Increase inspectors and fines, says offshore drilling report

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"MMS did not, in fact, have a real inspection and compliance program. It relied on the expertise and advice of the industry on how and how much they should be inspected," Feinstein said.

"For a decade or more, the cozy relationship between the oil companies and the federal agency was allowed to go unchecked, that allowed drilling permits to be issued in exchange not for safety plans, but assurances of safety from oil companies," President Obama said several days prior to the Senate hearings, when he appointed Michael Bromwich to take over as head of the troubled agency.

Secretary of the Interior Ken Salazar immediately changed the agency's name, to the Bureau of Ocean Energy Management, Regulation and Enforcement. He also created the Outer Continental Shelf Safety Oversight Board, made up of various DOI inspectors and managers, and charged it with studying how the government dealt with offshore oil and gas drilling companies and how it could improve these functions.

The task force submitted its report, including a set of recommendations, at the beginning of the month and Salazar released the document this week.

"The report is what I was looking for: it is honest; it doesn't sugarcoat challenges we know are there; it provides a blueprint for solving them; and it shows that we are on precisely the right track with our reform agenda," Salazar said.

"My mandate from the President and Secretary was explicit- reform the way the agency does business in managing and regulating offshore energy development on the nation's Outer Continental Shelf," BOEMRE Director Bromwich said, noting the initiatives recommended in the oversight board's report are consistent with the reform agenda he has been developing and implementing.

"Strengthening inspections and enforcement - from personnel training to the deterrent effect of fines and civil penalties - is a major focus of the recommendations," Salazar said.

Regarding enforcement, the report says penalties should be increased for companies that break the rules.

Civil penalties for non-compliance are currently capped at $35,000 per violation per day. When companies pay between $500,000 and $1 million daily to run a facility, a potential fine of no more than $35,000 per violation per day is an ineffective tool to deter violations, the report said.

The report recommends reevaluating the agency's entire toolbox of enforcement actions with the aim of giving them more teeth.

"For example, BOEMRE should consider sanctions for repeat offenders, including those who repeatedly engage in violations that do not trigger civil penalties under the current standards," the report said.

The task force also pointed to the long period of time it takes for the agency to pursue a single penalty for a single violation. Because of bureaucratic operations and the company's right to appeal, it often takes about a year to certify a fine for a single incident.

In all of 2009, out of the 2,298 incidents of noncompliance issued by MMS, only 87 made it into the civil penalty process, causing a total of $919,000 in fines collected for the year. The report noted that the amount was about the same a large facility would lose in one day of non-operation.

The task force recommended making greater use of the agency's power to shut down a noncompliant facility, as that would be a stronger deterrent.

The report recommends greater protections for whisteleblowers, as well as subjecting companies to perjury charges when they falsify information on compliance reports.

Ethics reform recommendations in the report are already being implemented by Bromwich through the creation of the Investigations and Review Unit within BOEMRE.

The mission of the unit includes, among other things, promptly and aggressively responding to allegations or evidence of misconduct or unethical behavior by BOEMRE employees or members of the industry, Bromwich said.

The investigations unit is also aiding Bromwich in reviewing and reevaluating the bureau's regulatory and enforcement programs.

As regards protecting the environment, the report recommends separating the management of environmental functions from those of leasing and development "to ensure that environmental concerns are given appropriate weight and consideration."

Bromwich said BOEMRE will soon be issuing rules requiring additional drilling safety measures and, for the first time, requiring industry to establish comprehensive safety and environmental management systems.

Bromwich noted that the administration is intent on helping the agency improve.

"A significant proportion of the anticipated increases in the bureau's funding and personnel resources will be devoted to the inspections program, including the hiring of scores of new inspectors and other personnel, including engineers, with expertise in drilling operations and safety," he said.

"The main ingredient that has been missing over the three decades of the agency's existence: adequate resources to do the job," Bromwich said. "For the first time, those resources appear to be on the way."