oil contracts awarded by department of defense to bp citizen letter

8/9/2019 Oil Contracts Awarded by Department of Defense to BP Citizen Letter

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June 7, 2010

President Barack Obama

1600 Pennsylvania Avenue, NW., 20500

Robert M. Gates

Department of Defense

The Pentagon 20301-1155

Dear President Obama and Secretary Gates,

On behalf of our 150,000 members and supporters across the U.S., Public Citizen requests thatyou immediately initiate proceedings to suspend and ultimately debar BP p.lc. and itssubsidiaries as federal contractors A BP subsidiary currently has $2.1 billion in contracts withthe Department of Defense (DoD). BP is responsible for what the administrations topenvironmental advisor Carol Browner rightly deemed the worst environmental disaster weveever faced in this country. The horror is still unfolding, but we know that 11 workers are dead,huge swaths of the Gulf are closed to fishing, underwater plumes are causing untold damage tosea life, coastlines in four states are fouled and a whole way of life is threatened.

This isnt the first time BP has caused harm. BPs poor track record, guilty pleas to criminalviolations of U.S. law (under which the company remains on criminal probation) and hundredsof millions of dollars in fines to federal agencies to settle allegations of wrongdoing directlyaffect[] the present responsibility

1of BP to effectively perform contracting functions.

Upon suspension and debarment of BP, we further urge that the government exercise its power toterminate six current DoD contracts awarded to BP Oil International Ltd (BPOI), a wholly-owned subsidiary of BP plc, totaling more than $2.1 billion.2 In addition to terminating currentcontracts, the government should exclude BP and its subsidiaries for three years from winningfuture contracts.

Federal regulations authorize suspension of a federal contractor based upon evidence that the

contractor has committed an offense indicating a lack of business integrity or business honestythat seriously and directly affects the present responsibility of a Government contractor orsubcontractor, as well as for any other cause of so serious or compelling a nature that it affects

1 48 C.F.R. 9.406-2(a)(2).2See 48 C.F.R. 9.405-1(a) (authorizing termination of contracts).


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the present responsibility of a Government contractor or subcontractor.3 The regulationslikewise authorize debarment of a contractor for these same reasons.4

While BPs two recent criminal convictions should have led the government to deem thecompany and its wholly-owned subsidiaries lacking in the business integrity or businesshonesty required of a government contractor, the companys ongoing role in the Gulf of Mexicooil disaster has further displayed an alarming level of irresponsibility that require the suspensionand debarment and termination of contracts held by BP and its subsidiaries. Indeed, press reportsindicate that the Environmental Protection Agency already is considering debarring BP fromgovernment contracts.5 The debarment regulations take into account the relationship of corporateaffiliates, defining an affiliate if either one controls or has the power to control the other.

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Two American BP subsidiaries are still on criminal probation under the terms of the companies2007 guilty pleas to a felony violation of the Clean Air Act and a criminal misdemeanorviolation of the Clean Water Act. In addition to the criminal misdemeanor violation of the CleanWater Act, the Department of Justice filed a civil lawsuit against BP Exploration (Alaska) Inc. inMarch 2009 for failing to comply in a timely manner with a Corrective Action Order involving

this spill of 200,000 gallons of crude oil into Alaskas Prudhoe Bay. These guilty pleas, inaddition to numerous settlements the company has paid regarding price-gouging, highlight thatBP cannot be relied on to carry out its contractor duties.

BPOI has several fuel supply contracts with the DoD:

One DoD contract pays BPOI $615,581,089.98 to deliver fuel through July 30,2010.

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A second contract pays BPOI $837,505,913.65 to deliver fuel through January 30,2011.

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A third pays BPOI $20,595 for airport-related services in Albania throughSeptember 30, 2010.

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A fourth pays BPOI $615,581,090 to deliver fuel through June 30, 2010.10 A fifth pays BPOI $13,856,270.41 to deliver fuel through September 30, 2012.11 A sixth pays BPOI $76,500,002 through October 31, 2011 for fuel delivery.12

3 48 C.F.R. 9.407-2(a)(9), 9.407-2(c)..4 48 C.F.R. 9.406-2(a)(2), 9.406-2(c).5 www.propublica.org/feature/epa-officials-weighing-sanctions-against-bps-us-operations6

48 C.F.R. 9.403.7 https://www.desc.dla.mil/DCM/Files/AwardRep.htm8 https://www.desc.dla.mil/DCM/Files/AwdRepWP.htm9www.usaspending.gov/fpds/fpds.php?parent_id=612582&sortby=u&reptype=r&database=fpds&fiscal_year=2010&detail=410 https://www.desc.dla.mil/DCM/Files/AwardRep.htm11www.usaspending.gov/fpds/fpds.php?parent_id=612582&sortby=u&reptype=r&database=fpds&fiscal_year=2009&detail=4


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In addition, nearly $1 billion in concluded contracts were awarded and paid to BPOI during thetime that other subsidiaries of BP plc were on probation for criminal violations of both the CleanWater Act and the Clean Air Act:

A $728,771,113 contract.13 A $277,526,225 contract.14 A $37,377,521 contract.15

Criminal Violations and Ongoing Criminal Probation by BP Subsidiaries

In 2007, two wholly-owned subsidiaries of BP plc BP Products North America, Inc (BPNA)and BP Exploration (Alaska) Inc (BPEA) pleaded guilty to two environmental crimes inconnection with two separate incidents.

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First, BPNA pleaded guilty to a felony violation of the Clean Air Act and is still serving its threeyears probation for the company's role in the March 23, 2005, explosion at a BP refinery thatkilled 15 workers. That three-year criminal probation is effective under the terms of a pleaagreement signed on October 24, 2007,17 meaning the criminal probation is effective throughOctober 2010. In addition to the felony criminal conviction, the company paid: A) a $50 millionfine for the Clean Air Act violation

18; B) $785,662 to resolve Emergency Planning and

Community Right-to-Know Act violations19; and C) $109 million for willful and negligentviolation of hundreds of workplace safety violations in connection with the explosion.

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On December 3, 2007, BPEA agreed to plead guilty to a misdemeanor criminal violation of theClean Water Act. The terms of the guilty plea required BP to pay $20 million in penalties andserve three years probation.21 The Department of Justice found that BP was criminally negligentin knowingly allowing the condition of its pipelines to deteriorate in Alaska, resulting in a spillof 200,000 gallons of crude oil into the Alaskan tundra. While BP was on criminal probation in

12www.usaspending.gov/fpds/fpds.php?parent_id=612582&sortby=a&reptype=r&database=fpds&fiscal_year=2008&detail=413 https://www.desc.dla.mil/DCM/Files/Award%20Report_1.htm14 https://www.desc.dla.mil/DCM/Files/AwardRep2.htm15 https://www.desc.dla.mil/DCM/Files/AwardRep_17.htm16http://yosemite.epa.gov/opa/admpress.nsf/ab2d81eb088f4a7e85257359003f5339/1af659cf4ce8a7b88525737f005979be17

Case 4:07-cr-00434 in the Southern District of Texas.18http://yosemite.epa.gov/opa/admpress.nsf/ab2d81eb088f4a7e85257359003f5339/1af659cf4ce8a7b88525737f005979be19http://yosemite.epa.gov/opa/admpress.nsf/e8f4ff7f7970934e8525735900400c2e/15730fed6bbb9399852575740071239920www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=NEWS_RELEASES&p_id=16674andwww.osha.gov/pls/oshaweb/owadisp.show_document?p_table=NEWS_RELEASES&p_id=1158921 Case 3:07-cr-00125-RRB


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September 2008, another BP Alaskan pipeline ruptured, causing a massive explosion. Thisrupture was due to corrosion stemming from the companys lack of maintenance. The state ofAlaskas Petroleum Systems Integrity Office was sharply critical of BPs negligence in the 2008explosion.22

Furthermore, on March 31, 2009, the Department of Justice filed a civil action against BPEA forviolations of the Clean Water Act for the same negligent release of 212,252 gallons of crude oilinto the tundra and waterways of Alaskas Prudhoe Bay.

23

In addition, BPNA settled a civil case in October 2007 alleging manipulation of the U.S. propanemarket by paying a $303 million fine.

24This followed two separate settlements totaling $21

million against BP Energy, another wholly-owned subsidiary of BP p.l.c., for manipulating theelectricity market in California in 2000-01.25 BP Energy also paid a $7 million civil penalty in2007 for engaging in anti-competitive practices with its natural gas pipeline operations.

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price-gouging and anti-competitive practices by BP display "a lack of business integrity orbusiness honesty and raise concerns about whether taxpayers are adequately protected fromanti-competitive actions with BPs multiple fuel supply contracts.

BP's entire operations - from exploration, to refining, to fuel transport, to commodity trading -have violated federal laws with frequency and severity. Given the company's willfultransgression of U.S. laws, it can no longer be presumed that BP will responsibly perform itscontractor responsibilities. The demonstrated disregard for the law means that there is goodreason to doubt that the company will abide by its obligations under its Department of Defensecontracts. Moreover, the company's repeated violation of environmental laws suggests anunacceptably high likelihood that BP will violate such laws in carrying out its contractualobligations. BP's aggregate record of wrongdoing including but not limited to causing theongoing gusher in the Gulf of Mexico evidences a lack of business honesty that seriously anddirectly affects its ability to perform its contractual duties. Indeed, negligently causing the worst

environmental catastrophe in U.S. history, as director of the White House Office of Energy andClimate Change Policy Carol Browner labels BP's Gulf gusher, by itself is an action of soserious or compelling a nature that it affects the present responsibility of the contractor orsubcontractor,

27and is reason enough to suspend and debar BP.

We appreciate your prompt attention to this matter.

Sincerely,

Tyson Slocum, Director

Public Citizens Energy Program

22 www.dog.dnr.state.ak.us/oil/programs/psio/psio_status_report_022009.pdf23 Case 3:09-cv-00064 in US District Court in Alaska.24 www.cftc.gov/PressRoom/PressReleases/pr5405-07.html25 www.ferc.gov/EventCalendar/Files/20041025175552-EL00-95-000.pdf andhttp://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=1041478926 http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=1148906127 48 C.F.R. 9.406-2(c)


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Cc:

House Speaker Nancy Pelosi

House Minority Leader John Boehner

House Armed Services Committee Chairman Ike Skelton

House Armed Services Committee Ranking Member Howard P. "Buck" McKeon

House Appropriations Committee Chairman Dave Obey

House Appropriations Committee Ranking Member Jerry Lewis

Subcommittee on Defense, Committee on Appropriations Chairman Norman D. Dicks

Subcommittee on Defense, Committee on Appropriations Ranking Member C.W. Bill Young

Senate Majority Leader Harry Reid

Senate Minority Leader Mitch McConnell

Senate Armed Services Committee Chairman Carl Levin

Senate Armed Services Committee Ranking Member John McCain

Senate Appropriations Chairman Daniel Inouye

Senate Appropriations Vice-Chairman Thad Cochran

Defense Logistics Agency Director VADM Alan S. Thompson, SC, USN


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Two American BP subsidiaries are still on criminal probation under the terms of the companies2007 guilty pleas to a felony violati

oil contracts awarded by department of defense to bp citizen letter

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