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Originally published July 4, 2010 at 7:04 PM | Page modified July 4, 2010 at 7:58 PM

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Embattled BP still big fuel supplier to U.S. military

The Defense Department has kept up its immense purchases of aviation fuel and other petroleum products from BP even as the oil giant comes under federal and state scrutiny for potential violations of clean-water and oil-spill laws related to the April 20 explosion of the Deepwater Horizon drilling rig, according to U.S. and company officials.

The Washington Post

Other developments

Choppy seas: Skimming vessels operated in Louisiana waters but not off the coasts of Mississippi, Alabama and Florida due to choppy seas from last week's hurricane, officials said. The offshore skimming in those states has essentially been curtailed for nearly a week because of Hurricane Alex, even though the storm was never closer than about 500 miles from the spill.

Response website: The Department of Homeland Security is expected to take over control of the main website for the oil-spill response, which has been run jointly by various agencies and BP for the 2 1/2 months since the Deepwater Horizon rig exploded.

BP liability: BP has said repeatedly it will pay for the disastrous oil spill. But newly released documents show that on June 2, BP sent out demands for nearly $400 million to its partners in the well, Anadarko Petroleum and Mitsui Oil Exploration of Japan, or roughly 40 percent of the $1 billion it had spent in May. The amounts demanded by BP — $272 million from Anadarko and $111 million from Mitsui reflect the provisions of each company's joint-operating agreement with BP, which gives a share of liability equal to each company's share of ownership.

Payouts so far: About $130 million has been paid out so far to help local businesses, employees and others affected by the massive spill, said Kenneth Feinberg, who was chosen by President Obama to independently administer financial claims. Feinberg also told "Fox News Sunday" that individuals and small businesses such as restaurants indirectly affected by the oil spill will be eligible for compensation.

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WASHINGTON — The Defense Department has kept up its immense purchases of aviation fuel and other petroleum products from BP even as the oil giant comes under federal and state scrutiny for potential violations of clean-water and oil-spill laws related to the April 20 explosion of the Deepwater Horizon drilling rig, according to U.S. and company officials.

President Obama said last month the company had shown "recklessness" in the Gulf of Mexico that contributed to the disaster and promised that BP will "pay for the damage" it caused. Attorney General Eric Holder said June 2 that Justice Department lawyers were looking at potential violations of civil and criminal statutes, adding that "if we find evidence of illegal behavior, we will be forceful in our response."

But BP remains a heavy supplier of military fuel under contracts worth at least $980 million in the current fiscal year, according to the Defense Logistics Agency.

In fiscal 2009, BP was the department's largest single supplier of fuel, providing 11.7 percent of the total purchased, and in 2010, its contracts amount to roughly the same percentage, according to agency spokeswoman Mimi Schirmacher.

"BP is an active participant in multiple ongoing Defense Logistics Agency acquisition programs," Schirmacher said, without providing details.

BP spokesman Robert Wine said he was aware of at least one "big contract" signed by the U.S. military after the oil rig sank, involving the supply of different fuels for its operations in Europe.

So far, members of Congress have discussed barring BP from future oil- and gas-drilling leases, not from fuel sales to the government. Rep. George Miller, D-Calif., who co-chairs the House Democratic Steering and Policy Committee, said last week he would introduce legislation to shut BP out of such leases for the next seven years as punishment for what he described as its "serial" legal violations.

But Rep. Bart Stupak, D-Mich., who chairs the House Energy and Commerce subcommittee on oversight and investigations, said in a statement that "the U.S. government needs to look at all possible options when it comes to showing BP, or any corporate bad actor, that a continued culture of cost cutting and increased risk taking will absolutely not be tolerated."

Even before the Gulf debacle, the Environmental Protection Agency had begun probing the potential debarment of BP from all federal contracts — including those reached with the Defense Energy Support Center (DESC), which buys all fuel for the military services.

The EPA plays the lead role in debarment proceedings related to the Clean Water Act and Clean Air Act, and its probe was sparked by BP's 2006 spillage of oil in Alaska and a 2005 explosion at its refinery in Texas.

But the EPA's deliberations are suspended until the investigations of the Gulf spill are concluded, according to an EPA spokeswoman. The agency could eventually decide to shut off federal contracts with specific divisions within BP or to the whole company "if it is in the public interest to do so," it said in May. Any such action would be meant to punish "environmental noncompliance or other misconduct," it said.

Jeanne Pascal, a former EPA lawyer who until recently was overseeing the review of BP's possible debarment, has said she initially supported taking such action but held off after an official at the Defense Department warned her that the agency depended heavily on BP fuel for its operations in the Middle East.

"My contact at DESC, another attorney, told me that BP was supplying approximately 80 percent of the fuel being used to move U.S. forces" in the region, Pascal said. She added that "BP was very 'fortunate' in that there is an exception when the U.S. is involved in a military action or a war."

As a result, Pascal attempted to negotiate a settlement allowing continued contracting with BP while forcing the company to elevate an internal office dealing with health, safety and environmental issues within its corporate structure.

She also demanded that the company keep an ombudsman, retired federal Judge Stanley Sporkin, that it had first hired after the Alaska spill but had since sought to let go. BP resisted both, and the talks were stalemated when the Deepwater Horizon rig sank, she said.

A spokeswoman for the Defense Department, Wendy Snyder, gave a different account of the internal debarment discussions. She said the Defense Logistics Agency "informed the EPA that there are adequate procedures and processes to protect the U.S. military missions should EPA determine that BP should be debarred."

That claim was reinforced by Schirmacher, who said that "none of BP's current energy contracts are in direct support of operations in Iraq and Afghanistan" and that the agency could meet its requirements without BP fuel. But she indicated the Pentagon had no intention of taking such action in the absence of an EPA decision.

Several other federal agencies besides the Defense Department have continuing contracts with BP, although none worth as much as the Pentagon's.

Since 2008, the Federal Aviation Administration has contracted to spend at least $2.26 million to station weather, communications and aerial-surveillance devices on several BP's platforms in the Gulf, including the Atlantis oil-production platform roughly 100 miles from the Deepwater Horizon's former location.

Critics, including a former BP contractor, have alleged the Atlantis was constructed without proper safety controls, but BP denies it.

FAA spokeswoman Laura Brown said BP's environmental and legal record was not a consideration in her agency's contracts. The Atlantis platform was selected "based purely on how it would support air traffic," she said.

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