The Obama administration continued revamping offshore oil drilling regulation by recently announcing the next step in its plans to reorganize the Department of the Interior – creating a new agency to oversee drilling safety.

Reorganizing the Interior Department has been a high priority for the Obama administration in the wake of the BP-Deepwater Horizon oil spill and its aftermath, which exposed major loopholes and conflicts of interest in the process for approving and monitoring offshore drilling. President Obama's commission investigating the spill also called for a bureaucratic overhaul.

In the administration's latest move, Interior Secretary Ken Salazar announced Jan. 19 that he would split the department's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) in two, tasking one agency with reviewing drilling plans for their environmental and economic impacts and the other with making decisions on permits and conducting on-site inspections. BOEMRE, which will disband once the bifurcation is complete, is one of the successors to the Minerals Management Service (MMS), the now-defunct agency that came under fire in the wake of the April 20, 2010, spill. Salazar said the reorganization will be completed by Oct. 1.

Salazar also announced the creation of the Offshore Energy Safety Advisory Committee comprised of researchers, industry representatives, and federal employees that will advise the secretary on drilling precautions.

The BP-Deepwater Horizon oil spill disaster underscored the perils of poor regulation. MMS was responsible for both resource management and protection and revenue maximization from the exploitation of those resources. As a result, regulators often found themselves siding with industry, from which they acquired a significant portion of the agency’s revenue, on matters of resource and environmental management. Inspectors were powerless at best and compliant at worst during safety inspections, permitting unsafe conditions and practices such as those existing on the Deepwater Horizon rig.

The Obama administration has been attempting to remedy the situation ever since. In May 2010, Salazar announced the end of MMS, replacing it with BOEMRE and the Office of Natural Resource Revenue. The split was intended to erect a stronger barrier between revenue and environmental decisions. The two offshoots of BOEMRE will be named the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement.

Environmentalists reacted positively to the Jan. 19 announcement. Regan Nelson of the Natural Resources Defense Council called the reorganization a "good first step" but also added, "The department, though, needs to go further to ensure that safety and environmental concerns are insulated from the kind of political pressure that has compromised this crucial mission in the past."

The oil and gas industry criticized Salazar's announcement, saying that the reorganization will result in delays to drilling permit approvals, according to the Houston Chronicle. The administration lifted a moratorium on deepwater offshore drilling imposed after the BP spill but has yet to approve new drilling projects pending safety reviews, irritating industry officials.

The reorganization does not go as far as Obama's oil spill commission recommended. The commission, which released its final report on the BP-Deepwater Horizon disaster and its recommendations for reforming federal policy, called for a more independent regulatory structure. Specifically, the commission called for the new safety agency to be headed by an official appointed to a five-year term and subject to Senate confirmation. The commission also recommended that Congress pass a new law better defining Interior's offshore drilling oversight responsibilities.

Because Salazar has called for the reorganization to be completed by Oct. 1, the first day of fiscal year 2012, Obama's next budget plan should reflect the organizational change. Less certain is whether Obama's budget, scheduled for release in mid-February, will include additional resources for the new agencies. The commission report repeatedly comments that Interior's drilling oversight functions have been underfunded, and the commission recommended a new funding structure in which industry user fees account for a greater share of the department's budget. However, in the prevailing tight fiscal environment, Obama is likely to exercise caution in proposing new spending.

Photo in teaser by flickr user USFWS/Southeast, used under a Creative Commons license.