One of the most intelligent investigative journalists I have read is Abrahm Lustgarten of ProPublica. His area of expertise is the oil and gas industry. I discovered him while researching the issue of NORM (naturally occuring radioactive materials) in the exploration of oil in shale. His articles and sources were more valuable than state and federal government sites.
On May 21, 2010, Mr. Lustgarten examined the problem with debarment in the matter of British Petroleum's criminal record and recent catastrophic release of oil into the Gulf. In EPA Officials Weigh Sanctions Against BP's US Operations Lustgarten details not only the history of BPs gross negligence but also the legal and potentially lethal consequences of debarment by the EPA.
Over the past 10 years, BP has paid tens of millions of dollars in fines and been implicated in four separate instances of criminal misconduct that could have prompted this far more serious action. Until now, the company's executives and their lawyers have fended off such a penalty by promising that BP would change its ways.
That strategy may no longer work.
According to Lustgarten, the EPA has indicated that it has "temporarily suspended" negotiations with BP over debarment/suspension related to the companies previous criminal and negligent behavior. BP was playing hardball prior to April 20, 2010 and believed that it could get very favorable terms. The suspension of negotiations was a shot over the bow of BP to let them know things have changed dramatically and they are no longer in the cat bird's seat.
Agencies have the authority pursuant to Federal Aquisition Regulation Subpart 9.4 Debarment, Suspension and Inelibibility, See also 68 FR 66533 to Disbar or Suspend a Contractor from doing business with federal agencies or on federal lands. These penalties can be anywhere from a short period of time under suspension, suspending one facility, or debaring the entire company from doing business. The final penalty is known as discretionary debarment and
many experts had considered highly unlikely because BP is a major supplier of fuel to the U.S. military.
Emphasis on had considered because that was prior to the latest calamity. Some officials would argue -- and, normally, rightly so, that debarring BP USA could pose a national security risk -- not only because of the supply to the military but also the effect on the overall economy. I'm not completely pursuaded.
BP is the largest oil and gas producer in the Gulf of Mexico and operates some 22,000 oil and gas wells across United States, many of them on federal lands or waters. According to the company, those wells produce 39 percent of the company's global revenue from oil and gas production each year -- $16 billion.
9.402 Policy.
(a) Agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only. Debarment and suspension are discretionary actions that, taken in accordance with this subpart, are appropriate means to effectuate this policy.
(b) The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government’s protection and not for purposes of punishment. Agencies shall impose debarment or suspension to protect the Government’s interest and only for the causes and in accordance with the procedures set forth in this subpart.
Robert Meunier, the EPA's debarment official under President Bush and an author of the EPA's debarment regulations . . . . [said] "How many times can a debarring official grant a resolution to an agreement if it looks like no matter how many times they agree to fix something it keeps manifesting itself as a problem?" Well, yes indeed because here are some of the causes for debarment:
9.406-2 Causes for debarment.
The debarring official may debar—
(a) A contractor for a conviction of or civil judgment for—
(1) Commission of fraud or a criminal offense in connection with—
(i) Obtaining;
(ii) Attempting to obtain; or
(iii) Performing a public contract or subcontract.
. . . .
(3) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property;
. . . .
(5) Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor.
(b)(1) A contractor, based upon a preponderance of the evidence, for any of the following—
(i) Violation of the terms of a Government contract or subcontract so serious as to justify debarment, such as—
(A) Willful failure to perform in accordance with the terms of one or more contracts; or
(B) A history of failure to perform, or of unsatisfactory performance of, one or more contracts.
EPA can decide to do two things:
- Reopen the discussions re: previous crimes and debar or suspend specific contracts related to those crimes; or
- Wait a year for the completion of the investigation and other agencies use that year to plan for a US with no British Petroleum or no BP offshore drilling.
When one agency debars -- all agencies must comply with the debarment.
What do I think? The consequences of total debarment would make it difficult to impossible to collect the penalties for the oil gusher which will be in the 100s of billions, conservatively. If the leases for the existing 22,000 BP wells are given to another entity -- will they also assume the liabilities? I don't know.
More than a sticky wicket and can't be determined by emotions. Some penalty will come out of this disaster beyond the financial liabilty under the Oil Pollution Act, but how far reaching it will be is anyone's guess.
There have been a mazillion diaries here in which the bashing or defense of the Administration, EPA, Salazar are the meat and potatoes. I get it, but I'd honestly like to know what opinions folks have on the consequences of a total debarment of British Petroleum. Thank you.
Most folks are there already, but please see DWG's Rumors of Debarment which is at the top of the rec list. Longer discussion is going on there.