Obama, Congress Question Cozy Relationship With Oil Companies

"Cozy relationship" is one of those phrases Washington loves. During the financial crisis, there were allegations of cozy relationships between bankers and the government regulators who were supposed to be policing them in the public interest. It's a similar story with the oil spill in the Gulf of Mexico. "For too long, for a decade or more," President Obama said recently, "there has been a cozy relationship between the oil companies and the federal agency that permits them to drill."

Obama was referring specifically to the Minerals Management Service, which is part of the Interior Department. It has long been a problem child. In 2008, an inspector general's report found that MMS workers weren't just cozy with the industry but were, in fact, holding sex and drug parties with industry representatives. And that was just the most visible problem for an agency with the conflicting roles of oil-revenue producer and safety enforcer.

It was no shock, then, that Interior Department Secretary Ken Salazar last week announced that he wants to split the agency into three parts: one to award drilling permits, one to collect the royalties that energy companies pay to the government (an average of $13 billion a year), and one to carry out safety inspections and enforce environmental rules, unhindered by real or imagined revenue considerations. Nor was it a shock today when Interior's current inspector general, Mary Kendall, released her own scathing report on MMS, noting that at least through 2008 the agency had fostered "a culture where the acceptance of gifts from oil and gas companies were widespread."

But judging from past efforts to end cozy relationships, just splitting up MMS probably won't be enough. In recent years, several other agencies have been taken to task by Congress for showing too much deference to industry, and the efforts to reform them are still works in progress.

Take the Federal Aviation Administration. For much of the past decade, the agency was lax on airline inspections. During the George W. Bush administration, says Linda Goodrich, an FAA inspector for 26 years and a vice president of the Professional Aviation Safety Specialists, "the feeling was, we don't need a bunch of government employees out there harassing people." Then, in 2008, thousands of flights were canceled after news broke that the FAA had been ignoring safety violations and that top FAA officials were punishing inspectors that the airlines considered too tough.

That led to hearings, drafting of legislation, and, with the change in administrations, more interest in enforcement. But there are still problems. "There's a lot that can't be mandated," Goodrich says. In general, she says, federal agencies tend to focus too much on quantity—checking things off the list—rather than on quality, because that's how supervisors are graded. In other words, there's a certain culture that develops within federal agencies that takes a long time to change.

Cleaning up MMS may prove even more challenging. Kendall, in her report, focused on agency culture, saying that her gravest concern with MMS is "the environment in which these inspectors operate—particularly the ease with which they move between industry and government." The report quotes one MMS employee saying that "almost all of our inspectors have worked for oil companies out on these same platforms." Among other things, Kendall suggests that the department consider a "two year waiting period" on hiring inspectors from industry.

Another area Congress is looking at is whether the industry has had too much influence in shaping offshore safety regulations; at least some of the government's rules come from standards developed by the industry's main lobbying group, the American Petroleum Institute. There's also intense talk about boosting the penalties oil companies face for violating safety and environmental regulations under federal law. As New Mexico Sen. Jeff Bingaman, who chairs the Senate Energy and Natural Resources Committee, put it this morning, the system "is in dire need of repair."

Meanwhile, Obama is launching a commission to investigate what went wrong on the Deepwater Horizon drilling rig in the Gulf, similar to the commissions that investigated the Challenger space shuttle explosion and the Three Mile Island nuclear plant incident. After Three Mile Island, of course, the nuclear industry went moribund. Obama doesn't want the same for offshore oil, and that might just mean ending the cozy relationships once and for all.

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