We Shouldn’t Be Doing Business With BP

Our guest bloggers are Director David Madland and Senior Policy Analyst Karla Walter of the American Worker Project at the Center for American Progress.

Current regulations require that the federal government only do business with responsible businesses, but as the BP oil catastrophe illustrates, existing policies and procedures are woefully inadequate. As a result, BP PLC, which has a long record of breaking environmental, safety, fraud, and antitrust laws, was allowed to sign new lease agreements and get billions of dollars in new contracts. This puts workers, the environment, and taxpayers in harm’s way.

Advertisement

The “high-road” contracting proposal supported by the Center for American Progress Action Fund would ensure that the government has the power and information it needs to avoid doing business with irresponsible companies in order to prevent tragedies like the BP oil gusher from happening again.

Well before the explosion on the Deepwater Horizon oil drilling rig in the Gulf of Mexico, BP had a long history of lawbreaking that should have warned the federal government to refrain from entering into risky deals with the company. A complete record of BP’s violations is available at the Project on Government Oversight’s Federal Contractor Misconduct Database, but here are just a few examples:

— A 2005 explosion at a BP refinery in Texas City, Texas killed 15 workers. BP’s negligence and continuing failure to remedy safety violations at its refinery resulted in it receiving the two largest total penalties in the history of the Occupational Safety and Health Administration ($87 million in 2009 and $21 million in 2005). BP also agreed to plead guilty to a one-count felony violation of the Clean Air Act, requiring the company to pay a criminal fine of $50 million and serve three years of probation.

— A hole in BP’s Prudhoe Bay pipeline caused the largest ever oil spill on Alaska’s North Slope — 200,000 gallons — in 2006, resulting in the temporary disruption of oil supplies to the United States. Investigators found that BP ignored warnings about corrosion in its pipelines and cut back on precautionary measures to save money. BP agreed to plead guilty to a violation of the Clean Water Act and paid $20 million in criminal fines, community service payments, and criminal restitution. Four years earlier, BP paid $150,000 in fines and penalties to Alaska’s Department of Environmental Conservation for delays in installing leak detection systems for the Prudhoe Bay crude oil transmission lines.

— BP agreed to defer prosecution in 2007 for a one-count criminal information, which charged the company with conspiring to violate the Commodity Exchange Act and to commit mail fraud and wire fraud after traders for the company conspired to manipulate and corner the market for one type of propane. BP paid $303 million as part of the agreement, including $100 million in criminal penalties.

Despite its failures to comply with the law, BP has continued to receive lucrative government leases and contracts. Since fiscal year 2008 — after the Texas City refinery deaths, the Prudhoe Bay spill, and BP’s settlement (on October 25, 2007) for mail and wire fraud charges — the company received the Deepwater Horizon lease and $4.3 billion in new government contracts. The company extracted $16 billion worth of oil and gas from its U.S. facilities in 2009 alone.

Advertisement

The current process for ensuring that the government only does business with responsible companies has been a failure for several reasons. Debarment — the process by which the government bans irresponsible firms from doing business with it — is rarely used, is too slow a process, and occurs after the fact. And responsibility review — the government’s tool to pre-screen every company’s legal record on a case-by-case basis before it does business with it — is weak and inadequate. Fixing the suspension and debarment process would help prevent the government from continuing to do business with companies that persistently violate the law, but existing the hurdles to effectively using the process are too high. “High-road” contracting rules — enhanced responsibility review based on thorough information and rigorous analysis — would address the key failings of the current process and help avoid incidents like the BP oil catastrophe along the Gulf Coast.

Read the full version of this post at the Center for American Progress Action Fund.