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Does Administration’s Proposed Break-up of Offshore Oil Regulator Go Far Enough?

As a former Minerals Management Service official defended the agency before Congress, Secretary of the Interior Ken Salazar announced a series of reforms today -- most notably, a proposal to break up MMS, the agency that oversees offshore drilling.

The announcement was the first sign of major restructuring at the agency after BP's disastrous oil spill, which continues to spread in the Gulf of Mexico. The MMS, an agency within the Interior Department, will be split in two, separating its safety inspection and enforcement responsibilities from its responsibility to oversee leasing, approve permits and collect royalties from oil and gas companies.

As we've pointed out in several blog posts, the MMS hasn't had the best track record in either of these departments.

In 2008, MMS's royalty department was embroiled in a scandal involving sex, drugs and other inappropriate ties with the industry it regulates. The regulatory side of the agency expressed concerns about safety equipment on several occasions, but never issued stronger regulations, instead allowing the industry to self-police while collecting insignificant penalties from companies with violations. Even after the Deepwater Horizon incident in the Gulf, the part of MMS that oversees leasing exempted 27 offshore drilling plans in the Gulf from having to undergo detailed environmental analysis, including another plan by BP.

Splitting the agency has the potential to help, but it doesn't go far enough to address the agency's main conflict of interest, said Mandy Smithberger, an investigator at the Project on Government Oversight, a nonprofit watchdog group.

"The conflict of mission at MMS is bigger than that issue," Smithberger told me. The conflict also looms between the leasing and royalties sides, which "seems not to be addressed at all" by the proposed restructuring. To the extent that a desire to collect royalties influenced how stringent inspections were, the new separation will help, she said. But a desire to collect more royalties could also influence the decision to move along lease sales in order to boost production.

Smithberger and others, including MMS-critic Rep. Darrell Issa, R-Calif., have called the move a good "first step." But not everyone seems to think the changes are necessary. In a defense of MMS's regulatory personnel, former MMS official Elmer Danenberger told a Congressional panel that "these people won't take a doughnut from the industry."

"I can tell you without hesitation that everyone in that regulatory program is fully committed to safety and pollution prevention," he said, expressing disappointment in the media coverage of the agency.

Salazar has the authority to divide MMS, according to Bloomberg. But several of the other reforms he announced today -- including the allocation of an additional $29 million for inspections -- would require Congressional approval.

We've called MMS for comment on the new changes, but have not received a response.