The top regulator of offshore drilling said this week that his agency is exploring expanding its oversight to include thousands of contractors on offshore rigs. The majority of offshore oil workers in the Gulf of Mexico are contractors and the their central role in safety issues came into focus after last year’s Gulf oil spill. BP had leased the Deepwater Horizon rig from the contractor Transocean and relied on the contractor Halliburton to provide casing for the Macondo well.
The government currently regulates only operators of offshore drilling rigs, such as BP, and in turn holds them responsible for any contractors they hire. Experts say that by delegating the supervision of contractors the government is essentially taking the word of rig operators that facilities are safe and comply with regulation.
As Reuters reported Monday, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement, Michael Bromwich, said he thinks his agency has the authority to oversee contractors and that he intends to do so.
Brownwich expanded on his comments Tuesday at a recruiting event at Columbia University attended by a ProPublica reporter. “It makes absolutely no sense to me why we should not regulate contractors as well as operators,” said Bromwich. “Historically we have only gone against the operator. My question is: why?”
Overseeing contractors could drastically expand Bromwich’s mandate, and it’s not clear whether his agency has sufficient resources to do it.
In the Gulf of Mexico, almost all of the personnel involved in offshore oil exploration are contractors, said Robert Bea, an engineering professor at Berkeley who specializes in offshore drilling. For oil production, Bea said, the proportion of offshore workers employed by operators varies significantly depending upon the site and the operating company, ranging from 20 percent to 60 percent.
Bea said he was concerned that regulators lack the staff and technical knowledge to take on what would be the sweeping new responsibility. “You need to have greater experience, knowledge and expertise than the entity that is being regulated,” he said. The agency “has no such expertise.”
Others have stressed that any changes must be implemented carefully so as not to allow drill operators to evade any responsibility.
“It’s important to maintain the accountability, the responsibility, the authority of the primary leaseholder and permit holder and not allow that to be diffused,” Bob Simon, staff director for the Senate Committee on Energy and Natural Resources, said on an April 15 conference call. The current approach has a chain of command and accountability that leads directly to the operator, Simon said.
Melissa Schwartz, spokeswoman for the offshore drilling regulator, emphasized that Bromwich’s proposal “would in no way change the responsibility of operators.” But she said her agency was still reviewing critical aspects of how the new system would work, including whether federal inspectors would examine additional facilities themselves or simply obtain greater authority to hold contractors responsible for violations.
The agency is also beefing up its enforcement capacity and hiring more inspectors as well as personnel for a new environmental compliance unit. It plans to hire 33 staffers for the environmental enforcement unit by the end of the 2012 fiscal year, as well as 24 new inspectors as funding permits, Schwartz said.
There are currently 60 inspectors charged with oversight for about 3,500 drilling rigs and pumping platforms in the Gulf of Mexico, according to the Wall Street Journal.
Bromwich told the Columbia graduate students who attended Tuesday’s recruiting meeting that he was making new hires to carry out his agency’s growing regulatory mandate.
“You’re looking for an interesting new job,” Bromwich told the students. “How would you like to be an environmental cop?”
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The budget agreement being finalized this week by Congress includes cuts that could place the country at increased risk in an emergency such as the one that’s unfolding in Japan, disaster preparedness experts say.
They’re particularly troubled by a $786 million cutback in grants from the Federal Emergency Management Agency to support first responders, a 19 percent reduction from the 2010 budget.
“The cuts undermine the security of the country, as far as disaster preparedness is concerned,” said Dr. Irwin Redlener, director of the National Center for Disaster Preparedness at Columbia University. “A very significant cutback is really inexplicable given what we’re observing unfold now in Japan.”
The FEMA first responder grants have been the primary source of funding for state and local agencies to train for major disasters, according to William Banks, director of the Institute for National Security and Counterterrorism and a Syracuse University law professor. State and local officials are responsible for initiating the critical first response in the U.S. preparedness system, which calls for the lowest possible level of government to manage to an emergency.
“States have very little resources for this of their own—they have relied on the federal government from the beginning,” Banks said. “They have essentially been able to stand up their preparedness activities in the last decade on the shoulders of federal support.”
The federal government is supposed to step in if a crisis is too big for local responders to handle – but as we reported last week, preparedness plans aren’t always clear about how and when federal authorities get involved.
FEMA did not comment on the cutbacks. Since FEMA administers grants for much of the Homeland Security department, including areas such as port and railroad security, it is still unclear how much of the reductions will affect state and local emergency planning. The summary of cuts provided by the House Appropriations Committee does not specify which FEMA first responder grant programs the $786 million reduction is taken from.
A majority staffer with the House Appropriations Committee, speaking on condition of anonymity, confirmed that the cuts come from “FEMA first responder grants.” But the staffer said the assertion that the cuts would threaten national security is unfounded.
Several cuts came from programs that weren’t performing well or had failed to spend most of the previous grants they had received, including Port and Transit Security and Emergency Operations Centers, according to information provided by the staffer. The agreement also cut $50 million from FEMA’s National Predisaster Mitigation Fund and $38 million from a fund to modernize flood maps.
Redlener, the disaster preparedness expert, said that while the appropriations committee is obligated to ferret out waste, the cuts were reckless and overly broad.
“I don’t think anyone proposed these particular cuts based on a finely tuned, nuanced analysis of which programs are working and which aren’t,” Redlener said. “This is much more of a sledgehammer set of reductions within FEMA.”
Redlener said the disaster in Japan indicates that the United States has much more work to do to be adequately prepared for a major emergency. This week, the Japanese government reluctantly decided to evacuate some areas outside the initial 12-mile evacuation zone surrounding the crippled Fukushima reactors. Redlener cited that decision as evidence that U.S. nuclear emergency plans, which emphasize preparedness within a 10-mile radius of nuclear plants, need to be retooled – which would require an increase rather than a decrease in support for emergency planning.
One of Redlener’s greatest concerns is that the budget agreement could indicate the beginning of a trend toward defunding emergency preparedness programs.
“These proposals and the bipartisan agreement to move them forward potentially represent where we’re going in future budgets, including 2012,” he said. “If this is the direction we’re going in, I think the country is in for a lot more trouble.”
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As Japan struggles to contain its growing nuclear crisis, a congressman and a disaster-preparedness expert raised concerns that the United States is not prepared to respond to a nuclear disaster.
Rep. Ed Markey, D-Mass., wrote a letter  to President Obama on March 13 saying that the federal government lacks a coordinated plan for responding to a major nuclear incident. Markey wrote that key agencies tasked with emergency response in the event of a nuclear disaster are unclear about what their roles would be and even about which agency would be in charge.
“It appears that no agency sees itself as clearly in command of emergency response in a nuclear disaster,” Markey wrote.
Dr. Irwin Redlener, the director of the National Center for Disaster Preparedness at Columbia University, echoed Markey’s assessment, saying current disaster-response plans are confusing and leave too much uncertainty.
“It’s definitely not as clear as it needs to be,” Redlener said. “Part of the problem is a tremendous overlap on the federal, state and local levels.”
The White House says that the lead agency in responding to a potential nuclear disaster depends upon the source and the nature of the nuclear release. It says federal disaster-response plans  clearly establish which agency would be in charge under different scenarios. For example, the Nuclear Regulatory Commission would lead the response to a release from a nuclear power plant, the Department of Energy would coordinate response to a crisis involving nuclear weapons in its custody, and the Department of Homeland Security would lead the response to a deliberate attack.
“Given the range of potential causes, from an earthquake to a terrorist attack, the plan provides the flexibility and agility we need to respond aggressively and effectively,” said White House spokesman Nicholas Shapiro in a statement.
The contingency plan cited by the White House includes six different agencies that could potentially be in charge of nuclear emergency response. A table  that details which agency takes the lead has 15 different scenarios, eight of which include more than one possibility for which agency would coordinate the response.
Columbia’s Redlener said that this setup is problematic: It would result in “people trying to make ad hoc decisions in the midst of a crisis.” Redlener said that officials in these circumstances might hesitate to make decisions because of uncertainty about their legal authority to act.
In his letter to Obama, Markey wrote that officials from the Nuclear Regulatory Commission and EPA who briefed his staff were confused about their roles and about which agencies should be taking the lead.
“One Agency official essentially told my staff that if a nuclear incident occurred, they would all get on the phone really quickly and figure it out,” Markey wrote.
The White House said that state and local officials, as well as nuclear facilities, all had detailed response plans in place. Shapiro, the White House spokesman, said that there is “a robust and active nuclear power plant accident exercise program” that involves authorities at different levels of government, and that such an exercise was conducted last year.
But Redlener said that the country was not prepared for critical elements of responding to a nuclear disaster, including mass evacuations, addressing the needs of vulnerable populations such as children, the elderly and the disabled, and distribution of potassium iodine in areas where it is not stockpiled. (See our story questioning how much protection  iodine pills could offer.)
“If you look back at what happened in the Gulf after Katrina, I think that’s a pretty good demonstration of the capacity we have,” Redlener said. “We need to do a much better job in terms of imagining and planning for large events.”
After the blowout of the Deepwater Horizon well triggered the largest oil spill in United States history, BP vowed to “Make it Right ” for Gulf Coast residents affected by the spill. One of the central pieces of BP’s program to make amends was to create a claims system — as required under federal law — to compensate individuals and businesses that lost money as a result of the spill.
ProPublica has examined the claims process closely to see whether BP and the government are delivering on their promises to the Gulf residents. Although nearly $3 billion has been paid out to date, there have also been chronic delays and a lack of transparency about payment decisions that have caused frustration and in many cases serious economic hardship to claimants.
At first, the claims system was managed by BP. But in the face of complaints about delays and unresponsive bureaucracy , the White House compelled BP to set aside $20 billion  in June for an escrow account that would be used to compensate spill damages. BP and the White House settled on Kenneth Feinberg, a mediator with a long track record  of handling contentious disputes, as the “claims czar” who would manage the compensation fund.
Most of the summer went by before Feinberg took the reins of the operation. ProPublica reported that during these months, BP deferred decisions  on thousands of claims whose legal eligibility was unclear until Feinberg took over the process, often without telling claimants why their applications were in limbo.
When Feinberg took over in August, he promised an array of changes  that would speed payments and expand eligibility for compensation.
It soon become clear that one of his main promises, his pledge to pay fully documented claims within two days for individuals and one week for businesses, was too optimistic. We reported that Feinberg’s operation was falling behind  in meeting his timeline for processing claims, and soon Feinberg retreated from his timeline  and offered an apology to claimants for raising unrealistic expectations.
In September and early October, Feinberg made two changes that led to a rapid increase in payments: He created industry-specific formulas  for judging groups of similar claims, and he announced that he would no longer apply a geographic test  to assess claimants’ eligibility.
However, some claimants continued to report delays, and we reported that many applicants were unable to get basic information  from Feinberg’s operation about what was happening with their claims. Feinberg told us that the longest delays were caused by claims that required tricky decisions  about eligibility. He vowed to improve transparency by sending claims agents down to the Gulf to answer questions and help claimants with their applications.
After Thanksgiving, the claims process moved into a new phase . Feinberg stopped issuing emergency payments, which covered past damages and did not require waiving any legal rights, and began considering final claims, which cover all past and future damages but require signing away the right to sue.
Feinberg recently pledged another slate of improvements. He said he would implement his previous transparency promises  within weeks by sending staff to the Gulf to assist claimants and that he would disclose to the public his methodology for deciding claims.
As of Dec. 21, Feinberg’s operation had paid out about $2.5 billion  over roughly four months — many times the $400 million that BP distributed over nearly as long a period. However, some claimants are still struggling to get checks and to get answers about their claims, and it is unclear how far Feinberg’s latest promises of reform will go toward easing their hardship.
Many foreclosures have been thrown into question  because of flawed documentation such as inaccurate affidavits describing a mortgage’s history. But three recent court cases point to another type of flaw in foreclosure filings that could place thousands more cases in doubt: false attorney signatures on court documents.
Experts said that foreclosures that relied on court documents with the signatures of attorneys who in fact neither signed nor reviewed them are vulnerable to being thrown out in the 23 states in which foreclosures must be approved by a judge.
“What you have is a non-lawyer engaged in unauthorized practice of law, and that would be a serious problem in terms of that foreclosure judgment withstanding that kind of attack,” said Max Gardner, a consumer bankruptcy lawyer and an expert on foreclosures. While the extent of the practice remains unknown, filings in the recent cases allege that law firms that specialize in foreclosure systematically directed their clerical staff to sign documents in the name of attorneys.
A suit filed this fall in a federal court in Pennsylvania, on behalf of a homeowner facing foreclosure from the Bank of New York, prompted a striking admission by the bank’s lawyers . In a deposition cited in the lawsuit, attorney Gary McCafferty — whose firm specializes in representing lenders in foreclosure cases — acknowledged that many documents his firm submitted to court with his signature had in fact been signed by administrative staff and that he had neither read nor reviewed them.
“Complaints were filed without an attorney seeing them,” McCafferty said in the deposition .
McCafferty also said that his firm no longer engages in this practice. He did not return a phone call from ProPublica inquiring about his firm’s role in the case.
False attorney signatures are different from robo-signing , in which mortgage company officials sign large numbers of foreclosure documents without checking the accuracy of the details. Bob Davis Jr., a Pennsylvania lawyer who concentrates on the defense of attorney ethics cases, said that falsified signatures from lawyers on case pleadings can void a foreclosure by rendering key documents invalid before the court.
“In litigation the signature of an attorney means something very specific: that they’ve read the material and attest that it’s truthful,” Davis said.
Davis said that while it is not good practice, it is permitted to use a name stamp or have another person physically sign an attorney’s name, but only if the attorney has personally conducted due diligence and determined that the material is truthful. He also distinguished between documents with false signatures and those whose contents are materially false. If an attorney has allowed another person to sign court documents in the attorney’s name without reviewing them, but the underlying evidence is accurate, Davis said it may be possible — but is by no means certain — that the pleadings could be corrected and re-submitted to the court.
In some cases, false attorney signatures have led to foreclosures being dismissed. In October, the Baltimore Sun reported that lawyers from two Maryland firms that handle foreclosures acknowledged that they had not in fact signed many affidavits  filed with their signatures and had submitted “corrective affidavits” to try to remedy the problem. The two lawyers, who have reportedly filed more than 20,000 foreclosure cases in Maryland since 2008, told the Sun that they had reviewed the content of all their affidavits although they did not always sign them themselves.
However, one of the lawyers, Jacob Geesing, agreed to dismiss five foreclosure cases after an attorney representing homeowners filed motions last November to dismiss them on the basis of “fraud on the court” related to false attorney signatures.
A class action suit in federal court in Mississippi against the foreclosure contractor Lender Processing Services  includes similar allegations. The suit, which the U.S. Justice Department has joined as a plaintiff, charges that LPS engaged in unauthorized practice of law , according to an investigation by Reuters.
Reuters obtained legal testimony and internal LPS documents that show foreclosure documents were “mostly prepared by clerical workers, not lawyers,” and that LPS created a ratings system  that rewarded law firms that processed documents quickly, often at the expense of being reviewed by lawyers. LPS told Reuters that its clients can pick the law firms that represent them — although court documents show that its clients signed agreements to use LPS’s network of lawyers — and said that its system did not encourage carelessness by law firms.
Gardner, the bankruptcy attorney, said that he believes the problem is widespread because it results from the business model employed by many law firms that specialize in foreclosures.
“They have a small number of attorneys and a very large back office,” Gardner said. “The first time an attorney knows anything about a case in these kinds of operations is when someone like me files a response.”
Lawyers who are found to have authorized fake signatures could face sanctions, such as reprimands, or suspensions of license, said Dianne Coscarelli, a partner at the firm Thompson Hine and the vice-chair of the American Bar Association’s Real Estate Finance Group.
Gardner, the consumer bankruptcy lawyer, said he expected that false attorney signatures will become the target of increasing scrutiny. He said that additional class action suits against law firms that specialize in foreclosures, sanctions by state bar associations against offending lawyers, and investigations of the practice by state attorneys general are all likely possibilities.
“I think this is the next huge issue,” Gardner said.