Oil Regulator Asleep at the Wheel?

This is a rush transcript from "On the Record," May 7, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: You will not believe this story! OK, maybe you will, and maybe you are already fed up with the government. Another agency of your government is apparently asleep at the switch. The U.S. agency that allegedly oversees offshore drilling is called the MMS. Yes, they are in charge of safety, preventing disasters like the one happening right now in the gulf.

The "Wall Street Journal" just invested the MMS and, no, it is not pretty. Joining us Stephen Power, staff reporter for "Wall Street Journal." We don't yet know what happened in the Gulf. It may have nothing to do with the MMS. But you still investigated this organization within the Department of Interior. Is there a conflict of interest in how this organization is set up?

STEPHEN POWER, "WALL STREET JOURNAL": That's the criticism that a number of lawmakers have made over the years of this agency. On the one hand you have an agency whose mission is to promote offshore drilling and to maximize the revenue that comes with it to the federal taxpayers from doing business with the oil industry and allowing them to get access to oil and gas.

On the other hand part of their job is regulate the industry, which also involves making decisions about what kind of expensive technologies and procedures the industry should be using. And some of those decisions can have consequences on the industry's willingness to invest.

VAN SUSTEREN: So it's not exactly a good way to set something up. They want to encourage exploration to get the cash. On the other hand that may mean that they have to look the other way on some safety considerations.

Are there any indications where there have been recommendations in terms of safety ideas for these rigs and they have not been pursued or followed through?

POWER: Sure. We have found a number of instances where the agency had flagged a potential safety problem in the industry, urged the industry to consider doing something about it, but in the end deferred to the industry's decisions and in many cases ignored the recommendations it was given by the independent experts commissioned to study the underlying problems.

So we found there were a number of instances where this occurred, including involving the issue blow-out preventers, which is the piece of equipment that on this particular rig, the deep water horizon, failed to work.

VAN SUSTEREN: In reading the "Wall Street Journal" article there was a recommendation that there be two redundancies, two ways to have it work. This rig didn't have the double one.

POWER: Most rigs do not have this --

VAN SUSTEREN: Recommendation of two.

POWER: Right. There was a recommendation by a Norwegian researcher that my colleague Russell Gold interviewed. He made the recommendation that they be required to have a second pipe-cutting device that could sheer off the pipe and increase the odds that you could tap the well in case of a big blow-out.

The recommendation was not acted upon apparently because it would have increased the cost for industry and made it difficult for older rigs to comply.

VAN SUSTEREN: So this within the Department of Interior, they have this messy situation on how they are set-up. We also have Congress which is supposed to be providing oversight. What is Congress doing, asleep at the wheel?

POWER: It is agency that both Democratic and Republican administrations have had problems with. The most notorious recent episode that occurred, a few years ago the inspector general of the Interior Department did an investigation of actions by people assigned to the royalty collection side of the agency.

Some f the employees were accepting gives from oil industry representatives, socializing with them, in some cases having sex with them.

VAN SUSTEREN: That's the Denver office. They're getting sex in exchange for something. I don't know what the something is, but they were fraternizing with the people they were supposed to be regulating.

POWER: They had become extremely close. And, as you put it, they did not have an arm's length relationship.

VAN SUSTEREN: I don't know if you followed the story about the SEC while we are having a financial meltdown they are looking at porno on the computer. It's a little bit stunning to me in the "Wall Street Journal" today that the IG of the Department of Interior that they're having sex with people they are supposed to regulate in an office.

POWER: Right. Well, there is a number of agencies, and this is a common criticism of federal agencies, they become captured by the entity that they are supposed to regulate.

VAN SUSTEREN: And Congress, who is supposed to watch and regulate them is doing nothing except writing reports, holding hearings, and looking the other way and complaining but actually doing nothing.

POWER: And most of the criticism focused has been on this royalty collection side, not so much on the safety side, because you haven't had a big, spectacular accident like this one in a long time.

VAN SUSTEREN: We still don't know what caused this accident, but nonetheless, something's wrong with MMS. Steve, thank you.

POWER: Thank you.

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