Oil and Water

The BP disaster has revealed a problem that is every bit as challenging as cleaning up the Gulf: how to reconcile two opposing visions of how government should work.

July 2010By Comments

The ability of nature to frustrate the will of man was already on full display in the Gulf of Mexico following the deadly explosion of the Deepwater Horizon rig when the ability of man to frustrate and embarrass himself came into focus as well. Apparently, the Minerals Management Service, the federal agency charged with regulating oil and gas operations on the outer continental shelf, believed that despite the catastrophic environmental disaster unfolding before it, the time was still right to drill, baby, drill. Even as oil gushed from the ocean floor, the MMS issued seventeen new permits and nineteen environmental waivers for offshore operations. This action was so tone-deaf that MMS director Elizabeth Birnbaum was forced to resign, and she was soon followed by associate director Chris Oynes. The house has been cleaned. Unfortunately, the Gulf of Mexico hasn’t.

In a strange political season that has given rise to the tea party movement and energized a wave of conservative voters, the calamity in the Gulf raises one of the most volatile issues in American politics: What kind of government do we want? A government, as Rick Perry is fond of saying, that secures the border and delivers the mail and then gets out of the way? Or a government that recognizes that powerful interest groups have the ability to undermine the public interest to their own benefit and enters the fray to level the playing field? Big government or small? The argument goes back to the respective visions of America—an industrial and commercial powerhouse or a nation of yeoman farmers—as seen by Alexander Hamilton and Thomas Jefferson in the late eighteenth century. These competing visions continue to dominate American politics more than two hundred years later.

The massive spill has revealed a problem that reaches beyond the Gulf Coast. It is one more instance in which regulatory agencies like the MMS have failed to protect the public. One does not have to have a long memory: the lack of stringent enforcement of safety laws by the Mine Safety and Health Administration before the deadly explosion at the Upper Big Branch Mine, in West Virginia; the ability of Toyota to persuade regulators to limit or avoid safety recalls and rules concerning uncontrolled acceleration; the warning by the Government Accountability Office that the Food and Drug Administration was not doing enough to protect the national food supply; the failure of the FDA to ensure the quality of children’s medications made by Johnson & Johnson; and, of course, the ineptness of financial regulators who didn’t foresee and couldn’t mitigate the subprime mortgage crisis and the resulting economic meltdown.

An increasing number of people have lost faith in the government’s ability to solve problems, and the continuing saga of the BP oil spill has emerged as a metaphor for the times. The Deepwater Horizon disaster is not, as Perry so rashly said, an act of God. It is incontrovertibly an act of man—of ineffectual regulators and corner-cutting oil companies. Both were charged with the duty of making certain that oil production in an ecologically sensitive area could proceed without harm to the environment. Both failed miserably. BP, for example, claimed in its permitting process that it was capable of containing a spill ten times as large as the current one. As for the MMS, it uses a lot of high-sounding words on its website, stating that its “oversight and regulatory framework ensure production and drilling are done in an environmentally responsible manner, and done safely.” A more accurate statement would be “MMS oversight ensures that oil companies can do whatever they want to do without fear of consequences.”

The BP debacle could have profound political implications in an election year. Barack Obama’s critics have already charged that the oil spill is his Hurricane Katrina. There are a number of apt comparisons with that terrible storm: It is another disaster afflicting our neighbors in Louisiana; it is another indication that government is incapable of responding to a crisis; and it is another occasion to doubt the judgment of a president. Obama, like George W. Bush in 2005, was slow to appreciate the seriousness of the crisis and the political damage it could inflict on his presidency. But there is a significant difference between the Katrina and Deepwater Horizon disasters. Getting food and water to New Orleans after Katrina was the responsibility of the Federal Emergency Management Agency. The responsibility for responding to an oil spill belongs to the industry, thanks to a law passed after the Exxon Valdez spill, in 1989. The federal government has neither the legal standing nor the equipment nor the know-how to repair a damaged well. Unfortunately, BP, which has the legal standing and the equipment, doesn’t seem to possess the know-how.

In addition to its failure to stop the oil from spewing out of the well, BP must depend on twenty-year-old technology like booms, skimmers, and dispersants to clean up the water and protect the coast. BP is using a dispersant called Corexit, which some marine toxicologists have warned will kill shrimp eggs and larvae. It may also be lethal to the microbes that naturally break down oil. Local fishermen who are unable to ply their trade have been hired by BP to clean up the oil, but toxicity levels in South Louisiana are already so high that workers have reported suffering from headaches and nausea. The fishermen told the Los Angeles Times that the company did not provide protective gear. BP is in control of the cleanup, but the government can still use its powers of persuasion.

So what has the government done? The same thing it did after 9/11: reorganize itself. Secretary of the Interior Ken Salazar announced in May a plan to break up the MMS into three divisions, one to supervise the leasing of federal lands for oil and gas operations, another to oversee safety and environmental protection, and a third to collect and audit royalty payments. But I doubt that any of this will make a difference. The problems involved in government regulation are so ingrained that it will take more than restructuring to overcome them. Foremost among them is the tendency for the regulators to become captives of the industry that they regulate. Government investigators charged in 2008 that the MMS suffered from “a culture of ethical failure.” And how. Agency employees, their report said, had accepted gratuities such as meals and tickets to sporting events; some had even used drugs and had sex with energy company officials. As if that weren’t bad enough, a recent investigation found that MMS regulators allowed industry representatives to fill in their inspection reports in pencil, after which the regulators traced over them in ink before turning them in to their superiors.

Even when the MMS tried to carry out its duty of protecting the safety of drilling operations, it was no match for Big Oil. At one point, the MMS proposed a rule establishing “Safety and Environmental Management Systems [SEMS] for Outer Continental Shelf Oil and Gas Operations” and invited comment from the industry. The response was uniformly negative. “The U.S. offshore industry has an excellent safety record; we strive for continuous improvement voluntarily, and thus this rulemaking is not justified,” wrote a company called Wild Well Control, adding, “We strongly disagree that a mandated program as proposed is needed.” ExxonMobil weighed in to urge that the MMS “allow operators and contractors with existing SEMS-equivalent programs [to] use their management systems in lieu of the proposed rule.” Translation: Leave us alone.

If the oversight agencies don’t have the power to rein in the companies they monitor, the last resort is the courts. Litigation is a long and slow process—the Supreme Court made its final ruling in the Exxon Valdez case in June 2008, nearly twenty years after the spill—but it does have the virtue, if successful, of hitting negligent companies in the one place that hurts them most: their bottom line. Attorney General Eric Holder has already announced that the federal government will pursue both criminal and civil investigations against BP. Criminalizing negligent drilling operations will hold guilty parties responsible; civil remedies such as canceling the leases of oil companies that despoil the environment will provide another deterrent. The president should ask Congress to lift the cap on damages, which in certain circumstances protects companies from large verdicts.

Among the casualties of the explosion could be U.S. energy policy. Major oil spills resulting from drilling operations are terrible environmental hazards, but fortunately they are rare. It would be self-defeating to permanently shut down operations on the outer continental shelf. The MMS estimates that the shelf contains 60 percent of the nation’s remaining oil and 40 percent of its natural gas. America needs that energy. Risky though it may be, offshore oil and gas production must go on safely.

Ultimately the only thing that can improve the performance of government is public pressure. This election cycle happens to be one in which the public is engaged—or, if you prefer, enraged. I believe that the anger being expressed in the tea parties is a healthy development. Politics is always better when people are paying attention. But their anger is directed primarily at politicians, and that’s the wrong target. It needs to be harnessed and redirected at the bad guys: the banks, the oil companies, the insurance companies, all the repositories of wealth and power that have created the messes we are in—and not just in the Gulf of Mexico.

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