the public economic interest by not using taxpayer money to support actions that could cost the government more money later on.

After several past BP accidents, including two oil spills in Alaska and close calls at several US refineries, private consultants and government investigators have pointed to wide-ranging problems within the company's culture. The critics have warned that BP has consistently prioritized speed and profit-making over safety and regulatory compliance.

The type of suspension ordered Wednesday is a part of what the government calls a "discretionary" debarment, which means it is considering this broader "corporate culture of noncompliance" and longer history.

While the EPA is the lead agency, its debarment decision affects the Department of Interior and Department of Defense, among other agencies. BP is among the US's largest corporate contractors and supplies more than $1 billion per year worth of fuel to the military.
The temporary suspension order issued Wednesday is the first step in a still-to-be-made decision about whether BP should be formally debarred, or banned entirely from contracts for a specified length of time.
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