Tuesday, August 24, 2010 How the Minerals Management Service’s partnership with industry led to failure By Juliet Eilperin and Scott Higham routinely referred to the companies ington paid close attention to MMS and under their watch as “clients,” the hard-to-understand world it was Washington Post Staff Writers “customers” and especially “partners.” charged with regulating. When they did, As the relationship became more it was often to pressure the agency to in- Two weeks after BP’s Macondo well intertwined, regulatory intensity crease the money it earned from leases blew out in the Gulf of Mexico, the federal subsided. MMS officials waivedit sold and the production that followed. government’s Minerals Management hundreds of environmental reviews Over its 28-year history, MMS grew to Service finalized a regulation intended and did not aggressively pursue become one the government’s largest to control the undersea pressures that companies for equipment failures. revenue collectors, after the Internal threaten deepwater drilling operations. They also participated in studies Revenue Service. MMS did not write the rule. As it financed and dominated by industry, As oil and gas companies took had dozens of times before, the agency more as collaborator than regulator. their drilling operations into deeper adopted language provided by the oil In the face of industry opposition, and riskier waters, MMS had to rely industry’s trade group, the American MMS abandoned proposals that would on its corporate partners’ expertise. Petroleum Institute, and incorporated have increased costs but might have Along the way were warning signs of it into the Federal Register. improved safety. the partnership’s imbalance, but the MMS received two favorable public The story of how a little-known fed- industry’s track record of no major comments about the regulation: one from the Offshore Operators eral agency became an extension of accidents provided a comfort level that Committee, an industry group, and the industry it oversaw spans three de- proved deceptive. the other from BP. The regulation cades and four presidents. It began in Industry innovation, as it often stated: “BP, a large oil and gas company, 1982 with a major expressed the importance of this rule change in the way and how they have been involved with the nation man- MMS and industry to develop the aged its natural industry standard.” resources, picked The fact that BP - which has come under up pace with ini- withering criticism for how it managed tiatives to stream- mounting pressure in the Macondo well line bureaucracy - took partial credit for crafting the rule in the Clinton and is not surprising. MMS has adopted at George W. Bush least 78 industry-generated standards as administrations, federal regulations, American Petroleum and ended after Institute records show. the April 20 BP MMS’s acquiescence stemmed from blowout with the the unusual relationship it had cultivated Obama adminis- with industry. Directed by law to “meet the tration’s abrupt de- nation’s energy needs,” the agency pursued cision to undo the that mission by declaring itself publicly partnership. In this image made from video released by British Petroleum, a saw slices into the blowout preventer to prepare for a capping device to seal and formally as industry’s partner. Few in positions off the oil gusher at BP's Macondo well. Top officials and front-line workers of power in Wash- does, had outrun and overpowered the D. Bettenberg carried out many of or the Georges Bank. government’s regulatory prowess, with Watt’s orders. He recalls that the agency Leasing new tracts to oil and gas disastrous results. They were partners, was created on the fly. companies was MMS’s primary objective. but they were not equals. Bettenberg left his office in Reston one Many agency employees spent their days Friday afternoon and returned Monday determining which offshore areas would On the fly to learn that Watt was giving MMS be most productive, and then auctioning oversight of drilling operations in the those swaths to the highest bidders. James G. Watt, the man who created Outer Continental Shelf, a responsibility Now, lawmakers were saying they had MMS, came to Washington in 1982 that had rested within another Interior as much of a right to draw the map for with a mission: to alter the way the Department division, the Bureau of Land drilling as MMS officials did. government managed its natural Management. A co-worker found a copy Watt backed away from leasing off the resources. Coming off the hostage crisis of Watt’s draft order on a Xerox machine California and Massachusetts coasts, but in oil-rich Iran and gas shortages on the and relayed the news to Bettenberg in a he moved to lease nearby areas, tracts home front, he vowed to “mine more” phone call. and “drill more.” As he set up the agency, Nearly three decades later, the Bettenberg turned to industry lawyer known for his sharp mind and for guidance. “Sometimes we oversized glasses says in an interview applied industry standards,” from his home in Jackson Hole, Wyo., he says. “Many of the that he “wouldn’t change one decision.” standards are good.” As Ronald Reagan’s first interior Bettenberg, who retired in secretary, Watt wasted little time pursuing 2005 after a 41-year career, his vision. The environment, he believed, wonders whether the agency contained valuable resources that should could have done more to be exploited for the good of the nation, regulate deep-sea drilling. particularly at a time of tense relations “This recent spill has with the Soviet Union and continuing prompted me to conclude I instability in the Middle East. didn’t ask enough questions,” “The Reagan administration was he says. “I suspect people didn’t for everything,” Watt says. “We wanted keep up with technology.” nuclear, we wanted solar, we wanted James G. Watt, former Secy. of the Interior and the creator of the MMS. (Curtesy of the Univerity of Wyoming). conservation, we wanted wind, we Expansion wanted coal. We were just doing everything we could to re-arm America, In the face of Watt’s push for more that were even closer to shore. Congress dig us out of a huge financial mess. That drilling, the Democratic-controlled responded with further restrictions, required energy at every level.” Congress resisted. the beginning of what would become a For years, the U.S. Geological Survey Rep. Les AuCoin, an outspoken drilling moratorium for certain regions. had handled the task of collecting Oregon Democrat, had a vision of what The one exception: most of the Gulf royalties from companies, based on the an oil spill off California could mean for of Mexico. amount of oil and gas they extracted his state. After major storms, he said, After Watt resigned in September from federal land and offshore reserves. dead cows would wash up on Oregon’s 1983, lawmakers expanded the But allegations of fraud had left the beaches, plucked from Northern moratorium. From 1982 to 1992, the program in a shambles. A panel California coast. Oil from a blown-out territory declared off-limits grew from appointed to examine the problems well, he reasoned, would be no different. 700,000 acres off the California coast recommended that a new agency take When Watt suggested opening up to more than 266 million acres off the over those duties as its main mission. the Pacific Outer Continental Shelf Pacific and Atlantic coasts, Alaska’s Watt went one step further. The and Georges Bank off Massachusetts to Bering Sea and the gulf’s eastern portion. Minerals Management Service he drilling in 1981, AuCoin and Republican Again, the rest of the gulf remained created in 1982 would not only lease Rep. Silvio O. Conte of Massachusetts open. tracts for exploration and collect the used their posts on the powerful House Lawmakers who opposed drilling government’s share of oil and gas Appropriations Committee to block found an ally in George H.W. Bush. revenue, it would regulate the industry, him. They put language in a funding During his 1988 presidential bid, he too. That built-in conflict would bill mandating that no money could said offshore areas needed protection hamstring the agency for decades. be used to lease exploratory tracts in “until technology moves forward.” As an early director of MMS, William central and Northern California waters In his first year as president, he canceled a slew of lease sales by put Vice President Al Gore in charge of Worried that leases were declining executive order and established a marine the initiative, which sought to slash the as opportunities in shallow water sanctuary in California’s Monterey Bay. federal workforce, reduce regulation dwindled, Louisiana Democrat J. The government also bought back leases and form “partnerships” between Bennett Johnston used his senior for tracts off South Florida. The result: Washington and industry. Profound position on the Senate Energy and More offshore auctions were canceled changes would take place at MMS: It was Natural Resources Committee to seek than held between 1987 and 1992. ordered to do a better job of collecting royalty relief for companies willing to The gulf remained the primary place royalties, while losing nearly 10 percent explore deeper water. for deepwater ventures, becoming what of its staff during the next five years. “Offshore drilling had always been environmentalists such as Peter Galvin Reinvention also became the very key to our [state’s] economy, and of the Center for Biological Diversity agency’s mantra. In October 1993, an the overall oil production,” he now called a “national sacrifice area.” Today, Interior panel issued findings aimed at says. “I thought we ought to make a it is home to 99 percent of the nation’s future drilling policies.