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Insideepa.com - EPA Faulted Over BP Debarment

inside-epa-logoEPA is facing criticism over its debarment decision blocking oil giant BP from entering into any new contracts due to its criminal guilty pleas stemming from the 2010 Gulf spill, with the company suing to reverse the debarment and some industry officials saying the debarment is intended to increase EPA leverage in a pending case over civil penalties.

EPA’s debarment order is just a way that they are “thumping their chest” to give the Justice Department (DOJ) leverage in its pending civil suit against BP, which seeks $17 billion in damages in addition to the $4 billion penalties the company has already paid in the criminal case, Breitling Oil and Gas CEO Chris Faulkner told Fox Business News recently.

Faulkner’s comments came shortly after BP filed an Aug. 12 complaint challenging EPA’s decision to block the company from winning new contracts with federal agencies due to what the agency characterized as a “lack of business integrity” in the company’s response to the massive 2010 Deepwater Horizon spill in the Gulf of Mexico.

The company alleges that EPA’s temporary suspensions and disqualification exceed the agency’s authority under the Clean Water Act (CWA), are in conflict with the administrative record, and are overly punitive, arbitrary and capricious, and in abuse of agency discretion under the Administrative Procedure Act (APA).

“EPA wields extraordinary power in making suspension and disqualification decisions and must scrupulously follow the law and legal standards that govern its actions,” BP says in its Aug. 12 complaint in BP Exploration & Production Company, et al., v. Gina McCarthy, filed in the U.S. District Court for the Southern District of Texas. “It has manifestly failed to do so in this matter.”

In the suit, BP — a major U.S. government fuel supplier — is challenging EPA’s Nov. 28, 2012 and Jan. 4 suspensions from participating in new federal procurement contracts and the agency’s separate decision Feb. 1 citing its misdemeanor CWA conviction and “seriously improper conduct” and disqualifying BP’s Houston headquarters from consideration for any new federal contracts or other benefits.

BP in December agreed to $4 billion in fines to settle a suite of criminal charges against the company, including 11 counts of felony manslaughter, one count of felony obstruction of Congress and misdemeanor charges under the CWA and Migratory Bird Treaty Act. The settlement included a five-year probation period during which time BP is subject to strict federal oversight.

But BP and DOJ lawyers are still battling in a non-jury trial in a federal district court in New Orleans over the scope of the company’s civil penalties, which the CWA and Oil Pollution Act prescribe based on the volume of spilled oil. DOJ lawyers have indicated they could seek as much as $17 billion in civil penalties for the spilled oil, depending on what the court determines was released into the Gulf.

Another factor up for consideration is whether BP was negligent, which would subject it to an $1,100 per barrel fine, whereas it is found to have been grossly negligent it is subject to a $4,300 per barrel penalty.

State and federal officials have reportedly offered to settle the civil charges for $16 billion, including fines and natural resource damages, but the first phase of the trial wrapped up in April without a settlement.

The second phase of the trial is slated to begin in September, according to published reports.

But environmental groups are calling for significantly more in civil penalties — up to $60 billion — than what DOJ is seeking. They have also pushed EPA to permanently debar BP from entering into any new contracts with federal agencies, following EPA’s November 2012 suspension of the company, which cited “lack of business integrity” in handling the spill.

Faulkner said EPA’s claim that BP lacks business integrity is “very contradictory,” because the company already has $1.4 billion in existing federal contracts and has won a host of new oil and gas leases from the Department of Interior since the spill.

But Tyson Slocum of Public Citizen, which petitioned EPA for the debarment, said he does not believe that convicted felons should be given government contracts. EPA is following the letter of the law. BP pleaded guilty to felony counts, including manslaughter, and obstruction of justice, he said.

And he said that EPA should continue the debarment over the five-year criminal probation period that BP agreed to.