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US Inspector General Report - Falsified Oil Rig Inspections and Other Improprieties

May 27th, 2010

by Stephen Lendman

On May 24, Mary L. Kendall, Acting Interior Department Inspector General's memo to her boss, Secretary Ken Salazar, discussed an "Investigative Report," titled "Island Operating Company, et al," addressing allegations that Lake Charles, Louisiana District Office Minerals Management Service (MMS) employees (in charge of inspections and oversight) "accepted gifts from oil and gas production companies."

Occurring prior to 2007, it provides evidence that "a much-needed (MMS ethics) change is required." Ordinarily, public release would have followed a formal MMS response, 90 days after getting it. But today's events forced Kendall "to release it now," saying her greatest concern is the "environment in which these inspectors operate - particularly the ease with which they move between industry and government."

She found evidence that MMS and industry personnel fraternized and exchanged gifts, and have known each other since childhood. MMS staff used illegal drugs, viewed pornography on their government computers, and sent emails with racist comments, citing one manager saying:

"Obviously, we're all oil industry. We're all from the same part of the country. Almost all of our inspectors have worked for oil companies out on these same platforms. They grew up in the same towns." They've been friends all their lives. "They've hunted together. They fish together. They skeet shoot together....They do this all the time."

John E. Dupuy, Assistant Inspector General for Investigations, prepared the report for S. Elizabeth Birnbaum, MMS's Director.

It says industry gifts included hunting and fishing trips, lunches, and other favors from the Island Operating Company (IOC), working on Gulf oil and gas rigs. In addition, one inspector was in the process of "negotiating and later accepting employment with that company."

The investigation followed an anonymous October 28, 2008 letter, addressed to the New Orleans US Attorney's office, citing improprieties and recommending an investigation. Dupuy found "a number of MMS employees....admitted to attending sporting events prior to 2007 in which which oil and gas production companies sponsored teams, as well as receiving lunches" and other gifts.

His investigation showed a pervasive gift-acceptance culture in the Lake Charles, LA District Office, suggesting similar improprieties elsewhere.

Background

MMS leased Gulf drilling sites to about 130 oil and gas companies, including BP, Exxon Mobil, Shell, Chevron, and many others. About 4,000 rigs are located throughout four Louisiana districts - Lake Charles, Lafayette, New Orleans, and Houma - as well as one in Lake Jackson, TX.

The Outer Continental Shelf Act requires that MMS inspect these platforms to assure they comply with federal regulations with regard to safety and environmental considerations, issuing "incidents of non-compliance" for known deficiencies. From 2004 - 2009, IOC's experience was instructive. It was fined a mere $572,500, pocket change too little to matter.

The current investigation followed an earlier one into former New Orleans regional supervisor Don Howard's activities - fired in January 2007 for accepting drilling contractor gifts, failing to report them, then making false statements for cover.

His impropriety "appears to have been a generally accepted practice by MMS inspectors and supervisors in the Gulf of Mexico region."

Gifts included sports tickets, skeet-shooting contests, hunting and fishing trips, golf tournaments, crawfish boils, Christmas parties, among others, at times including travel and other expenses. If they exceed $335 dollars from any one source during the reporting period, they're required to be disclosed, and the identity of the source.

According to one former Lake Charles inspector, "everyone has gotten some sort of gift before at some point," showing a practice way out of hand, suggesting the possibility that maybe cash and other favors were given.

According to one inspector, what oil and gas companies got in return was a "better working relationship." Indeed so, including letting them prepare their own audits in pencil, inked over by inspectors to look legitimate - a practice far worse than gross mismanagement.

It's a crime demanding prosecutions of industry and government offenders. They're not coming. Informed about the Inspector General's report, the US Attorney's Office for the Western District of Louisiana declined further action, absolving serious offenses.

One or more inspectors also used cocaine and methamphetamine, may have been under the influence on the job, and not for the first time according to an internal 2008 investigation, prepared by Inspector General Earl E. Devaney.

On May 11, AP noted a "culture of substance abuse and promiscuity" by MMS inspectors and other workers. The agency has a duel role - collecting over $10 billion in annual royalties while enforcing drilling regulations, a clear conflict of interest.

Devaney found MMS royalty collection personnel having sex and using drugs with energy company employees, besides inspectors on the take. He described a "culture of ethical failure" in an agency rife with conflicts of interests, including the longstanding practice of being too cozy with the oil and gas industry.

On May 24, New York Times writer Ian Urbina headlined, "Inspector General's Inquiry Faults Regulators," saying:

MMS "inspectors (also) accepted meals, tickets to sporting events and gifts from at least one oil company (from 2005 - 2007) while they were overseeing the industry," more evidence of lax oversight and cozy industry ties.

"At least seven inspectors cited in the report as having been involved in inappropriate or illegal activities were still employed by the agency when the report was completed in March." No surprise under Ken Salazar's watch at Interior, a man rife with conflicts of interest.

He's a rancher, former Colorado junior senator, and one of the "Gang of 14" against filibustering extremist Bush judicial appointments. In addition, he supported Alberto Gonzales for Attorney General, then introduced and sat with him at his Senate confirmation hearing.

In 2001, he also backed Gale Norton (a former Colorado Attorney General) for Interior Secretary, and the worst of her pro-business, anti-environmental policies. William Myers III as well, a former ranching industry lobbyist and Interior Department solicitor, for the federal bench even though the American Bar Association rated him "not qualified."

It gets worse. His overall environmental record is abysmal. In 2005, he voted against higher fuel efficiency standards for cars and trucks, so-called "Corporate Average Fuel Economy" (CAFE). He also opposed an amendment to repeal tax breaks for Exxon Mobil and other Big Oil and gas companies, and supports unregulated drilling on federal lands, including offshore.

He voted limiting offshore Florida Gulf coast drilling, and backed subsidies for the livestock industry, ranchers, and other users of public lands and national forests. He fought efforts to increase Farm Bill protections for endangered species and the environment, and threatened to sue the US Fish and Wildlife Service when its scientists determined that the black-tailed prairie dog was endangered.

In 2007, he was one of the few Democrats against a bill requiring the Army Corps of Engineers to consider global warming when planning water projects. According to Project Vote Smart, the US Humane Society rated his voting record a low 25%. The Fund for Animals scored him zero during 2005 and 2006.

Other critics expressed dismay about a man with close ranching and mining industry ties as well as no interest in environmental protection or reforming drilling and other energy development practices. Unsurprisingly, the criminal Gulf incident happened on his watch, and he's spearheading coverup.

When the Interior Department's head is compromised, inspectors on the take, using drugs, and engaging in other improprieties follow - apparent longstanding practices at Interior, likely also throughout government agencies, serving business when they're supposed to be watchdogs.

A Final Comment

The Center for Biological Diversity (CBD) reported that since the April 20 Gulf incident, MMS approved 27 new regional offshore projects and exempted 26 others from environmental review, from April 21 - May 7 - 26 got "categorical exclusion(s)" under the National Environmental Policy Act. According to Salazar, Interior has no intention of stopping new oil and gas operations in the Gulf, despite Obama's announced moratorium.

CBD's executive director, Kieran Suckling said:

"Under pressure from the oil industry and an agency he seems incapable of controlling, Secretary Salazar has watered down the drilling moratorium to a point where it is virtually meaningless." Like Obama, he's more interested in political damage control than protecting the environment. His "so-called moratoriums and reforms are little more than rhetorical dispersants designed to break up the hide the political scandal threatening to wash up on his shore."

On May 25, New York University Professor Paul Light called the moratorium "so ridiculous that it defies understanding." Instead of one with teeth, it "appears to have been basically done through the most casual way possible under federal law," to deflect criticism, not institute reform or environmental protection.

Lewis and Clark Law School Professor Daniel J. Rohlf said "The moratorium does not even cover the dangerous drilling that caused the problem in the first place." He and others doubt that the Interior Department can institute reforms, given its longstanding coziness with the industry.

On May 25, the Center for Biological Diversity responded to the Inspector General's Report, citing an agency "riddled with illegal drug use, and worst of all, falsification of inspection reports crucial to ensuring the safe operation of drill rigs in our waters....The extent of the culture of corruption in the MMS is mind boggling. Steps (Salazar) proposed to fix this dysfunctional organization do not come close to what is needed to root out the systematic corruption of the agency."

Shades of Paddy Bauler, former Chicago alderman who once famously said: "Chicago ain't ready for reform," nor is it today under Mayor Richard M. Daley or his predecessors, in Illinois under successive governors, or in Washington where the criminal class is bipartisan, Obama no different from the rest, and in many respects much worse.

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/.

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