Former drilling regulator defends record


CASPER — Former Minerals Management Service director Johnnie Burton says the spewing oil well in the Gulf of Mexico is a disaster that merits a worldwide effort to plug.

As for her oversight of the agency from 2002 to 2007, Burton said she knew of no indications that the offshore oil and gas industry in the Gulf was prone to such an accident.

“I have been gone from the Minerals Management Service for three years, and I may not remember a lot of details. But I remember enough to tell you, for the five years I was there, we never relaxed any rules — never changed any rules to make them any less safe,” Burton said.

In an exclusive interview with the Star-Tribune, Burton defended her leadership of the federal agency, which was recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, or BOE.

During Burton’s tenure at the agency, it was embroiled in controversy over the “royalty-in-kind” program and ethical lapses in which a handful of MMS employees accepted gifts from, and were literally in bed with, managers in the industry it was supposed to regulate, according to government reports.

Burton also presided over the agency when hurricanes Katrina and Rita wreaked havoc on oil and gas operations in the Gulf. Burton said wells and undersea pipelines withstood the storms with minimal spillage, but many drilling platforms went missing at sea for days.

“I wasn’t pleased to learn that several production platforms disappeared,” Burton said. “That troubled us.”

Burton said she initiated an effort that resulted in more stringent mooring standards.

As for allegations of lax enforcement at the MMS, grossly inadequate spill response plans and other regulatory shortfalls, Burton said that as director she was unaware of those problems.

Burton said safety enforcement and inspections were largely left to the MMS division in New Orleans, where inspectors had access to only three or four helicopters for site inspections. That access was further limited by poor weather conditions much of the time, she said.

She said drilling and production plans went through a series of MMS divisions where they were scrutinized by geologists, engineers and other professionals.

“I can’t give you the details because I don’t know,” Burton said. “People seem to forget that this (offshore drilling) has been going on in the Gulf of Mexico for 50 years. We haven’t had very many accidents. It seemed the performance was pretty good until this happened.”

Burton said the logistics of drilling some 15,000 feet and deeper into the ocean floor in waters 5,000 feet deep requires that regulators depend on a certain amount of information provided by the companies.

Royalty and ethics

An Interior Department inspector general’s report in 2008 detailed ethics violations among a handful of MMS employees at the Lakewood, Colo., office. Employees allegedly engaged in drug use and accepted gifts from and had sex with industry officials.

Although the report came out in fall 2008, Burton said she is the person who, in 2006, asked the inspector general to look into allegations of ethics violations in the Lakewood office.

“I heard rumors that we had problems in that area, and I went to the inspector general. I’m the one who turned them in,” Burton said.

Burton said that before the 2008 report went public, one of the main MMS employees involved in the controversy agreed to resign, and several others were reassigned within the MMS where they would have no fraternal access to industry officials.

She said the MMS has been branded by the salacious details of the report, but the violations involved 10 or 12 employees out of 500 in the Colorado office.

The agency is still responsible for all mineral leasing, drilling and production oversight offshore. It is also responsible for collecting royalties and accounting for of all energy production on federal and American Indian lands onshore and offshore.

The federal government collected some $12 billion from mineral revenues in 2008.

But the royalty-in-kind program administered by the agency is being phased out under Interior Secretary Ken Salazar.

Typically, a company pays a royalty to the federal government for the right to produce a public resource such as oil, natural gas or coal. The concept of royalty-in-kind, or RIK, is to allow qualifying companies to pay the federal government in volumes of oil and gas rather than a royalty payment.

Deductions are allowed for certain things such as pipeline tariffs, then the government takes the oil and gas and sells it on the open market for the best price it can get.

Burton said she didn’t design the program, but remains convinced that the federal government made more money off the program than it otherwise would have through common royalty payments.

But that program, too, was mired in controversy.

For starters, it was managed in the Lakewood, Colo., office by some of the accused employees. The Government Accountability Office suggested that the program was rife with accounting errors and it was believed by many that the American public was getting shortchanged.

When the program was written off in August, the MMS estimated it was owed a net $21 million for past imbalances, “but it lacks the information necessary to calculate the full amount of revenues due,” according to the GAO.

Whatever is owed is not being written off as a loss, according to agency officials. Imbalances will be corrected and money collected, including interest, according to the agency.

Burton said many of the royalty-in-kind contracts that came under scrutiny were signed during the Clinton administration — years before she became MMS director. “But I was the one who got crucified,” she said.

Burton said she had ordered a third-party review of the program, and when Interior’s inspector general found unethical actions by MMS employees involved in the program, “We moved them out.”

She said investigations found no financial fraud.

Back in Wyoming

Burton, 70, served on the Natrona County School Board from 1978 to 1982, during which time she managed an oil and gas reporting service company. She then served three terms in the state House of Representatives.

Burton served several years as director of the Wyoming Department of Revenue in the 1990s, and in 2002 was appointed director of MMS. In the midst of controversies, hurricanes and data systems failures at MMS, Burton agreed to take on double duty and served for a brief time as the Interior’s acting assistant secretary for land and minerals management.

Today, Burton is a caseworker for Rep. Cynthia Lummis, R-Wyo., in Cheyenne. She stressed that her comments about the MMS are strictly outside her affiliation with Lummis.

Former Wyoming Speaker of the House Randall Luthi, who served as MMS director from 2007 to 2009, told the Star-Tribune this week his tenure at the agency was “old news” and said he would not provide any further comment about his role at the agency.

Luthi is now president of the National Ocean Industries Association, an association of offshore energy companies. Luthi continues to speak publicly against a moratorium on deepwater drilling.

Contact Dustin Bleizeffer at dustin.bleizeffer@trib.com or 307-577-6069.


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