Washington, D.C. – Citing lax oversight and the inappropriate influence of corporate interests over the Minerals Management Service (MMS), U.S. Senator Sheldon Whitehouse (D-RI) spoke on the Senate floor today to propose a path to restore the integrity of “captured” government agencies. “We can no longer wait for more catastrophes to root out improper corporate influence in our government, we have to at long last address the problem of insidious regulatory capture,” Whitehouse said.
The Senator recounted many examples of MMS corruption, including: MMS staff accepting money and gifts from oil and gas companies; senior executives at the agency’s Royalty in Kind office steering contracts to their own outside consulting firm; an inspector in the agency’s Lake Charles, Louisiana office conducting inspections of a company’s drilling platforms while negotiating a job with that company; and other “significant issues worthy of separate investigation, including ethical lapses, program management, and process failures.”
Senator Whitehouse then explained how these activities led to conditions ripe for disaster:
“As my hometown Providence Journal wrote in a recent editorial, ‘The Deepwater Horizon accident has made it painfully clear that, in its current form, MMS is a pathetic public guardian. Neither it nor BP was prepared for a disaster of this magnitude, and MMS’ cozy relationship with industry is a big reason why.’ I agree with the Providence Journal. The scope, the extent, the insidious nature of corporate influence in regulatory agencies of government – this question of regulatory capture – is something we should attend to here.”
Senator Whitehouse outlined a proposal for rooting out the corruption and undue corporate influence that resides in a captured federal agency:
“I propose a simple device, in this country of laws not men – of rule of law – and that is to allow our top national law officer, the Attorney General of the United States, to step in and clean house whenever an agency or element of government is no longer credibly independent of the industry and businesses it is intended to regulate.”
The text of Whitehouse’s speech, as delivered, is below. Video available here: Part 1, Part 2
Mr. President, we have watched with horror the unfolding disaster in the Gulf. We have seen precious lives lost; hard-earned livelihoods hammered; treasured ways of life imperiled.
We have seen the largest deployment of resources ever against an environmental disaster.
We have seen astonishing corporate negligence.
But we have seen something else too-something that ought to be a lasting lesson from this catastrophe: we have seen the revolting specter of an agency of government subservient to – captive to – the industry it is supposed to regulate.
From the Minerals Management Service, supposed to regulate deep sea oil drilling, here’s what we have seen:
From the 2008 Inspector General’s report on MMS’s Royalty in Kind program based in Colorado:
• Senior executives steering lucrative contracts to an outside company created by the executives;
• Staff failing to collect millions of dollars in royalties owed to the American people and allowing oil and gas companies to revise their own multi-million-dollar bids;
• Staff accepting gifts and money from oil and gas companies with whom the office was conducting official business; and
• Staff participating in social events with industry representatives that included illegal drug use and sex.
From the IG report, the Inspector’s General’s report, released last month on the MMS office in Lake Charles, Louisiana:
• The District Manager telling investigators: “obviously we’re all oil industry.”
• Employees accepting numerous gifts from companies doing business with the MMS, including a trip to the 2005 Peach Bowl on a private airplane, skeet shooting contests, hunting and fishing trips, and golf tournaments.
• An MMS inspector conducting four inspections of oil drilling platforms while negotiating a job for himself with the company that owned those platforms, and finding (guess what?) no violations during those inspections.
And a 2007 Inspector General Report into the MMS’ Minerals Revenue Management office cited, and I quote:
• “Significant issues worthy of separate investigation, including ethical lapses, program mismanagement, and process failures.”
As my hometown Providence Journal wrote in a recent editorial, “The Deepwater Horizon accident has made it painfully clear that, in its current form, MMS is a pathetic public guardian. Neither it nor BP was prepared for a disaster of this magnitude, and MMS’ cozy relationship with industry is a big reason why.” I agree with the Providence Journal.
The scope, the extent, the insidious nature of corporate influence in regulatory agencies of government – this question of regulatory capture – is something we should attend to here. It is the lesson. And it raises the question, beyond the Minerals Management Service, how far does this corporate influence reach into our agencies of government?
The wealth of the international corporate world is staggering. The five biggest oil companies just this quarter posted profits of $23 billion dollars. That’s a 23 with twelve zeros behind it-in just one quarter.
The Republican appointees on the Supreme Court just overturned decades of precedent and a hundred years of practice to give these big corporations freedom to spend unlimited funds in our American elections.
Put it to scale; consider $23 billion of pure profit, just in one quarter, by Big Oil. And compare: the Obama and McCain campaigns together spent about $1 billion in the last election. Do the math: for 5% of one quarter’s profits, Big Oil could outspend both American presidential campaigns. That may be some politicians’ idea of a happy day, because that is who they work to please, but it is wrong and needs to be stopped.
But think: if that’s what corporate influence could do in a national election, think of what those vast powerful tentacles of corporate influence can do to a little government agency like the Minerals Management Service:
• Revolving doors to lucrative jobs in the industry so you’re set for life;
• Sports tickets, gifts, drugs;
• Constant, relentless lobby pressure and threats of litigation;
• Steadily inserting industry operatives into regulatory positions.
Inch by inch, the tentacles of industry reach further and further into the regulator, until it silently and invisibly comes under industry control, and becomes the industry’s puppet; until it is serving the special interests, and not the public interest.
This is no new phenomenon. Marver Bernstein wrote about regulatory capture 55 years ago. He explained that a regulator tends over time to “become more concerned with the general health of the industry and tries to prevent changes which will adversely affect it,” to become “passive toward the public interest.” This, he said, “is a problem of ethics and morality as well as administrative method,” and he called it “a blow to democratic government and responsible political institutions.” Ultimately, this leads to what he called “surrender:” “the commission finally becomes a captive of the regulated groups.”
If you don’t want to go back half a century for a discussion of regulatory capture, look to last week’s Wall Street Journal editorial page, where a senior fellow at the Cato Institute writes, “By all accounts, MMS operated as a rubber stamp for BP. It is a striking example of regulatory capture: Agencies tasked with protecting the public interest come to identify with the regulated industry and protect its interests against that of the public. The result: Government fails to protect the public.”
There is plenty of evidence that the oil and gas industry had captured MMS. And when you have a captured agency, you get what we’ve seen:
• Altering, deleting, or ignoring warnings and recommendations from government scientists. A draft environmental analysis for drilling in the Gulf from May of 2000 included the haunting prediction that “the oil industry’s experience base in deep-water well control is limited” and a massive oil spill “could easily turn out to be a potential showstopper for the [outer continental shelf] program if the industry and MMS do not come together as a whole to prevent such an incident.” This unwelcome observation was deleted from the final analysis published.
• Oil and gas company employees filled out official inspection forms in pencil, for the MMS inspectors to trace over in pen.
• Nearly 400 categorical exclusions, shielded even deepwater drilling from thorough environmental review.
• Cut-and-paste Environmental Assessments were provided by oil and gas companies. BP’s Environmental Assessment listed walruses as a species of concern in the Gulf of Mexico. Mr. President, there are not, and never have been, in the memory of man, walruses in the Gulf of Mexico. When they are writing about walruses in the Gulf of Mexico, you know 1) they are cutting and pasting out of documents in Alaska, 2) they are paying no attention to what they write because they know it doesn’t matter, and 3) they know perfectly well that MMS will never catch the fact that they’ve cut and pasted, because they’re not looking at it either.
• MMS adopted wholesale for its oil and gas drilling “best practices” proposals of the American Petroleum Institute, and then they made most of those best practices only suggestions.
• There’s been virtually no enforcement: According to the MMS website, between 2000 and 2009, civil penalties averaged less than $130 per well per year on our Outer Continental Shelf; and only three criminal referrals were made to the Department since 1990 in the last twenty years.
Add it all up, and there is no real question MMS was a captive regulator. So the question is, after all those years of corporate control of government in the Bush years, how far-reaching is the insinuation of corporate influence? We know big Pharma wrote the Bush pharmacy benefit legislation. We know big oil and big coal sat down in secret with Dick Cheney to write their energy policy. But down below the decks, down in the guts of the administration’s agencies, how far were the tentacles of corporate influence allowed to reach? How many industry plants are stealthily embedded in the government, there to serve the industry, not the administration or the public.
Well, how is it looking, Mr. President? Well, it is not looking good. The Securities and Exchange Commission, for instance, gave up its watchdog role years ago and became the lap dog of the big Wall Street financiers: raising leverage limits; refusing to investigate Bernie Madoff; and helping to precipitate the biggest financial disaster since the Great Depression.
29 miners were killed in a West Virginia mine with a safety record that President Obama called troubled.” The Mine Safety and Health Administration has been described as a “revolving door” with industry, staffed by people with mining companies’ interests at heart, even at the expense of worker safety. The Bush head of MSHA, for instance, oversaw the rewriting of regulations in 2004 that allowed conveyor belt tunnels to double as ventilation shafts, a practice that contributed to a fatal 2006 Massey mine disaster.
Who knows how far it leads? Think of the timber rights the taxpayer gives up every year, the grazing rights, the multi-billion dollar contracts to big government contractors, the oil and coal leases on land, the carnival of public wealth at which these big corporations feed.
The vital question is this: are these assets of our nation still in the hands of servants of the nation? Or have the servants of the nation quietly and insidiously become the servants of the big private corporations who want to profit from that public wealth-corporations for whom every dollar of a sweet deal, every avoided expense allowed by a cozy regulator, every corner cut in safety or environmental protection, goes straight to their bottom line and right into their pockets?
The big, multi-billion dollar corporations – Is this who we want safeguarding our national assets? Is this who we want controlling agencies of the United States government?
Mr. President, Winston Churchill once said, in a phrase that I like, that history turns on sharp agate points. What is the sharp agate point on which the history of this Gulf catastrophe should turn? What lesson of history, if left unlearned after this disaster, are we condemned to repeat?
I hope that the lesson we learn is this one: that we can never, never, never again let agencies of the government of the United States of America fall so far under the influence of the corporations they are supposed to regulate.
This government of ours, founded in a Revolution pledging the lives, fortunes and sacred honor of those early patriots;
This government of ours, which has raised for more than two centuries the promise of freedom in human hearts;
This government that lifts its lamp aloft to brighten the darkness of chaos and despair in far distant corners of the globe;
This government, whose finely tuned balance, crafted by those Founders, has seen us through civil war and world war, through westward expansion and great depression, through the light bulb and the Model T and the Boeing 747 and the iPod.
This government, of ours, formed by Washington and Madison, Jefferson and Adams, and led by each of them; and later led by Abraham Lincoln, and by Harry Truman, and by Theodore Roosevelt and by Franklin Roosevelt and by John Fitzgerald Kennedy.
This American government of ours should never, never be on its knees before corporate power, no matter how strong. It should never be in the thrall of corporate wealth no matter how vast.
This American government of ours should never give the American citizen reason to question whose interests are being served. Never.
In this complex world of ours, Mr. President, government must protect us in remote and specialized precincts in the economy. In those remote precincts, few people are watching, but big money is made.
We must be able to trust our government, both in plain view in front of us, and in corners far from sight, to be serving always the public interest, not doing the secret bidding of special interests; of corporate interests, because that’s where the big money is at stake.
Have we now learned, have we now finally learned, from the financial melt-down and the Gulf disaster, the price, the terrible price, of all those quietly cut corners?
Have we now learned what price must be paid when the stealthy tentacles of corporate influence are allowed to reach into and capture our agencies of government?
I pray, let us have learned this; let us have learned that lesson. I sincerely pray we have learned our lesson, and that this will never happen again. But let’s not just pray.
In this troubled world God works through our human hands; grows a more perfect union through our human hearts; creates his beloved community through our human thoughts and ideas. So it is not enough to pray. We must act.
We must act in defense of the integrity of this great government of ours, which has brought such light to the world, such freedom and equality to our country. We cannot allow this government – that is a model around the world, that inspires people to risk their lives and fortunes to come to our shores – we cannot allow any element of this government to become the tool of corporate power, the avenue of corporate influence, the puppet of corporate tentacles.
I propose a simple device, in this country of laws not men – of rule of law – and that is to allow our top national law officer, the Attorney General of the United States, to step in and clean house whenever an agency or element of government is no longer credibly independent of the industry and businesses it is intended to regulate.
When a component of government is deemed no longer credibly independent of the corporations or industry it is supposed to regulate, I suggest the Attorney General be allowed to come in and clean up:
– To hire and fire and take personnel actions, to assure the integrity of the personnel;
– To establish interim regulations and procedures, to assure the integrity of the process;
– To audit permits and contracts and assure they were not affected by improper corporate influence; and, if they were,
– To rescind them where they are not in the public interest due to that improper corporate influence;
– To establish an integrity plan for that component of government;
– All subject to appropriate judicial review where private rights are affected;
– And then the Attorney General can get back out, with his or her job done: sort of like an ethics trusteeship or receivership.
Mr. President, I’ll conclude by saying that the damage to America from the corporate takeover of the Securities and Exchange Commission was nothing short of catastrophic – just in my home state, just in Rhode Island, 70,000 Rhode Islanders are unemployed, and many have lost homes, retirement, health insurance. The toll is devastating.
The damage from the corporate takeover of the Minerals Management Service has also been catastrophic; and who knows what potentially catastrophic damage lurks in whatever other agencies of government have silently succumbed to corporate takeover, but just have not exploded in disaster? If the financial catastrophe and the Gulf catastrophe, and whatever other catastrophes lurk, if they have any meaning at all, it is that business as usual is no longer enough to stem the tide of corporate influence, insidious, secret corporate influence in agencies of the United States government.
It is an institutional problem: relentless, remorseless, constantly grasping and insinuating corporate influence; it will never go away; it will only worsen as corporations get bigger and richer and more global; and there has to be an institutional mechanism in place to resist it, so that it no longer takes a catastrophe to call the failure of governance of an American regulator to proper attention.
I think this is the right way. If a colleague has a better idea, I’m more than willing to listen. But, one thing I know: after our economic catastrophe and this environmental catastrophe, this much, at least, is clear: we can no longer wait for catastrophes to root out improper corporate influence in our government, in this government of our United States. We have to at long last address the problem of insidious regulatory capture, of agencies of our government captive to the industries they are suppose to regulate.
I thank the Presiding Officer. I yield the floor.