Bureau of Ocean Energy Management, Regulation and Enforcement

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Bureau of Ocean Energy Management, Regulation and Enforcement
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Agency overview
Headquarters Washington, D.C.
Annual budget US$310 million (2009)[1]
Agency executives General Michael Bromwich, Director
Mary Katherine Ishee, Deputy Director, Renewable Energy
Walter D. Cruickshank, Deputy Director, Mineral Resources
Parent agency Department of the Interior
Website
www.mms.gov

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE),[2] also known as the Bureau of Ocean Energy, and formerly known as the Minerals Management Service (MMS),[3][4] is an agency of the United States Department of the Interior that manages the nation's natural gas, oil and other mineral resources on the outer continental shelf (OCS).[5] The Offshore program, which manages the mineral resources on the OCS, is comprised of three regions: Alaska, Gulf of Mexico, and the Pacific Ocean.[5]

Headquartered in Washington, DC,[6] the agency receives most of its revenue from leasing federal lands and waters to oil and natural gas companies with a profit margin of 98%. It is one of the largest revenue sources to the federal government after the IRS.[7] The BOEMRE is responsible for inspection and oversight of energy companies to ensure they are following the law and protecting the safety of their workers and the environment.[8]

History

The Bureau of Ocean Energy Management, Regulation and Enforcement, was created on January 19, 1982 as the Minerals Management Service.[8] In 1982, Congress passed the Federal Oil & Gas Royalty Management Act, which mandates protection of the environment and conservation of federal lands in the course of building oil and gas facilities. Secretary of the Interior James G. Watt designated the MMS as the administrative agency responsible for the mineral leasing of submerged OCS lands and for the supervision of offshore operations after lease issuance.[9]

With the passage of the Energy Policy Act of 2005, MMS was given authority to develop renewable energy projects such as wave, wind and current energy on the Outer Continental Shelf.[8] On June 21, 2010, the Minerals Management Service was renamed the Bureau of Ocean Energy Management, Regulation and Enforcement.[3]

Criticism and controversies

See also: Department of the Interior Controversies

Since its inception, and in particular since the 90's, BOEMRE has been embroiled in numerous scandals and implicated in many notable scandals. For example, in 1990 bureau employees were linked to prostitution,[10] and in 2008 the Department of Interior's Inspector General reported that employees participated in drug use and sexual activity with employees from the very energy firms they were to be regulating.[11]

Collection of oil and gas royalties

File:Earl E. Devaney.jpg
Inspector General Earl Devaney gave testimony on his investigation of the MMS gifts scandal: "I think there is a bar [against corporations offering gifts], but I think in this case a decision was made at the Department of Justice... to approach the oil and gas people in a different way."

Drilling for oil and gas on federal lands and waters produces the second largest source of revenue for the federal government other than taxes.[12] The Minerals Revenue Management (MRM) division of BOEMRE is responsible for managing all royalties associated with both onshore and offshore oil and gas production from federal mineral leases. In 1997, in light of evidence that industry was getting around royalty regulations and underpaying royalties to the tune of billions of dollars,[13] MMS proposed a more stringent rule to collect royalty payments in value (RIV), meaning in the form of cash payments from companies producing from federal leases. In response to that rule-making, industry proposed an alternative — "royalty in kind" meaning in the form of actual oil or gas production. A pilot test of the RIK concept was conducted. The Bush administration allowed the pilot to expand to a full program even though the bill authorizing the program failed to pass in Congress. By the program's termination in 2009, the MRM collected more than half of its revenues via the royalties in kind (RIK) program.[14] When MRM collected royalties in kind, the oil or gas received from producers is offered for sale on the open market, and the proceeds from these sales are included with other collections made by MRM. The RIK program within MRM was responsible for managing these in kind sales.[15] Of the $12 billion in oil and gas royalties that MMS collected in fiscal 2008, the RIK program collected gas valued at $2.4 billion and oil valued at nearly $4.2 billion.[16]

The oil and gas industry supported aggressive expansion of the RIK program early in the Bush administration. In 2001, the American Petroleum Institute advised Vice President Dick Cheney's energy task force that "RIK should be considered part of a comprehensive national energy strategy and a permanent tool for the Minerals Management Service to use in fulfilling its mission." The memo also stated industry's opposition to paying for royalties in cash, and detailed industry's legal challenges aimed at halting the government's efforts to establish regulations for fair market-based royalty payments.[17]

In 2003, the General Accounting Office noted that the MMS had failed to develop "clear strategic objectives linked to statutory requirements nor collected the necessary information to effectively monitor and evaluate the Royalty-in-Kind Program".[18] From 2003 to 2008, the GAO consistently challenged the legitimacy of the statistics published by the MMS that it used to support its claims that the RIK program was a success, and justify its expansion.[19][20][21][22]

Though oil and gas trading requires high levels of sophistication and acuity, the RIK program had 55 government employees acting without proper training, or systems as a multi-billion dollar business selling oil and gas.[23] Due to lack of sophistication in personnel and systems, multiple GAO investigations reported that that the RIK program was incapable of safeguarding the public interest, and had lost significant revenue. For 2006 alone, a GAO report estimated industry underpayments at $160 million.[14] As an example of unsophisticated process, RIK tracked the value of oil and gas on a monthly rather than daily basis. This meant that companies owing revenues could register payment of gas or oil on a day when prices are comparatively high, then make actual delivery when prices are lower. The RIK program not only resisted independent audits, its own controls were so lax that it did not verify production information provided to it.[16]

Investigations by GAO and the Interior's Office of the Inspector General pointed to two basic and significant structural weaknesses to the auditing of the RIK system. The first is an organizational conflict: the auditors looking at the RIK program report to the people in MMS who are running the program, who are more inclined to make their program look successful than to actually be successful. The second structural flaw is methodological: the audits and compliance reviews are based entirely on the self-reported data provided by industry. To make matters worse, a recent GAO report revealed that the MMS computer system is incapable of identifying, in a timely manner, instances when industry fails to report revenue and royalty at all.[24]

Citing its scandals and the persistent incapacity of the RIK program to fulfill its statutory obligations, Interior Secretary Salazar announced in September 2009 that the RIK program would be shut down. Due to existing lease contracts with RIK provisions, the program as of 2010 is still winding down.[14] On October 7, 2009, the U.S. House Oversight Committee reported the loss of billions in revenue resulting from MMS mismanagement and cozy relationships with industry officials.[11] According to Darrell Issa, the top Republican on the United States House Committee on Oversight and Government Reform, there may be a conflict of interest for the Minerals Management Service to collect revenue and also oversee safety.

Gifts, gratuities and the revolving door

In September 2008, reports by the Inspector General of the Interior Department, Earl E. Devaney, were released that implicated over a dozen officials of the MMS of unethical and criminal conduct in the performance of their duties. The investigation found MMS employees had taken drugs and had sex with energy company representatives. MMS staff had also accepted gifts and free holidays amid "a culture of ethical failure", according to the investigation.[25] The New York Times's summary states the investigation revealed "a dysfunctional organization that has been riddled with conflicts of interest, unprofessional behavior and a free-for-all atmosphere for much of the Bush administration’s watch."[26][27][28][29][30][31][32][33]

A May 2010 inspector general investigation revealed that MMS regulators in the Gulf region had allowed industry officials to fill in their own inspection reports in pencil and then turned them over to the regulators, who traced over them in pen before submitting the reports to the agency. MMS staff had routinely accepted meals, tickets to sporting events, and gifts from oil companies.[34] Staffers also used government computers to view pornography.[35] In 2009 the regional supervisor of the Gulf region for MMS pled guilty and was sentenced to a year's probation in federal court for lying about receiving gifts from an offshore drilling contractor. "This deeply disturbing report is further evidence of the cozy relationship between MMS and the oil and gas industry," Salazar said.[36][37]

The Project On Government Oversight (POGO) alleges that MMS has suffered from a systemic revolving door problem between the Department of Interior and the oil and gas industries. For example, thirteen months after departing as MMS director, Bush appointee Randall Luthi became president of the National Oceans Industries Association (NOIA) whose mission is to "to secure reliable access and a favorable regulatory and economic environment for the companies that develop the nation's valuable offshore energy resources in an environmentally responsible manner."[38] Luthi succeeded Tom Fry, who was MMS director under the Clinton administration. Luthi and Fry represented precisely the industries their agency was tasked with being a watchdog over.[39] Lower level administrators influencing MMS have also gone on to work for the companies they once regulated:[40] In addition, Jimmy Mayberry served as Special Assistant to the Associate Director of Minerals Revenue Management (MRM), managed by MMS, from 2000 to January 2003. After he left, he created an energy consulting company that was awarded an MMS contract via a rigged bid. He was convicted along with a former MMS coworker Milton Dial who also came to work at the company. Both were found guilty of felony violation of conflict of interest law.[41][42][43]

Deepwater Horizon catastrophe and restructuring

On May 11, 2010, in response to the Deepwater Horizon oil spill, Secretary of the Interior Ken Salazar announced that MMS would be restructured so that the safety and environmental functions are carried out by a unit with full independence from MMS in order to ensure that federal inspectors will have more tools, resources, and greater authority to enforce laws and regulations that apply to oil and gas companies operating on the Outer Continental Shelf.[44] Another outcome of the spill was the retirement of the associate director for offshore energy and minerals management at the time of the spill, Chris Oynes.[45]

MMS's regulatory decisions contributing to the 2010 oil spill included, in negligence, the decision that an acoustically-controlled shut-off valve (BOP) would not be required as a last resort against underwater spills at the site,[46], MMS's failure to suggest other “fail-safe” mechanisms after a 2004 report raised questions about the reliability of the electrical remote-control devices.[46], and the fact that MMS gave permission to BP and dozens of other oil companies to drill in the Gulf of Mexico without first getting required permits from the (National Oceanic and Atmospheric Administration that assess threats to endangered species and to assess the impact the drilling was likely to have on the gulf.[47]

On May 19, 2010 Salazar announced that MMS will be broken up into three separate divisions, the Bureau of Ocean Energy Management, the Bureau of Safety and Environmental Enforcement, and the Office of Natural Resources Revenue, which will separately oversee energy leasing, revenue collection, and safety enforcement.[48]

S. Elizabeth (Liz) Birnbaum served as the Director of the then named Minerals Management Service from July 15, 2009 to her resignation on May 27, 2010 amidst the Deepwater Horizon oil spill.[49] On June 15, 2010 President Obama named Michael R. Bromwich, a former federal prosecutor and inspector general for the Justice Department, to head up efforts to restructure BOEMRE. Bob Abbey, then director of the Bureau of Land Management, took over as Acting Director of BOEMRE until his replacement could be confirmed.[50] Amidst efforts to reorganize the bleagured agency, on June 21, 2010, General Michael Bromwich was sworn in as BOEMRE's new director, and Secretary of the Interior Ken Salazar issued a Secretarial Order that renamed the Minerals Management Service the Bureau of Ocean Energy Management, Regulation and Enforcement.[3]

Responsibilities and duties

An agency of about 1,700 people in 20 locations, BOEMRE has two primary programs: Minerals Revenue Management (MRM) and Offshore Energy and Minerals Management (OEMM).

Under the guidance of the 1953 Outer Continental Shelf Lands Act, the OEMM manages energy and mineral development in over 1.71 billion offshore acres of Federal land called the Outer Continental Shelf (OCS) and annually disburses to the U.S. Treasury an average of $13 billion in minerals revenue. Through the Minerals Revenue Management (MRM) program, BOEMRE collects, accounts for, and disburses mineral revenues from Federal and American Indian leases. Since its inception in 1982, BOEMRE has disbursed approximately $200 billion to Federal, state, and American Indian accounts.

The BOEMRE offshore renewable energy program includes development of renewable energy such as wind, wave, and solar.[51] BOEMRE is responsible for inspection and oversight of energy companies to ensure they are following the law and protecting the safety of their workers and the environment.[8]

Organization

File:Bromwich-director.jpg
Secretary of the Interior Ken Salazar swears in Michael Bromwich as new director on June 21, 2010 as Betsy Hildebrandt, Department of Interior Communications Director holds the Bible

The BOEMRE was reorganized in May 2010 under the direction of Secretary of the Interior Ken Salazar following the Deepwater Horizon disaster. The bureau is organized into these three newly created agencies:[48][3]

See also

References

  1. "2010 Budget Justification". MMS. http://www.mms.gov/adm/PFD/2010BudgetJustification.pdf. 
  2. Salazar, Ken (June 18, 2010) (PDF), Secretarial Order Nº 3302, http://www.doi.gov/deepwaterhorizon/loader.cfm?csModule=security/getfile&PageID=35872, retrieved June 28, 2010 
  3. 3.0 3.1 3.2 3.3 "Salazar Swears-In Michael R. Bromwich to Lead Bureau of Ocean Energy Management, Regulation and Enforcement". Bureau of Ocean Energy Management, Regulation and Enforcement. 2010-06-21. http://www.mms.gov/ooc/press/2010/press0621.htm. 
  4. "Salazar swears in new boss at MMS BOEMRE". Washington Post. 2010-06-21. http://voices.washingtonpost.com/federal-eye/2010/06/salazar_swears_in_new_boss_at.html. Retrieved 2010-06-21. 
  5. 5.0 5.1 About the Minerals Management Service Bureau of Ocean Energy Management, Regulation and Enforcement
  6. "Contact Us." Minerals Management Service. Retrieved on June 21, 2010.
  7. Dylan Ratigan (Tuesday, May 4, 2010). "Issa says oil royalties trail only taxes in generating revenue for the federal government". MSNBC. http://www.politifact.com/truth-o-meter/statements/2010/may/06/darrell-issa/issa-says-oil-royalties-trail-only-taxes-generalti/. 
  8. 8.0 8.1 8.2 8.3 MMS Overview
  9. OCSLA history "About the Minerals Management Service: OCS Lands Act History". http://www.mms.gov/aboutmms/OCSLA/ocslahistory.htm OCSLA history. 
  10. Sex Scandal At Federal Agency Is Not New
  11. 11.0 11.1 "MMS's troubled past". Washington Post. May 29, 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/05/28/AR2010052804599.html?hpid=topnews. Retrieved 30 May 2010. 
  12. Interim Report on the History of the Offshore Oil and Gas Industry in Southern Louisiana, Department of Interior, Minerals Management Service, July 2004, p. 30, http://www.gomr.mms.gov/homepg/regulate/environ/studies/2004/2004-049.pdf 
  13. Feds neglect to collect billions from big oil: Along with lax enforcement of safety rules, the agency that regulates drilling has failed to collect billions in fees (Miami Herald, May 22, 2010)
  14. 14.0 14.1 14.2 Oil, Gas Royalty-In-Kind Program to End, Salazar Says, Bloomberg news, September 16, 2010, http://www.bloomberg.com/apps/news?pid=20601103&sid=amtN_wUEgr2o, retrieved 2010-05-14 
  15. Investigative Report: Gregory W. Smith, Department of Interior, Office of Inspector General, August 7, 2008, http://www.doioig.gov/upload/Smith%20REDACTED%20FINAL_080708%20Final%20with%20transmittal%209_10%20date.pdf, retrieved 2010-05-13 
  16. 16.0 16.1 Ben Geman (September 14, 2009), Oil And Gas: Royalty-in-kind oversight problems costing millions in revenue — GAO, Energy and Environment News, http://www.eenews.net/public/eenewspm/2009/09/14/4, retrieved 2010-05-13 
  17. Jim Ford, Director (March 20, 2001), Statement on Energy Policy/ Implementation, American Petroleum Institute, http://pogoarchives.org/m/nr/rik/appendix-d-20010320.pdf, retrieved 2010-05-13 
  18. Report to Congressional Requesters on Mineral Revenues: A More Systematic Evaluation of the Royalty-in-kind Pilots is Needed (GAO-03-296), General Accounting Office, January, 2003, http://www.gao.gov/new.items/d03296.pdf, retrieved 2010-05-13 
  19. Report to Congressional Requesters on Mineral Revenues: A More Systematic Evaluation of the Royalty-in-kind Pilots is Needed (GAO-03-296), General Accounting Office, January, 2003 
  20. Report to Congressional Requesters on Mineral Revenues: Cost and Revenue Information Needed to Compare Different Approaches for Collecting Federal and Gas Royalties (GAO-04-448), General Accounting Office, April 2004 
  21. Testimony Before Committee on Natural Resources, U.S. House of Representatives on Royalties Collection: Ongoing Problems with Interior's Efforts to Ensure A Fair Return for Taxpayers Require Attention (GAO-07-682T), General Accounting Office, March 28, 2007, http://www.gao.gov/new.items/d07682t.pdf, retrieved 2010-05-13 
  22. Testimony Before the Subcommittee on Energy and Mineral Resources, Committee on Natural Resources, House of Representatives on Mineral Revenues: Data Management Problems and Reliance on Self-Reported Data for Compliance Efforts Put MMS Royalty Collections at Risk (GAO-08-560T), General Accounting Office, March 11, 2008, p. 4, http://resourcescommittee.house.gov/images/Documents/20080311/testimony_rusco.pdf, retrieved 2010-05-13 
  23. Budget Justifications and Performance Information. Fiscal Year 2009, Department of Interior, Minerals Management Service, p. 139, http://www.doi.gov/budget/2009/data/greenbook/FY2009_MMS_Greenbook.pdf, retrieved 2010-05-14 
  24. Mineral Revenues: Data Management Problems and Reliance on Self-Reported Data for Compliance Efforts Put MMS Royalty Collections at Risk (GAO-08-893R). Mineral Revenues, Government Accountability Office, September 12, 2008, p. 5, http://www.gao.gov/new.items/d08893r.pdf, retrieved 2010-05-14 
  25. Kravitz, Derek (September 11, 2008). "Report Says Oil Agency Ran Amok: Interior Dept. Inquiry Finds Sex, Corruption". The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR2008091001829.html. Retrieved 2008-09-11. 
  26. Savage, Charlie (September 11, 2008). "Sex, Drug Use and Graft Cited in Interior Department". The New York Times. http://www.nytimes.com/2008/09/11/washington/11royalty.html. Retrieved 2008-09-11. 
  27. "Oil companies gave sex, drinks, gifts to federal overseers". McClatchy Newspapers. http://www.mcclatchydc.com/226/story/52243.html. Retrieved 2008-09-11. 
  28. "Memorandum [cover letter by inspector general"]. http://media.mcclatchydc.com/smedia/2008/09/10/18/Gordon-OIG-Cover-Letter.source.prod_affiliate.91.pdf. Retrieved 2008-09-11. 
  29. "Investigative Report of Gregory W. Smith (Redacted)". The Washington Post. http://media.washingtonpost.com/wp-srv/investigative/documents/smith-080708.pdf. Retrieved 2008-09-11. 
  30. "Investigative Report of MMS Oil Marketing Group - Lakewood (Redacted)". The Washington Post. http://media.washingtonpost.com/wp-srv/investigative/documents/mmsoil-081908.pdf. Retrieved 2008-09-11. 
  31. "Government Officials Tried To Rewrite Ethics Rules To Accommodate Their Partying". http://thinkprogress.org/2008/09/10/rik-ethics-rules. Retrieved 2008-09-11. 
  32. "Official increased employee’s ‘performance award’ for providing him with cocaine". http://thinkprogress.org/2008/09/10/smith-cocaine. Retrieved 2008-09-11. 
  33. Simon, Dan; David Fitzpatrick (October 14, 2008). "Whistleblower: Oil watchdog agency 'cult of corruption'". CNN.com. http://www.cnn.com/2008/US/10/14/oil.whistleblower/index.html. Retrieved 2008-10-15. 
  34. Inspector General Faults Minerals Management Service (New York Times, May 24, 2010)
  35. Salazar: IG drilling findings 'deeply disturbing' - Associated Press, 5/25/10
  36. Regulators Accepted Gifts From Oil Industry, Report Says (Wall Street Journal, May 25, 2010)
  37. Investigative Report, Office of Inspector General, U.S. Dept of Interior, May 25, 2010
  38. NOIA home page, National Oceans Industries Association, http://www.noia.org/website/article.asp?id=7, retrieved 2010-05-13 
  39. Mandy Smithberger (April 30, 2010), MMS Scandal: Where Are They Now? Deepwater Horizon Edition, Project On Government Oversight, http://pogoblog.typepad.com/pogo/2010/04/mms-scandal-where-are-they-now-deepwater-horizon-edition.html, retrieved 2010-05-13 
  40. Drilling the Taxpayer: Department of Interior's Royalty-In-Kind Program, Project On Government Oversight, September 18, 2008, http://www.pogo.org/pogo-files/reports/natural-resources/drilling-the-taxpayer/nr-rik-20080918.html#Revolving_Door, retrieved 2010-05-13 
  41. Investigative Report: Federal Business Solutions Contracts, Department of Interior, Office of Inspector General, September 4, 2008, http://www.doioig.gov/upload/FBS%20REDACTED%20with%20Transmittal%209_10%20date.pdf, retrieved 2010-05-13 
  42. Former Department of Interior Official Pleads Guilty to Conflict of Interest Charge, United States Department of Justice, July 30, 2008, http://www.usdoj.gov/opa/pr/2008/July/08-crm-672.html, retrieved 2010-05-13 
  43. Former Department of Interior Official Pleads Guilty to Felony Violation of Post Employment Conflict Law, United States Department of Justice, September 15, 2008, http://www.justice.gov/opa/pr/2008/September/08-crm-818.html, retrieved 2010-05-13 
  44. Salazar Launches Safety and Environmental Protection Reforms to Toughen Oversight of Offshore Oil and Gas Operations, Department of the Interior, May 11, 2010, http://www.doi.gov/news/pressreleases/Salazar-Launches-Safety-and-Environmental-Protection-Reforms-to-Toughen-Oversight-of-Offshore-Oil-and-Gas-Operations.cfm, retrieved 2010-05-13 
  45. Independent probe of BP oil spill in works
  46. 46.0 46.1 Richard S. Dunham; Stewart Powell (May 9, 2010), Critics blame energy lobby for lax safety rules, Houston Chronicle, http://www.chron.com/disp/story.mpl/business/deepwaterhorizon/6996736.html, retrieved 2010-05-13 
  47. Ian Urbina (May 13, 2010), U.S. Said to Allow Drilling Without Needed Permits, New York Times, http://www.nytimes.com/2010/05/14/us/14agency.html?pagewanted=print, retrieved 2010-05-14 
  48. 48.0 48.1 Salazar, Ken (May 19, 2010) (PDF), Secretarial Order Nº 3299, http://www.doi.gov/deepwaterhorizon/loader.cfm?csModule=security/getfile&PageID=32475, retrieved May 21, 2010 
  49. Salazar on Birnbaum's resignation, Politico.com, Capital News Co., 27-05-2010
  50. Interior's New Oil Industry Watchdog Has Little Energy Experience (New York Times, June 16, 2010)
  51. "Cape Wind Threats: Permit Process". Alliance to Protect Nantucket Sound. 2007. http://www.saveoursound.org/site/PageServer?pagename=CapeWind_Threats_PermitProcess. Retrieved 2007-12-05. 
  52. Interior secretary orders division of federal oil regulator (Los Angeles Times, May 19, 2010)

External links

de:Bureau of Ocean Energy Management, Regulation and Enforcement fr:Minerals Management Service no:Bureau of Ocean Energy Management, Regulation and Enforcement pt:Minerals Management Service