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Beyond Oil: Corporate Influence and Regulation

Editor's note: Any hope that the Deepwater Horizon would mark a turning point in the fight for a climate bill quickly evaporated. But the spill still offers us a "teachable moment" on many critical issues. In a series of essays in our magazine and online, some of the nation's leading environmental writers and thinkers reflect on our two national disaster areas: the one in the Gulf and the other in Congress. Here, the executive director of Columbia University's Earth Institute argues for increased oversight of both the drilling industry and its influence in Washington.

The modern economy is hooked on petroleum, and we are a bunch of addicts increasingly desperate for our next fix. When we drill for oil a mile deep in the Gulf of Mexico, we are like junkies in a dangerous alley, willing to go anywhere to score. The latest result of our addiction was arguably the worst environmental catastrophe in American history. One would have to go back to the Dust Bowl of the early 1930s to find human-induced environmental destruction of a similar scale and impact.

The primary cause of this disaster in my view was that advances in resource extraction technology outpaced effective government regulation of resource extraction industries. The notion of government as the enemy and the modern glorification of the private sector, both of which have their origins in the Reagan Administration, were the root causes of both our recent environmental and financial disasters.

The Department of the Interior has an inherent conflict of interest because it both generates revenues and wealth by leasing government lands and waters for mining and drilling and regulates those activities on government property. It’s like the city’s chief food inspector owning a part interest in the town’s biggest restaurant. The Obama administration’s organizational response to the disaster was to direct Interior Secretary Ken Salazar to split up these two functions. He was tasked with dividing the infamous Minerals Management Service into two parts: one to lease resources and the other to regulate the extraction practices of the firms holding the leases.

In practice, however, this simply moves the conflict of interest up one level of hierarchy, into the secretary’s own office. The Department of the Interior, like the Department of Commerce and the Department of Agriculture, is an old-line federal agency that is essentially a wholly-owned subsidiary of the American business community. I am not complaining about this in principle. Economic power tends to be aligned with political power in most nations, and I would prefer to have it out in the relative open in a cabinet-level agency. However, as the creation of the Environmental Protection Agency, the Food and Drug Administration, and other regulatory agencies has demonstrated, it is possible to set up reasonably effective agencies to police corporate behavior. Regulatory responsibility has to be removed from these old-line cabinet dinosaurs. The EPA and FDA are far from perfect and they are certainly influenced by corporate interests, but they still manage to work reasonably well.

The influence of business in public policy is not limited to food and fuel but extends to finance as well. The "Great Recession" that began in 2008 was also caused by inadequate regulation, and the financial reforms enacted in the summer of 2010 were a direct response to that failure. Now we need a similar reform of mining and drilling regulation.

One lesson learned from the BP disaster is that the inspection, regulation, and enforcement of offshore drilling must be given to the EPA or a new regulatory agency. A second lesson is the need to pay more attention to the role of money and corporate influence in public policy. The Supreme Court has decided that political donations are a form of free speech that cannot be regulated. It is legal for corporations to spend lavishly to subtly steer the media and the political process to define issues in ways that match corporate interests. The fact that confidence in the technology of deep-sea oil drilling was unchallenged until the BP disaster exemplifies how pervasive this corporate influence has become.

The third lesson we have learned relates to the control of this complex technology. The views of experts may have been influenced by the resources and clout deployed by the energy industry, but the President trusted these experts. Our decision makers need to develop a healthy skepticism of the views of experts. They need to engage panels of competing experts to debate these issues and then subject their analyses to external peer review.

We live in a world dominated by technology, and we are all addicted to the convenience and comforts that technology generates. While we could all use a little treatment to reduce our need for a fossil-fuel fix, it’s a little ridiculous to pretend that we can free ourselves completely of our dependency on the natural resources we rip out of this fragile planet. But if we are to manage these resources for the use of our children, we need to be more careful in the way we extract and use them. Companies that refuse to be careful should be treated like reckless drivers running red lights. They should ticketed, penalized, and if necessary, lose their licenses.

image of Steve Cohen
Steven Cohen is the executive director of Columbia University’s Earth Institute and is also director of the Master of Public Administration Program in Environmental Science and Policy at Columbia University’s School of International and Public... READ MORE >
"The primary cause of this disaster in my view was that advances in resource extraction technology outpaced effective government regulation of resource extraction industries." It wasn't a technical issue, it was human failure all the way down the line, first of MMS, then BP. The MMS gave BP the OK to install the BOP after testing it at 6,500 psi, when it was supposed to pass a test at 10,000 psi. The MMS told them they had to retest at 10,000 psi before production started, but the MMS never checked. Then it failed, and nothing worked. I also would like to see come consolidation in the agencies involved. The EPA, Coast Guard, NOAA, and USFWS are all involved in monitoring the Gulf, and the delayed gov response with pitiful. There are too many chefs in the kitchen.