The Project On Government Oversight (POGO) Blog

Congressional Oversight at Its Best

We thought it was important to point out what an exemplary job the Senate Permanent Subcommittee on Investigations (PSI) has been doing. For those who have read POGO's congressional oversight handbook, you may remember that we refer several times to PSI's effective oversight techniques. Lately, between its investigation into the Office of Thrift Supervision, its probe into the role of credit rating agencies on the financial crisis, and its hearing with Goldman Sachs executives, the Subcommittee has been conducting some top-notch congressional oversight. (Bonus kudos to Sen. Susan Collins, R-ME, for suggesting that Congress introduce a fiduciary duty requiring brokers to act in the interests of its clients.)

It has clearly been backbreaking work for the Hill staff — just look at the 2-foot thick binders of documents as evidence. All the elements have come into place: an outrage shared by both sides of the aisle; great prep work with the press so the media could cover the hearings with depth and could have familiarity with the best docs; relevance to current legislative activity; and not being scared off by current litigation. Keep up the good work!

-- Team POGO

MMS Scandal: Where Are They Now? Deepwater Horizon Edition

We don't know everyone's fate, but a recent quote by former Minerals Management Service (MMS) Director Randall Luthi (Director from July 2007 - January 2009—and oddly not identified as a former MMS Director in the article) shows that he is now the president of the National Oceans Industries Association (NOIA).

According to its website, NOIA's mission is "to secure reliable access and a favorable regulatory and economic environment for the companies that develop the nation's valuable offshore energy resources in an environmentally responsible manner." Its members include "producers of crude oil and natural gas, contractors, marine engineers, service and supply companies and others with an interest in producing energy from the nation's outer continental shelf." In other words, Luthi now represents precisely the industries his agency was tasked with overseeing. Ruthi succeeded Tom Fry, another former MMS Director, as as President of NOIA. NOIA's March press release announcing Luthi's position can be found here.

This is, of course, only one instance of the systemic revolving door problem between the Department of the Interior and the oil and gas industries that continues to cast doubt on the integrity of Interior's oversight of taxpayers' natural resources. We invite readers to contact POGO, or leave comments, into other instances that we have missed.

-- Mandy Smithberger

See also:

• MMS Thought Deepwater Horizon was Award-Winningly SAFE
• More Lessons From the Deepwater Horizon Disaster
• How Much Will the Deepwater Horizon Spill Cost Taxpayers?

Politics of Contracting: International Edition, Part II

Back in February, POGO did a quick inventory of our Federal Contractor Misconduct Database to see how many of the top 100 contractors were foreign companies. At that time, the top 100 ranking included ten contractors, awarded a combined total of $18.4 billion in contracts in fiscal year 2007, which had headquarters outside the U.S.

In light of POGO’s latest update of the FCMD, we decided to conduct another inventory with the new data:

Morning Smoke: Senators: Pentagon Needs Better System to Prevent Counterfeit Parts from Ending Up in Weapons

Senators call on Pentagon to better detect and prevent counterfeit parts by Roxana Tiron [The Hill]

Is the Army Leaning Toward a Tracked Ground Combat Vehicle? by Paul McLeary [Ares]

Financial Crisis Hearing Puts Former SEC Chiefs in Hot Seat by John D. McKinnon [The Wall Street Journal]

Oil, Gas Drillers Brace for Lawmaker Grilling, Tougher Rules by Jim Efsathiou Jr. and Jessica Resnick-Ault [Bloomberg]

Top Democrats seek broad disclosure on campaign financing by Dan Eggen [The Washington Post]

BP Had Other Problems in Years Leading to Gulf Spill by Abrahm Lustgarten [ProPublica]

Defense secretary Gates confronts cost of new subs by Jen Dimascio [Politico]

Inouye wants to know: Where is the war funding bill? by Josh Rogin [The Cable]

House transparency caucus vows to regain public's trust in government by Aliya Sternstein [Nextgov]

FDA Faulted in Heparin Case by Alicia Mundy [The Wall Street Journal]

Banks Pressured Credit Agencies, Then Blamed Them by Marian Wang [ProPublica]

Study: Derivatives Rules Would Cost Banks Billions by Cyrus Sanati [Dealbook]

U.S. Subpoenas Times Reporter Over Book on C.I.A. by Charlie Savage [The New York Times]

MMS Thought Deepwater Horizon was Award-Winningly SAFE

This afternoon Energy and Commerce Chairman Henry A. Waxman (D-CA) and Subcommittee on Oversight and Investigations Chairman Bart Stupak (R-MI) sent letters to BP America and Transocean Ltd. requesting information as part of an investigation into the "companies' risk management and emergency response plans for accidental oil and gas releases at the Deepwater Horizon drilling rig and other offshore deep water or ultra-deep water drilling facilities."

But we think it would probably be wise for the committee to expand their investigation to see whether the Minerals Management Service (MMS) conducted adequate oversight of the drilling rig. In addition to the document unearthed by Marcus Baram at Huffington Post that said that BP would be able to respond to this kind of disaster "to the maximum extent practicable," a POGO blog reader pointed our attention to an article in Beacon magazine noting that MMS awarded Transocean a District Safety Award for Excellence (SAFE). Transocean won the award "for the outstanding manner in which it conducted its drilling operations in the Lafayette District during the rating period of January 1 through December 31, 2008." Transocean is not noted on MMS's own press release for the 2009 award, though they did win in 1999.

For those who have been following royalty issues for a while, it's fun to note that the Kerr-McGee Corporation also was recognized for corporate leadership in 1999 (now called Anadarko, they were also honored in 2007). Since then, the company has been in litigation with the government over royalty relief for deepwater drlling leases in the Gulf of Mexico. The most recent GAO estimate is that taxpayers could stand to lose $53 billion in royalties. For more information on royalty relief, go here.

MMS announced that due to the accident, this year's award ceremony will be postponed (but Anadarko will again be recognized).

-- Mandy Smithberger

Photo: Minerals Management Service

See also:

• President Obama Agrees with POGO: Cozy Relationship Between Industry and MMS Must End
• Splitting MMS a Good Start, but Mission Conflict Remains
• MMS Scandal: Where Are They Now? Deepwater Horizon Edition
• More Lessons From the Deepwater Horizon Disaster
• How Much Will the Deepwater Horizon Spill Cost Taxpayers?

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More Lessons From the Deepwater Horizon Disaster

One commenter had this to say about our concerns about how taxpayer dollars will be effected by spending:

This will initially cost taxpayers nothing other than the costs of the coast guard rescue and assistance, which may in the end be charged back to BP. Oil companies carry extremely large insurance policies on these rigs for all kinds of circumstances e.g. hurricanes, sub-sea mud slides, fires, boat collisions etc.

As for the royalties that would have been paid for the oil, the fines that will be charged for the spill to BP by the MMS and EPA will be several times more than what they would have paid to lease that particular block from the government. Out of an estimated 100,000,000 barrels of oil in that resevoir the well is gushing just over 1,000 barrels a day. At that rate, it would take over 27 years for all the oil to leak out. Besides, as I type, BP is planning to drill 2 relief wells that will plug the current well and they will eventually, probably produce those wells and pay royalties/lease fees for it.

One of the issues that investigators will certainly be looking into is whether this disaster was preventable. The Wall Street Journal continues to report reasons that it thinks it might have been, but we'd also point POGO blog readers to a report recently released by the Government Accountability Office that showed that the Interior Department struggles to effectively inspect federal leases — and has for a long time. This is part of a culture that prioritized production, and it's worth asking whether this oil spill is a preventable consequence of that culture.

Marcus Baram at Huffington Post has evidence that the agency managing offshore royalty collections, Interior's Minerals Management Service (MMS), may bear some responsibility for the lack of preparation for this disaster:

An MMS official certified that BP "has the capacity to respond, to the maximum extent practicable, to a worst-case discharge, or a substantial threat of such a discharge." But after the explosion, the scale of the accident required BP to get assistance from the Coast Guard, other federal agencies and other oil companies such as Shell, which is sending half a dozen vessels to help with the clean-up effort.

-- Mandy Smithberger

See also:

• MMS Scandal: Where Are They Now? Deepwater Horizon Edition
• MMS Thought Deepwater Horizon was Award-Winningly SAFE
• How Much Will the Deepwater Horizon Spill Cost Taxpayers?

Can Regulators Be Trusted to Crack Down on Derivatives Abuses?

Earlier this week, the Chairs of the Senate Agriculture and Banking Committees reached an agreement on a proposal that could bring sweeping changes to the regulation of over-the-counter (OTC) derivatives. The Democratic leadership announced it will incorporate the joint proposal, which was negotiated by Senators Blanche Lincoln (D-AR) and Christopher Dodd (D-CT), into a substitute amendment for the main bill, which is set to be introduced on the Senate floor any second now. (POGO has obtained a copy of the substitute amendment, which can be viewed here; the section on derivatives begins on page 501).

But even before it’s officially introduced, the Lincoln-Dodd bill has already encountered some stiff opposition.

The controversy surrounding derivatives reform

What Congress Can Do to Enhance Government Transparency: A Brief Interview with POGO's General Counsel

This afternoon, POGO General Counsel Scott Amey heads to the Hill for the inaugural event of the new bipartisan Congressional Transparency Caucus. As part of the event, Scott will participate in a panel discussion alongside Daniel Schuman from the Sunlight Foundation, Jerry Brito from the Mercatus Center, and Patrice McDermott from OpenTheGovernment.org.

I asked Scott for a quick preview of what he planned to discuss — what Congress can do to enhance government transparency, the challenges it will face, and what's being overlooked — and you can find our interview below the jump. Below you'll also find details on the event, which is, naturally, open to the public. We've been told to expect a crowd.

Morning Smoke: The CH-53K Helicopter, an "Example of Procurement Done Right," Faces Delays

What’s Strangling the CH-53K? by Craig Hooper [Defense Tech]

Pentagon Confirms It Gave $1.4 Billion In No-Bid Fuel Contracts To Mysterious Companies by Mark Hosenball [Declassified]

Foreign contractors could face prosecution in U.S. courts by Robert Brodsky [Government Executive]

Senate Republicans Vow to Amend Finance Bill as Debate Begins by Alison Vekshin and James Rowley [Bloomberg]

Leaking Oil Well Lacked Safeguard Device by Russell Gold, Ben Casselman, and Guy Chazan [Wall Street Journal]

Obama to Nominate Three to Fed Board by Sudeep Reddy [The Wall Street Journal]

After drubbing, Goldman mulling deal with SEC by Mark DeCambre [New York Post]

Citing Goldman Sachs suit, Schapiro seeks 12% budget hike for SEC by Zachary Goldfarb [The Washington Post]

Webb asks: Why so many officers? by Rick Maze [Navy Times]

Bill aims to close 'revolving door' between automakers, traffic safety agency by Kimberly Kindy [Washington Post]

Overseer Says AIG Can't Insure Regulatory Compliance by Beatrice Edwards [The Whistleblogger]

Bennet Bill Would Forever Bar Ex-Members From Lobbying by Anna Palmer [Roll Call]

How Much Will the Deepwater Horizon Spill Cost Taxpayers?

Today the Coast Guard set fire to parts of an oil slick in the Gulf of Mexico to prevent the Deepwater Horizon rig's spill from drifting closer to Louisiana. A Slate Explainer points out that the oil recovered from the leaking oil well (at a rate of 42,000 gallons per day 5,000 barrels per day) off of the Louisiana coast can still be used. But one question that has yet to be answered* (and in fairness, to be asked): does BP still owe royalties to taxpayers for any of their natural resources that have been spilled and/or burned? Does it matter that BP opposed stricter safety rules for offshore drilling? Or that Food and Water Watch has raised concerns about the potential for a similar disaster, based on the allegations of "a whistleblower and former company contractor" that another platform "has been operating without a large percentage of the engineer-approved documents needed for it to operate safely"?

The Associated Press reports that industry officials have said that replacing the Deepwater Horizon will cost $700 million, and that BP is paying $6 million a day to contain the spill, and there are predictions that the cost of the disaster could easily exceed $1 billion. We don't yet know what the costs will be taxpayers. The Interior Department and Homeland Security Department announced a full investigation into the Deepwater Horizon rig incident yesterday.

-- Mandy Smithberger

*Okay, I'm well aware that I'm probably one of the only people with this question.

See also:

• MMS Scandal: Where Are They Now? Deepwater Horizon Edition
• MMS Thought Deepwater Horizon was Award-Winningly SAFE
• More Lessons From the Deepwater Horizon Disaster

Time to Curb Taxpayer-Funded Compensation for Contractor Executives

POGO has sent a letter to Office of Management and Budget (OMB) Director Peter Orzsag and Jared Bernstein, the Assistant to the Vice President for Economic Policy, urging them to lower and extend compensation limits for all federal government contractor employees.

Each year, the Office of Federal Procurement Policy (OFPP) sets the maximum allowable reimbursement that contractors may seek from the government for its top five executives — the benchmark executive compensation limitation. This year, the benchmark has climbed to $693,951.

As we point out in our letter, one of the problems with this benchmark is that it may not reflect the value of the service that executives are delivering to the government. Worse still, the methodology for calculating the limit — the median compensation for senior executives of publicly-owned U.S. corporations with annual sales in excess of $50 million — practically invites trouble into the acquisition environment:

Morning Smoke: Post-Mortem Analysis of the Goldman Hearing

The Senate Goldman Hearing: Fiduciary duties for broker-dealers? by Erik Gerding [The Conglomerate]

Goldman Sucks: The Senate tries to get the bankers to admit they sold America a pile of crap by Christopher Beam [Slate]

Goldman in DC: A blogger round-up by Joseph Cotterill [FT Alphaville]

How 2006 Mine-Safety Law Led to ‘Broken’ U.S. System by Jeff Plungis and Holly Rosenkrantz [Bloomberg]

GE/RR Claims $20B JSF Savings by Colin Clark [DoD Buzz] 

The Republican Counter-Proposal vs. the Dodd Bill by Annie Lowrey [The Washington Independent]

OMB seeks input on changes to 'inherently governmental' definition by Robert Brodsky [Nextgov]

Former Special Counsel Scott Bloch Pleads Guilty to Contempt by Mike Scarcella [The BLT: Blog of the Legal Times]

Jon Stewart's Daily Show on V-22 [The DEW Line]

"We've decided to short you" [Tom Toles]