U.S. agency let oil industry write offshore drilling rules

McClatchy NewspapersMay 10, 2010 

WASHINGTON — The oil industry, not the federal agency that regulates it, plays a crucial role in writing the safety and environmental rules for offshore drilling, a role that critics say reflects cozy ties between an industry and its regulators that need to be snapped.

Nearly 100 industry standards set by the American Petroleum Industry are included in the nation's offshore operating regulations. The API asserts that its standards are better for the industry's bottom line and make it easier to operate offshore than if the Minerals Management Service set the rules.

Following the massive oil spill in the Gulf of Mexico, the MMS is increasingly under a microscope. Congressional hearings beginning Tuesday will examine the cause of the April 20 drilling rig explosion and whether the MMS's regulatory framework ought to be changed.

The agency has a built-in conflict. It's responsible for regulating offshore drilling, but also for leasing tracts on the outer continental shelf and collecting royalties on the oil and gas they produce. The MMS generates more revenue for the federal Treasury than any other agency except the Internal Revenue Service.

So while one arm of the agency is trying to make money, the other tries to regulate an industry where pumping oil sometimes trumps safety and environmental concerns.

The MMS has said it plans to strengthen its oversight, and points out that more than 30,000 wells have been drilled in the Gulf of Mexico over the past 40 years without an incident of the magnitude of the Deepwater Horizon.

"Over the past year and a half, we have been working very hard to try to set the agency on the right path, fix problems that arose, and restore the public's trust in the agency that manages offshore energy resources on their behalf," said Kendra Barkoff, a spokeswoman for the Interior Department, of which the MMS is part.

However, critics say the MMS is a revolving door where officials slip back and forth between the government and the oil industry. That only adds to the perception that the federal agency is too close to the interests it regulates, said Peter Van Tuyn, an environmental lawyer in Alaska.

Most recently, former MMS director Randall Luthi was named president of the National Oceans Industries Association and promised to deliver "policies favorable to the offshore energy industry."

"MMS is the most corrupt, inept, industry-dominated agency I have dealt with in 20 years," said Kieran Suckling, the executive director and founder of the Center for Biological Diversity, an environmental group in San Francisco. "They are incapable of regulating the industry. Maybe it's time to put them out of their misery."

That view is echoed among a growing number of lawmakers. Set to testify Tuesday at two Senate oversight hearings are top executives of BP, which owned the well, Transocean Ltd., which owned the rig, and Halliburton, a contractor on the rig.

All are expected to face tough questions, particularly from senators whose states have the most at stake in the offshore drilling debate: Democratic Sen. Bill Nelson of Florida, who opposes drilling off Florida's coastline, and the top Republican on the Senate Energy Committee, Sen. Lisa Murkowski of Alaska, where Shell Oil is about to commence exploratory drilling in Arctic waters.

"Big oil has had its way among the regulators," Nelson told CNN Sunday, adding that Congress could "never get to first base because big oil would flex its muscle and call in its votes, and we could never get anything done. And tragically, it is going to take this disastrous oil spill to finally clamp down on them."

Criticism of MMS comes from both sides of the aisle.

Rep. Darrell Issa of California, the top Republican on the House Oversight and Government Reform Committee, would like to see the agency's leasing and policing duties split.

"It's an agency that doesn't belong in the Department of Interior, and it needs to be reorganized," Issa said, adding that top MMS officials seem "blase."

A spot check of MMS rules and regulations shows that they often incorporate API standards, which when published in the Federal Register, have the "force and effect" of law.

API standards range from ensuring that drilling platforms can withstand hurricanes like Katrina to regulating venting and flaring of natural gas on offshore rigs.

Most damning, though, said Van Tuyn, is a rule published by MMS earlier this month and set to take effect in June to manage pressure on wellheads. The final rule was effectively written by API, Van Tuyn said. In it, the MMS said it would establish criteria for monitoring and testing older wells with pressure and "would also incorporate the American Petroleum Institute's Recommended Practice for managing" such pressure.

"It just demonstrates, I think, that we're dealing with an agency that's very close to the industry," Van Tuyn said.

Other regulatory agencies already have made a transition from broader, industry-written performance goals to narrower "prescriptive" regulations, said Lois Epstein, an Alaska engineer who served as an adviser to the Office of Pipeline Safety, an agency within the U.S. Department of Transportation, after a 1999 gasoline pipeline explosion killed three youths in Bellingham, Wash.

For example, performance goals leave it to the offshore drilling industry to prevent blowouts, Epstein said. Prescriptive rules detail how it's supposed to do so — and hold the industry accountable if it doesn't.

"What we found is the industry standards are adopted as consensus standards, often with very little government and public involvement," she said.

Interior Secretary Ken Salazar is in the midst of a 30-day review of the gulf incident that has put a temporary halt to all new offshore drilling in the U.S. He also has established a safety oversight board that "may result in additional changes and reforms," Barkoff said.

API defends its work writing highly technical standards on behalf of the industry. It believes the industry needs the flexibility of performance goals in varied offshore drilling environments, said Andy Radford, a senior API adviser for offshore policy.

"They come to us with a problem, we come to them with a solution, they judge the effectiveness of our solution, and if it proves to be not working, they certainly can come back with more prescriptive regulations to remedy it," he said.

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