A report by the Department of Interior’s Inspector General (IG) has found “ethical lapses” at the Minerals Management Service (MMS) between 2000 and 2008, Secretary Ken Salazar said Tuesday.

An investigation was initiated in late 2008 after the U.S. Attorney’s Office in New Orleans received an anonymous letter alleging that “a number” of unnamed MMS employees in the Lake Charles, LA, district office had accepted gifts from oil and gas producer representatives. The letter was turned over to Interior’s IG Office, now led by Acting IG Mary L. Kendall.

The latest investigation followed one that found several violations of federal regulations and agency ethics rules by Lake Charles District employees between 2000 and 2008 (see Daily GPI, Sept. 27, 2007).

The IG zeroed in on complaints suggesting that MMS employees be investigated for accepting gifts, including hunting and fishing trips, from the Island Operating Co. (IOC), an oil and gas production company working on oil platforms regulated by the Department of the Interior. The report, officially released Tuesday, is Island Operating Co., et. al, Case No. PI-GA-09-0102-I.

The conduct chronicled in the report occurred prior to 2007, predating Salazar’s tenure as secretary and Interior’s January 2009 Ethics Guide for MMS.

“While this conduct is dated, it is more evidence that there was, indeed, a much-needed change to the ethical culture at MMS,” Kendall noted in her memo to Salazar.

In response to the report, Salazar said he has asked the IG to investigate “whether there was a failure of MMS personnel to adequately enforce standards or inspect the Deepwater Horizon offshore facility and look into whether there are deficiencies in MMS policies or practices that need to be addressed to ensure that operations on the Outer Continental Shelf are conducted in a safe and environmentally sensitive manner.”

Initially the latest IG report was to be issued according to its routine protocol, providing a copy to MMS and requesting a formal response in 90 days. After the response period, the report then was to be posted to the IG website. “Unfortunately,” said Kendall, “given the events of April 20 of this year, this report had become anything but routine, and I feel compelled to release it now,” referring to the Gulf of Mexico oil spill.

“Of greatest concern to me is the environment in which these inspectors operate — particularly the ease with which they move between industry and government,” she wrote. “While not included in our report, we discovered that the individuals involved in the fraternizing and gift exchange — both government and industry — have often known one another since childhood.

“Their relationships were formed well before they took their jobs with industry or government. MMS relies on the ability to hire employees with industry experience. I am pleased that MMS has advised us that it will enhance ethics training specifically for its inspectors to address this unique industry/government dilemma, and will establish controls, like a two year waiting period, to minimize the potential for conflicts of interest.”

John E. Dupuy, the assistant IG for Investigations at Interior, said several MMS employees at the Lake Charles District office “admitted to attending sporting events prior to 2007 in which oil and gas production companies sponsored teams, as well as receiving lunches and accepting gifts.

“Through numerous interviews, we found a culture where the acceptance of gifts from oil and gas companies were widespread throughout that office,” declining after MMS Gulf of Mexico Regional Supervisor Donald C. Howard was terminated in January 2007 for accepting gifts from Rowan Drilling Co. Inc.

In its investigation of whether gifts and travel were given to MMS employees by oil and gas companies, IG personnel showed MMS Lake Charles District Manager Larry Williamson nine photos discovered on a former MMS inspector’s computer that were taken in 2005 at the Peach Bowl football game between Louisiana State University and the University of Miami. Williamson identified two MMS inspectors in the pictures, which showed tailgating festivities at the game.

“According to Williamson, many of the MMS inspectors had worked for the oil and gas industry and continued to be friends with industry representatives,” the report noted. “‘Obviously, we’re all oil industry,’ he said. ‘We’re all from the same part of the country. Almost all of our inspectors have worked for oil companies out on these same platforms. They grew up in the same towns. Some of these people, they’ve been friends with all their life. They’ve been with these people since they were kids. They’ve hunted together. They fish together. They skeet shoot together…They do this all the time.'”

Two employees in the Louisiana office “admitted to using illegal drugs during their employment at MMS,” Dupuy said. And the investigation revealed that “many of the inspectors had e-mails that contained inappropriate humor and pornography on their government computers.”

Between June and July 2008, one MMS inspector conducted four inspections of IOC “while in the process of negotiating and later accepting employment with that company,” the report noted. The inspector took a job with IOC late in 2008.

According to Interior, many of the individuals named in the 2007 report have resigned, been terminated or referred for prosecution. Individuals named in the new IG report because of “questionable behavior who are still with MMS will be placed on administrative leave pending the outcome of a personnel review,” Interior said.

“The Inspector General report describes reprehensible activities of employees of MMS between 2000 and 2008,” Salazar said. “This deeply disturbing report is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry.

“I appreciate and fully support the Inspector General’s strong work to root out the bad apples in MMS and we will follow through on her recommendations, including taking any and all appropriate personnel actions including termination, discipline, and referrals of any wrongdoing for criminal prosecution.”

In addition, the IG has been asked to expand the investigation “to determine whether any of this reprehensible behavior persisted after the new ethics rules I implemented in 2009,” Salazar said.

The IG report about activities in the Lake Charles district office followed a 2008 report that identified “major ethical lapses” in the Lakewood, CO, MMS office (see Daily GPI, Sept. 11, 2008). In response to the 2008 report, Salazar established new ethics standards for MMS in January 2009, terminated the controversial royalty-in-kind program and launched other reforms.

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