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The undoing of BP, MMS

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For yet another example of how the theory of less regulation in the business sector collapses, sometimes literally, under its own weight, the BP disaster provides a clear picture of what happens when companies, wholly vested in their own moneymaking interests, despite what they tell us in their sunny, “green” commercials, are allowed to operate with impunity.

To say that the Minerals Management Service also failed in its mission to oversee BP is a glaring understatement. According to a May 30 editorial from The New York Times:

Much has been said — including by President Obama — about the incestuous relationship between the oil industry and its chief regulator, the Interior Department’s Minerals Management Service, which routinely ignored basic environmental laws and its own rules to fast track drilling permits.

Moreover, the agency is crippled by an onerous past (more here), and thankfully, Interior Secretary Ken Salazar has started a controlled burn to clean up shop. Previously, he said the agency exuded a

culture in which oil companies were able to get what they wanted without sufficient oversight and regulation.

To be sure, questionable conduct by those within the MMS might have occurred on Obama’s watch, and Salazar, as noted below, will look at 2009 as well. But the problems within the agency go back at least a decade, and it’s unfortunate that it takes something as monumental as one of the largest oil spill in U.S. history for the agency to be probed and gutted. We shouldn’t be surprised if violations go back three decades since the agency’s 1982 inception, which would obviously span numerous presidential administrations of both parties.

The most recent report from the Interior Inspector General cites violations from 2000-2008:

The report, which is a follow-up report on an investigation that the Inspector General conducted in 2007, notes a number of violations of federal regulations and agency ethics rules by employees of MMS’ Lake Charles, LA, district office from 2000-2008. Among other things, staffers in the office were found to have accepted sport event tickets, lunches, and other gifts from oil and gas production companies and used government computers to view pornography. Some of these staffers were tasked with inspections of offshore drilling platforms located in the Gulf of Mexico.

Several of the individuals mentioned in the Inspector General’s report have resigned, been terminated, or referred for prosecution. Those individuals mentioned in the IG report for questionable behavior who are still with MMS will be placed on administrative leave pending the outcome of a personnel review.

“The Inspector General report describes reprehensible activities of employees of MMS between 2000 and 2008,” said Secretary Salazar. “This deeply disturbing report is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry. That is why during the first ten days of becoming Secretary of the Interior I directed a strong ethics reform agenda to clean house of these ethical lapses at MMS. I appreciate and fully support the Inspector General’s strong work to root out the bad apples in MMS and we will follow through on her recommendations, including taking any and all appropriate personnel actions including termination, discipline, and referrals of any wrongdoing for criminal prosecution.”

“In addition,” Salazar said, “I have asked the Inspector General to expand her investigation to determine whether any of this reprehensible behavior persisted after the new ethics rules I implemented in 2009.”

So, what we have is a federal agency that proved inept at keeping the oil industry in check and a major oil company that proved impotent in fixing, while at the same time apparently ignoring, the mechanical deficiencies of its own equipment. Where does that leave us? The Times editorial linked above asks whether it might be plausible for the federal government to develop its own method for handling such disasters, independent of any private company.

As things stand now, industry has all the equipment and experience. In an interim report to the president on Thursday, Mr. Salazar suggested the creation of a kind of parallel technological universe in which government would have the robots, the coffer dams and the other tools necessary to help control a big blowout.

That could be expensive, but Mr. Obama indicated on Friday that he had been thinking along the same lines. As well he should be. The images from the last month — Washington essentially powerless, BP flailing away — have been deeply disheartening.

Makes one wonder: Where are the small government folks now calling for the Obama administration to swoop in and save the day? Oh, what’s that you say? The federal government has no means to fix this particular crisis? That’s all on BP, the company whose many prior misgivings are now being brought to light? We are in for a long, troubling ordeal, and as fines from Clean Water Act violations, private litigation and other costs mount for the company, BP and the environment will likely be dealt an equally harsh blow. For BP, it may be a fatal one. Or, given years and years of colossal profits, maybe not.

Written by Jeremy

June 3rd, 2010 at 6:02 pm

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