The extent of penalties levied against BP for environmental damages will be based largely on analysis by a laboratory paid by BP, the New York Times reported yesterday. That lab, B&B Laboratories, is an affiliate of TDI-Brooks International, a Texas-based firm that "provides scientific services on a global basis with a focus on petroleum geochemistry."
As the Times, notes, these fines could amount to hundreds of millions of dollars. BP is footing the bill due to a seemingly well-intentioned law in response to Exxon-Valdez to hold contractors accountable by making them pay the bills, which simultaneously gives BP control over this process.
While TDI-Brooks notes that it has worked with government agencies in the past, the client list on the company's website suggests that the bulk of the firm's business comes from the oil industry. This seemingly lopsided client portfolio raises questions about whether the lab can truly assess these environmental samples without bias. What incentives does TDI have to work in the interest of taxpayers? Does the company feel pressured to be gentle with its analysis? Would an aggressive determination of environmental damage jeopardize future business with BP, or business with any of the other 102 oil companies it lists as clients? Are there any firewalls or other tools in place at the company to ensure there are no internal conflicts of interest?
This, of course, isn't the first time that the federal government has relied upon industry to perform what may be an inherently governmental function. POGO blog readers may recall that MMS relied on an industry group, Lukens Energy, to provide analysis to push forward the now-cancelled RIK program against the advice of government analysts who opposed the program. From our report, Drilling the Taxpayer:
In 2003, MMS contracted with the Lukens Energy Group to conduct an independent assessment of the RIK program's transition from a pilot program to a full-scale operation and chart a five-year business plan. Lukens' report to MMS concluded that the RIK program had "performed remarkably" and that "the pilots have proven that RIK can succeed operationally while at the same time representing a viable option when compared to royalty-in-value."
This finding is not surprising: the independent review by Lukens turns out not to be so independent. From 1998 to 2000, Lukens Vice President Fred Hagemeyer had chaired the industry's Royalty Strategy Task Force, which vigorously supported the use of royalty-in-kind. In 2000, Mr. Hagemeyer even received an award from the American Petroleum Institute, for his "policy development which led to significant improvements to the Minerals Management Service's oil valuation rule and expansion of its fledgling royalty-in-kind projects."(Emphasis added)
Not only was Lukens not independent in its position about RIK, but the RIK program was not independent of relationships with Lukens. A recently released DOI IG report determined that Lukens Vice President Hagemeyer was considered a "trusted advisor" by RIK Program Director Greg Smith, and that the two communicated extensively during the contract selection process, despite regulations clearly prohibiting such contact between bidding companies and MMS officials. The IG further reported that during the same time period Lukens' contract bid was being considered by MMS, Hagemeyer assisted then-RIK Deputy Program Manager Smith in his efforts to market Geomatrix, a firm with which Smith was improperly consulting on the side.
Using Lukens' "independent" findings as justification, MMS expanded the RIK program and made it fully operational in 2004
As always, feel free to let us know your thoughts in the comments section.
-- Bryan Rahija and Mandy Smithberger