U.S. bans BP from new govt contracts after oil spill deal

WASHINGTON Wed Nov 28, 2012 9:06pm IST

A logo is seen at a BP fuel station in London July 27, 2010. REUTERS/Toby Melville/Files

A logo is seen at a BP fuel station in London July 27, 2010.

Credit: Reuters/Toby Melville/Files

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WASHINGTON (Reuters) - The U.S. government temporarily banned BP Plc (BP.L) from federal contracts on Wednesday over its "lack of business integrity" in the Deepwater Horizon oil spill in 2010, a move that the British company had said could force it to rethink its entire U.S. operations.

The U.S. Environmental Protection Agency said the suspension was "standard practice" following criminal actions. Earlier this month, BP plead guilty to criminal misconduct in the Gulf of Mexico disaster, the worst oil spill in U.S. history, and agreed to pay record penalties of $4.5 billion.

The suspension means that BP will not be able to secure any new contracts with the U.S. government, including the lease of new exploration territory in the federal Gulf of Mexico, one of BP's biggest oil production regions globally. Some 20 million acres of offshore territory is being auctioned later Wednesday.

The suspension will not affect existing leases.

"Federal executive branch agencies take these actions to ensure the integrity of federal programs by conducting business only with responsible individuals or companies. Suspensions are a standard practice when a responsibility question is raised by action in a criminal case," the EPA said in a statement. It did not say how long the suspension could last.

In London, BP had no immediate comment.

BP recognized the risk that it could be banned from U.S. government contracts when it agreed earlier this month to plead guilty to criminal charges over the spill, but it said at the time it had "not been advised of the intention of any federal agency to suspend or debar the company in connection with this plea."

BP's Finance Director Brian Gilvary told investors on a November 15 conference call that should a blanket ban be put in place, the company may have to rethink its entire U.S. business.

BP shares ticked lower in London after the news to stand 1.7 percent down on the day at 424 pence, but were still outperforming a weak European energy sector.

Analysts said that without more information about the likely length of the suspension, and a reaction from the company to its interpretation of the move, it was hard to assess the potential impact on the business.

The Interior Department would not award any lease to BP in today's lease Gulf of Mexico lease sale "unless and until" the company resolves its suspension from federal contracts, a department official said on Wednesday.

(Reporting By Jonathan Leff and Karey Wutkowski; additional reporting by Andrew Callus in London and Ayesha Rascoe in Washington; Editing by Gerald E. McCormick, John Wallace and Grant McCool)

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