Big Oil & Conflicts of Interest: Obama Owns This Mess
Troubled chickens come home to roost
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.
© 2010 Boston Globe