Big Oil & Conflicts of Interest: Obama Owns This Mess

INTERIOR SECRETARY Ken Salazar and President Obama say they will
split up the Minerals Management Service to separate the arm that
inspects and investigates the oil industry from the arm that last year
collected $13 billion in royalties and fees from the industry. Both
Obama and Salazar say this will ensure "there is no conflict, real or
perceived.''

Splitting the agency means nothing unless Obama and Salazar revamp
the culture of this lazy, conflict-ridden agency that in some years,
according to the Wall Street Journal, collects more money than any other
federal agency except for the Internal Revenue Service. While the IRS
is the subject of national ire every April 15, the minerals agency
dutifully conducted its business in unseen labyrinths until BP's deadly
Deepwater Horizon explosion and gargantuan oil spill in the Gulf. One
of the tragedies is that the Obama administration knew exactly what
dysfunction it had on its hands entering office.

In 2006, the Interior Department's inspector general, responding to a
Senate committee request and a New York Times report that the minerals
agency had undercollected $700 million in gas royalties, said the agency
"lacks reliable management information to adequately develop a
compliance strategy, monitor progress, and assess results.'' In 2007,
Interior inspector general Earl Devaney issued a report that found that
the revenue management division of the minerals agency was "fraught with
difficulties,'' including:

# The bureau's conflicting roles and relationships with the energy
industry disagreements.

# A working environment in which poor communication or no
communication compounded an already existing element of distrust.

# A Band-Aid approach to holding together one of the federal
government's largest revenue producing operations.

Obviously, nothing was learned because after the report the agency
was rocked by a conflict-of-interest scandal in which employees received
gifts from and had sex with oil company representatives. Besides saying
that the scandal represented a "culture of ethical failure,'' Devaney
also concluded in 2008 that the minerals agency "modified oil sale
contracts without clear criteria, and that modifications appeared to
inappropriately benefit the oil companies.'' It said the agency adjusted
one of every six bid packages from 2001 to 2006 to the tune of $4.4
million.

That was only the known money. The Wall Street Journal reported in
2008 that auditors feared that mistakes by the agency might cost
taxpayers $10.5 billion over the next 25 years. In addition, the
Government Accountability Office has issued its own reports criticizing
the minerals agency, saying last summer that the agency "risks losing
millions of dollars in revenue.''

Obama and Salazar knew all that coming into office. But what did
Salazar do? He hired a BP executive,
Sylvia Baca, for the post of deputy assistant secretary for land and
minerals management. So much for conflict of interest, real or
perceived. Salazar said last year, "Sylvia brings more than two decades
of management experience dealing with natural resource and environmental
stewardship issues'' and "understands the value of partnerships and the
dynamics of consensus building on difficult issues.''

While Baca has not been implicated in anything connected to Deepwater
Horizon, it is ironic that her former employer is not only fouling the
waters, but has betrayed the toxic dynamics of partnership between
government and Big Oil. The Deepwater operation was one of many approved
by the minerals agency without a full environmental impact review.
Government scientists have complained that other BP operations were not
safe. And all during the current crisis, BP has arrogantly underplayed
the disaster.

There was a time that the Obama administration could say it inherited
a mess. But now, having approved hundreds of drilling and seismic
blasting plans without full environmental reviews, according to the New
York Times, it owns this mess. Last month, the Interior Department's
inspector general office said Interior "has never had and currently
operates without a scientific integrity policy.''

The Times reported yesterday that the Texas laboratory that the
government is using to analyze the impact of the oil spill in the Gulf
of Mexico is also employed by BP. Salazar and Obama have a long way to
go to eliminate the reality and perception of conflict of interest.