In an attempt to break up the “cozy relationship” between the Minerals Management Service (MMS) and the oil and natural gas industry, the Interior Department’s acting inspector general (IG) last Thursday raised the possibility of requiring companies that do business with the federal government in the future to comply with ethics standards. At the same time, President Obama appointed someone with an extensive law and order background to take over the agency.

“How do we address the conduct of industry representatives? Perhaps it is time to impose some ethics requirements on companies doing business with the government,” said Acting IG Mary Kendall during a subcommittee hearing of the House Natural Resources Committee.

Past IG reports included “troubling accounts of inappropriate behavior on the part of certain MMS employees,” but Kendall added that “conduct was for the most part enabled by industry.”

The Obama administration and Capital Hill lawmakers believe that MMS, which is in charge of the safety inspections of offshore rigs, allowed the industry to write their own safety regulations. And by doing so, it unwittingly contributed to the disaster in the Gulf of Mexico (GOM).

But Kendall rejected that notion. “We also have had questions about the influence of industry on MMS in developing regulations [for the offshore]. While industry clearly has influence, MMS appears to have followed the proper legal processes in finalizing its regulations,” she told the Subcommittee on Energy and Mineral Resources.

“Because MMS relies heavily on an industry that it regulates, however, the possibility for and the perception of undue influence will remain,” she said.

“We also have questions about MMS’ enforcement programs. In the operations and safety arena, we question whether the civil penalty regulations are tied appropriately to the seriousness of the violations and the threat to human safety, property and the environment,” Kendall noted.

She further noted that more inspectors were needed in the GOM. “We have been told MMS has approximately 60 inspectors for the Gulf of Mexico region to cover nearly 4,000 facilities,” Kendall said. Comparatively the Pacific offshore region has 10 MMS inspectors for 23 facilities.

“MMS also has difficulty in recruiting inspectors due to its grade and pay structure. Industry tends to offer considerably higher wages and bonuses. [And] when they can be recruited, inspectors for MMS receive primarily on-the-job training. In any reorganization effort, MMS should consider formalizing and updating its inspector…training program and conduct periodic reviews” of the program.

Both Kendall and Frank Rusco, director of Natural Resources and Environment at the Government Accountability Office (GAO), urged Interior to be thoughtful in restructuring MMS in response to the oil spill. Interior Secretary Ken Salazar has proposed splitting the agency into three bureaus, with each handling separate functions — safety and environmental enforcement; leasing; and revenue collection (see NGI, May 24).

“We do have some concerns about just the ability of Interior staff to simultaneously respond to the catastrophic oil spill in the Gulf, undergo a major structural reorganization and also work to implement the over 120 recommendations” made by GAO, the inspector general and Interior’s Royalty Policy Committee, Rusco said.

“We do feel that any reorganization should be done only after thoughtful analysis with sufficient time to consider a variety of organizational structures and in consultation with Congress,” he noted.

“It needs to be well thought out and considered before hasty action is taken,” Kendall said.

Obama last week picked Michael R. Bromwich, a partner in the law firm of Fried Frank in Washington, DC, and New York, to head up reform of the troubled MMS. He will.oversee and work with Congress on the restructuring of the agency.

Bromwich fills the position vacated by Liz Birnbaum, who either resigned on her own or was pushed out in late May in the wake of the explosion and sinking of the Deepwater Horizon rig off the southern coast of Louisiana (see NGI, May 31).

In 2002 Bromwich was selected by the Department of Justice (DOJ) and the District of Columbia to serve as the independent monitor for the D.C. Metropolitan Police Department, focusing on the use of force, civil rights integrity, internal misconduct and training issues.

Prior to joining the law firm, Bromwich served as inspector general for the DOJ from 1994 to 1999. He conducted criminal and administrative investigations into allegations of corruption and misconduct involving 120,000 employees at DOJ. Before the DOJ, he served as a federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York and as associate counsel in the Office of Independent Counsel for Iran-Contra.

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