LITTLE ROCK — Regulators overseeing U.S. offshore drilling move too easily between government and industry and may have exploited ethics rules leading to potential conflicts of interest, the Interior Department’s watchdog said.
Relationships among regulators and the industry were forged in some cases in childhood, acting Inspector General Mary Kendall told the House Oversight and Government Reform Committee. Exceptions to rules that let federal employees accept gifts from industry workers with whom they had a relationship may have been misused by regulators, she said.
After the explosion of the drilling rig leased by BP, President Barack Obama told Interior Secretary Ken Salazar to boost oversight of offshore drilling and end a “cozy” relationship with regulators. The Gulf of Mexico spill triggered by the blast exposed ethical lapses within the department, said committee Chairman Edolphus Towns, D-N.Y.
“I am concerned about the environment in which these federal employees operate,and the ease in which they move between government and industry,” Kendall said. “I am also concerned about the conduct of industry representatives. That they should think it permissible to fraternize and provide federal government employees with gifts, after all the media coverage about this practice, is somewhat hard to fathom.”
In 2008, Inspector General Earl Devaney found that employees in Interior’s Minerals Management Service, the division that gathers drilling fees, had sex with and accepted gifts from industry contacts while failing to collect almost $200 million due from energy companies. The allegations led Salazar to scrap a program that accepted payment of drilling fees in oil and gas instead of cash.
Salazar announced in May that he would rename and break up the Minerals Management Service into three units, including the Bureau of Ocean Energy Management, Regulation and Enforcement and the Office of Natural Resources Revenue. Congress is debating legislation to implement the changes. Salazar also said he is considering rules to restrict government employees from joining companies in industries they formerly regulated.
“We are dividing up the agency into different units so that the revenue function, the dollar collectors, will be separate from those in charge of granting the leases and doing enforcement,” Salazar said. “My personal view is if you have been an MMS director, then you ought not to go on and work with the industry.”
Two past directors of the Minerals Management Service, Randy Luthi and Tom Fry, went on to become president of the National Ocean Industries Association, a business group that aims to secure a “favorable regulatory and economic environment” for drillers, said Danielle Brian, executive director of the Washington-based Project on Government Oversight, an advocacy group.
“Whose interests were they actually serving when they were regulators?” Brian said.
Government recruiters often lose to industry when seeking candidates for engineers or inspectors, said Michael Bromwich, director of the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement. Bromwich said he asked officials at engineering schools to develop recruiting programs to help enlarge the pool of potential safety and environmental inspectors.
The agency has had a “historical problem with recruiting qualified inspectors,” Bromwich told the committee. “Let’s make it a sustainable career path so they’re not tempted by more dollars.”
Minerals Management Service employees may have exploited exceptions to ethics rules that allow gifts from industry officials they count as friends, Kendall said.
“These people are all friends,” Kendall said. “The folks in industry and in the MMS grew up together. They married each other’s sisters or cousins. They’ve been playing on the same teams since they were in high school.”
The Gulf spill prompted Kendall to expand probes into potential conflicts of interest to include officials in charge of environmental, safety, inspection and enforcement.
“The Deepwater Horizon disaster has now exposed what appears to be continuing, major problems at MMS,” Towns said. “Over the last decade, MMS has essentially permitted the oil industry to police itself. The Deepwater Horizon disaster suggests this might not be the most effective approach to ensuring safe offshore drilling.”
Salazar told lawmakers Thursday that he will use his regulatory authority to impose strict new rules on department officials becoming lobbyists for the oil and gas industries.
Salazar, who has supported legislative efforts to address what he acknowledges is a problem, offered few details about what rules he might impose but told members of the House Committee on Oversight and Government Reform that he would report back.
Bromwich assured the committee that he will never work for the oil industry.
“You’ll never see me in this position,” Bromwich said. “I’ll say right now that I’ll impose a lifetime ban on contacts with the agency, and I hope that sets an example for other people in the agency, and other people throughout government.”
His statement came after Rep. Jackie Speier, D-Calif., asked about a Washington Post article that reported that dozens of former Interior Department officials had crossed over into the industries and that three out of four industry lobbyists had once worked for the federal government.
The rate is more than double the norm in Washington, where industries recruit about 30 percent of their lobbyists from the government, according to data from the nonpartisan Center for Responsive Politics. With more than 600 registered lobbyists, the industry has among the biggest and most powerful contingents in Washington, the Post reported.
Speier pushed Bromwich to ban former Interior Department employees who now work for the oil industry from communicating with the department.
Bromwich said he will give former employees no special access and no more time than he gives others who have a stake in oil production and safety oversight of the industry.
Information for this article was contributed by Jim Efstathiou Jr. of Bloomberg News and by Kimberly Kindy and Eddy Palanzo of The Washington Post.
Front Section, Pages 8 on 07/23/2010