University of Alaska Anchorage Department of Public Administration

MPA Comprehensive Exam ‐‐ January 7, 2011

Question 1 ( 40%)

You are a member of a Presidential Commission mandated to review the role of Public Administration in the 2010 Deep Water BP Horizon Oil Disaster. Identify four examples of action failures that led to the 2010 disaster. (List a specific example from the article that related to each failure you selected) For each failure:

a) Recommend a regulation or policy or structural change that would help prevent the failure in the future. b) Explain why the change you recommend will improve the situation. c) Explain how the recommended change is supported by Public Administration theory or literature.

Question 2 (40%)

The losses suffered by BP as a result of this spill were both large and significant and we can assume BP didn’t plan to suffer them. Risk is part of everything that we do, and achieving zero risk would impose significant costs on the industry, citizens of Louisiana and consumers of energy. MMS had the job of balancing the trading off of risk versus production.

a) Why would society’s view of this tradeoff differ from that of the petroleum industry? b) What about the original structure of MMS influenced the choice of tradeoff? c) Do you think the restructuring of MMS will affect this decision process? d) How would you change the process to make the industry account for society’s view?

Question 3 (20%)

In 2000, an environmental assessment meant to guide MMS into the deepwater age counted 151 well blowouts in the years 1971 to 1995, about a quarter of which had led to spills. The report concluded that spills are a "very low probability event." In 2003, Mr. Oynes was quoted as saying that it is "almost impossible" for a spill the size of the Santa Barbara spill in 1969 to happen again.

a) What information do you need to calculate the probability of a blowout with spill? Show the formula you would use. b) Is this a good estimate of spill probabilities looking forward through 2010? Why or why not? c) As a public manager, what additional information would you seek to inform your assessment of the risks? August 7, 2010 Minerals Service Had a Mandate to Produce Results By JASON DePARLE NEW ORLEANS — On March 5, 1997, an obscure federal official with a puckish grin entered a hotel ballroom here and greeted 1,000 jittery oilmen on what would prove a landmark day.

For years, fading interest in the Gulf of Mexico had punished the local economy and left Louisiana to mourn its “Dead Sea.” Now, rising oil prices and new technology were setting off the deep-water version of a gold rush. Interest in drilling ran so high that the official, Chris Oynes, was heading into the annual lease auction with a record number of sealed bids.

In giddier times before the bust, his predecessor presided over the auction in a jaunty red blazer, but Mr. Oynes was far too conservative for that. Or so everyone thought — until he opened his briefcase and brought down the house with a size 46 scarlet jacket, an omen of the coming deep-water boom.

“They knew symbolically what this meant,” Mr. Oynes said in a recent interview. “In Louisiana terms: ‘Let the good times roll.’”

Now the gulf is reeling from the worst oil spill in United States history, after five million barrels of sludge escaped from a defiant mile-deep hole that BP finally cemented last week. Deep-water drilling has been temporarily banned. And the Minerals Management Service, the agency that led the way into the deep-water age, has been abolished, ridiculed as a pawn of the oil industry it was meant to oversee. The gulf office that Mr. Oynes ran for many years has drawn particular scorn.

The causes of the spill remain unclear, but a number of the agency’s actions have drawn fire: it shortened safety and environmental reviews; overlooked flaws in the spill response plan; and ignored warnings that crucial pieces of emergency equipment, blowout preventers, were prone to fail.

1 of 12 The story has gained a bacchanal gloss because agency employees in Louisiana and Colorado took meals, gifts and sporting trips paid for by the industry, and several Colorado officials had sex and used drugs with industry employees. But the agency’s culture was shaped by forces much bigger than small-time corruption.

For decades, Washington and Louisiana were joined in the quest for red-jacket days, and the minerals agency was expected to provide them. Washington got oil and royalty fees; Louisiana got jobs; and the agency got frequent reminders of the need to keep both happy.

Seldom do regulators work in a place so dependent on the industry they oversee. From the top of Louisiana’s tallest building (One Shell Square) to the bottom of its largest aquarium (with a sunken rig), oil saturated the state’s culture long before it covered its marshes. It is prized as a source of jobs and as a source of tax revenue.

While Floridians stage protests to prevent drilling, Louisianians stage a Shrimp and Petroleum Festival to “prove that oil and water really do mix.” When Mr. Oynes’s wife, Rena, won a teaching award, it was sponsored by the American Petroleum Institute. Across South Louisiana, regulators have grown up hunting and fishing — and working on oil rigs — with the people they oversee.

Few people have mattered more in that world than Mr. Oynes, 63, who held top jobs in the gulf office for 21 years and outlasted 11 agency directors before resigning abruptly in May. Many branches of government have parallel figures, little-known civil servants whose knowledge and staying power lend them great sway.

Cobbled together three decades ago from rival corners of the Interior Department, the minerals service had a three-part charge: issuing leases, collecting royalties, and overseeing the dangerous work at sea. His superiors in Washington set broad policy, but Mr. Oynes, a heavyset conduit of high energy, dominated the gulf with 12-hour days and a zeal for detail. His decisions guided which drilling plans would be approved, what safety checks would be required and how the platforms would be inspected.

Raised in conservative Orange County, Calif., he shared nothing of the Mardi Gras spirit for which Louisiana was known — only its belief in the importance of oil and its respect for the people who mined it. For years, he told associates that modern engineering made spills all but impossible and harmless if they did occur.

Since the Deepwater Horizon rig exploded on April 20, Mr. Oynes has made no public comments. But angry at what he called lampooning depictions of the agency, he recently

2 of 12 broke his silence, offering his account of what happened on his watch. He aired many problems, but few regrets.

“I thought we had done a pretty good job of addressing the challenges that come with deep water,” he said in an interview. “My opinion has not changed.”

Mr. Oynes acknowledged that he had known nothing about a group of studies, some nearly a decade old, that cast doubt on the reliability of blowout preventers — the fail-safe equipment that failed in the BP spill. He could not explain why the studies, commissioned in Washington, had not reached him.

But he bridled at what has become the dominant story line: that a heedless group of derelict bureaucrats abetted catastrophe. In Mr. Oynes’s counternarrative, a dedicated staff did all it could to safely coax oil from watery depths, mindful that it creates jobs, bolsters national defense and helps keep the lights on.

“That is a very noble mission,” he said, while emphasizing that the gulf is a special prize.

“When people came down, new directors, whatever, I would try not to insult their intelligence,” he added. “But I tried to make sure they understood we had a national asset they were managing.”

“I can’t tell you how many times we had that conversation inside M.M.S.: doesn’t the public understand energy doesn’t come from a light switch?” he said. “It has to come from somewhere before it gets to the light switch.”

A Special Bond

If modern Louisiana history could be squeezed on a bumper sticker, this is what it would say: Louisiana ♥ Petroleum.

Or that was the message conveyed last year when Mr. Oynes joined other Interior Department officials at a hearing in New Orleans on offshore drilling. At hearings elsewhere, industry critics largely set the tone. But in New Orleans, a grandmother waited for hours to say, “Drill, and drill vigorously.”

A school principal said the majority of his students’ parents worked for the oil industry. A drilling engineer lauded the industry’s safety record. “The incident rate for a real estate agent is higher than someone working on the rigs,” he said.

3 of 12 As things go in Louisiana, the engineer happened to be Mr. Oynes’s best friend.

Five states border the Gulf of Mexico, but Louisiana’s bond with subsea petroleum is unique. Marshes blur distinctions between drilling on land and at sea. The continental shelf slopes gently. There are no white sand beaches to protect, only river mud.

In some states, drilling has been seen as a threat to native cultures. In Cajun country, it opened a door to the middle class — even as a typical offshore schedule (two weeks on, two weeks off) let workers still fish, hunt and farm.

“The industry didn’t destroy the old culture — it saved it,” said Diane Austin, an anthropologist at the University of Arizona.

What it did largely destroy, through cash and cunning, was significant political opposition. Local groups have typically been weak and small — no match for an industry that Mr. Oynes calls the “900-pound gorilla.”

“We would issue standard notices to environmental groups, and they would never even come to a meeting,” he said. “Arguing against oil and gas isn’t going to get them anywhere.”

As Congress debated the landmark 1978 law that governs offshore activity, Louisiana officials argued for a light federal touch.

“We have 20,000 oil wells off the coast of Louisiana, and we have been drilling out there for a quarter of a century,” Senator J. Bennett Johnston, a Democrat, said on the Senate floor. “The so-called danger from oil spills has simply not been proved. Not only has it not been proved, it has been disproved, and we need to get on with that drilling.”

Elsewhere in the country, the law requires companies to submit detailed proposals for offshore activities, called Drilling and Production Plans. In the gulf, it specifically forbids them. Though the minerals agency invented an alternative (a Development Operations Coordination Document), it provides for lesser levels of review.

Born of competing national concerns, the law outlines competing goals. One passage calls for the “expeditious and orderly development” of offshore gas and oil. The next adds a codicil: “subject to environmental safeguards.”

While Mr. Oynes said he gave the mandates equal weight, many subordinates thought that he — like his adoptive state — favored one word.

4 of 12 “Expedite,” he would say.

Technology Outpaces Rules

When Mr. Oynes arrived in New Orleans in 1986, Louisiana was in crisis. Oil prices had fallen by more than 60 percent in a single year, and discoveries in the gulf were dwindling. With unemployment in some parishes above 25 percent, sardonic bumper stickers entered state lore: “Last one out, turn off the lights.”

The crash lives on in communal memory like a bout with a life-threatening disease — a reminder of how many organs fail when the offshore heart stops pumping.

After 11 years in the Interior Department’s leasing program, Mr. Oynes knew the importance of offshore oil but was still surprised at how deeply it had seeped into Louisiana society. “It’s subtle, but it’s everywhere,” he said.

His main interests outside work were church and his sons’ swim meets, and both brought friendships with people in the industry. “Maybe 20 percent of the guys in the church worked in the oil patch,” he said. Among the other swim team parents was his friend the drilling engineer.

Economic rejuvenation came slowly but accelerated in 1994 with the launching of Shell’s Auger platform, a $1.2 billion marvel capable of mining oil through 2,800 feet of water and 19,000 feet of subsea sand and rock. It came amid a series of head-turning technological advances that, along with rising oil prices and lowered federal royalty fees, suddenly made deep-water drilling lucrative. The gold rush was on.

In 1997, Mr. Oynes’s red-jacket auction brought the federal government $824 million and leased a record 1,032 tracts — numbers he can still recite as readily as his phone number. In 1998 he won a presidential award for distinguished government service.

Mr. Oynes was a lawyer, not an engineer, but he understood that the regulations lagged the technology. When Congress started its debate in the 1970s, the deepest well was less than 700 feet beneath the gulf’s surface. By 2003, rigs were drilling nearly two miles down. The achievements inspired awe — even allusions to space exploration — but posed new safety and environmental risks that the agency had to address.

One internal problem it faced was a feeling among many staff members that swift action was impossible. One regulation had famously taken nine years to get through Washington. “It

5 of 12 created a tone of ‘Why should we try to have an aggressive program of regs?’ ” Mr. Oynes said. “I had to become a cheerleader: ‘Now guys, don’t give up.’ ”

Rather than issue formal regulations, the office often relied on weaker “Notices to Lessees and Operators,” which were supposed to explain existing rules, not announce new ones. Mr. Oynes said the office got “very inventive” in stretching the reach of the notices but knew the industry “could file a lawsuit and we were vulnerable.”

That frustration was compounded by a feeling that the agency’s Washington bosses cared more about leasing — where to do it and how much money it would bring? — than they did about the challenges of getting the oil from the sea. That was true, Mr. Oynes said, under Republican and Democratic administrations.

“It’s almost a given with a director that they don’t know anything about drilling,” Mr. Oynes said. “We would turn to each other and say, ‘Headquarters isn’t paying attention.’ ”

Despite the impediments — tight budgets were another — Mr. Oynes won what felt to him like significant victories. He got money to create a fifth field office, in Lake Charles, La. He hired a dozen or more new inspectors. (After the BP spill, the Obama administration is now talking of adding hundreds.) He won small amounts of money for new training and created retention bonuses to keep staff members in the 550-person office from decamping to the oil industry, where they could sometimes double their salaries.

Many accounts of the agency’s culture have cited the “revolving door,” suggesting that regulators pulled their punches in the hopes of landing industry jobs. A number of Mr. Oynes’s senior lieutenants went to work for the industry, including his deputy, his chief of staff and heads of two of the four divisions. Two former agency directors went on to lead the industry’s Washington lobbying group.

Mr. Oynes calls the criticism “totally off base,” saying the role-swapping was limited and played no role in the agency’s culture. But he added: “I find it pretty hard to imagine I would ever go to work for an oil company. I’m just not comfortable with that.”

He considered himself a tough cop. When he learned that Shell was burning huge volumes of natural gas it considered too costly to bring to shore — cheating the government of royalties and wasting energy — Mr. Oynes called federal prosecutors, who won $49 million in royalties and fines.

Chevron howled in 2003 after the agency rejected a hefty bid for a deep-water tract. But Mr.

6 of 12 Oynes backed the staff geologists, and the tract fetched more than five times as much the following year.

“We stuck to our guns,” he said.

One agency practice now called into question is the use of a process called categorical exclusion to excuse individual drilling plans from intensive environmental reviews. Critics say the exclusions are meant for activities with no potential for environmental harm, not drilling in the ocean floor. BP got two categorical exclusions for its ill-fated well, one for exploration and one for drilling.

“What’s missing when you do a categorical exclusion is the chance to consider alternative techniques,” said Kieran Suckling, executive director of the Center for Biological Diversity, which is one of several groups suing the agency over the practice. “You say there is only one option — the preferred option of the oil industry.”

Agency officials say the sheer volume of gulf activity left them little choice: they issued up to 1,000 drilling permits each year, and environmental impact statements can take up to two years. Instead, they examined the safety and environmental issue posed by the drilling in wholesale fashion, before conducting the annual lease sales.

Decades had passed since the last big spill. Mr. Oynes saw no reason to change.

Tension Between Factions

As the gulf office adapted to the deep-water age, it was riven by a tribal split: engineers versus environmental scientists.

The engineers were action-oriented and confident; they trusted machines. The scientists were deliberative and academic; they worried about what they might not know. Engineers typically had local roots. Scientists often came from out of state. The engineers called their rivals the “free thinkers down on the third floor.”

“We had huge conflicts,” said Hammond Eve, who ran the environmental division for eight years before retiring in 2004.

Both sides knew which division held the power. The law gave the head of field operations — the lead engineer — the authority to approve exploration and drilling plans. To win changes, the environmental scientists had to work through him.

7 of 12 When tensions arose between the factions, Mr. Oynes cast himself as the neutral broker, but subordinates sensed where his instincts lay. “From my perspective, we can’t sit here and talk about it forever,” he said. “We have to get on with things.” The result was a culture that favored trust over doubt, saying yes over saying no.

One day in a staff meeting Mr. Eve raised a question: with wells being sunk at ever-greater depths, what are the chances of a blowout, a catastrophic eruption?

Mr. Oynes said the answer would come from the head of field operations. “And later on the answer came back that it was impossible,” Mr. Eve said. “They said the blowout preventer will take care of it.” (That head of field operations, Donald C. Howard, was fired in 2007 for accepting gifts from a drilling company, and pleaded guilty to lying on his ethics form.)

Mr. Oynes expressed a similarly confident view in a 2003 interview with Tyler Priest, an oral historian at the University of Houston. Referring to a giant spill in Santa Barbara, Calif., in 1969, Mr. Oynes said, “You could almost say it is impossible for that to happen again.” Given modern cleanup technology, he added, “Even if you had a spill, how much harm is it going to do?”

Mr. Eve calls the comment “absurd.”

“Chris shaped the program around that premise,” he said. “The premise was wrong, and therefore the program was wrong.”

He said Mr. Oynes, seeking to increase production, had fostered an office culture that was “pro-industry to the point of being blind.”

Others saw his doggedness in a fight over seismic testing. The industry uses the tests to locate oil, but the high-decibel blasts can harm marine mammals. To authorize them, the minerals agency needed permission from the National Marine Fisheries Service.

When the fisheries agency declined to give it, the minerals group proceeded anyway — temporarily, minerals officials said, while the agencies continued negotiations. The fisheries service wanted the gulf office to require independent spotters aboard the seismic testing boats, with the authority to shut them down. Mr. Oynes grew livid, calling the idea costly and impractical and saying the boat crews could be trained as scouts instead.

“He was screaming at the top of his lungs,” said a former agency scientist, who spoke on the condition of anonymity because he fears government reprisals. “He said, “N.M.F.S. is trying

8 of 12 to shut down oil and gas in the Gulf of Mexico!’ ”

The standoff with the fisheries service has now lasted eight years. Four environmental groups filed a suit against the minerals service in June, saying the seismic testing violates the law.

The clash between the agency’s environmentalists and engineers dominated a project meant to guide the agency into the deep-water age, a two-year study of new risks called an environmental assessment. Published in 2000, it framed the agency’s approach for the next decade. It reads like a document at war with itself.

It counted 151 well blowouts in the previous 25 years, about one every two months. It said a quarter had led to spills. It questioned the effectiveness of chemical dispersants and cited the difficulties of drilling relief wells. In noting that a deep-water blowout could take up to four months to control, it all but forecast the BP disaster: “Of particular concern is the ability to stop a blowout once it has begun.”

Then it quickly silenced its own alarm bells, casting spills as a “very low probability event” and noting that companies had “speculated” that deep-water blowouts might cap themselves (because of loose sediment on the ocean floor). It saw no need for new safeguards or an environmental impact statement, a more rigorous review that would have included public debate.

Why not do one, just to be safe?

“I’m sure industry would have been very nervous,” Mr. Oynes said, explaining that it took “some hand-holding” just to do the assessment. “If you start talking about an E.I.S., their alarm bells start going off a bit stronger: ‘Oh my God, what is going on here?’ ”

Still, he said, had the study been necessary, the agency would have done it.

A Bureaucratic Bungle

For most of his career, Mr. Oynes, like his agency, flew beneath the public radar. But in 2006 he was dragged before Congress for his role in a costly mistake. For him, and for the minerals service, it forecast troubles to come.

To encourage production, Congress had passed a law in 1995 suspending royalties on deep-water tracts unless oil prices exceeded a certain threshold. But the minerals agency somehow dropped the threshold provision from two years of contracts. When prices

9 of 12 unexpectedly rose, the companies pocketed billions of dollars.

The inspector general called the episode a “jaw-dropping example of bureaucratic bungling.” While he placed much of the fault on the Washington staff, two industry representatives recalled telling Mr. Oynes about the omission. Mr. Oynes testified that he did not recall the exchange.

The incident has trailed Mr. Oynes ever since, but most accounts omit the coda. Congress drafted the law so poorly that the federal courts invalidated the thresholds for the entire five-year program, at a cost of up to $60 billion. Congress had derided Mr. Oynes while committing the greater mistake.

For Mr. Oynes and members of his inner circle, the episode only fed a notion they had of themselves as stoic sentinels on the petroleum frontier — forced to take flak unfairly, but there to get things done.

A year after his Congressional thrashing, Mr. Oynes was promoted in 2007 to a top Washington job. He felt like he was capping a storybook career. The Dead Sea had come to life, technology had made quantum leaps and there had not been a single major spill.

“It felt very good,” he said.

Last year the Offshore Energy Center, a nonprofit group in Galveston supported by the oil and gas industry, inducted the minerals agency into its Hall of Fame for raising safety and environmental standards “in cooperation with the petroleum industry.” The minerals service gave out safety awards, too. Last year one went to BP.

On the morning of April 21, Mr. Oynes got an e-mail saying that 11 people were dead. The news got worse from there. Nothing would stop the toxic geyser about a mile below the sea. The blowout preventer had failed.

Soon, news accounts focused on a trail of studies, a decade long, that had questioned the reliability of the devices. One, commissioned by the Washington office of the minerals agency, reported a “grim snapshot” that “illustrates the lack of preparedness.” Mr. Oynes is still trying to understand why he knew nothing about them.

Time magazine placed him on its “dirty dozen” list of people most responsible for the spill. In New Orleans, The Times-Picayune reprised his role in the blown royalties affair. A congressman hailed his planned departure as a “an opportunity to begin anew.”

10 of 12 Soon the inspector general’s office released a report, long in the making, about the agency’s Lake Charles office. It depicted an ethics-free zone, where inspectors routinely took industry gifts and did favors for industry friends.

They went hunting and fishing on the companies’ tab, accepted company meals, went skeet shooting at the companies’ expense, and in one case flew on a private plane to watch Louisiana State University in the Peach Bowl. (One employee said he knew it was wrong, but did it because he was a “big L.S.U. fan.”) One inspector negotiated a job with a company while inspecting its platforms.

“Obviously we’re all oil industry,” said Larry Williamson, the district manager. “We’re all from the same part of the country. Almost all our inspectors have worked for oil companies out on these same platforms. They grew up in the same towns.”

On May 12, the administration announced that the minerals service was being abolished. It would be split into three agencies: one to issue leases, one to collect royalties and one to supervise offshore operations.

After decades of quiescence, Louisianians are suddenly appearing at oil and gas protests. But what they object to is the federal government’s six-month ban on deep-water drilling. About 10,000 people gathered last month in the Cajundome in Lafayette as Gov. Bobby Jindal, a Republican, urged them to “defend our way of life.”

Two federal courts in Louisiana invalidated the ban (though the administration created a new one). While the accident “is an unprecedented, sad, ugly and inhuman disaster,” wrote Judge Martin Feldman of Federal District Court, “oil and gas production is quite simply elemental to gulf communities.” He said halting would have “immeasurable effects” on the economy.

At the Aquarium of the Americas, a beckoning riverfront attraction beside the French Quarter, curious crowds file through the Gulf of Mexico exhibit. The first thing they see is a sunken oil platform, with fish swarming about its barnacled legs. Dreamy music completes the message: symbiosis and serenity.

The Audubon Institute, which runs the aquarium, is the city’s most prominent nature group, but the exhibit talks about oil as much as it talks about fish. It cites the taxes the industry pays, the number of jobs it creates and the utility of “a special fluid called drilling mud.”

No one could accuse the group of distancing itself from its sponsors. A large sign credits six

11 of 12 major oil companies for sponsoring the exhibit, led by BP.

Jack Begg and Kitty Bennett contributed research.

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