Quote:

---

BP has sued the United States government to overturn the suspension of most BP entities, including its exploration arm, from federal contracts.

The suit, filed on Tuesday in federal court in Texas, seeks to overturn a ban imposed in November by the Environmental Protection Agency. The agency cited BP for “lack of business integrity” as demonstrated by its role in the disastrous oil spill in 2010 in the Gulf of Mexico. The agency said the suspension would be in force “until the company can provide sufficient evidence to E.P.A. that it meets federal business standards.”

The ban’s most significant impact is that it prevents BP from gaining new oil and gas leases in the United States. That suspension, for instance, is likely to be hampering the company’s activities in the Gulf of Mexico. The company is the leader in deepwater gulf leases with 719, it says.

BP’s output in the Gulf of Mexico, a crucial profit center, has dropped sharply to 219,000 barrels a day in 2012, from about 338,000 in 2010, because it divested itself of oil and gas fields there, as well as the temporary moratorium on drilling that was imposed after the spill.

Robert W. Dudley, BP’s chief executive, said that although BP had enough leases in the gulf, not being able to bid on new ones limited its ability to maneuver and keep pace with rivals like Royal Dutch Shell and Chevron.

The E.P.A. also disqualified BP’s exploration and production unit from federal contracts in February 2013.

The company’s chief financial officer, Brian Gilvary, said on July 30 that BP wanted to obtain closure on the episode.

BP executives appear to have concluded that their conciliatory approach did not work as well as they had hoped.

The E.P.A. move came after BP reached an agreement with the Justice Department in November to plead guilty to criminal charges and pay $4.5 billion in penalties.

Civil claims against BP are also mounting despite the company’s efforts to settle them. BP originally estimated that the settlement would cost $7.8 billion, but it increased that estimate on July 30 to $9.6 billion, and it said the final cost would most likely be “significantly higher.”

Whether BP’s new approach will succeed is open to question. Fadel Gheit, an oil analyst at Oppenheimer in New York, worried that BP risked a further backlash. “You need to be aggressive but not too aggressive,” he said. “The regulators will put you in the penalty box.”

BP’s legal brief against the E.P.A. is a remarkable catalog of the company’s grievances. BP called the suspension and disqualification of the exploration unit “punitive, arbitrary and capricious” and said the court should declare the bans “null, void and unenforceable.” http://www.nytimes.com/2013/08/15/business/global/bp-sues-us-over-cont
ract-suspensions.html#h[]

---