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Offshore drilling agency to undergo radical overhaul, Salazar announces

By Juliet Eilperin and Ed O'Keefe
Washington Post Staff Writer
Wednesday, May 12, 2010; A01

The Obama administration announced Tuesday that it would radically overhaul the obscure government agency that oversees offshore drilling operations, under scrutiny since the oil rig explosion in the gulf.

Interior Secretary Ken Salazar said he would divide the Minerals Management Service in an effort to separate its apparently conflicting missions. He planned to split the section that ensures energy companies comply with federal safety and environmental laws from the part that reaps billions in drilling royalties each year.

The move, he said, was designed to guarantee "there is no conflict, real or perceived, with respect to those functions."

The reorganization was a tacit acknowledgment of persistent problems at the 1,700-person agency, which has come under fire in the past for ethical lapses and most recently for accelerating permit approvals and incorporating industry practices in the regulations.

It comes as new polls show the public is much less supportive of offshore drilling than it has been recently. More than a third of all Americans in a new CBS News poll say the big spill is indicative of a broad problem with offshore exploration, and a new Pew survey shows just 38 percent approval for the president's handling of the issue.

It is hard to judge the impact of the new structure, because many details remain unsettled. Environmental activists, former Interior officials and Republicans on Capitol Hill said bolder steps will be needed to ensure that the agency that brings in $13 billion to federal coffers -- more than any agency other than the Internal Revenue Service -- will oversee drilling operations in a fair and impartial manner.

"My question is whether what he's [Salazar's] setting out to accomplish will accomplish what he wants to do," said Bracewell & Guiliani counsel Michael Olsen, who worked on offshore oil issues as Interior's deputy assistant secretary for land and minerals management under George W. Bush.

Salazar has pushed to reform MMS for a year and a half. Within a week of taking office, he asked the Justice Department to investigate allegations of wrongdoing and traveled to the agency's office in Lakewood, Colo., to announce plans to raise the ethics standards for the entire Interior Department. His drive to reform the agency has taken on new urgency as its role in regulating companies associated with the gulf oil spill has come into question.

The agency's offshore permitting process came under renewed attack Tuesday during a hearing in Kenner, La., where federal officials investigating the Deepwater Horizon accident questioned Frank Patton, an MMS official who oversees drilling permits. He indicated that the agency had not detected any major problems with the project in the weeks before the explosion.

But he conceded that the rig had not been required to prove that the "shear ram" in the rig's blowout preventer -- the device designed to cut through the oil pipe in case of an emergency -- would slice the particular pipe used by the Deepwater Horizon.

"Why did we approve the application?" said Jason Mathews, an MMS official investigating the blast.

"That is one thing I do not look for in my application, in my approval process," Patton answered.

Interior released few details about the hastily assembled reorganization at its news briefing Tuesday, in part because its top officials are focused on plugging the oil leak and protecting the coastal resources. MMS Director Elizabeth Birnbaum did not even attend the official announcement, working on the spill instead.

It remains unclear whether the new safety and environmental office will review all drilling proposals and can exercise a veto over them, or will merely enforce federal standards once offshore energy projects are in operation.

KierĂ¡n Suckling, executive director of the Center for Biological Diversity, questioned what it meant to have one office doing "environmental enforcement" when the critical role of issuing oil and gas leases remained in the agency's other division. Like past Salazar policy pronouncements, Suckling said, "they sound good at first, appear ambiguous on close inspection, then are less than advertised when explained."

Interior spokesman Matt Lee-Ashley said he could not provide a specific timeline for revamping the agency. "We will work responsibly and thoughtfully through the process," he said in an e-mail.

In recent years, MMS has come under fire for a slew of lapses: In 2008 alone, Interior's then-inspector general, Earl E. Devaney, issued one report accusing the agency of writing royalty contracts in a way that "appeared to inappropriately benefit the oil companies" and another saying it was defined by "a culture of ethical failure" that condoned activities such as regulators engaging in sex and cocaine use with some of the officials they oversaw.

Salazar said he wanted "to assure the American people we will have a strong and independent organization holding energy companies accountable and in compliance with the laws of the land." And he added some fixes would be simple, such as extending the current 30-day review that MMS has to sign off on for exploration plans to 90 days, with an option of adding more time if needed.

But some critics such as Rep. Darrell Issa (Calif.), the top Republican on the House Oversight and Government Reform Committee, have suggested that the government needs to move at least part of MMS out of Interior to ensure it can make enforcement decisions that aren't driven by financial considerations.

"While there are many outstanding questions surrounding what went wrong and what should have been done to avoid this disaster," Issa said in a statement, "what we know for sure is that MMS is in need of a surgical overhaul and that a quick-fix, Band-Aid approach is wholly inadequate and will only serve to preserve a broken bureaucracy at the expense of the American people and their safety."

Dismantling a federal agency is rare, said New York University professor Paul Light, an expert on government operations. "Industry doesn't want the division," he said. "They like the notion that the agency has both promotion and regulation, on the notion that maybe they can divide and conquer."

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