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Cheney’s Culture of Deregulation and Corruption

How Bush Administration Inaction Created the BP Disaster

SOURCE: AP/Cliff Owen

A look at the culture of deregulation, self-regulation, and corruption ushered in on Cheney’s underscores why the BP oil catastrophe should forever be remembered as Cheney’s Katrina.

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Read more: The Prelude to Cheney’s Katrina and The BP Disaster Is Cheney’s Katrina

Big Oil spent millions of dollars to sweep—and keep—George W. Bush and Dick Cheney in the White House. And it got its money’s worth.

The new administration and its staunchly pro-oil congressional allies returned the favor by enacting one of the most pro-oil, anti-environment pieces of legislation in history: the Energy Policy Act of 2005—itself based on the recommendations of Cheney’s secret energy policy task force. The Bush-Cheney administration’s cozy relationship with Big Oil, however, goes much deeper than one law.

A closer look at the culture of deregulation, self-regulation, and corruption ushered in on Cheney’s watch further underscores why the BP oil catastrophe should forever be remembered as Cheney’s Katrina.

The poster child for Bush-Cheney crony capitalism

The mention of Halliburton likely summons for most Americans memories of the Bush administration’s infamous no-bid Iraq war contracts—and Halliburton’s subsequent efforts to defraud taxpayers and its fatal negligence in facilities it constructed for our troops. Halliburton’s main business, however, is providing services to major oil companies such as its potentially faulty cementing job on BP’s blown out well.

The company had an unprecedented opportunity to engage in self-dealing and create a regulatory climate favorable to its business interests when Cheney, Halliburton’s former CEO, was ensconced in the White House and still effectively on its payroll.

The Energy Policy Act of 2005 has come to be known as the “Dick Cheney energy bill,” but there’s one provision that is so closely identified with the former vice president that it has become known as the “Cheney loophole.” The provision in question, Section 322, exempted hydraulic fracturing, a drilling process invented by Halliburton commonly known as “fracking,” from the Safe Drinking Water Act.

The use of hydraulic fracturing has opened up vast new reserves of domestic natural gas from Texas to Wyoming to Pennsylvania, but serious environmental concerns about the process have been raised following numerous cases of groundwater contamination after nearby drilling. The exemption has placed the burden to rein in drillers largely on state regulators that are often unable or simply unwilling to police the thousands of wells that have been drilled in recent years.

Cheney not only offered permanent regulatory relief and rolled back existing environmental laws to help the oil industry. This particular example also demonstrates the administration’s willingness to distort science to benefit Big Oil and others. A 2004 Environmental Protection Agency study declared that fracking posed no significant threat to drinking water, thus paving the way for Congress to pass the Cheney loophole. The integrity of the 2004 study has been called into serious question, and a broad new Obama EPA study on the practice is raising the ire of the oil and gas industry.

The one exception to the Cheney loophole was a ban on injecting diesel fuel into wells. Yet a recent House Energy and Commerce Committee investigation revealed that the drilling companies violated this single restriction with impunity during the Bush-Cheney years. And oil and gas interests have launched a public relations and lobbying campaign to prevent Congress from closing the Cheney loophole or imposing other regulations.

There have been two serious accidents involving onshore natural gas wells in the past week alone. A Pennsylvania well had a blowout and one in West Virginia exploded.

Categorically excluding oversight

One of the 2005 Energy Policy Act provisions that is most directly related to the BP oil catastrophe is Section 390, which dramatically expanded the circumstances under which new drilling permits could be approved without further environmental reviews or assessments under the National Environmental Policy Act. Many appear to have been approved based almost completely on responses to yes or no questions on pro forma checklists.

The Minerals Management Service approved BP’s blown out Mississippi Canyon 252 well using just such a “categorical exclusion.” BP was even lobbying to further expand use of such exemptions just 11 days before Deepwater Horizon exploded.

And expanding the use of such exclusions for onshore drilling is potentially devastating for some areas of the Intermountain West. A 2009 investigation by the Government Accountability Office found that the Bureau of Land Management, the agency responsible for issuing drilling permits on federal lands, engaged in widespread abuse of categorical exclusions during the final two years of the Bush-Cheney administration. The report stated that the use of so-called “Section 390 categorical exclusions” created by the 2005 energy bill was “frequently out of compliance with both the law and BLM’s guidance.”

The GAO report found that the BLM approved nearly 6,100 permits from 2006 to 2008 using the new exemptions carved out by Cheney and his congressional allies. Field offices in Wyoming approved 2,462 such permits. In fact, the Pinedale, Wyoming BLM office alone granted an extraordinary 1,498 permits using Section 390 exclusions. This is more drilling permits than there were residents of the town in 2000—1412. Ground level ozone levels, largely related to the drilling boom in the area, measured in the tiny central Wyoming town have at times exceeded those of downtown Los Angeles. Secretary of the Interior Ken Salazar luckily announced onshore drilling reforms in January 2010 designed to end the abuse of Cheney exclusions on public lands.

But dramatic budget cuts and a lack of resources meanwhile prompted the BLM to briefly impose a moratorium on all new solar energy permits in 2008. The moratorium, which some argued would’ve killed the nascent solar industry, was eventually lifted after a massive outcry by industry officials, congressional leaders, and environmentalists.

A mile high at the Minerals Management Service

The culture of corruption and ethical lapses across the entire Bush-Cheney Department of the Interior is well documented. But the Minerals Management Service appears to have experienced a particularly stunning depth and breadth of corruption and simple incompetence. GAO reports have documented almost unbelievable allegations of drug use and improper relationships, payments, and gifts between Bush-Cheney-era MMS employees and the oil and gas industry that they were charged with overseeing.

The most recent GAO report, detailing problems in the Lake Charles, Louisiana office of the MMS, notes that the report’s findings were turned over the U.S. attorney for the western district of Louisiana in October 2009 and that the office declined to prosecute any of those involved in what would plainly appear to be numerous violations of the law.

The U.S. attorney for the western district of Louisiana from October 2001 to January 2010 was Donald Washington. His official Department of Justice biography noted that he had practiced “toxic tort litigation,” “held a variety of positions with Conoco Inc from 1982-1996,” and “served as Chief Counsel for Conoco’s Gulf of Mexico Division until his departure from Conoco in 1996.”

Washington has since returned to private practice in Lafayette, Louisiana, where he may again find himself involved in the ongoing catastrophe. The press release touting his hire at the firm Jones & Walker notes that he “will focus on complex civil litigation, federal and state criminal investigations, regulatory enforcement actions, and internal investigations and compliance programs in such industries as health care, maritime, and energy.”

Catastrophic cronyism

The so-called environmental assessments that laid the foundation for approving permits without further review were fatally flawed under the Bush-Cheney years—in addition to violating both the spirit and the letter of the law.

The last meaningful environmental review of any kind standing between BP and drilling at the Mississippi Canyon 252 site should have been the October 2007 Minerals Management Service environmental assessment of the “Proposed Gulf of Mexico OCS Oil and Gas Lease Sale 206.” But just six words—splashed in bold capital letters across the top of the report’s first page—paved the way for what is now the worst environmental calamity in the history of the United States: FINDING OF NO NEW SIGNIFICANT IMPACT.

The assessment points out that Hurricanes Rita and Katrina rendered beaches and marshes more vulnerable to spills, but it still concluded that the potential for a damaging spill as a result of leasing the 5,569 drilling blocks contained in proposed sale 206 was basically nil:

Concerns were raised related to…the potential effects of oil spills on tourism, emergency response capabilities, spill prevention…accidental discharges from both deepwater blowouts and pipeline ruptures…The fate and behavior of oil spills, availability and adequacy of oil-spill containment and cleanup technologies, oil-spill cleanup strategies, impacts of various oil-spill cleanup methods, effects of weathering on oil spills, toxicological effects of fresh and weathered oil, air pollution associated with spilled oil, and short-term and long-term impacts of oil on wetlands…Offshore oil spills resulting from proposed Lease Sale 206 are not expected to damage significantly any wetlands along the Gulf Coast.

The assessment also includes one passage that reads like something of a death certificate for the gulf’s coastal communities:

Accidental events associated with proposed Lease Sale 206 such as oil or chemical spills, blowouts, and vessel collisions would have no effects on the demographic characteristics of the Gulf coastal communities…As inland marshes and barrier islands erode or subside, without effective restoration efforts, the population in coastal communities in southern Louisiana is expected to shift to the more northern portions of the parishes and cause increasing populations in urban and suburban areas and declining populations in rural coastal areas.

Given that they appear to have considered the decline of the Gulf Coast’s communities a foregone conclusion, it’s perhaps unsurprising that Bush-Cheney administration officials exercised so little care in attempting to prevent an accident like the catastrophe now unfolding.

Cheney’s direct role in this situation of regulatory capture and failure could not be clearer. Randall Luthi signed the so-called environmental review for the proposed lease sale 206. He is a longtime Cheney insider who was installed as director of the Minerals Management Service in 2007. Luthi, who was once Cheney’s intern, went on to hold various positions in several Republican administrations before returning to his native Wyoming.

Luthi is currently the president of the National Ocean Industries Association, whose stated mission is “to secure reliable access and a fair regulatory and economic environment for the companies that develop the nation’s valuable offshore energy resources in an environmentally responsible manner.” Just yesterday, he called on the Obama administration to lift new restrictions on drilling in the gulf, even in face of the ever-growing economic and environmental disaster that he had a direct role in allowing to happen.

The Bush-Cheney administration made an unprecedented effort from beginning to end to rewrite our nation’s laws and rules to benefit their allies in the oil industry. They installed incompetent or corrupt cronies in important regulatory and oversight positions. And what they could not achieve legally, the administration pursued by other means.

Eight years of Bush and Cheney created an insidious, pervasive rot throughout the government—a rot so severe that it prevented the government from carrying out its most basic functions and, as we have now seen, could not be easily undone by a new administration. The pro-oil, anti-regulatory culture, agenda, and ideology relentlessly advanced by Cheney and others in the Bush administration unquestionably led to the catastrophe that now threatens to destroy the environment and economy of America’s Gulf Coast—Cheney’s Katrina.

Joshua Dorner is the Communications Director for Progressive Media at the Center for American Progress.

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