Washington’s Revolving Door: How Oil Oversight Failed

Oil is a lubricant — just what you need to keep a revolving door spinning freely for decades. That, in a single image, sums up the Minerals Management Service (MMS), a pip-squeak unit of the Interior Department created by then Secretary James Watt in 1982 that has found itself at the center of the worst environmental disaster in U.S. history. Charged with regulating and promoting oil drilling off America’s coasts, MMS has not always made it easy to distinguish the regulators from the regulated, and no wonder. The agency is the nation’s second largest source of revenue (after the IRS), pouring $13 billion annually into the U.S. Treasury from royalties on oil and other sources. When there’s so much money sloshing around, sloppiness and coziness can be tolerated, until some of that crude begins washing up in Louisiana marshes.

Prior to the spill, MMS flared into the news only when its misbehavior — sex and drugs shared by MMS staffers and energy-company officials — lit up a 2008 report by Interior inspector general Earl Devaney, who blasted the agency’s “culture of substance abuse and promiscuity” along with its “culture of ethical failure.” But sex, drugs and other assorted bribes are mere symptoms of a deeper rot built on collusion between those doing the drilling and those charged with monitoring it.

(See the world’s top 10 environmental disasters.)

Corner-cutting has been common practice at MMS for years: in the days leading up to the explosion of the Deepwater Horizon rig on April 20, which caused the ongoing spill, MMS officials scaled back tests on the well’s blowout preventer and delayed when those tests would be run at all. Under MMS rules, backups for blowout preventers have been encouraged but not required (“Regulation by suggestion,” as Democratic Senator Sheldon Whitehouse of Rhode Island put it). Efforts to stiffen such casual rulemaking have always foundered because the work of MMS has been arcane, profitable and largely overseen by pro-petroleum lawmakers unwilling to rock the rig.

And that worked for a while — but only until the risks and complexity of drilling operations got too far ahead of the loose regs that the government did put in place. Twenty-five years ago, only 6% of the oil tapped from the Gulf — about 21 million bbl. per year — came from wells drilled more than 1,000 ft. underwater, where the immense pressure makes everything more difficult. Last year, those wells provided 456 million bbl. — 80% of the Gulf’s total, and a quarter of U.S. oil production. The Deepwater Horizon rig was drilling 5,000 ft. down — close to a mile below the wave tops. The further rigs strayed from shore, the looser regulations got — at least relative to the risks — with proliferating exemptions and loopholes allowing operations that otherwise would not be permitted. “The pace of technology has definitely outrun the regulations,” Coast Guard rig inspector Lieut. Commander Michael Odom told a panel investigating the Gulf disaster last month.

(See pictures of the Gulf oil spill.)

Interior Secretary Ken Salazar, the Cabinet officer ultimately responsible for MMS, defends the agency. There are “pockets” of problems, he says, but most of its 1,700 employees do good work. There’s some truth in that: MMS had overseen the drilling of 36,000 wells in the Gulf of Mexico before the Deepwater Horizon began hemorrhaging crude. But when an accident like the current one has the power to shut down hundreds of miles of coastline and imperil state economies, your safety record really needs to be 36,001.

See pictures of critters caught in the Gulf oil spill.

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The Obama Administration, which hardly created the MMS mess, has been ham-fisted in fixing it. In the past, critics were keen to note that there were too many oil-industry executives rotating within the agency, so last year President Obama appointed Elizabeth Birnbaum, a longtime environmentalist and congressional aide, to run it. Associates say she maintained a low profile while carrying out some changes, ensuring that miscreants were disciplined or dismissed. But the pace wasn’t fast enough — at least in the post-spill hunt for a guilty party. While Obama stepped up to take the blame — “In case you’re wondering who’s responsible, I take responsibility,” he said on May 27 — it was Birnbaum who took the fall. She, along with several prior MMS executives, declined interview requests.

The rush to play dodgeball with blame spattered some. “The oil industry’s cozy and sometimes corrupt relationship with government regulators meant little or no regulation at all,” Obama also said on May 27 — a claim denounced by Salazar when made by others on Capitol Hill. But the Interior Secretary’s defense was sometimes contradictory. When a lawmaker pressed him on whether such spills could be prevented in the future, he insisted, “We are taking action within the Executive Branch to make sure that this problem never occurs again.” But when a second lawmaker challenged his ability to offer such a guarantee, he acknowledged that “nothing in life is risk-free.” That’s true enough, but some risks, as the current disaster shows, are too big to take.

(See pictures of the oil spill victims.)

The DNA of MMS may be where its biggest problems are. Much of MMS’s leadership over the years has come from Wyoming, which is no accident. Watt, who created the agency unilaterally, was a Wyoming native, and the Cowboy State’s clout surged during the tenure of Vice President Dick Cheney, a former Wyoming Congressman and ex-CEO of Halliburton — which was the company working on the failed cement plug on the Deepwater Horizon rig. As with other arcane areas, Washington’s ability to regulate offshore drilling is vested in a relatively small community of experts who routinely move back and forth between industry and government, and in this case it was the Wyoming fraternity that did the job.

Such geographical coziness encouraged other kinds of cronyism. George W. Bush’s final MMS director, Randall Luthi, now heads the National Oceans Industries Association, a trade group that focuses on “a favorable regulatory and economic environment for the companies that develop the nation’s valuable offshore energy resources.”

Further evidence of bipartisan culpability is Sylvia Baca, who oversaw MMS in the Clinton era, then spent nearly a decade at BP in senior positions overseeing environmental and safety issues, before returning to Interior under Obama last June as Deputy Assistant Secretary for Land and Minerals Management. The greatest scandal, perhaps, is not that these apparent conflicts of interest have been allowed to go on for so long but that for all this time, they’ve been an entirely open secret.

“Obviously, we’re all oil industry,” a recent inspector-general report quoted an MMS official as saying. “We’re all from the same part of the country. Almost all of our inspectors have worked for oil companies out on these same platforms. They grew up in the same towns. Some of these people they’ve been friends with all their life. They’ve been with these people since they were kids.” It may be time, at last, to break up the old gang.

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