BP 2013 Annual Report Download - page 269

contracts. As a result of the temporary suspension, the BP entities listed
in the notice are ineligible to receive any US government contracts either
through the award of a new contract, or the extension of the term of or
renewal of an expiring contract. The suspension does not affect existing
contracts the company has with the US government, including those
relating to current and ongoing drilling and production operations in the
Gulf of Mexico.
The charges to which BPXP pleaded guilty included one misdemeanour
count under the Clean Water Act that, by operation of law following the
court’s acceptance of BPXP’s plea, triggers a statutory debarment, also
referred to as mandatory debarment, of the facility where the Clean
Water Act violation occurred. On 1 February 2013, the EPA issued a
notice that BPXP was mandatorily debarred at its Houston headquarters.
Mandatory debarment prevents a company from entering into new
contracts or new leases with the US government that would be
performed at the facility where the Clean Water Act violation occurred. A
mandatory debarment does not affect any existing contracts or leases a
company has with the US government and will remain in place until such
time as the debarment is lifted through an agreement with the EPA or
the EPA decides to lift the debarment.
On 15 February 2013, BP filed an administrative challenge with the EPA
seeking to lift the 28 November 2012 suspension of 22 BP entities and
the 1 February 2013 mandatory debarment of BPXP at its Houston
headquarters. On 19 July 2013, the EPA affirmed its suspension and
mandatory debarment decisions. BP maintains that the EPA’s actions do
not have an adequate legal basis and do not reflect BP’s present status
as a responsible government contractor. On 12 August 2013, BP filed a
lawsuit in the US District Court for the Southern District of Texas (the
Texas District Court) challenging the EPA’s suspension and mandatory
debarment decisions. On 25 November 2013, BP filed a motion for
summary judgment on its claims in the Texas District Court. The UK
government and a coalition of major trade and business groups led by the
American Petroleum Institute later filed friend of the court (amicus) briefs
supporting BP’s position. On 28 January 2014, the EPA filed a motion for
summary judgment in the Texas District Court. Both motions remain
pending with briefing scheduled to be completed by 14 March 2014.
On 26 November 2013, the EPA issued a Notice of Continued
Suspensions and Proposed Debarments that continued the suspensions
of the previously suspended BP entities, suspended two new BP entities
(BP Alternative Energy and BP Pipelines (Alaska) Inc.), and proposed
discretionary debarment of all suspended BP entities.
BP continues to work with the EPA in preparing an administrative
agreement to resolve these suspension and debarment issues.
US Department of Interior matters
On 14 September 2011, the US Coast Guard and Bureau of Ocean
Energy Management, Regulation and Enforcement (BOEMRE) issued a
report regarding the causes of the 20 April 2010 Macondo well blowout
(the BOEMRE Report). The BOEMRE Report states that decisions by BP,
Halliburton and Transocean increased the risk or failed to fully consider or
mitigate the risk of a blowout on 20 April 2010. The BOEMRE Report also
states that BP, Transocean and Halliburton violated certain regulations
related to offshore drilling. In itself, the BOEMRE Report does not
constitute the initiation of enforcement proceedings relating to any
violation. On 12 October 2011, the US Department of the Interior Bureau
of Safety and Environmental Enforcement issued to BPXP, Transocean,
and Halliburton Notification of Incidents of Noncompliance (INCs). The
notification issued to BPXP is for a number of alleged regulatory
violations concerning Macondo well operations. The Department of
Interior has indicated that this list of violations may be supplemented as
additional evidence is reviewed, and on 7 December 2011, the Bureau of
Safety and Environmental Enforcement issued to BPXP a second INC.
This notification was issued to BP for five alleged violations related to
drilling and abandonment operations at the Macondo well. BP has filed an
administrative appeal with respect to the first and second INCs. BP has
filed a joint stay of proceedings with the Department of Interior with
respect to both INCs.
Louisiana Department of Natural Resources
On 21 August 2013, the Louisiana Department of Natural Resources
(LDNR) issued a Cease and Desist Order (the Order) directing BP to apply
for a Coastal Use Permit to remove certain ’orphan’ anchors that had
been placed in coastal waters to secure containment boom during oil spill
response operations in 2010. On 6 September 2013, BP sent a letter to
the LDNR observing that the Order is pre-empted by federal law and
would require the consent of the Federal On-Scene Coordinator following
a net environmental benefits analysis. BP has requested that the LDNR
withdraw the Order or initiate a judicial hearing. The LDNR has yet to
withdraw the Order or initiate a judicial hearing, but responded on
17 September 2013 that the Order will not take effect unless and until
the LDNR assesses costs or penalties or files a lawsuit. On
18 September 2013, BP filed a complaint in the US District Court for the
Middle District of Louisiana seeking to enjoin the State of Louisiana from
enforcing the Order on grounds of federal pre-emption. The LDNR moved
to dismiss BP’s complaint on 5 November 2013, and BP filed a motion
for summary judgment on 18 December 2013. Briefing on the motions is
now complete.
Non-US lawsuits
Mexico
On 18 October 2012, before a Mexican Federal District Court located in
Mexico City, a class action complaint was filed against BPXP, BP America
Production Company, and other BP subsidiaries. The plaintiffs, consisting
of fishermen and other groups, are seeking, among other things,
compensatory damages for the class members who allegedly suffered
economic losses, as well as an order requiring BP to remediate
environmental damage resulting from the Incident, to provide funding for
the preservation of the environment and to conduct environmental
impact studies in the Gulf of Mexico for the next 10 years. The plaintiffs
did not properly serve the BP entities named as defendants and, on
20 January 2014, the plaintiffs voluntarily dismissed their action.
Ecuador
A claim was commenced against BP by a group of claimants on 26 July
2012 in Ecuador. The majority of the claimants represent local NGOs. The
claim alleges that through the Incident and BP’s response to it, BP
violated the ’rights of nature’. The claim is not monetary but rather seeks
injunctive relief. Two previous claims on identical grounds were
dismissed at an early stage by the Ecuadorian courts. On 3 December
2012, the Ecuadorian court of first instance dismissed the claim. On
7 December 2012, the claimants filed a timely notice of appeal to the
Ecuadorian court of second instance. On 28 February 2013, the court
affirmed the dismissal by the lower court.
Pending investigations and reports relating to the Deepwater
Horizon oil spill
CSB investigation
The US Chemical Safety and Hazard Investigation Board (CSB) is
conducting an investigation of the Incident that is focused on the
explosions and fire, and not the resulting oil spill or response efforts. As
part of this effort, on 24 July 2012, the CSB conducted a hearing at which
it released its preliminary findings on, among other things, the use of
safety indicators by industry (including BP and Transocean) and
government regulators in offshore operations prior to the Incident. On
30 March 2013, a ruling was issued in the CSB’s pending enforcement
action against Transocean in federal district court in the Southern District
of Texas holding that the CSB has jurisdiction to investigate the Incident
and its subpoenas are valid and enforceable. On 3 May 2013, Transocean
appealed to the Fifth Circuit, the district court’s ruling that the CSB has
jurisdiction. That appeal is currently pending. On 20 June 2013, the CSB
sent BP a letter stating that BP must comply with the outstanding
document subpoenas. BP is producing documents in compliance with
the CSB’s document subpoenas. Separately the CSB has announced that
it may issue its reports in this matter in 2014. The CSB may seek to
recommend improvements to BP and industry practices and to regulatory
programmes to prevent recurrence and mitigate potential consequences.
National Academy of Engineering/National Research Council report
A Committee of the National Academy of Engineering/National Research
Council that had been reviewing methods for assessing impacts on
natural resources issued its final report on 10 July 2013. The report
endorses use of an ‘ecosystems services approach,’ and discusses
additional data, models, research, and analysis that potentially would be
needed in order to apply the approach to the Deepwater Horizon oil spill.
Additional disclosures
BP Annual Report and Form 20-F 2013 265