Will BP lose large government contracts?

BP PLC could face heavy fines and threats to its lucrative business relations with the U.S. government in the fallout from the Gulf oil spill. The Wall Street Journal reports that White House lawyers are beginning to wrestle with whether BP’s actions leading up to the disaster warrant barring the company from future federal contracts or oil leases, a process called debarment. BP is the single biggest supplier of fuel to the Department of Defense, with Pentagon contracts worth $2.2 billion a year, according to government records. BP is also the largest producer of oil on federal waters in the Gulf of Mexico, which makes it a significant contributor of revenue to the government. Separately, the government’s new estimate Thursday that oil is flowing from BP’s damaged Gulf of Mexico well at a rate of 12,000 to 19,000 barrels of oil a day into the Gulf of Mexico -far higher than the previous government estimate of 5,000 barrels a day-could expose the London-based oil giant to heavier fines under the U.S. Clean Water act.

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