A little more than a year after the Macondo well blowout in the Gulf of Mexico (GOM), reorganization of the chief federal regulator of offshore energy projects, the Department of Interior, is struggling, and some of the sprawling agency’s major responsibilities may be suffering, according to a report released Thursday by the Government Accountability Office (GAO).

Earlier this year GAO identified Interior’s management of oil and gas resources as a “high risk” issue (see Daily GPI, Feb. 17). Frank Rusco, GAO’s natural resources and environment director, presented the latest report to a meeting of the House Committee on Oversight and Government Reform.

Within a month of the blowout of BP plc’s Macondo well, Interior created its Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) to oversee offshore oil and gas activities. Its Bureau of Land Management (BLM) has continued to do the same onshore. Interior also has created the Office of Natural Resources Revenue (ONRR) to assume the responsibility for collecting royalties on oil and gas produced on and offshore.

BOEM replaced the Minerals Management Service (MMS), which came under fire following the oil spill for being lax in its oversight and allegedly too close to the industry.

In the GAO report, the Congressional investigative unit was frank in expressing concerns about “Interior’s ability to undertake this reorganization while meeting its revenue collection and oil/gas oversight responsibilities.” The revenue collection alone involves about $9 billion annually, one of the biggest single revenue sources for the federal government.

GAO’s report, “Interior’s Restructuring Challenges in the Aftermath of the Gulf Oil Spill,” identified five areas of concern — the reorganization and revenue collection, first, but also the federal department’s “balancing responsibilities,” its ability to attract and retain qualified personnel, and the development of existing oil/gas leases.

Interior has been under Congressional pressure since the oil spill, with concerns about ethics (see Daily GPI, June 18, 2010) and the pace of providing offshore leases and stepping up its oversight (see Daily GPI, Jan. 20).

“Interior’s ongoing reorganization of bureaus with oil/gas functions will require time and resources, and undertaking such an endeavor while continuing to meet ongoing responsibilities may pose new challenges,” Rusco told the House committee. He said Interior intends to continue restructuring beyond the creations of BOEM and ONRR, establishing two additional separate bureaus in BOEM: the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement.

In the meantime, Interior has suffered from what GAO characterized as “high turnover rates” in key oil and gas inspection and engineering positions. “As a result, Interior faces challenges meeting its responsibilities to oversee oil/gas development on federal leases, potentially placing both the environment and royalties at risk,” Rusco said.

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