BP won't bid on new Gulf drill leases


BP won't bid on new Gulf drill leases

WASHINGTON -- BP declined to bid on new oil-drilling leases made available in the Gulf of Mexico Wednesday, following the Obama administration's decision to block the oil company from receiving new government contracts following the 2010 oil spill.

BP's move suggests it is far from confident it can clear up the contract suspension within 90 days--the time it takes the Interior Department to review new bids and award them to the oil companies.

"It's just something that BP is going to have to resolve before they can acquire additional leases," said Tommy Beaudreau, director of Interior's Bureau of Ocean Energy Management.

BP is one of the largest operators in the Gulf of Mexico and holds more leases in the region than any other company. "We hope we can reach a reasonable resolution with regulators so that America's top energy investor over the past five years can once again enter into new contracts with the U.S. government," BP spokesman Geoff Morrell said.

The Environmental Protection Agency imposed the contract suspension on BP in November, citing a "lack of business integrity" that resulted in the Deepwater Horizon explosion and oil spill in 2010.

The suspension prevents BP from obtaining new government contracts, including new oil-drilling leases. BP also supplies fuel to the U.S. military.

BP declined to participate in an auction of drilling leases in November held just hours after the suspension was announced. However, BP said at the time its decision had nothing to do with EPA's move.

Wednesday's auction is the most significant offering of drilling leases in 2013. Involving nearly 40 million acres in the central Gulf, the auction attracted more than 400 bids from about 50 companies.

BP was an active participant in the last auction of central Gulf leases, held in June. It submitted dozens of bids, including one winning proposal valued at more than $100 million in an area known as Keathley Canyon. BP's bid beat out proposals from ExxonMobil and several other major companies gunning for drilling rights in the same area.

The short-term impact of BP's decision is minimal. The contract suspension allows BP to continue operating its existing wells. If extended much longer, however, the suspension will start to affect dozens of companies BP hires to drill its wells and perform myriad other services.

In a civil trial taking place in a federal court in New Orleans, the U.S. Justice Department seeks to prove BP acted in a way that was "grossly negligent" during the Deepwater Horizon disaster--a legal definition that, if proven, can result in more than $17 billion in fines under the Clean Water Act.

Last year, BP agreed to pay $4.5 billion to settle all criminal and some civil charges stemming from the Deepwater Horizon disaster.

Gulf Coast lawmakers, sensitive to the potential departure of a major oil operator in the region, have started to say BP is being treated unfairly. Sen. Mary Landrieu (D., La.) said BP has become the victim of "double jeopardy"--having to prove its ability to operate safely to both EPA and offshore regulators at the Interior Department.

An EPA spokeswoman said "BP has to prove that it is presently responsible to do business with the federal government...however, at this time, negotiations have not been concluded and there is no formal timeline for resolving this matter."

Dow Jones Newswires

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