The Minerals Mismanagement Service

ENERGY

May 24, 2010

by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Zaid Jilani, Andrea Nill, and Alex Seitz-Wald

Interior Secretary Ken Salazar and Homeland Security Secretary Janet Napolitano will visit Louisiana today to inspect the government's response to the massive BP oil spill in the Gulf of Mexico. Meanwhile, following calls from the Center for American Progress, the Obama administration has announced it will establish an independent commission to investigate the disaster. The probe will investigate "industry practices" and potential negligence on the part of BP and the other companies involved, but it will also investigate the Minerals and Management Service (MMS), a deeply troubled federal agency that for years was the "handmaiden of industry." Housed in the Department of the Interior, MMS is tasked with collecting $13 billion a year from energy companies, while also policing them to ensure safety and environmental rules are followed. These conflicting functions have created a "cozy" relationship between industry and regulator and led to an explosive scandal under President Bush, in which regulators used drugs and had sex with industry representatives while flouting federal law. Salazar vowed to clean up the agency, saying in February, "There's a new sheriff in town." Nevertheless, the institutional culture created under the Bush administration has proved difficult to change. The New York Times reports today that despite President Obama's moratorium on permits for offshore drilling following the BP spill, "at least seven new permits for various types of drilling and five environmental waivers have been granted, according to records." Interior Department officials said that "the moratorium was meant only to halt permits for the drilling of new wells" and "not meant to stop permits for new work on existing drilling projects." Obama acknowledged the unhealthy relationship between industry and regulator, saying, "It seems as if permits were too often issued based on little more than assurances of safety from the oil companies. That cannot and will not happen anymore." Salazar has now proposed splitting MMS into three agencies with separate functions in order to eliminate this dangerous conflict of interest that may have contributed to the BP disaster.
'CONFLICTING MISSIONS': Under Salazar's plan, announced last week, one new division of MMS will oversee leasing and land management, another safety, and the third revenue collection. The three functions "are conflicting missions and must be separated," Salazar explained, before signing a secretarial order to enact the change. Leasing will be handled by the new Bureau of Ocean Energy Management, which "will be responsible for the sustainable development of the Outer Continental Shelf's conventional and renewable energy resources, including resource evaluation, planning, and other activities related to leasing." The Bureau of Safety and Environmental Enforcement, also new, "will be responsible for ensuring comprehensive oversight, safety, and environmental protection in all offshore energy activities." "This will be the police of offshore oil and gas operations," Salazar said. "We will make sure that we are holding energy companies accountable for their responsibilities," he added. The third new division will be the Office of Natural Resources Revenue, which will be "responsible for the royalty and revenue management function including the collection and distribution of revenue, auditing and compliance, and asset management." The first two divisions will be overseen by the assistant secretary for land and minerals management, while the third will be supervised by the assistant secretary for policy, management, and budget -- a separation that will help maintain a clear division between the revenue collection and other functions. President Reagan's controversial Interior Secretary James Watt created MMS by secretarial order in 1982, so Salazar has significant leeway in its reorganization, but he said he will work with Congress to draft legislation that would establish the agencies by law in the coming month. House Natural Resources Chair Nick Rahall (D-WV) called Salazar's plan a "bold initiative to shake up a badly troubled agency," and said his committee will explore the matter this week. Senate Interior Appropriations Subcommittee Chair Dianne Feinstein (D-CA) said her subcommittee will hold a hearing on the plan in the next few weeks, adding, "I've always looked at MMS as a relatively weak agency."
'SUPPRESSING SCIENCE': Early efforts to stop the Gulf spill focused on the blowout preventer, which would have almost certainly stopped the oil gusher had it functioned properly. It did not. MMS was warned in a 2004 study that a "vital piece" of blowout preventers -- the shear rams, which use hydrolic pressure to cut and seal a pipe in order to stop the flow of oil -- may not function under the extreme water pressure of deepwater operations, the Wall Street Journal reported earlier this month. "This grim snapshot illustrates the lack of preparedness in the industry to shear and seal a well with the last line of defense against a blowout," the authors of the MMS-commissioned study concluded. Nevertheless, MMS did not issue any new regulations on blowout preventers, nor did it mandate that blowout preventers contain two sets of redundant shear rams, as is common in other countries. Moreover, MMS "gave permission to BP and dozens of other oil companies to drill in the Gulf of Mexico without first getting required permits from another agency that assesses threats to endangered species -- and despite strong warnings from that agency about the impact the drilling was likely to have on the gulf," a New York Times investigation found. The National Oceanic and Atmospheric Administration (NOAA), tasked with safeguarding endangered species, warned on multiple occasions that drilling in the gulf could harm such animals and told MMS that it was granting permits in violation of federal law. A spokesperson for Interior said, "Under the previous administration, there was a pattern of suppressing science in decisions, and we are working very hard to change the culture and empower scientists in the Department of the Interior." The White House and Interior Department have now announced "an accelerated review of all actions taken by the minerals agency" under relevant environmental law.
SEX, DRUGS, AND OIL: As Nobel Laureate Paul Krugman noted earlier this month, "Given [its] history, it's not surprising that the Minerals Management Service became subservient to the oil industry -- although what actually happened is almost too lurid to believe." Indeed, under Bush, the agency was, "to a large degree, run by and for the extractive industries." A two-year investigation by the Interior Department's Inspector General (IG) released in late 2008 found that workers at MMS' royalty collection office were "partying, having sex, using drugs and accepting gifts and ski trips and golf outings from energy company representatives with whom they did government business." The IG report detailed  unethical relationships between government officials and the oil industry, calling it "a culture of substance abuse and promiscuity." Royalty in Kind (RIK) officials also attempted to rewrite the ethics rules to cover up their misdoings. Two employees engaged in "brief sexual relationships" with oil and gas representatives, yet they did not recuse themselves from work with those companies and officials. Since their disastrous tenure at Interior, many Bush officials "have since gone on to work directly for the companies they were supposed to be policing," the Project on Government Oversight noted. Former MMS director Randall Luthi is now president of the National Oceans Industries Association, whose mission is to secure a "favorable regulatory and economic environment for the companies that develop the nation's valuable offshore energy resources." Former Interior Secretary Gale Norton became Shell's general counsel, and "J. Steven Griles, a deputy secretary of Interior, lobbied for numerous oil and gas industries -- including BP -- before he went to jail for obstructing a Senate investigation" for his involvement in the Jack Abramoff scandal.