BP Has Help Challenging Loss of Federal Contracts After Gulf Spill

Business and oil-industry groups are urging a federal court to overturn BP's suspension from receiving new government contracts, calling it a "disturbing" overreach that threatens other companies doing business with federal agencies.

The American Petroleum Institute, the U.S. Chamber of Commerce, and other groups filed a court brief on BP's behalf in the oil giant's case against the Environmental Protection Agency, which imposed the freeze in late 2012 following the disastrous 2010 oil spill in the Gulf of Mexico.

EPA suspended BP, a major fuel supplier to the military, shortly after the company reached a $4 billion criminal plea deal over the spill, which was caused by a blowout of a BP well being drilled a mile beneath the ocean surface.

The business groups that filed a brief on BP's behalf Monday say EPA's suspension of all BP business units—regardless of whether they were connected to the accident—from new contracts with any federal agency sets a dangerous precedent.

"These expansive assertions of authority, and EPA's actions pursuant to that authority, pose a grave threat to federal contractors and private industries with business touching on federal programs or federal lands," states the brief that's also supported by the National Association of Manufacturers, the National Ocean Industries Association, the Organization for International Investment, and the technology industry trade group TechAmerica.

They allege that EPA's "unprecedented assertion of suspension power over affiliates" is illegal.

They want the court to overturn EPA's designation of BP's corporate headquarters as a "violating facility" and the suspension of the company's affiliates lifted, noting it was BP Exploration and Production specifically that pleaded guilty to charges of felony manslaughter, environmental crimes, and obstruction of Congress.

Their brief was filed with the U.S. District Court in Texas where BP filed suit in August challenging the federal suspension. It argues that the implications of EPA's approach, if BP loses the case, are "disturbing" and that enabling this "guilt by association" would have major consequences.

"If an entire corporate family is suspended or disqualified from federal programs, a cascade of impacts will follow," the brief states, citing layoffs and harm to the broader economy.

The trade groups also warn of a ripple effect if federal contractors must "struggle with uncertainties" created by the threat of suspension of an entire corporation based on the improper conduct of a few employees of a single affiliate.