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Obama Taps Salazar for Interior, Gensler for CFTC

In formally tapping Sen. Ken Salazar (D-CO) for secretary of the Interior Department, President-elect Obama last Wednesday gave him the tough assignment of cleaning up the troubled agency whose image has been scarred by scandal during the past year. Salazar was the last pick to round out Obama's energy and environmental team. Obama also moved quickly last week to unveil his financial regulatory team, selecting Gary Gensler, former undersecretary of the Treasury and partner at Goldman Sachs, as his nominee for chairman of the Commodity Futures Trading Commission (CFTC).

"I...want an Interior Department that very frankly cleans up its act. There have been too many problems and too much emphasis on big-time lobbyists in Washington," Obama told reporters in Chicago. "Over the last eight years I think we had an Interior Department that was deeply troubled...The Interior Department too often has been seen as an appendage of commercial interests as opposed to a place where the values and interests of the American people are served.

"Part of what I want to put an end to is an Interior Department that sees its job as simply sitting back, waiting for whoever has the most access in Washington to extract what they want. I want a proactive vision of getting out talking to people, talking to farmers, talking to ranchers [and] being at the cutting edge of environmental and energy policy so that commercial interests are just one group among many groups that are being listened to and being brought together to craft the kind of policies that we want to see."

Salazar joined other members of Obama's energy and environmental team, including Nobel laureate physicist Steven Chu to be energy secretary; Carol Browner to head a new White House council overseeing energy and climate policy; Lisa P. Jackson to be the next EPA administrator; and Nancy Sutley to lead the White House Council on Environmental Quality.

Prior to coming to Capitol Hill in 2004, Salazar was Colorado's attorney general and head of the state's Department of Natural Resources. He will be inheriting a scandal-riddled agency. As Obama settled on Salazar for the Interior post, Interior Inspector General Earl E. Devaney last week submitted a report to Congress that found agency officials had doctored scientific work to preclude certain species from receiving protections under the Endangered Species Act (see related story).

This came only three months after Devaney delivered reports to Congress revealing a side of Interior's Minerals Management Service that few knew about or even imagined -- one that involved drug usage, sex with oil industry contacts and between former employees of the agency's royalty in kind program, as well as rigging of contracts and other financial misdealing at high levels (see NGI, Sept. 15).

Part of the problem stems from the fact that "Interior has a wide portfolio of issues, and some of them run counter to each other," said Lee Fuller, vice president of government relations for the Independent Petroleum Association of America (IPAA), which represents independent producers.

For instance, Interior's Bureau of Land Management (BLM) and Fish and Wildlife Service (FWS) have conflicting roles, he said. The BLM oversees the sale of federally management lands for energy and mining development and other activities, while the FWS is charged with protecting species and wildlife from the encroachment of development.

"The agency is a challenging one to manage. On the other hand, it is a significant revenue source for the federal government and states," Fuller said.

Calling Salazar "my dear friend" from the Senate, Obama said "one of the qualities I most admire in Ken is his ability to listen and bring all parties together." Oil and gas producers echoed that sentiment. Salazar has been a "centrist on a lot of the issues that we have worked with him on in the Senate," Fuller said. "He's approachable, he listens...I expect he will bring the same traits to the role as secretary of Interior."

But the IPAA and other producer groups are concerned that the Obama administration may reinstate the moratorium on drilling in the federal Outer Continental Shelf (OCS). "I think we're always concerned about the rush to reimpose the moratorium. I hope that the administration will carefully look at the overall balance of American energy needs...and will conclude that America's offshore is a significant component of meeting those needs," Fuller said.

Last Monday Obama said one of the first tasks facing his energy and environmental team will be to review the issue of whether to reinstate the ban on drilling off the East and West coasts. "What I said during the campaign was that I was open to the idea of offshore drilling if it was part of a comprehensive package to achieve energy independence," he told reporters. But "I'm not thrilled with it [the moratorium] simply lapsing as a consequence of inaction without broader thought to how we're going to achieve energy independence."

Consequently "what this team will be charged with in part is figuring out how can we arrive at a comprehensive energy strategy that meets the goals of our national security, meets the goals of our economy and meets the goals of preserving our planet for our children."

Lawmakers let the nearly three-decades-old congressional moratorium on offshore drilling expire on Nov. 1 as part of a stopgap measure to fund the federal government through March 2009 (see NGI, Oct. 6). Earlier in the year, President Bush issued an executive order shelving the parallel presidential ban on drilling in federal offshore areas (see NGI, July 21). The two actions lifted all restrictions on drilling in the OCS.

Before handing over the reins to the Obama team, the Bush administration plans to issue a draft proposed five-year leasing program for 2010-2015, which could include development throughout the OCS, in early January (see NGI, Dec. 15). However, the subsequent steps -- a proposed leasing program, final environmental impact statement and possible congressional review of the program -- would be up to the Obama administration, which could conceivably shelve the entire leasing program.

As for Salazar's position on OCS development, he was a member of a coalition of Republican and Democrat senators -- originally called the "Gang of 10" -- who backed a compromise proposal on offshore drilling earlier this year, proposing to open additional Gulf of Mexico areas and allow the states of Virginia, North and South Carolina and Georgia to opt into leasing off their shores (see NGI, Sept. 1). The Senate energy gang grew to 20 in September.

The measure, however, would prohibit any production within 50 miles from shorelines, which has drawn objections from producers who said the most significant oil and gas resources were closest to shore and could be developed environmentally. Although the proposal was never introduced this year, it may serve as the basis for debate in both the Senate and House in the 111th Congress.

Producers will be watching closely to see what Salazar does with respect to access to onshore lands as well. Salazar is a "lifelong advocate of a multi-use approach to managing our public land and accessing safely the resources that reside beneath it. The livelihoods of thousands of independent oil and gas operators in this country remain inextricably linked to that access, and that's a point we intend to make early, often and with purpose as this new administration begins to take shape," said IPAA President Barry Russell.

With respect to the CFTC, "Obama has made an outstanding choice in Gary Gensler. Gary has the rare combination of intelligence, market and government experience and independence that will help lead this agency in its vigorous oversight of the futures markets going forward," said acting CFTC Chairman Walter Lukken. He added that he would work with Gensler to "facilitate a seamless transition at the agency."

In announcing his choice for the CFTC, as well as the Securities and Exchange Commission and Federal Reserve Board, Obama said, "We are going to have to greatly strengthen our regulatory apparatus." He noted that his team "will be releasing a very detailed plan on how we think that regulatory upgrade will take place" to reflect a "21st century regulatory framework."

Obama acknowledged that regulators have been "asleep at the switch," as have members of Congress.

The choice of an outsider for CFTC chairman came as something of a surprise. Current CFTC Commissioner Bart Chilton was believed to be next in line for chairman (see NGI, Nov. 17).

Gensler was Treasury undersecretary for domestic finance during the last couple of years (1999-2001) of the Clinton administration, and prior to that spent nearly two decades at Goldman Sachs, where he made partner at the age of 30.

He also worked on Capitol Hill. He was a senior advisor to Sen. Paul Sarbanes (D-MD), a co-author of the Sarbanes-Oxley Act of 2002, which introduced major changes to the regulation of financial practice and corporate governance. Sarbanes left the Senate in 2006.

Ironically, Gensler was a senior advisor to the campaign of Sen. Hillary Rodham Clinton (D-NY), who unsuccessfully challenged Obama for the Democratic presidential nomination. Obama has picked Clinton as his nominee for secretary of state.

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