In reform bid, Minerals Management Service split in 3 parts

WASHINGTON – With the Gulf of Mexico oil spill highlighting possible conflicts of interest in the Minerals Management Service, Interior Secretary Ken Salazar announced plans Wednesday to split the much-beleaguered agency into three separate entities.

“It is important that we have a government that avoids even the perception of potential conflict,” Salazar said at a news conference announcing the change.

The MMS collects royalties from the oil and gas industry operating on federal lands and issues leases, while at the same time enforcing safety and environmental rules. Last week President Barack Obama criticized what he termed a “cozy relationship” between MMS regulators and industry.

Under the reorganization, the job of collecting the approximately $13 billion in annual royalties from the oil and gas industry will fall to the Office of Natural Resources Revenue, which will be overseen by the Interior Department’s assistant secretary for policy, management and budget.

The other two functions of the MMS – leasing offshore energy sources and enforcing environmental and safety standards – will be carried out by new entities under the assistant secretary for land and minerals management.

The new Bureau of Ocean Energy Management will oversee leasing and development of offshore energy sources, including both conventional and renewable energy projects.

Policing of offshore energy activities will be done by a new agency called the Bureau of Safety and Environmental Enforcement. Part of this oversight will include creating standards such as those being discussed in the wake of the Deepwater Horizon explosion in the Gulf of Mexico.

Salazar instituted the reorganization through a secretarial order, but congressional committees have also been reviewing perceived conflicts of interest in MMS and may want a role in shaping the changes.

The secretary’s team has 30 days to work with the White House and Congress to sketch out details for the reorganization. That’s when specifics about revenue streams and employees for each bureau will be announced. Salazar said he expects that 700 of the 1,700 MMS employees will move to the new revenue bureau. The rest are expected to be divided between the other two new bureaus.

Leadership of the three new entities also remains to be determined. MMS Director Liz Birnbaum was not present at the announcement because she was testifying before Congress, but Salazar voiced strong support for her.

“We will need three very strong people to lead these three agencies,” Salazar said.

Over the next month, the secretary’s team will be meeting with employees from the service’s major offices in Virginia, Mississippi and Colorado to discuss the changes.

Although the reorganization attempts to build a firewall between royalty collection and leasing and policing activities, all three entities are slated to continue running primarily on royalty revenue.

Salazar presented the reorganization as a single step in an ongoing reform effort in the MMS. Earlier reforms have included strengthened ethics standards and the termination of the controversial royalty in-kind program that allowed energy companies to pay royalties to the government with oil and gas instead of cash.

Rep. Nick Rahall, D-W.Va., who chairs the House Natural Resources Committee where Salazar will be testifying next week, welcomed the change as a step in the right direction.

“The secretary has proposed a bold initiative to shake up a badly troubled agency by separating its three basic missions,” Rahall said in a statement. “While I commend him, the devil is in the details.”