U.S. EPA announced today the suspension of BP PLC and its subsidiaries from new federal contracting, citing the "lack of business integrity" that led to the 2010 deadly explosion of the company's rig and massive oil spill in the Gulf of Mexico.

The announcement comes weeks after BP pleaded guilty to several criminal charges -- including 11 felony counts of manslaughter -- under an agreement reached with the Justice Department over its role in the 2010 Deepwater Horizon disaster (Greenwire, Nov. 15).

The decision also effectively barred the company from winning federal oil and gas leases in a western Gulf sale that offered roughly 20 million acres.

BP historically has been one of the largest bidders in the Gulf -- submitting $27 million in in high bids at the last western Gulf sale a year ago -- but did not submit bids at today's sale, which netted $134 million.

In a statement to media, EPA said it was designated as the lead agency for "suspension and debarment" actions and that today's decision was made "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 agency said.

It's unclear how long BP's suspension will last. Unlike debarments -- which prohibit companies from contracting with the government for a set period of time -- suspensions are temporary actions that generally last a maximum of 18 months.

BP's suspension, which also covers federal grants and other transactions, will last "until the company can provide sufficient evidence to EPA demonstrating that it meets federal business standards."

But an EPA spokesman said legal proceedings can extend that time frame. A court is expected to soon accept the company's plea agreement in the criminal charges, but BP also faces civil charges. The civil trial is set to begin in February unless the company strikes a deal with the Justice Department before then.

BP today said it has been in "regular dialogue" with EPA and has provided more than 100 pages of documentation addressing its "present responsibility" to conduct business with the U.S. government. EPA said it will soon issue a draft administrative agreement that would effectively lift the suspension, BP said.

"As BP's submissions to the EPA have made clear, the company has made significant enhancements since the accident," the company said. "BP has to date spent more than $14 billion in operational response and clean-up costs."

Since the Gulf spill, BP has received more than 50 leases in the Gulf and currently holds 700 blocks with seven operating rigs. Over the past five years, it has invested more than $52 billion in the United States, more than any other oil and gas company, it said. It employs 23,000.

The suspension won't affect existing agreements the company may have with the government.

According to The Washington Post, BP in 2011 was the largest supplier of fuel to the U.S. military, with contracts worth about $1.35 billion. BP also claims to be the largest leaseholder and producer in the Gulf, which is the leading source of crude from federally owned tracts.

Bureau of Ocean Energy Management Director Tommy Beaudreau this morning said BP did not bid in today's western Gulf lease sale, but even if it had, the agency would not have awarded it any leases until the suspension was resolved.

"I believe BP is genuine and sincere about reforming the way it does business offshore and making changes not only to its practices but its culture," he said when asked whether BP "lacked business integrity." BOEM was not involved in EPA's decision, he said.

"As with all operators, we need to see continuous vigilance on safety," he said. "I think BP has made significant progress in that direction, and it is for that reason we have permitted BP to conduct work over the last year or so. That is not to say there is not more work for BP and others to do to maintain that vigilance."

As part of the oil spill settlement announced earlier this month, BP will pay $4 billion to resolve criminal claims, which several sources said includes the largest-ever fine for criminal charges in U.S. history.

In addition to the manslaughter counts, BP will plead guilty to one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act and one felony count of obstruction of Congress.

The settlement also requires the company to "further enhance the safety of drilling operations in the Gulf of Mexico," including third-party auditing and working with regulators to develop new technologies for deepwater drilling safety.

The April 2010 explosion aboard the Deepwater Horizon rig resulted in 11 deaths and released nearly 5 million barrels of crude into the Gulf, the nation's largest-ever spill.

Reactions

The news was met with a mixture of praise and surprise by lawmakers on Capitol Hill.

Rep. Ed Markey (D-Mass.), who last fall urged the government to consider barring BP from new contracts, said today's decision was "the right thing to do."

"When someone recklessly crashes a car, their license and keys are taken away," said Markey, who is the ranking member of the Natural Resources Committee. "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."

Sen. Mary Landrieu (D-La.) this morning said news of the decision was "a bit of a surprise" and that she had not been notified.

"I'm not sure what triggered it, but we'll look into it," she said at a natural gas briefing this morning in Washington, D.C.

Sen. Lisa Murkowski (R-Alaska) said she was unaware of the decision but would be looking into it soon.

Environmentalists and watchdog groups seemed surprised today by EPA's announcement. Indeed, suspensions and debarments are somewhat rare, prompting the Government Accountability Office to release a report last year suggesting agencies devote more resources to the effort.

Since then, the Obama administration has put a renewed focus on suspending contractors, as part of an effort to curb waste. In fiscal 2011, agencies issued more than 3,000 suspensions and debarments, up 30 percent from fiscal 2009 (Greenwire, Sept. 19).

Oceana, an environmental group that has opposed offshore drilling in the Gulf, said it was "pleased" with the decision but that it offered "little solace," coming the same day that Interior is offering 20 million acres for lease in the Gulf.

"Overall, President Obama is missing the lesson of the Deepwater Horizon disaster, which is that offshore drilling is inherently dirty and dangerous and needs to be phased out," said Matt Dundas, acting campaign director at Oceana.

One oil and gas attorney in Washington, D.C., said he expects BP to file a lawsuit challenging the EPA decision.

Lease sale nets $134M

Today's lease sale in the western Gulf drew $134 million in winning bids, which is far less than the $338 million Interior sold in its last western Gulf sale a year ago (E&ENews PM, Dec. 14, 2011).

Interior officials said they were not surprised at today's bid results and that last December's sale -- the first since the Deepwater Horizon spill -- could have been a result of pent-up industry demand.

Beaudreau said the 13 companies that bid are a reflection "of how strong and how central the Gulf of Mexico is" to the United States' energy portfolio.

In total, the United States has seen about $2 billion in Gulf investments in the three lease sales that have occurred since the spill.

Companies submitted 131 bids on 116 blocks, suggesting the vast majority of tracts did not garner competitive bidding. The highest bid was $17 million from Chevron USA Inc.

BOEM estimated that the proposed lease sale could result in the production of 116 million to 200 million barrels of oil and 538 billion to 938 billion cubic feet of natural gas.

The next lease sale will include 38 million acres in the central Gulf and is scheduled for March 20.

Reporter Hannah Northey contributed.