Senate panel passes offshore resources management reforms

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, July 2 -- The US Senate Energy and Natural Resources Committee passed a bill to change federal offshore resources management policies on June 30 that codifies steps US Interior Sec. Ken Salazar has taken already to reform what formerly was the US Minerals Management Service.

The bill, S. 3516, would amend several provisions of the Outer Continental Shelf Lands Act. It included seven amendments and passed by voice vote. It includes language that Salazar sought raising the stature of what is now the US Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE) so that the directors of its divisions must be confirmed by the Senate. The revenue and royalty collection activities within the agency will be formally separated from its leasing, environmental protection, and safety roles, as the secretary previously ordered.

Two of the measure’s other provisions would impose a 1-year waiting period before a US Department of the Interior agency director could work for a company or trade association of companies that they previously regulated, and establish a separate commission to investigate offshore oil and gas policies that would include members with oil and gas industry experience.

Other provisions would increase financial responsibility requirements for offshore well operators while raising civil and criminal penalty amounts and require that they be increased automatically to reflect inflation. Lease sales would be limited only to operators with good safety and environmental track records.

The bill also would eliminate arbitrary requirements for processing drilling permit applications so fuller environmental reviews can be conducted, and increase the quantity and quality of inspectors and pay for them with a fee on operators.

‘A good start’
“From clear and tough ethics requirements, to better research and analysis of the natural resources on the [US] Outer Continental Shelf, to an improved and adequately funded system for inspecting offshore rigs, this bill makes a good start on reforms that will help Americans regain confidence in our ability to manage offshore energy in a responsible and forward-looking way,” chairman Jeff Bingaman (D-NM) said following the vote.

Committee member Tim Johnson (D-SD) said the bill was a first step to reform federal oil and gas programs following the ongoing oil spill in the gulf. It is expected to help form a broad energy bill that the Senate will consider in several more weeks, he added.

Johnson specifically cited S. 3516’s provisions separating BOE’s revenue and royalty collection activities from its leasing, environmental protection, and safety functions. “This separation will help put an end to the corruption that plagued MMS, which first came to light several years ago, and put in place people with the expertise and experience necessary to oversee oil and gas programs,” he said.

The bill also would establish an independent environmental and technical safety research program within Interior and require that it be part of all planning and rulemaking. It also would require that DOI publicly consider the expertise of other interested federal agencies during its planning processes. And it would allow a limited number of exemptions from civil service pay rates so employees with an extremely high level of scientific or technical expertise could be hired.

New safety rules
Safety requirements would be increased for each operator to include technical best practices, systems analysis, risk assessment, and an evidentiary safety case as well as details for responding to loss of well control and cleanup. Redundant systems including blowout preventers would be required. There would be additional requirements for obtaining a deepwater well permit. Employees working offshore would have to have adequate training and experience. DOI’s new independent technical research unit would participate. And cost-benefit analyses for best safety practices would be banned.

New accident investigation and data-sharing requirements would be imposed. All accidents, including those involving minor problems, would have to be reported and investigated, and information would have to be provided to a common data base for all operators so they could learn from others’ mistakes and the agency could spot and solve problems before they caused significant harm.

An independent OCS safety and environmental advisory board would be established to provide the Interior secretary with scientific and technical advice on safe and environmentally sound energy development. Its members would be chosen in consultation with the National Academies of Science and Engineering.

The National Transportation Safety Board could investigate major accidents at the secretary’s request, which the bill’s sponsors said would provide additional expertise and independence. Relevant research and development programs would be revised to direct funding to previously neglected areas, including oil spill response and well control technologies.

Finally, S. 3516 would require more rigorous reviews of royalty rates, and require analyses of costs for the oil and gas industry to operate offshore in the US compared to other countries.

‘Revolving door’
The amendment establishing time limits before a DOI employee could go to work for a company or association of companies they used to regulate was proposed by committee member Ronald A. Wyden (D-Ore.) and cosponsored by Bingaman. In addition to barring such employment for 1 year after a DOI employee leaves, it also would prevent the employee from advising or assisting anyone involved in seeking a lease or involved in a regulatory action for 2 years.

The employee would be barred from acting on matters involving any entity in which the employee or his or her family held a financial interest while at DOI. DOI employees also would be prohibited from accepting gifts from outside sources, except for clerical and support personnel who do not conduct inspections, audits, or otherwise make policy or regulations. Soon after he became secretary, Salazar issued new ethics orders in response to flagrant violations of federal work codes by a few employees within MMS’s Minerals Revenue Management Office and in its royalty-in-kind program, which he subsequently eliminated.

Wyden did not issue a statement following the bill’s passage with his amendment but indicated at the committee’s June 24 hearing on it and other proposals that he would not support it unless stronger ethics language was included. “You have got off to a good start, but I think we need to change the ground rules,” he told Salazar, who testified at that hearing. “I want to see strict limits on employees going to work for organizations of companies they used to regulate.”

Although the lawmaker did not mention him by name, Wyden described former MMS director Randall L. Luthi who accepted an appointment as president of the National Ocean Industries Association less than a year after ending his tenure at MMS, although he did not assume the association’s helm until Mar. 1. Luthi’s predecessor at NOIA, Tom Fry, also was a former MMS director as well as a former director of the US Bureau of Land Management.

In a statement following S. 3516’s passage with the Wyden-Bingaman amendment, the Project on Government Oversight said that the provision was a good start at addressing what it described as “the revolving door which has been spinning out of control between the oil and gas industry and [DOI].”

Spill commission
Another adopted amendment, which the committee approved by a 15 to 8 vote, would establish a bipartisan commission to investigate the Apr. 20 well blowout and spill. Committee member John A. Barrasso (R-Wyo.) proposed it in response to US President Barack Obama’s appointing members to the commission he established for the same purpose, which included Natural Resources Defense Council Pres. Francis Beineke, who opposes offshore oil and gas development.

“Any investigation into the spill should be unbiased and focused on the facts,” Barrasso said after the bill was passed with his amendment included. “Unfortunately, the president’s commission is stacked with people who philosophically oppose offshore drilling. Today, bipartisan members of the Energy Committee voted to ensure that an investigation is led by a wide range of experts—not people with an agenda.”

This commission would have 10 members, equally appointed by Democrats and Republicans, he explained. The amendment emphasized the importance of appointing members with technical expertise in offshore oil and gas exploration, health and safety, and environmental protection. The commission would have subpoena power but would first be directed to review information compiled by existing investigations, including the one by Obama’s commission, to avoid duplications. It would have to issue its recommendations within 180 days.

The bill which cleared the committee also included Mary L. Landrieu’s (D-La.) amendment which would require the US Energy Information Administration to produce a monthly report of direct and indirect economic impacts from the Obama administration’s 6-month moratorium on deepwater drilling. “Whether those damages will be paid by BP, by the taxpayers of the United States, or by the federal government, they are going to be addressed,” she explained following the bill’s approval with her amendment included. “The economic damages and losses suffered because of this arbitrary moratorium will be very significant, staggering in fact, and we need to know exactly what that will mean for Gulf Coast families, businesses, and communities who will be both directly and indirectly impacted.”

Landrieu said she reluctantly voted for the full bill because it did not address immediate distribution of federal funds from offshore oil and gas production to Gulf Coast states which have encouraged activity off their shores, or to the federal Land and Water Conservation Fund.

“But because it contains some important, much-needed regulatory reforms and oversight, and new ethics requirements at MMS, I'm going to support this bill moving to the Senate floor for a full and public debate,” she continued. “However, I will reserve my right on the floor to vote against this or any other major piece of legislation that attempts to significantly change [OCSLA] without immediately providing a fair share of oil and gas revenues to the gulf states.”

Contact Nick Snow at [email protected].