The top federal offshore-drilling regulator warned today that a House plan for reorganizing the former Minerals Management Service could create conflicting agency missions, compromise environmental oversight and delay development of oil and gas.

Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich issued his warning a day after the release of a long-awaited joint agency report that found companies involved in the April 2010 Deepwater Horizon oil spill in the Gulf of Mexico had committed several federal infractions (Greenwire, Sept. 14).

Those companies, the agency said, will receive violation notices as early as next week that could include civil fines.

Bromwich, whose agency by the end of the month will finalize its split into three separate agencies, said a draft proposal by Natural Resources Chairman Doc Hastings (R-Wash.) would defeat a "fundamental goal" of the reorganization in the wake of BP PLC's deadly explosion and spill.

While Hastings' plan would not likely compromise the safety of offshore drilling, it could affect the pace of environmental reviews and add new bureaucratic layers, Bromwich said.

The proposal "has the potential to impair the timely and efficient review of proposed offshore energy projects," Bromwich told the Subcommittee on Energy and Mineral Resources this morning.

By next month, BOEMRE is set to split into two agencies. One will handle leasing, drilling and environmental reviews and the other will oversee environmental safety and inspections.

The Hastings draft would task both new agencies with conducting National Environmental Policy Act reviews, one for pre-leasing activity and one for post-leasing permits, Bromwich said.

"We think it carries grave risks of conflicting NEPA judgments by both agencies," Bromwich said. "It adds additional layers of bureaucracy in an agency that does not need extra layers."

Bromwich also expressed concern with the draft's proposal to create a new Interior Department undersecretary to oversee both onshore and offshore energy development and an assistant secretary for ocean energy and safety, both appointed by the president. It is a break from typical agency structure that would reduce the role of the deputy secretary, Bromwich said.

Hastings said the new undersecretary position would increase accountability to the American people and help ensure all Interior agencies collaborate to increase production of a range of domestic energy on federal lands and waters.

Bromwich's testimony, perhaps his last before the committee, comes a day after the release of the joint Interior-Coast Guard spill report that found BP and its contractors had violated at least seven federal regulations before the well ruptured and spilled nearly 5 million barrels of oil into the Gulf. The 212-page report also makes a series of 40 recommended regulatory changes to improve the safety of offshore drilling operations.

The companies involved will receive "notices of incidents of noncompliance" as early as next week that will possibly include civil penalties. A dollar figure is unlikely to be included, an Interior Department spokeswoman said.

Bromwich said the current civil penalties his agency is allowed to impose are "trivial" compared to the cost of operating a rig in the Gulf. They were recently raised to $40,000 a day per infraction, but rigs can cost up to $1 million a day to operate.

"It's in everyone's interest to have a system of fines and penalties that serves as a deterrent to bad conduct, a specific deterrent so that the violator gets smacked," Bromwich said.

Permitting pace quickens

Bromwich, who did not comment on his future role at Interior, came to the hearing armed with new data indicating the pace of offshore permitting is nearing levels before the Macondo spill in April 2010.

He cited a Wall Street Journal report this morning that drilling in the Gulf has returned to "near-normal levels," with 23 rigs currently drilling in water deeper than 3,000 feet.

Due in part to supplemental funding from Congress, the agency has also hired additional rig inspectors. The agency now has roughly 80 inspectors, up from 55 at the time of the spill, who oversee about 3,500 offshore facilities, he said.

Bromwich said his agency still needs additional funding to hire new inspectors and drilling engineers to process permits. The agency faces a backlog of about 12 deepwater drilling permits, but Bromwich said he fears his agency is not prepared to keep up with proposals if the pace of applications increases.

"Down the road, we need more resources," he said, adding that the House's proposed fiscal 2012 funding levels would be "problematic," leading to a shortfall of 20 permitting personnel.

The agency has approved 129 permits for 40 unique wells in deep water, with 12 permits pending and 23 permits returned to the operator with requests for additional information, Interior said.

Hastings said the agency is making progress in its reorganization, but that codification of its structure and continued oversight is critical.

"The stakes are high and we must ensure that reforms are done right," he said. "Millions of jobs, our economy, and energy security are all on the line. Reforms must increase accountability, improve efficiency, promote safety and ensure the highest ethical standards of employees."

Rep. Rush Holt (D-N.J.), the subcommittee's ranking member, said the Hastings proposal comes too late.

"It's a little late and it will be disruptive of the steps that are already taking place," he said.