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Years of collusion set the stage for Gulf catastrophe

Post by Patrick O'Callahan on May 24, 2010 at 7:44 pm |
May 25, 2010 9:49 am

This editorial will appear in tomorrow’s print edition.

President Obama has described the relationship between oil drillers and the federal government as “cozy.” Corrupt might be a better word.

Until last month’s catastrophic blowout in the Gulf of Mexico – which continues to foul the region with oil – the American offshore drilling industry had a seemingly stellar record. Three decades had gone by without a major spill from thousands of rigs pumping petroleum from far below the sea floor.

It turns out that big problems were festering behind that façade of safety.

Prior to April 20, when BP’s Deepwater Horizon exploded, few Americans may have known the U.S. Minerals Management Services even existed. It’s been under a microscope since then, though, and microscopes don’t make things look pretty.

Operating under the radar for many years, the MMS functioned like a well-rewarded middleman helping two tycoons – the U.S. government and the oil-and-gas industry – enrich each other while shifting risks to the public. The industry wanted the privilege of tapping the Gulf’s immense petroleum deposits; the government wanted the billions of dollars in royalties the industry paid every year.

It looks as if the MMS, which was supposed to both regulate and promote drilling, did a lot more promoting than regulating. Not surprising: Hard-nosed regulation produces neither profits nor royalties – on the contrary, it threatens them.

The arrangement ensured that all the incentives were stacked in favor of letting oil companies have their way with the Gulf.

Minerals Management officials actually received cash bonuses for issuing oil-and-gas exploration leases by federal deadlines, so everybody directly involved had a financial stake in greasing the deals.

The Washington Post reported Monday that the MMS repeatedly ignored warnings from scientists about environmental risks – and that its officials “frequently” altered paperwork and did end-runs around procedural safeguards. With the regulators themselves getting their palms lined with silver, it would have been surprising if rules hadn’t been bent.

The well that’s been spilling millions of gallons of crude into the Gulf was itself fast-tracked by the agency and BP. It probably would never have blown if the MMS hadn’t been in bed – literally, it seems, during one drug-happy Denver lovefest – with the energy industry.

The Deepwater Horizon catastrophe was the worst sort of wake-up call, but it has panicked politicians into overhauling the system – or at least acting indignant and outraged about the collusion that went on under their noses for who knows how long.

President Obama has now divided the MMS into three separate agencies, one charged with leasing, the second charged with safety, the third charged with collecting fees.

That’s a good idea, though it should have happened a long time ago. Another good idea would be to give regulators bonuses for spotting flaws in drilling plans – not for overlooking them.

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