BUS604: Innovation and Sustainability

The Gulf of Mexico British Petroleum (BP) oil spill of 2010 is the largest oil spill in the history of the United States. While the spill was most directly linked to British Petroleum's drilling practices, the role of government, both before and after the spill, has come into question following the accident. To some the spill reflected that the industry had taken over a regulatory agency, so the agency acquiesced to industry interests. To others it represented how government had failed, both in its role to prevent the spill and in its inadequate response to the spill. Many factors contributed to this apparent government failure and the subsequent environmental damage.

Regulations passed by the government may have contributed to short-sighted decision making within BP. After the Exxon Valdez spill in 1989, the US Congress capped an oil company's financial liability for a spill (over and above the cleanup costs) at $75 million. Although BP, accepting responsibility for the spill, eventually waived the cap, this law could have contributed more to BP (and other oil companies) undertaking riskier drilling practices than if a liability cap had been in place. Without a cap, BP may have more closely weighed the potential revenue of drilling against the possible costs associated with a spill.

Another aspect of government failure was related to conflicts of interest. Many federal employees experienced conflicts of interest associated with the oil business in years leading up to the spill. This was specifically the case at the Minerals Management Service (MMS), which is the federal agency under the US Department of the Interior that managed the US oceanic oil resources prior to the spill. US government auditors had warned of corrupt operations within the MMS that suggested inappropriate relationships and interactions with members of the oil industry. In particular, MMS personnel were found to have accepted gifts from oil company employees. Another source of conflict of interest was with the lawmakers on the congressional committees that oversaw the MMS. Some committee members represented states in which oil companies had a significant economic presence and members of the Senate Energy and Natural Resource Committee, for example, received, on average, double the amount of campaign support from the oil and gas industry as did other members of the Senate.

The MMS seemingly ignored federal regulations surrounding oil drilling compliance. The National Environmental Policy Act (NEPA) was enacted to ensure that federal agencies completed thorough and adequate assessments before approving projects that carried significant environmental risk, including offshore drilling. The MMS, however, had been bypassing this regulation and granting hundreds of drilling permits without due process. Specifically, the well associated with the Gulf spill was granted exemption from the NEPA process because BP officials ensured that the well was safe.

The management of former MMS director Elizabeth Birnbaum has also come into question after the oil spill. She did very little during her one-year term to solve the issues of corruption and inefficiency at the MMS. Many staff members, especially at remote offices, claim to never have even seen her during her term. Birnbaum had very little experience in the oil and gas industry before she took office. Her lack of experience with the industry may have contributed to the agency's inattention to regulations.

The government also received criticism for how it responded after the incident. In fact, one poll cited that two-thirds of Americans viewed the government's actions. Many critics argued that the government relied too heavily on BP's assessment of the spill and the company's suggested methods for cleanup. However, analysts suggest that neither party could have completed the task on its own. The government required the assistance of BP's available equipment and BP needed the government's scientific expertise and logistical management".'Cap-and-Trade' Model Eyed for Cutting Greenhouse Gases," San Francisco Chronicle, December 3, 2007. Consequently, collaboration was crucial to the success of cleanup efforts.

The 2010 Gulf oil spill exposed many organizational problems and concerns within the agencies managing offshore drilling. The MMS was described as having a "culture of lax oversight and cozy ties to [the oil] industry". In response to this criticism and the many others during the spill, the US government chose to reorganize the MMS into a new agency - the Bureau of Ocean Energy Management, Regulation, and Enforcement. It is hoped that this will lead to reforms that will help to prevent some of the government failures in the BP oil spill.