Last updated: December 3, 2013 4:29 pm

UK backs BP in federal contracts dispute with US government

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File photo of fire boat response crews battling the blazing remnants of the off shore oil rig Deepwater Horizon, off Louisiana©Reuters

The UK government has thrown its weight behind BP in the dispute over its future in the US, branding as “excessive” a ban that prevents the oil company from winning federal contracts due to the 2010 Deepwater Horizon disaster.

In a filing to a court that is considering BP’s attempt to lift the ban, the UK said the US Environmental Protection Agency’s decision to bar the oil company from government contracts “affects jobs and pensions of workers in the United Kingdom, the United States, and elsewhere”.

Until now, the British government has made several behind-the-scenes interventions on behalf of BP, but this is its strongest public defence of the oil company since the spill in the Gulf of Mexico in 2010. The intervention threatens to escalate the issue from a dispute involving a private company to a transatlantic diplomatic row.

The rising cost of the disaster to BP, which is now estimated at $42.5bn but is likely to rise still higher, and its effect on the company’s investors and employees has been a subject of growing concern for the UK government.

A Downing Street official told the Financial Times: “This is a straightforward economic argument. BP is vital to British jobs and pension funds: Britain’s businesses need certainty to operate and invest.”

The official said the government recognised the seriousness of the Gulf of Mexico oil spill, “but it is important that where companies take responsibility, as BP has, they are treated fairly under the law”.

BP has faced myriad legal and regulatory problems in the US since the Deepwater Horizon drilling rig blew up in April 2010, killing 11 workers and triggering the worst offshore oil spill in US history.

One of the biggest blows came last year when the EPA suspended BP from new US government contracts, citing its “lack of business integrity” as demonstrated by its conduct in the Gulf disaster.

It came shortly after BP agreed a $4.5bn settlement with the US Department of Justice to resolve criminal charges related to the accident.

The company is still facing civil penalties under the Clean Water Act, which could reach a maximum of about $18bn, as well as damages for harm done to the environment, and has been in negotiations with the US government over a settlement to resolve those liabilities.

In depth

BP trial

BP Plc Chief Executive Officer Robert Dudley

Latest news on the litigation in the US to resolve damages and apportion blame for the 2010 Deepwater Horizon disaster

In August BP sued the US government over the EPA’s move, calling on the US District Court for the southern district of Texas to declare the decision null, void and unenforceable.

In an “amicus brief”, filed at midnight on Monday, the UK government told the court the EPA’s move “may have been excessive”, especially the decision to suspend multiple BP entities including some that were not implicated in the accident.

“By creating a process under which any corporate affiliate anywhere in the world can be suspended from transacting business with the government regardless of culpability, EPA risks creating a powerful disincentive to cooperation in times of crisis,” it said.

Making its filing as an amicus brief means the UK government is not a party to the case but is expressing its view as a supporter of BP.

The move has precedents. Last year, the UK government intervened in a US court case connected to another big oil company, Royal Dutch Shell. It filed an amicus brief to the US Supreme Court on the side of Shell in its long-running case against communities in the Niger Delta. But such interventions are unusual in lower courts.

In their brief on the BP case, the UK government’s lawyers said the EPA’s actions could create “regulatory and administrative uncertainty that can harm the economy”. They argued that suspensions of the kind meted out to BP should be “temporary and corrective in focus, not wide-ranging and punitive”.

They also suggested the EPA had not fully taken into account BP’s extensive response to the gulf spill and the way it acted “promptly and responsibly to address the harm caused by the Deepwater Horizon incident”.

BP said it welcomed the filing, saying the UK government “has an interest in the clear and consistent application of law and regulation to all businesses”.

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