Offshore Drilling Agency to Undergo Radical Overhaul

By Washington Post, Washington Post - May 12, 2010

The Obama administration announced Tuesday that it would radically overhaul the obscure government agency that oversees offshore drilling operations, under scrutiny since the oil rig explosion in the gulf.

Interior Secretary Ken Salazar said he would divide the Minerals Management Service in an effort to separate its apparently conflicting missions. He planned to split the section that ensures energy companies comply with federal safety and environmental laws from the part that reaps billions in drilling royalties each year.

The move, he said, was designed to guarantee "there is no conflict, real or perceived, with respect to those functions."

The reorganization was a tacit acknowledgment of persistent problems at the 1,700-person agency, which has come under fire in the past for ethical lapses and most recently for accelerating permit approvals and incorporating industry practices in the regulations.

It comes as new polls show the public is much less supportive of offshore drilling than it has been recently. More than a third of all Americans in a new CBS News poll say the big spill is indicative of a broad problem with offshore exploration, and a new Pew survey shows just 38 percent approval for the president's handling of the issue.

It is hard to judge the impact of the new structure, because many details remain unsettled. Environmental activists, former Interior officials and Republicans on Capitol Hill said bolder steps will be needed to ensure that the agency that brings in $13 billion to federal coffers -- more than any agency other than the Internal Revenue Service -- will oversee drilling operations in a fair and impartial manner.

"My question is whether what he's [Salazar's] setting out to accomplish will accomplish what he wants to do," said Bracewell & Guiliani counsel Michael Olsen, who worked on offshore oil issues as Interior's deputy assistant secretary for land and minerals management under George W. Bush.

Salazar has pushed to reform MMS for a year and a half. Within a week of taking office, he asked the Justice Department to investigate allegations of wrongdoing and traveled to the agency's office in Lakewood, Colo., to announce plans to raise the ethics standards for the entire Interior Department. His drive to reform the agency has taken on new urgency as its role in regulating companies associated with the gulf oil spill has come into question.

The agency's offshore permitting process came under renewed attack Tuesday during a hearing in Kenner, La., where federal officials investigating the Deepwater Horizon accident questioned Frank Patton, an MMS official who oversees drilling permits. He indicated that the agency had not detected any major problems with the project in the weeks before the explosion.

But he conceded that the rig had not been required to prove that the "shear ram" in the rig's blowout preventer -- the device designed to cut through the oil pipe in case of an emergency -- would slice the particular pipe used by the Deepwater Horizon.

"Why did we approve the application?" said Jason Mathews, an MMS official investigating the blast.

"That is one thing I do not look for in my application, in my approval process," Patton answered.

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