The Wall Street Journal has a great investigation on Minerals Management Service, the regulator supposed to oversee oil drilling.
The headline alone ought to make your blood boil:
Regulator Ceded Oversight Of Rig Safety to Oil Drillers
Great idea, Regulator!
A Wall Street Journal examination of the MMS’s track record found several instances of the agency identifying potential safety problems and then either not requiring follow-up or relying on the industry to craft a solution. In some cases, the industry didn’t do its part…
The Journal has identified instances in which MMS didn’t follow through on potential safety problems that the agency had asked the industry to examine. In 2000, the agency asked the industry for advice on how to deal with problems with cement used to keep oil and natural gas from bubbling to the surface and exploding. A decade later, the industry is still working on its recommendations, according to the American Petroleum Institute. No regulations have been issued by the agency.
And:
To explain its shift toward industry self-regulation, the MMS in a 2005 rule change pointed to a 1996 law that encouraged federal agencies to “benefit from the expertise of the private sector” by adopting industry standards. Mr. Herbst also pointed out that the MMS often has a seat on panels setting industry standards.
This is a good story, but the Journal could have taken it further. This all part of the anti-regulation philosophy that dominated Washington for three decades, and there are clear parallels to the failures of the financial system.
That’s the Big Picture.
The Financial Times, by contrast, makes the regulation connection in its lede, but its story is thin.
Republican Congressman Darrell Issa, who’s done some great watchdog stuff recently, is on this:
In an interview with the Financial Times, Mr Issa said MMS had since 2003 failed to hold oil companies’ feet to the fire and force the implementation of guaranteed safety mechanisms that could have prevented the Deepwater disaster.
“In 2003, MMS knew that these safety devices weren’t totally safe. [But] does MMS care when bad things happen, or do they care about declines in [oil] revenue?” Mr Issa said. “That’s the reason this is a scandal not of the Obama administration or the Bush administration, but of this bureaucracy that has failed the American people.”
Uh huh. When a politician generously denies political culpability for both parties, you can bet his own is at fault. Does anybody seriously believe that George W. Bush and Dick Cheney didn’t weaken oil regulation during their two terms?
Come on.
Reporters should be looking at all subjects under a department that, from the article, " received unwelcome attention for the behavior of employees assigned to a royalty-collection office in Denver, Colo. The Interior Department's inspector general concluded in 2008 that MMS employees there broke government rules and created a "culture of ethical failure" by accepting gifts from, and having sex with, industry representatives. Following the inspector general's report, the Interior Department took disciplinary action against more than a half dozen MMS workers, with punishments that ranged from a warning letter to termination.
Ethical problems also hit the offshore oil program. In 2009, Donald C. Howard, the former regional supervisor of the Gulf of Mexico region for MMS, pled guilty and was sentenced to a year's probation in federal court in New Orleans for lying about receiving gifts from an offshore drilling contractor. Mr. Howard declined to comment."
That includes coal (eg. Massey Mines and others) and oil. Again we see the influence of the rational, efficient markets theory, ""There was a recognition that everyone has a vested interest in being as safe as possible," Mr. Hunt said."
That attitude of trust based on assumption rather than proof leads to criminalization, as William Black points out in this interview:
http://www.pbs.org/moyers/journal/04232010/watch.html
"Well, first, when you deregulate or never regulate, mortgage bankers were never regulated, you effectively have decriminalized that industry, because only the regulators can serve as the sherpas, that the FBI and the prosecutors need to be able to understand and prosecute these kind of complex frauds. They can do one or two or maybe three on their own, but when an entire industry is beset by wide scale fraud, you have to have the regulators. And the regulators were the problem. They became a self-fulfilling prophecy of failure, because they, President Bush appointed people who hated regulation. I call them the anti-regulators. And that's what they were....
A criminogenic environment is a steal from pathology, a pathogenic environment, an environment that spreads disease. In this case, it's an environment that spreads fraud. And there are two key elements. One we talked about. If you don't regulate, you create a criminogenic environment because you can get away with the frauds. The second is compensation. And that has two elements. One is the executive compensation that people have talked about that creates the perverse incentives. But the second is for these professionals. And for the lower level employees, to give the bonuses. And it creates what we call a Gresham's dynamic. And that just means cheaters prosper. And when cheaters prosper, markets become perverse and they drive honesty out of the market. "
#1 Posted by Thimbles, CJR on Fri 7 May 2010 at 09:30 PM
Why is this worthy of mention,the good ole boy network is alive and (oil)well, how is it possible that, that can astonish anyone with any intellect.
#2 Posted by Stefano Ascioti, CJR on Mon 10 May 2010 at 05:00 PM