House hearing, Senate bill focus on MMS ethics reforms

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 27 -- Ethics reforms are needed at the US Minerals Management Service, but making them effective and realistic will be a challenge, the US Department of the Interior’s acting inspector general told a US House committee on May 26. Two US senators introduced their own MMS ethics reform bill as Mary L. Kendall waited to testify in the day-long hearing.

One day after releasing a report that found ethics violations during 2000-08 at MMS’s district office in Lake Charles, La., Kendall told the House Natural Resources Committee that she neither condones nor excuses the acceptance of gifts, fraternizing with industry, pornography and other inappropriate material on government materials, and lax handling of inspection forms that IG investigators found.

“I am more concerned about the environment in which these inspectors operate, and the ease with which they move between industry and government,” she said. “I am also concerned about the conduct of industry representatives, something that stems from our 2008 report. That they should think it permissible to fraternize and provide federal government employees with gifts after all the media coverage of this practice is somewhat hard to fathom, but may be informed by the environment as well.”

Kendall said while it was not included in the report, IG investigators discovered that the individuals involved in the fraternizing and exchange of gifts at the Lake Charles MMS district office, both government and industry, often had known each other since childhood. “Their relationships were formed well before they began their professional careers,” she said.

“MMS relies on the ability to hire employees with industry experience,” Kendall noted. “In my very brief, but intense, experience in this arena the past three-plus weeks, the MMS employees I have met are highly professional, extremely knowledgeable, and passionate about the job they do.”

‘Bad apples’
Testifying earlier at the hearing, which was the first of seven that the Natural Resources Committee and its subcommittees have scheduled to examine the Gulf of Mexico rig accident and crude oil spill, US Interior Secretary Ken Salazar said, “Of the 1,700 employees at MMS, they continue to work to collect and distribute about $13 billion/year and to stop this oil that is leaking. There are bad apples, but they will be rooted out with every power we have.”

He noted that soon after taking office in early 2009, he instituted reforms at DOI which included a new department-wide ethics code after reading then-Inspector General Earl E. Devaney’s 2008 report about activities in MMS’s royalties office in Lakewood, Colo. Devaney’s investigators found serious ethics violations including drug abuse, sexual misconduct, acceptance of gifts and meals from oil and gas producers, and, in one employee’s case, simultaneously working for the industry while employed at MMS.

Salazar said the 2008 report contributed to his decision to divide MMS in two and move its royalty collection responsibility to a separate agency. He also instituted a crackdown. “If we know an employee has done something which requires termination, they have been terminated and turned over for prosecution if the facts surrounding the incident are severe enough,” he said. “We are talking about the here-and-now. This is not like the previous administration, where MMS was an oil and gas kingdom.”

Kendall said most of her office’s recommendations in the latest report involved stronger ethics requirements and ensuring that the reforms which Salazar ordered actually happened. “The secretary also can take some short-term steps, such as instituting a 2-year waiting period,” she said. “An inspector who comes from Shell, for example, should not be allowed to inspect a Shell platform or well for 2 years.” MMS suggested a two-year waiting period in its response to the IG office’s latest report, she added.

US Sens. Robert Menendez (D-NJ) and Bill Nelson (D-Fla.) called for additional steps in their bill. In addition to barring DOI employees from taking oil and gas industry jobs for two years after leaving government service, the measure they introduced on May 26 would make it a felony for regulators to knowingly accept gifts from someone in the industry, and increase the penalty for making fraudulent statements and false representations to 15 years in prison from 5 years.

Other provisions
The bill also would prohibit regulators from simultaneously doing work for the oil and gas industry, require financial disclosure for senior oil and gas regulators (GS-13 or higher), and prohibit regulators from owning stock or other interests in the oil and gas industry. The bill is a tougher version of legislation Menendez and Nelson introduced 2 years ago, the senators said.

“The more we learn about the safety oversight of oil drilling, the more it becomes clear that for many years the federal regulators have been a wholly owned subsidiary of Big Oil,” said Menendez. “When a regulator is lured by immediate or future financial gain, the industry is able to ignore safety rules.”

“We don’t need our public servants serving Big Oil,” Nelson added. “The conduct in this agency is at least indirectly responsible for what is becoming one of the country’s worst disasters.”

But discussion at the House committee’s hearing suggested that part of MMS’s problem may be that its employees and their counterparts in the business they regulate come from the same relatively small professional pool. “As much as we’d like to see it in a perfect world, we’re never going to see 100% honesty and integrity,” said Chairman Nick J. Rahall (D-W.Va.) “It’s impossible to legislate or otherwise make happen.”

He noted that members of Congress have a personal relationship exception for their gift-giving rules, and that there are bans on former members becoming lobbyists very soon after leaving office. Kendall said that DOI has similar bans for its employees, and their lengths are determined by the extent to which someone was involved in a company’s regulation.

‘Not acceptable’
“The fraternizing certainly is not acceptable. One weakness is in the ethics regulations which allows gifts if they are based on a personal relationship,” she continued. “I think the Office of Government Ethics, when it put these rules together in the late 1980s, did not envision this kind of problem.”

Kendall said that IG investigators did not find a quid pro quo involved in their examinations of the Lake Charles district office or the royalty-in-kind group in Colorado. “We determined that the Deepwater Horizon was not inspected by anyone mentioned in this report,” she said.

There were clear violations of ethics in the acceptance of gifts, however. “The rule is not against socializing but against acceptance of gifts, such as a meal or going to a football game,” Kendall said. “The preliminary response we’ve received from MMS said it will implement ethics training specific to their inspectors which incorporate their unique problems.”

Other findings in the Lake Charles district office investigation have been exaggerated or distorted, she continued. “The allegation that inspectors let employees of the companies whose rigs were being inspected fill out inspection forms did not pan out,” she said. “We found the inspectors filled them out in pencil, came back, and refilled them out in pen. They did not get them from someone else and simply sign them. A careful reading of our report found that the allegation could not be substantiated.”

Committee member Dan Boren (D-Okla.) suggested that it can be hard for people in public and private employment to draw the ethics line when their relationships started before their careers did. Kendall said that this may be why MMS believes specific ethics rules are needed for its workforce. “We can govern human behavior,” she maintained. “If you can be specific about expectations, you have a better chance.”

Contact Nick Snow at nicks@pennwell.com.

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