Minerals Management Service: When Revenue Trumps Regulation

Oil platformIt's been just over four months since the Deepwater Horizon rig explosion in the Gulf of Mexico killed 11 crew members and caused a massive oil spill as BP's (BP) Macondo well to blew out. Inquiries into the incident -- including command of the rig and how BP handled the mounting pressure in the well -- are ongoing. The federal government's Minerals Management Service (MMS) is also coming under fire, the Washington Post reported. A presidential commission will hold a public hearing Wednesday.

The MMS, created in 1982, had a built-in conflict from the start. It leases tracts for exploration and collects the government's share of oil and gas revenue -- as well as regulate the industry. Over the last three decades, the MMS has instead become partner with the industry it regulates, putting revenue ahead of safety at times, as the Post reports:
The story of how a little-known federal agency became an extension of the industry it oversaw spans three decades and four presidents.

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.
Favorable Industry Comments

The MMS has adopted at least 78 industry-generated standards as federal regulations, as shown by records from the American Petroleum Institute, an oil industry trade group. Even after the explosion, when the MMS finalized a regulation intended to control the undersea pressures that threaten deepwater drilling operations, it has adopted language provided by the API and incorporated it into the Federal Register, the Post reports.

Not surprisingly, MMS received two favorable public comments about the regulation: One from the Offshore Operators Committee, an industry group, and the other from BP. But what is perhaps surprising is that the MMS actually touted this in its report.

In 2008, an investigation into the agency provided the basis for several criminal cases involving federal contracting rules and conflict-of-interest laws. In 2009, when President Barack Obama took office, the new Interior secretary, Ken Salazar, said the MMS would be one of his first targets. Another report in 2010 showed more of the same.

Under Salazar, in the aftermath of the BP disaster, the agency was renamed Bureau of Ocean Energy Management, Regulation and Enforcement and got a new chief, Michael Bromwich. Oversight of the industry was separated from collecting royalties. The House has passed a similar bill with a stronger separation between regulation and revenue collection.
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