Overhaul of Offshore Drilling Regulator ProposedMay 11, 2010 | Parker Waichman LLP
In the wake of the disastrous Deepwater Horizon oil spill, the Obama Administration has proposed a plan to significantly change the way offshore drilling is regulated. The proposal calls for the Minerals Management Service (MMS) to be divided so collection of oil royalties and safety inspection of offshore drilling are separated.
Since the April 20 explosion aboard the Deepwater Horizon oil rig in the Gulf of Mexico, MMS has been faulted for lax oversight of the industry. Last week, The Wall Street Journal reported that over the last decade, MMS has done little regulating at all, and instead has focused on setting broad performance goals for the offshore drilling industry. Over the past decade, drillers and oil producers have been free to decide for themselves how to meet those goals.
When it comes to offshore drilling, MMS has long had a two-fold mission. On one hand, it’s supposed to be an industry watchdog. But on the other, the agency is also charged with promoting energy independence and generating government revenue from drilling on government lands. What’s more, half of the MMS budget comes from the oil industry in the form of fees and rental receipts. Former and current MMS officials told the Journal that because of this, the agency has put an emphasis on collecting fees in recent years. To collect those fees, it has to keep oil flowing, something critics charge has created a conflict with its safety mission.
According to the Los Angeles Times, MMS had faced criticism even before the spill for a relationship with the oil drilling industry that can only be described as “cozy”. In 2008, MMS was caught up in a scandal after the Interior inspector general issued an embarrassing report which found that current and former employees in the royalty program’s Denver office engaged in “unbridled, unethical conduct” with oil and gas company representatives. This included alcohol, cocaine and marijuana use, as well as sexual relationships between MMS employees and energy industry insiders. Further, the report found that MMS workers frequently accepted gifts, gratuities, golf and ski outings and tickets to sports events and concerts.
According to the Times, Interior Secretary Ken Salazar is expected to announce the move to split the functions of MMS at a news conference this afternoon. According to a press release issued by the Department of Interior, Salazar will address new reforms “to toughen oversight of offshore oil and gas operations.” Two separate agencies would be created – one for safety and inspections, and another for collecting royalties.
According to a CNN report, the reforms announced today are expected to be the first of several changes coming from the Interior Department in response to the Deepwater Horizon oil spill.