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Originally published Tuesday, September 14, 2010 at 10:10 AM

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Oil industry: Nix higher offshore inspection fees

The oil and gas industry says an Obama administration plan to double fees charged for inspections of offshore operations could cost jobs.

Associated Press Writer

WASHINGTON —

The oil and gas industry says an Obama administration plan to double fees charged for inspections of offshore operations could cost jobs.

The industry recognizes the need for improved inspections and oversight following the massive BP oil spill, American Petroleum Institute president Jack Gerard said. But doubling the fees is not appropriate, especially during a recession, he said.

"This is not the time to go back and impose additional costs on industry," Gerard said Tuesday in a conference call with reporters.

The oil and gas industry contributes billions of dollars to the U.S. government in royalty payments, taxes and other fees, Gerard said, adding that government policies should encourage development of domestic energy while making sure it is safe.

The White House asked Congress late Monday to approve the higher inspection fees as part of a request for $80 million in new spending for the agency that oversees offshore drilling.

The proposal would more than double the amount collected from oil and gas companies, to $45 million next year from about $20 million this year.

Obama said in a letter to Congress that the fee increases and other changes are needed to strengthen oversight of offshore oil and gas operations; address deficiencies in mineral revenue collection; and complete the reorganization of the agency formerly known as the Minerals Management Service.

The drilling agency's new director said Tuesday that he was not involved in the fee increase decision, but supports additional revenue for his organization, now known as Bureau of Ocean Energy Management, Regulation and Enforcement.

"We need the additional resources to do the job that we've been asked to do," said Michael Bromwich, the drilling agency's new chief. Under its former name, the drilling agency was long plagued by staffing shortages and an overly cozy relationship with the industries it oversees.

Bromwich acknowledged those problems, but said the ocean energy bureau is turning a corner - and needs additional money to get even better.

"We've been faulted for not doing the job people expected us to do, and the central reason for that is we haven't had adequate resources. If we don't get the resources we need we won't be able to do the job effectively," Bromwich said Tuesday in a separate conference call.

Congress recently approved $29 million in emergency spending to hire hundreds of new offshore drilling inspectors and take others steps to improve the drilling agency. No new inspectors have been hired yet, but Bromwich said officials were conducting a "full-court press" to find and hire qualified inspectors to bolster the 60 or so inspectors now responsible for about 3,500 drilling rigs and platforms in the Gulf of Mexico.

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In a related development, Bromwich said the Interior Department has hired McKinsey & Co., a management consulting firm, to help him reorganize the drilling agency. Bromwich said he was not involved in the selection process - which began before he took office in June - and did not know how much the company was being paid.

Federal records indicate that McKinsey will be paid $4.4 million over the next year for its analysis and expertise. The company defeated four other bidders for the yearlong contract, which began Aug. 13.

Bromwich also said the Interior Department is "highly unlikely" to extend its six-month moratorium on deepwater drilling beyond Nov. 30.

He said he hopes to finish a report to Interior Secretary Ken Salazar by the end of September, a month ahead of a deadline to make recommendations on the drilling moratorium and other issues. It was unclear how soon Salazar will act after the report is submitted.

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