Interior secretary calls for splitting offshore-drilling agency in two

Reporting from Washington —  Interior Secretary Ken Salazar said Tuesday he will split the troubled agency that regulates offshore drilling in two, the first in what he promised would be a series of moves to improve safety regulation in response to the ongoing oil spill in the Gulf of Mexico.

At a press conference, Salazar called for breaking the Department of the Interior’s Minerals Management Service into two agencies – one to lease federal lands and waters for drilling and collect billions of dollars in oil and gas royalties, and the other to inspect drilling operations and enforce safety and environmental regulations.

He also asked Congress for $29 million to fund increased safety inspections and investigations at the management service, and to triple the amount of time allowed for environmental reviews.

Interior officials believe Salazar has the power to split the service by secretarial order.

Salazar also said Tuesday that he would ask Congress to authorize other changes, such as making the head of the service a presidential appointee who requires Senate confirmation.

Even as federal investigators work to determine the cause of the BP spill and how to prevent a repeat, Salazar told reporters, “We must not hesitate to take actions that would bring about change and reform now.”

He suggested that dividing the agency’s functions would help resolve conflicts, real or perceived, between the management service’s primary functions: maximizing federal revenue from oil and gas leasing, while also regulating the drillers for safety and environmental impact.

But his comments and the department’s accompanying press release left key questions unanswered about the split, including which arm of the MMS would have final say over whether to proceed with drilling plans

The management service has drawn repeated criticism from outside auditors and internal whistle-blowers in recent years, largely from a relationship with industry that critics call too cozy. Those criticisms reached new heights after oil from the downed Deepwater Horizon rig began gushing into the gulf.

Scores of interviews and federal documents showed the management service and oil companies were not prepared for the massive spill a mile below the ocean surface, because the service’s regulations and risk assessment had not kept pace with rapidly changing drilling technologies that enabled riskier deepwater exploration.

The management service is tasked with regulating the nation’s offshore energy development and collecting nearly $14 billion in royalties from mineral leases on federal land and waters.

Although a relatively unknown agency, MMS became infamous after a series of scandals culminated in a scathing 2008 report from the Interior inspector general.

The investigation found that current and former employees in the royalty program’s Denver office engaged in “unbridled, unethical conduct” with oil and gas company representatives -- a tame way of describing partying that included alcohol, cocaine and marijuana use, as well as sexual relationships between MMS employees and energy industry insiders.

In addition, MMS workers accepted gifts, gratuities, golf and ski outings and tickets to sports events and concerts “with prodigious frequency,” according to the report.

The chapter detailing these transgressions was titled “A Culture of Ethical Failure.”

The report provided insight into what some called business as usual at MMS, noting that “when confronted by our investigators, none of the employees involved displayed remorse.”

Auditors also have repeatedly criticized the service for its methods of collecting royalties, which result in the federal government losing out on millions of dollars it is owed by oil and gas companies. In March, the Government Accountability Office charged that MMS officials suppressed their own scientists’ input when considering new drilling in the Arctic Ocean.

Salazar made MMS reform a top priority when he took over as secretary. He issued new ethics guidelines and required ethics training for employees, and he began evaluating MMS managers based on conduct and disciplinary issues.

He also canceled a method of collecting lease revenues called “Royalty-in-Kind,” by which oil companies paid their revenues in oil, not cash. The program was heavily criticized by auditors.

At the same time, Salazar has added to the management service’s portfolio by making an aggressive play to open coastal waters to wind-farm development.

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