Days after Obama's inauguration, Ken Salazar met the press in the White House briefing room. He was promising change at the Department of Interior, most especially at the Minerals Management Service (MMS).
President Obama immediately made clear that the type of ethical transgressions, the blatant conflicts of interest, waste and abuses that we have seen over the last eight years will no longer be tolerated. Nowhere is President Obama's commitment to reform and to cleaning up the waste, fraud and abuse of the past more important than at the Department of Interior, which I now lead on his behalf.
Salazar singled out the scandal-plagued MMS for scorn.
It is a department that the American people associate with Jack Abramoff. And it is a department that was tarnished by a scandal involving sex, drugs and inappropriate gifts from the oil and gas companies that the employees were in charge of overseeing.
The Animal House
Salazar's characterization of the MMS as "tarnished by scandal" was an understatement. The MMS, particularly the Lakewood office in Colorado, was a veritable nest of vipers during the Bush administration. Some of the shenanigans at Lakewood were outlined in this article in the Colorado Independent by Eric Luning.
In three reports prepared for Congress by the Department of Interior’s inspector general, 13 current and former employees at the agency’s Minerals Management Service were charged with violating the public trust in a frat house atmosphere. MMS employees, according to the reports, accepted gifts from oil companies, had sex with industry contacts, and did drugs at the office and at oil company parties. Other MMS officials steered business to their own companies and set up consultancies to win contracts they drew up themselves.
The agency collects roughly $10 billion a year in oil and gas royalties from companies drilling on public lands. It also handles one of the federal government’s largest in-kind revenue sources, accepting $4 billion in oil and gas in lieu of cash royalty payments. MMS is based at the Federal Center in Lakewood and also has an office in Washington, D.C.
Zachary Roth at TPM provides more sordid details of the MMS office in Colorado gone amuck.
One of those who escaped prosecution was Greg Smith, who ran the Denver office of MMS's Royalty in Kind (RIK) program, in which the government forgoes royalties and takes a share of the oil and gas for resale instead. Smith was accused in the reports -- including one special report focused on him -- of coercing two subordinates into sex, doing cocaine with a subordinate, suggesting to other employees that they should lie to investigators, and taking $30,000 from a private company for marketing its services to oil and gas companies.
It sounds like MMS was Animal House except for the billions and billions and billions of dollars at stake. Thanks to the MMS allowing oil companies to self-police their operations, U.S. offshore rigs had one of the worst safety records for accidents and fatalities in the world. From 2001 to 2007, there were 1,443 offshore drilling accidents, resulting in 41 fatalities, 302 injuries and 356 oil spills. And let's not forget former Deputy Secretary of Interior Stephen Griles and his many years of public service to Jack Abramoff.
Now, fast forward 15 months. An oil drilling platform under the jurisdiction of the MMS suffers a catastrophic failure and explodes, rupturing the well casing and coating the Gulf of Mexico with oil. Accidents happen. Thanks to faulty design or operation by humans, machines sometimes fail. And what happened to the Deepwater Horizon and Gulf of Mexico was nothing short of epic failure. It raises the obvious question of how well did Salazar clean house upon taking the reins at Interior.
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Cha-cha-cha-changes
One disturbing trend that warrants consideration for a bad housekeeping award can be found in the number of rig inspections and cases referred for enforcement. In both categories, numbers fell below the abysmal standards set by the MMS during the Bush administration.
But the number of rigs inspected has fallen significantly in recent years, according to agency data, from 1,292 in 2005 to 760 by 2009.
. . .
Over the past decade, the number of MMS enforcement cases that resulted in penalties ranged from a high of 66 in 2000 to a low of 20 last year.
Wall Street Journal article by Russell Gold and Stephen Power
While the performance of the agency over one year is not definitive, the trends are not in the direction expected for serious reform, particularly since offshore drilling activity did not diminish during the period. Other recent revelations include the MMS continuing its practice of pressuring engineers to change their reports if they raised operational safety issues during the permitting process. And even something as fundamental as having accurate design plans on file does not appear to be standard practice at MMS.
In the days after an oil well spun out of control in the Gulf of Mexico, BP engineers tried to activate a huge piece of underwater safety equipment but failed because the device had been so altered that diagrams BP got from the equipment's owner didn't match the supposedly failsafe device's configuration, congressional investigators said Wednesday.
McClatchy article By Maria Recio, Dave Montgomery and Mark Washburn
To place these patterns into some context, there were two serious mine accidents during April, resulting in 31 fatalities. However, mine safety inspections and citations increased dramatically during the first year of the Obama administration, with the appeals process and limits of statutory regulations regarding "pattern of violations" cited as the weak links contributing to the 2 mine accidents in April. Structural changes in the enforcement process are still needed, but at least both mines and mining operators were under intense scrutiny by the Mine Safety and Health Administration before the accidents occurred. Neither BP or Transocean were on the radar of the MMS prior to the Deepwater Horizon failure.
More disturbing allegations about the MMS under Salazar include its disregard for environmental protections and unwillingness to cooperate with other federal agencies.
The National Oceanic and Atmospheric Administration, or NOAA, is partly responsible for protecting endangered species and marine mammals. It has said on repeated occasions that drilling in the gulf affects these animals, but the minerals agency since January 2009 has approved at least three huge lease sales, 103 seismic blasting projects and 346 drilling plans. Agency records also show that permission for those projects and plans was granted without getting the permits required under federal law.
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Need more proof?
In case you are still not convinced that the MMS operations are out of control, consider the following. Dozens of new offshore drilling permits in the Gulf of Mexico have been approved by the MMS since the Deepwater Horizon catastrophe. Now you might think with all the talk of a temporary moratorium, the MMS would have put new drilling permits on hold. I looked at recently approved permits that involved operation in 5000 feet or more of water depth (i.e., similar to or greater in operational complexity as the Deepwater Horizon). I found three newly approved permits.
--Well number 608174087502 was submitted for its drilling permit on May 7 and approved on May 12. This well by ATP will operate at depth of 7000 feet of water and will employ newly developed technology.
The ATP Titan project, a deepwater dry tree platform, is the first of its type to be used in the GoM. The patented MinDOC hull, designed by Bennett & Associates (BASS), consists of three circular columns connected by triangular pontoons and a top tensioned riser (TTR) frame that supports the risers through the center of the hull.
. . . .
The Titan can operate in depths ranging from 2,000 ft (610 m) to 7,500 ft (2,286 m) with comparable payload and environment conditions.
So, a well that will be drilled by newly designed rig, one never tested in the Gulf of Mexico (GoM) and will operate near the upper limit of its technical capability, was approved in 5 days by the MMS despite a temporary moratorium on new projects during a time of supposedly great scrutiny. That is impressive, although not in a positive way.
--Well number 608114056001 was submitted for its drilling permit on May 4 and approved on May 5. This well by Noble Energy will operate in 5040 feet of water (Bottom block = 723), but will drill down to deeps far greater than the Deepwater Horizon. Approval in one day, indeed.
Noble Energy announced that the Deep Blue exploration well on Green Canyon 723 in the deepwater Gulf of Mexico reached a depth of 32,684 feet.
--Well number 608174118900 was submitted for its drilling permit on April 26 and approved on April 28. This well will operate at water depth of 5200 feet, 200 feet deeper than the Deepwater Horizon. It will be operated by ... you guessed it, BP. Approval in 2 days.
Clearly the fine professionals at MMS have a careful deliberative process in place to review offshore drilling permits. It sounds like the perfect recipe for more of this:
and this:
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The Big Plan for reform
As evidence of the truly epic failure of the MMS to regulate the oil and gas industry grows larger by the day, Interior Secretary Salazar announced his new big plan to reform the agency.
Salazar called on Congress to split the Minerals Management Service (MMS), the division of the Department of Interior that oversees oil and gas drilling, into two agencies. One agency would handle collection of royalties from oil and gas production, while the other would be charged with safety and environmental regulation. The plan also calls for expanding the current 30-day environmental and safety review period for exploration plans to 90 days.
Mother Jones article by Kate Sheppard
Ho-hum. And about that review period. Either the MMS has ignored the current 30-day review period or it is not reflected in the agency's own database. Perhaps this is part of what Obama is referring to as the "cozy relationship" between the MMS and oil companies.
Vice President Biden weighed in yesterday on the MMS.
“I think we do” have a real problem here, the Vice President said. “We’ve had a real problem with that for a long time.”
Mr. Biden said for his entire career in the Senate he’d been one of the “main guys opposing drilling. Under the last administration they sort of threw away the key.”
The vice president said he doesn’t “have a problem with drilling if they have incredibly heavy oversight. But it just wasn’t happening.”
So, he continued, “when President Obama announced that he would go for limited drilling it was conditioned upon the fact that there be real serious oversight. And we’re finding out that the oversight was as bad as I thought it was in my career as a senator.”
It has been 25 days since the Deepwater Horizon blew up and sank in the Gulf of Mexico. Pardon me, Mr. President, Vice President, and Secretary, but shouldn't there have been a review of oversight at MMS before you approved an expansion of offshore drilling and before the Gulf of Mexico was coated with oil?
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