Interior Secretary charts offshore oversight plan *updated*

Interior Secretary Ken Salazar today unveiled the next chapter in the Obama administration’s overhaul of the government agencies that oversee coastal drilling, with plans for a new environmental watchdog and an offshore safety bureau.

Under the plans, a new Offshore Energy Safety Advisory Committee would allow top U.S. scientists and engineers to provide input on improving offshore drilling safety, well containment and spill response. It will “facilitate collaboration among some of the nation’s best and brightest minds” from industry, academia and environmental groups, Salazar said.

Meanwhile, Salazar said the creation of a new Bureau of Safety and Environmental Enforcement was the next step in “the most aggressive and comprehensive reforms to offshore oil and gas that have ever been seen in U.S. history.”

“We are moving ahead quickly and responsibly to establish the strong, independent oversight of offshore oil and gas drilling that is needed to ensure that companies are operating safely and in compliance with the law,” Salazar said. He described the plans during a speech in the opening hours of a three-day ocean conference in Washington, D.C.

The new advisory committee will be headed by Tom Hunter, the former director of the Sandia National Laboratory, and will include representatives from the oil and gas industry, environmental groups and academia. More details on the panel’s membership will be detailed in an upcoming issue of the Federal Register. The advisory panel is the evolution of an idea Salazar pitched last November for a new ocean energy safety institute.

The administration’s planned new safety and environmental bureau represents the third major step in the administration’s plan to divide the former Minerals Management Service’s sometimes-competing missions among three separate agencies. The administration has already created the Bureau of Ocean Energy Management, Regulation and Enforcement, which oversees leasing, and the Office of Natural Resources Revenue, which is responsible for collecting and distributing money tied to energy production on federal lands, tribal territories and the outer continental shelf.

Michael Bromwich, the head of the ocean energy bureau, is overseeing the reorganization. He described the changes as “enormous” and warned that they would stress the agency. “This reorganization is much more than just moving boxes around,” Bromwich said. “It is about a comprehensive review and fundamental change in the way that these agencies operate.”

The presidential commission investigating the oil spill last week concluded that major regulatory lapses at the MMS — combined with systemic failures in the oil and gas industry — contributed to last year’s lethal blowout of BP’s Macondo well. The seven-member panel recommended a series of changes to boost offshore drilling oversight, including a reorganization of the federal agencies that police energy production offshore and a new risk-based regulatory system. The commission also stressed that the ocean energy bureau needs more money and manpower to go head-to-head with the oil and gas industry.

Although the new safety and environmental enforcement bureau will be separate from the Interior Department’s decisions on the leasing of public lands and waters, the change falls short of the commission’s recommendation for a separate and independent agency within the Interior Department. The administration’s planned Bureau of Safety and Environmental Enforcement and the ocean energy bureau instead will fall under the supervision of the assistant secretary for land and minerals management.

The commission also said it was important that the new agency be led by a director appointed by the president who would serve a term of at least five years — much like the FBI director.

Administration officials today noted that it would be up to Congress to authorize an independent safety and environmental agency, and that there could more changes. “We are by no means foreclosing the possibility that down the road we may move to the model that the commission recommended,” Bromwich told reporters.

Drilling industry leaders and some lawmakers have stressed that any overhaul of offshore drilling oversight must be done carefully to ensure that even when conflicting missions and agencies are walled off, there is still enough cooperation and collaboration to ensure essential decisions about offshore leases continue.

Erik Milito, upstream director for the American Petroleum Institute, said it was important for the administration to ensure work continues even as the overhaul moves forward. “Our whole concern is creating a bureaucracy that is going to result in a delay,” Milito said.

And Rep. Doc Hastings, R-Wash., the head of the House Natural Resources Committee, said the changes shouldn’t cause slowdowns.

“The new Bureau of Safety and Environmental Enforcement must carry out effective oversight of offshore drilling and ensure that permits for new drilling are issued in a timely manner,” Hastings said. “With the average price of gasoline steadily rising and an Iranian-controlled OPEC advocating for higher prices, families already struggling to make ends meet cannot afford to have American energy development slowed down by new layers of bureaucratic red tape.”

Bromwich highlighted that as a concern too. He said that even as changes are under way it iis important to maintain a structure and system that “continues to function” in both the short and long term — without bringing vital functions, such as leasing and permitting, to a “standstill.”

With the plan announced today, the administration is not waiting for Congress and is moving ahead with changes, while “hoping to minimize operational and personnel disruption” at the Interior Department, Bromwich said. “This reorganization has been long in the planning and is based on detailed research and analysis of the permit approval and other processes that we have in the agency. We think (it) is the best design currently calculated to separate the missions and yet allow work to continue.”

“We’re talking about a thousand people here,” said Salazar, adding that the reorganization was “a huge undertaking.” He insisted that even if the plans don’t go as far as the commission wanted, they fulfill the panel’s recommendation to separate the MMS’ competing functions into separate agencies.

“By separating the conflicting missions, the new agencies will have clarity of purpose and be stronger for it,” Salazar said.

Bromwich noted that “the former MMS was saddled with the conflicting missions of promoting resource development, enforcing safety regulations and maximizing revenues from offshore operations. Those conflicts, combined with a chronic lack of resources, prevented the agency from fully meeting the challenges of overseeing industry operating in U.S. waters.”

Salazar said the administration aimed to complete the latest bureau reorganization by the end of September.

Although the administration telegraphed its plans for a new safety and environmental bureau last year, today’s announcement shed new light on what that agency would do. In particular, the administration clarified that environmental reviews and analysis required by the National Environmental Policy Act would still be conducted by the Bureau of Ocean Energy Management and overseen by a new chief environmental officer. And the BOEM also will be responsible for reviewing and approving exploration plans filed by oil and gas companies.

But as described in an Interior Department fact sheet, all field operations — including the permitting of individual wells, inspections and oil spill response — would be handled by the Bureau of Safety and Environmental Enforcement. BSEE also would be tasked with handling training and the environmental compliance of offshore operations.

That division means that “offshore operators will now need to communicate with one agency — BSEE — to obtain permits, but those permits will be reliant upon swift completion of environmental review by another agency,” said Randall Luthi, the president of the National Ocean Industries Association. That could cause “further bureaucratic delay,” he warned.

“The real test is whether or not a permit for new deep-water drilling is issued in the very near future,” Luthi said.

Jim Noe, the head of the Shallow Water Energy Security Coalition, said the organizational changes don’t respond to concerns that the government is moving too slowly already in approving permits to drill in less than 500 feet of water.

The Interior Department’s reorganization resembles “little more than reshuffling deck chairs as our industry continues to sink,” Noe said. “Without a new and improved approach to shallow-water permitting in the Gulf, BOEMRE’s new bureaucratic structure will do nothing to enhance America’s energy security.”

The Interior Department said the division of BSEE and BOEM will take into account “the crucial need for information sharing . . . to ensure that the business and regulatory process related to offshore leasing, plan approval and permitting are not plagued by bureaucratic paralysis.”

Photo: U.S. Interior Secretary Ken Salazar speaks to reporters at Gulf Island Fabrication in Houma, La., in November 2010. (AP Photo/The Daily Comet, Maxwell S. Gersh)