Too Big to Obey: Whether BP Is De-barred Up to DOD and (Hopefully) the White House

For a potentially earth-shattering move against one of the most notorious corporate environmental scofflaws in history, the Environmental Protection Agency (EPA) sure hid its light under a bushel this morning. The agency’s scant three-paragraph press release announced simply: “BP Temporarily Suspended from New Contracts with the Federal Government,” adding that “EPA is taking this action due to BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, oil spill and response.” As the headline suggests, the temporary suspension applies to new, but not existing, contracts with the government.

Don’t get me wrong, EPA’s move was in its own way a profile in courage for an agency that too often walks around with a target on its back, taking unwarranted hits from both its known foes—House Republicans—and from people who should be on its side—White House staff, and occasionally from other agencies and departments—like the Pentagon, or the Small Business Administration's Office of Advocacy. The question is whether the little release was an exercise in mere bravado or whether it will deliver real results.

As reporters hustled to interpret the cryptic release, the Interior Department confirmed that BP would be barred from winning any new federal oil leases. Unfortunately, BP just finished winning a slew of new leases in June, making it the largest leaseholder in the Gulf. The new leases are located in the same region of the Gulf as the Macondo well, the one that exploded in April 2010, killing 11 destroying the $350 million Deepwater Horizon drilling rig, fouling the Gulf of Mexico and hobbling the regional economy of the Gulf Coast. As the rig’s name suggests, oil lies deep below the surface out there, representing plenty of hazards to be navigated by a company that, according to EPA's careful review of ample evidence, lacks integrity.

Meanwhile, the Department of Defense (DOD) did not comment on the EPA action, an ominous sign that suggests the government’s ducks have strayed far from their desired straight row. As originally reported by ProPublica’s Abrahm Lustgarten, EPA has been working on debarring BP for nearly a decade on the strength of its pre-Deepwater Horizon transgressions, but has never managed to get past its much larger, five-sided, Big Brother, more often than not a nemesis when it comes to protecting the environment. DOD is the company’s single largest customer, and BP would really take a hit if those contracts were cut off. But again, EPA’s timing is lousy. DOD bought $1.35 billion worth of fuel from BP in 2011, a surge of 33 percent over the previous year’s total $1.01 billion in sales. On September 20, 2012, DOD re-upped for $1.38 billion in sales under a set of contracts characterized as “fixed price with economic price adjustment, indefinite delivery and indefinite quantity” contracts capped at that very large dollar figure.

As DOD’s silence implies, the real question here is what will happen next. Under the law, a temporary debarment imposed without the company’s consent cannot exceed 30 days. BP must be given the opportunity to rebut the charges and can challenge any final decision in court. Although some courts have concluded that parties do not have any right to do business with the government, others have said that contractors have a “liberty interest” in continuing to do business with the government unless they are cut off for “just cause,” meaning that EPA will be compelled to explain itself quite thoroughly if the matter is litigated.

Even more disturbing, individual government agencies and departments may also waive debarment and do business with banned companies for “compelling reasons,” a term every bit as loose and loophole-riddled as it sounds. If DOD goes this route and the President doesn’t back EPA, even this temporary debarment will vaporize as quickly as it materialized. There can be little doubt that BP lawyers have pitched a tent outside the office of the Defense Logistics Agency employee in charge of its case file.

EPA deserves applause for moving to debar BP, and more than that, it deserves White House support as it tries to make the debarment stick. Someone pretty senior should call up Secretary of Defense Leon Panetta and tell him to get his people to start shopping for different gas. Never did a bigger company do so much to deserve what the defense bar calls the “nuclear option” of debarment. This is one red button the President should not hesitate to press.

Rena Steinzor is the author, with Anne Havemann, of Too Big to Obey: Why BP Should Be Debarred, published in the William and Mary Environmental Law and Policy Review.