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How the Minerals Management Service's partnership with industry led to failure

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Washington Post Staff Writers
Tuesday, August 24, 2010; 10:14 PM

Two weeks after BP's Macondo well blew out in the Gulf of Mexico, the federal government's Minerals Management Service finalized a regulation intended to control the undersea pressures that threaten deepwater drilling operations.

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MMS did not write the rule. As it had dozens of times before, the agency adopted language provided by the oil industry's trade group, the American Petroleum Institute, and incorporated it into the Federal Register.

MMS received two favorable public comments about the regulation: one from the Offshore Operators Committee, an industry group, and the other from BP. The regulation stated: "BP, a large oil and gas company, expressed the importance of this rule and how they have been involved with MMS and industry to develop the industry standard."

The fact that BP - which has come under withering criticism for how it managed mounting pressure in the Macondo well - took partial credit for crafting the rule is not surprising. MMS has adopted at least 78 industry-generated standards as federal regulations, American Petroleum Institute records show.

MMS's acquiescence stemmed from the unusual relationship it had cultivated with industry. Directed by law to "meet the nation's energy needs," the agency pursued that mission by declaring itself publicly and formally as industry's partner.

Top officials and front-line workers routinely referred to the companies under their watch as "clients," "customers" and especially "partners." As the relationship became more intertwined, regulatory intensity subsided. MMS officials waived hundreds of environmental reviews and did not aggressively pursue companies for equipment failures. They also participated in studies financed and dominated by industry, more as collaborator than regulator. In the face of industry opposition, MMS abandoned proposals that would have increased costs but might have improved safety.

The story of how a little-known federal agency became an extension of the industry it oversaw spans three decades and four presidents. It began in 1982 with a major change in the way the nation managed its natural resources, picked up pace with initiatives to streamline bureaucracy in the Clinton and George W. Bush administrations, and ended after the April 20 BP blowout with the Obama administration's abrupt decision to undo the partnership.

Few in positions of power in Washington paid close attention to MMS and the hard-to-understand world it was charged with regulating. When they did, it was often to pressure the agency to increase the money it earned from leases it sold and the production that followed. Over its 28-year history, MMS grew to become one the government's largest revenue collectors, after the Internal Revenue Service.

As oil and gas companies took their drilling operations into deeper and riskier waters, MMS had to rely on its corporate partners' expertise. Along the way were warning signs of the partnership's imbalance, but the industry's track record of no major accidents provided a comfort level that proved deceptive.

Industry innovation, as it often does, had outrun and overpowered the government's regulatory prowess, with disastrous results. They were partners, but they were not equals.

On the fly

James G. Watt, the man who created MMS, came to Washington in 1982 with a mission: to alter the way the government managed its natural resources. Coming off the hostage crisis in oil-rich Iran and gas shortages on the home front, he vowed to "mine more" and "drill more."

Nearly three decades later, the lawyer known for his sharp mind and oversized glasses says in an interview from his home in Jackson Hole, Wyo., that he "wouldn't change one decision."


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