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Oil spill panel recommends tighter rules, money for Gulf Coast

By Steven Mufson and Juliet Eilperin
Tuesday, January 11, 2011; 11:00 AM

The presidential oil-spill commission said Tuesday that the federal government should require tougher regulation, stiffer fines and a new industry-run safety organization, in its final report released as part of an effort to prevent a repeat of the massive BP oil spill in the Gulf of Mexico last year

The report suggests strengthening the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), calling it "underfunded" with personnel who are "often badly trained.

Former Sen. Bob Graham (D-Fla.), one of the commission's two co-chairs, said the Deepwater Horizon accident was "both foreseeable and preventable," and reflected a failure on the part of both three individual companies and the federal government.

"I am sad to say that part of the answer is the fact that our government helped let it happen," Graham said. "Our regulators were consistently outmatched."

The panel proposes several safeguards aimed at strengthening regulators' control over the oil and gas industry, including establishing an independent safety agency within the Interior Department that would be headed by someone for a fixed term in order to insulate the appointee from political interference. Graham said such a person should have "a background of both science and management."

It also calls for funding the regulatory agencies that oversee offshore drilling with fees from the companies who are tapping into the nation's petroleum resource, saying in its executive summary, "Funding sources could include a regulatory fee on new and existing leases or an increase in the inspection feeds already collected by the Department of Interior."

William K. Reilly, the commission's other co-chairman, emphasized that it would be a mistake to focus just on the three companies involved in last year's accident. "The solution to the problem has to be industry wide."

The final report also calls for a "risk-based" regulatory approach now used by nations such as Norway and the U.K., in which companies will have to demonstrate they have fully evaluated the risks associated with a particular well rather than deepwater drilling in a general area.

Borrowing an idea from the nuclear power industry, the oil-spill commission backs the creation of an industry-run organization modeled on the Institute of Nuclear Power Operations that was created after the Three-Mile Island disaster. That organization helps establish best practices and technology for reactors.

The commission also recommends boosting the liability cap on oil spills, which is $75 million for environmental and economic damage. BP has said that it would disregard the cap.

The commission's report says that Interior should also include the National Oceanic and Atmospheric Administration in the decision-making process about where and how to conduct oil and gas leasing. If Interior officials were to reject NOAA's recommendations, they would have to say in writing why that would be in the national interest.

"Science has not been given a sufficient seat at the table," Graham said. "Actually, that is a significant understatement. It has been virtually shut out."

The commission also recommends that 80 percent of the Clean Water Act fines and penalties linked to the Gulf of Mexico oil spill go to environmental restoration.

Larry Schweiger, president of the National Wildlife Federation, said his group supports the idea that the bulk of federal fines should go to the area most directly affected by the spill. "From the fisheries that support thousands of jobs in commercial and sport fishing to the marshes and barrier islands that soften the blow of hurricanes, the Gulf Coast can't be made whole without a major national commitment," he said in a statement.

Looking to the north, the commission said the Coast Guard needs better capabilities to respond to a spill resulting from offshore drilling in the Arctic. Oil and gas companies should be able to demonstrate their abilities to respond in those areas off Alaska.

BOEMRE, the agency the administration created after the oil spill, has changed the way the government oversees offshore drilling. It has created an investigations and review unit to probe wrongdoing within the agency as well as the petroleum industry; it has separated leasing revenue collection from safety, environmental and regulatory enforcement; and it has temporarily stopped issuing "categorical exclusions," which exempt drilling proposals from detailed environmental reviews as it reviews the entire procedure.

"We have made significant progress over the last eight months, but these reforms must continue and we look forward to reviewing the commission's recommendations as we continue this important work," Interior spokeswoman Kendra Barkoff said in an e-mail.

Tuesday's report is not the last word on the disaster. The Justice Department has been trying to determine if crimes were committed. Civil litigation is underway to assign blame and assess damages. And the Coast Guard has been conducting a parallel probe with BOEMRE.

The two agencies are trying to determine why the giant blowout preventer, the last line of defense against a gusher, failed to contain the well.

Another federal agency, the U.S. Chemical Safety and Hazard Investigation Board, last month alleged that the government had compromised the testing of the blowout preventer by allowing Transocean, which owned the Deepwater Horizon rig, and Cameron, which built the blowout preventer, to play an improper role in the process.

The Coast Guard and the BOEMRE are to some extent investigating themselves, because both participated in oversight of offshore operations.

mufsons@washpost.com eilperinj@washpost.com

Staff writer David Hilzenrath contributed to this report.

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