OFFSHORE DRILLING:

Spill panel urges overhaul, increased funding for regulators

The presidential panel investigating the causes of last summer's oil spill in the Gulf of Mexico today highlighted the need to create a federal agency to oversee offshore drilling that would be walled off from outside influences.

The seven-member panel proposed the new agency in a long-awaited report on the Deepwater Horizon blowout and subsequent oil spill last summer in the Gulf of Mexico. The 380-page report also includes recommendations for industry and Congress.

The commissioners said the Gulf disaster was rooted in both the systemic failure of industry and in the lack of adequate oversight by government.

"I am sad to say that part of the answer is the fact that our government let it happen," co-chairman and former Sen. Bob Graham (D-Fla.) said, decrying the "internal conflict of interest" among the Interior Department's regulators.

"The old Minerals Management Service had the responsibility of collecting revenues and it had the responsibility of providing an effective management of safety, protection of the environment," he said. "Those two conflicting responsibilities -- as we heard from three former directors of MMS -- led to revenue trumping safety as a priority of the department."

Graham and co-chairman Bill Reilly commended Interior Secretary Ken Salazar for reorganizing MMS into the new Bureau of Ocean Energy Management, Regulation and Enforcement. But they argued the move doesn't go far enough to ensure that the organization's safety priorities aren't compromised by politics.

"That is a move to good," Reilly, a former U.S. EPA administrator, said of Salazar's reorganization. But "we think it's not enough."

The commission's concerns lie with the organization of Interior, which is responsible for overseeing offshore drilling safety, as well as leasing and collection of revenues and royalties from those leases. The government office that enforces safety should be separate from the office that handles revenues, the commissioners say. The current reorganization under BOEMRE separates the two responsibilities at the base level, but the leaders of each group report to the same official.

The commissioners suggest appointing an autonomous director of the new walled-off agency within Interior with a background in science and management who would be term-limited.

That recommendation, they say, is relatively simple. "Congress can reorganize to create a safety agency walled off from revenue without spending any money," Reilly said.

But some of the other recommendations may not be so easy -- namely, the panel's top three recommendations to Congress.

Calls for action by Congress, industry

The group says its top recommendation to Congress is to provide more funding to Interior to ensure regulators have ample resources to oversee increasingly technical drilling operations. But spending increases will likely be hard to come by in the new Republican-controlled House and the split Senate, which couldn't pass spill-response legislation last year with wider partisan margins.

The panel also wants Congress to direct the majority of the penalty money collected from BP PLC and the other companies involved in the disaster under the Clean Water Act to be returned to the Gulf states to assist in environmental cleanup and wetlands restoration. Sen. Mary Landrieu (D-La.) has been a vocal advocate for such a move, but the proposal doesn't have widespread support.

The commissioners are also recommending that Congress lift the liability cap for oil companies involved in a spill higher than the current $75 million, but they don't have a specific number in mind.

"We do recommend a significant increase in liability, but we're sensitive to what we don't know," Reilly said.

The panel had questions about how insurance companies would cope with unlimited or pooled liability -- part of two congressional proposals -- that the group wasn't able to answer within the scope of the current seven-month study, Reilly said.

And he said the group wanted to be sensitive to the effects of higher liability on the Gulf's 185 independent operators. Another commissioner, Frances Beinecke, said simply that the panel's seven members couldn't agree on a figure.

But Congress so far hasn't been able to agree on a figure, either. The debate over liability issues contributed significantly to the spill-response legislation's stalling in the Senate.

The group also wants to see industry step up its own safety regime by creating an independent industry-run safety organization to develop and enforce safety best practices. But that proposal, which has been debated for months, has gotten a somewhat lukewarm reception from industry, which has argued the Deepwater Horizon incident was an isolated occurrence rather than evidence of a systemic failure.

"This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety," American Petroleum Institute Director Erik Milito said in a statement.

Milito touted API's efforts to create an industry safety program for deepwater drilling operations that will draw on best practices from similar bodies in the nuclear and chemical industries. But the commission's staff has argued such a body should not be located within a trade group, like API, which also lobbies lawmakers and regulators.

Reactions

Other industry groups are also opposed to the panel's characterization of the event as evidence of a "systemic" failure within the industry.

"We object to the commission's insistence on there being a 'systemic' problem throughout the industry. This is not supported by the facts," Randall Luthi, president of the National Ocean Industries Association, said in a statement.

But environmentalists are hailing the report's main conclusion.

"The oil spill commission's report confirms that the root causes of the largest oil spill in U.S. history are systemic in the oil industry, bolstering the Obama administration's sage decision to protect our coasts from expanded drilling for the next several years," said Mike Gravitz, oceans advocate for Environment America.

Larry Schweiger, president and CEO of the National Wildlife Federation, also praised the commission's findings and called on Congress to implement the recommendations.

"The commission's final report makes clear that we can't restore the Gulf's economy without restoring its ecosystems. In particular, the National Wildlife Federation supports the commission's call for Congress to direct 80 percent of civil and criminal Clean Water Act penalties to Gulf Coast ecological restoration," Schweiger said.

"After past catastrophes that have devastated America's natural resources, Congress has moved swiftly to prevent similar disasters," he added. "This Congress owes it to the people of the Gulf to act decisively to implement the commission's recommendations."

Some Democratic lawmakers expressed willingness to take the panel's recommendations to heart.

"The White House, Congress and even the oil industry must work together to pass bipartisan legislation that will prevent and contain a similar environmental disaster and support continued efforts to restore the environment and economy of the Gulf Coast," Senate Majority Leader Harry Reid (D-Nev.) said in a statement.

Planning has started in both the House and Senate to hold hearings on the commission's findings.

Reilly and Graham are scheduled to appear before both the Senate Energy and Natural Resources and House Natural Resources committees on Jan. 26. Reilly said House Energy and Commerce Chairman Fred Upton (R-Mich.) had also expressed interest in hosting the duo for a hearing.

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