Interior Department to propose splitting oil oversight agency in two

WASHINGTON (AP) -- The Obama administration is proposing to split up an Interior Department agency that oversees offshore drilling, as part of its response to the Gulf Coast oil spill, The Associated Press has learned.

An administration official who asked not to be identified because the plan is not yet public said Interior Secretary Ken Salazar will urge that Congress approve splitting the Minerals Management Service in two. One agency would be charged with inspecting oil rigs, investigating oil companies and enforcing safety regulations, while the other would oversee leases for drilling and collection of billions of dollars in royalties.

Currently, the Minerals Management Service, an arm of the Interior Department, is responsible for collecting more than $10 billion a year from oil and gas drilling and with enforcing laws and regulations that apply to drilling operations.

Some critics have said the two roles are in conflict and are one reason the agency has long been accused of being too cozy with the oil and natural gas industry.

An internal investigation in 2008 described a "culture of substance abuse and promiscuity" by workers at the agency. The investigation by Interior's inspector general found workers at the MMS royalty collection office in Denver partied, had sex with and used drugs with energy company representatives. Workers also accepted gifts, ski trips and golf outings, the report by Inspector General Earl E. Devaney said.

Devaney decried "a culture of ethical failure" and an agency rife with conflicts of interest.

Salazar, who promised aggressive reform when he took over the Interior Department early last year, believes the tragedy aboard the Deepwater Horizon oil rig -- and the resulting massive oil spill -- has made reform even more urgent, the administration official said.

The Interior Department will move to establish an independent energy inspection agency within the Minerals Management Service "so that the American people know that they have a strong and independent organization holding energy companies accountable and in compliance with the law of the land," the official said.

Salazar is expected to announce the reforms Tuesday in what is likely to be the first of several structural changes he is considering at Interior. At the request of President Barack Obama, Salazar is conducting a 30-day review of offshore drilling. He also has appointed an Outer Continental Shelf Safety Oversight Board to recommend management improvements and closer oversight of offshore drilling operations.

The MMS and U.S. Coast Guard are conducting a joint investigation of the April 20 explosion on the Deepwater Horizon rig and will file a report to Obama. The six-member panel begins two days of hearings Tuesday in Louisiana, the same day Congress begins a series of hearings on the oil rig explosion and oil spill.

Since taking office in January 2009, Salazar has pushed a series of reforms at MMS, including establishment of new ethics standards, termination of a controversial royalty-in-kind program, and increased emphasis on wind and other renewable energy sources.

He also has canceled proposed offshore lease sales in Alaska and the Arctic Ocean and established what he calls a science-based process for determining where offshore drilling is appropriate on the Outer Continental Shelf.

Last week, the Interior Department said it is indefinitely suspending public hearings on the proposed sale of oil and gas leases off the Virginia coast while it focuses on the Gulf oil spill. The department said MMS staff had focused their attention on the Gulf incident and would be unable to conduct the meetings until a later date.

On March 31, three weeks before the Gulf explosion, Obama called for new offshore drilling in the Atlantic Ocean from Delaware to central Florida, plus the northern waters of Alaska. He also said he wants Congress to lift a drilling ban in the oil-rich eastern Gulf of Mexico, 125 miles from Florida beaches.

After the oil spill, Obama promised that no new offshore oil drilling leases will be issued unless rigs have new safeguards to prevent a repeat of the explosion. He ordered Salazar to report on what new technologies are needed to tighten safeguards against oil spills from deep water drilling rigs.