BP oil rig disaster is big setback for Big Oil

The spreading BP oil rig disaster is starting to shape up as a big blow to Big Oil.

This week brought new revelations of the “cozy relationship” between the oil industry and the government officials who are supposed to be regulating it.

And a hearing heard testimony indicating that deregulation of the industry, combined with the drive for profits, likely played a big role in the April 20 Deepwater Horizon oil rig explosion that continues to spew oil into the Gulf of Mexico.

A report by the Interior Department’s acting inspector general lays bare a culture of corruption and cronyism between federal regulators and the oil industry under the Bush administration. The report, released May 25, covers activities of the department’s Minerals Management Service between 2000 and 2008. The agency is responsible for overseeing offshore oil drilling.

One confidential source told investigators that agency inspectors let the oil and gas companies fill out their own inspection forms for their own drilling rigs in pencil. Then an inspector would trace over their writing in ink and file the report.

Staff members at the agency accepted tickets to sports events, lunches and other gifts from oil and gas companies, the report says.

Indicating the anything-goes atmosphere at the agency, staffers also used government computers to view pornography, and at least one MMS inspector admitted he used crystal methamphetamine and “said he might have been under the influence of the drug the next day at work,” according to an Associated Press report.

Interior Secretary Ken Salazar said the report was “further evidence of the cozy relationship between some elements of MMS and the oil and gas industry.”

The report began as a routine investigation, the acting inspector general, Mary Kendall, said in a cover letter to Salazar. “Unfortunately, given the events of April 20 of this year, this report had become anything but routine, and I feel compelled to release it now,” she wrote.

She said her biggest concern is the revolving door of staff moving back and forth between the oil industry and the agency. “We discovered that the individuals involved in the fraternizing and gift exchange – both government and industry – have often known one another since childhood,” Kendall said. Their relationships took precedence over their jobs, she said.

Almost two years ago, this newspaper reported on a 2008 investigation by the Interior Department inspector general that “described a ‘culture of substance abuse and promiscuity'” at the MMS, involving energy company representatives and staff at the section of the agency that issues offshore drilling leases.

That investigation found that MMS employees were rigging contracts, working as private oil consultants and having sex with, using drugs with and accepting golf and ski trips, dinners and other gifts from oil and gas company employees.

At that time, New York Rep. Louise Slaughter, who chairs the House Rules Committee, summed it up this way: ‘The Bush administration put an ‘America for Sale’ sign on the White House lawn from day one and has been courting Big Oil ever since.”

The Bush administration, she commented, was “literally in bed with Big Oil. Little did we know they were such a cheap date.”

Today the U.S. is paying a steep price for that cozy relationship, a hearing conducted by the Coast Guard and the MMS in Louisiana this week is revealing.

The officials heard testimony about conflicts among companies involved with the Deepwater Horizon oil rig just before the explosion.

A former senior Coast Guard official with 15 years of drilling experience, Capt. Carl R. Smith, warned about the conflicting interests of the oil company that leases the rig – BP in this case – and the company that owns the rig, according to a New York Times report.

“You’re always going to have a conflict between the people that are representing the owners of the rig and the people that are renting it,” he said. “The people that are renting it want to go faster and drill, and the people that own the rig want to maintain the integrity of the rig.”

The testimony underscored the fact that, as a result of deregulation, oil drilling safety relies mainly on self-regulation by the oil companies.

Now, the tide seems to be turning toward strong regulation of Big Oil. An indication of that is a May 26 column by Washington Post business writer Steven Pearlstein.

He cited the oil spill, on top of the Massey mine disaster, the financial crisis, recalls of toxic meat, toys and medicines, and “the biggest climate threat since the Ice Age,” as evidence of “the glaring failure of government regulators to protect the public.”

Pearlstein pinned the blame on the deregulation drive of the Bush administration, pointing to “how dramatically the regulatory agencies have been shrunken in size, stripped of talent and resources, demoralized by lousy leadership, captured by the industries they were meant to oversee and undermined by political interference and relentless attacks on their competence and purpose.”

Regulation does cost the corporations money, he noted, but the benefits for society far outweigh those costs. “It’s time for the business community to give up its jihad against regulation,” he concluded.

President Obama is heading back to the Gulf this week and is expected to announce stricter regulations.

And humorist Andy Borowitz has suggested plugging the massive oil leak with BP executives.

Photo: Aerial view of oil being burned in the Gulf of Mexico, May 19, in an effort to reduce the amount of oil in the water from the Deepwater Horizon/BP explosion. U.S Coast Guard photo by Chief Petty Officer John Kepsimelis.