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EPA Bans BP From Bidding On Federal Contracts

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ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

The Environmental Protection Agency is taking away one of BP's biggest customers. That's after the oil giant has already agreed to plead guilty and pay billions of dollars in criminal penalties for its massive spill in the Gulf of Mexico two years ago.

As NPR's Elizabeth Shogren reports, the EPA is suspending BP's right to enter into new contracts with the federal government.

ELIZABETH SHOGREN, BYLINE: The EPA's decision means for the time being, BP cannot lease any more land offshore to drill for oil or sell more of its fuel to the Pentagon. EPA says it's taking this action because of the lack of business integrity BP showed during the blowout of the Deepwater Horizon and its response to the massive, months-long oil spill that followed. After the suspension, BP's stock tumbled two percent. Eric Smith, director of Tulane University's Energy Institute, says he doesn't expect a major, short-term financial hit for the company.

ERIC SMITH: But it's one of these things that's progressive like cancer. And if they don't settle these pending claims with the government, it could get very nasty over a longer period of time.

SHOGREN: Smith believes that by barring contracts the government is playing hardball in its coming negotiations with BP over civil lawsuits.

SMITH: This is sort of a shot fired across their bow, saying, we're serious about this. You probably want to negotiate seriously.

SHOGREN: BP refused to provide an interview. But in a statement, it stressed that it's already been busy answering the EPA's questions about how it's improved its safety practices. BP says the EPA told the company it's preparing an agreement that could lift the suspension soon.

The EPA says the suspension could continue for months as legal proceedings grind forward. But there was an early sign today of how serious a blow this could potentially be to the company. BP is the biggest player in the Gulf of Mexico, but the government held a big auction of leases today in New Orleans. And experts were surprised that BP didn't make any bids.

The government had been doing business with BP up until now. And some officials say they are seeing positive changes. Tommy Beaudreau is the head of the Federal Bureau of Ocean Energy Management.

TOMMY BEAUDREAU: I believe BP is genuine and sincere about reforming the way it does business offshore and making real changes not only to its practices but its culture.

SHOGREN: Beaudreau says BP made commitments to improve its safety practices, that's why more than a year ago Beaudreau allowed BP to resume its operations in the Gulf of Mexico. BP will be allowed to continue drilling on the leases it already holds, and it will be able to keep providing fuel to the Pentagon under existing contracts.

University of Michigan law professor David Uhlmann says that both the government and BP have big incentives to get back to doing business together.

DAVID UHLMANN: For a company like BP, it would have a huge effect on its bottom line if it had to go without government contracting for any length of time. But precisely that reason, BP is going to do whatever the government asks it to do in terms of correcting the conditions that led to the Gulf oil spill.

SHOGREN: Uhlmann worked at the Justice Department for many years in its Environmental Crimes division. He predicts that BP will be back to signing contracts with the government after not too much time. Elizabeth Shogren, NPR News, Washington.

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