Report shows close ties between rig inspectors, oil industry

Wednesday, May 26, 2010; A07

Inspectors with the Minerals Management Service -- charged with enforcing safety and environmental rules on offshore rigs -- routinely took gifts from the companies they were supposed to be policing, including hunting trips, college football tickets and meals, according to a new report.

The report, released Tuesday by the Interior Department's inspector general, does not directly relate to the Deepwater Horizon oil rig, which sank after an explosion April 20 and set off a massive spill in the Gulf of Mexico. It details misconduct in the service's Lake Charles, La., office, which oversaw a different region of the gulf, and covers up to 2008, before the problem well was approved.

But the report adds to a growing portrait of the Minerals Management Service as corrupted by industry: Many inspectors, the inspector general found, were already friends with industry officials. Some had worked in the oil and gas business before their stint in government, and would again. One official inspected four platforms owned by one company at the same time he was negotiating for a job at that firm.

The result, the report found, was regulation that often looked less than rigorous. One confidential source, it said, told investigators that service inspectors let the oil and gas companies fill out their own inspection forms -- in pencil. Then an inspector would trace over their writing in ink.

"Of greatest concern to me is the environment in which these inspectors operate -- particularly the ease with which they move between industry and government," Mary L. Kendall, the Interior Department's acting inspector general, said in a cover letter to Interior Secretary Ken Salazar.

Salazar said he was concerned enough about the findings to ask Kendall to expand her investigation and try to determine whether similar activities took place during the Obama administration.

"The inspector general report describes reprehensible activities of employees of MMS," Salazar said in a statement. "This deeply disturbing report is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry. That is why during the first 10 days of becoming secretary of the interior I directed a strong ethics reform agenda to clean house of these ethical lapses at MMS."

The inspector general's report was to be released later in the year, but Kendall said she moved it up because of the Deepwater Horizon explosion. Officials have questioned whether the service could have done more to prevent the explosion or halt the spill from spewing for more than a month.

Salazar has already said he intends to split the MMS into three agencies, separating the functions of leasing offshore parcels, enforcing safety and environmental rules, and collecting royalties from oil and gas companies.

The inspector general's report was first detailed in a story in Tuesday's New York Times.

Among the problems identified in the report:

-- Two MMS inspectors, along with family members, traveled to the 2005 Peach Bowl in Atlanta on a plane owned by an offshore company. One inspector later told investigators he was a "big LSU fan" (Louisiana State University was playing the University of Miami) and couldn't refuse the tickets.

-- An MMS inspector visited platforms owned by Island Operating Co. while negotiating to be hired by that company. In four visits to the firm's platforms during that time, he reported no violations.

-- MMS employees accepted free lunches, hunting trips and fishing trips, and they allowed oil and gas companies to pay for their entrance fees at shooting events. "Everybody was doing it," one MMS inspector told investigators. But the inspector general said the practice became less common after an investigation of a regional MMS supervisor, Don Howard, who pleaded guilty in court to failing to report gifts from industry.

The culture of the MMS office revealed in the report might be summed up in one e-mail exchange found by the inspector general. It began with an MMS inspector -- the report did not give inspectors' names -- sending an e-mail to an employee at the oil company ConocoPhillips, listing fines for breaking the service's rules. According to the inspector general's report, the ConocoPhillips employee responded, "[E]ver get bribed for some of that?"

The inspector replied, "They try all the time."

The ConocoPhillips employee responded, "[E]ver take em?"

The inspector said, "I accept 'gifts' from certain people. But we have VERY strict ethic standards as you could imagine."

The ConocoPhillips employee replied, "[C]ertain people, meaning women?"

The inspector, according to Tuesday's report, said, "No. [M]eaning good friends that I wouldn't write up anyway."

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