INFLUENCE GAME: Drilling regulators move from government to industry through revolving door

By Frederic J. Frommer, AP
Wednesday, May 26, 2010

INFLUENCE GAME: Govt regulators hired by companies

WASHINGTON — At a 2005 workshop, a senior official in the U.S. government’s Minerals Management Service raised concerns about ultra-deepwater drilling and included the bullet point, “Few or no regulations or standards.” Within two years, Jim Grant left his post as chief of staff of the government’s Gulf of Mexico region to take a job with BP PLC — one of the companies his former agency regulated in its oversight of offshore drilling.

Grant’s change is one example of the revolving door between the Interior Department’s MMS and the oil industry, which increasingly has the attention of Congress, the Obama administration and watchdog groups after the disastrous BP oil spill at an ultra-deepwater rig in the Gulf of Mexico.

Just this week, a government report said drilling regulators have been so close to the industry they’ve been accepting gifts from oil and gas companies and even negotiating to go work for them.

As BP’s regulatory compliance and environmental manager for the Gulf of Mexico strategic performance unit, Grant has weighed in on several offshore drilling proposals by his former federal employer and other government agencies.

Last fall, speaking at a U.S. ocean policy task force, Grant cautioned the group to “carefully weigh policies that may establish exclusionary zones, disrupt the MMS leasing program or affect opportunities for economic growth,” according to a statement posted at He said BP supports access to areas previously off-limits to leasing, such as the eastern Gulf of Mexico.

“It is our opinion that economic development of ocean resources is compatible with responsible ocean stewardship,” he said.

President Barack Obama made pledges during the campaign to limit the influence of special interests and promises now to end the “cozy relationship” between the oil industry and federal regulators, which he said had existed for years and into his own administration. Interior Secretary Ken Salazar acknowledged at a Senate hearing last week that there has been a revolving door problem at his agency.

The new report by Interior’s inspector general flagged the issue, too.

“Of greatest concern to me is the environment in which these inspectors operate — particularly the ease with which they move between industry and government,” wrote Acting Inspector General Mary Kendall. Kendall said the investigation found that even after starting job negotiations with Island Operating Co., an MMS inspector conducted four inspections of the same company’s platforms — and found no problems. Soon after, the unidentified inspector resigned to work for the company.

The revolving door can undermine government regulation in several ways.

Former government workers who move to industries they once regulated can take advantage of personal relationships at their former agencies on behalf of their new companies. They can exploit loopholes in regulations based on their knowledge of the federal bureaucracy. And even before leaving, government employees hoping to one day land high-paying jobs with companies they regulate might be tempted to ease off.

MMS has long been targeted by government investigators, lawmakers and watchdog groups. In 2008, an investigation by Interior’s inspector general described a “culture of substance abuse and promiscuity” at the minerals agency, finding that workers at the MMS royalty collection office in Denver partied, had sex and used drugs with energy company representatives. Employees also accepted gifts, ski trips and golf outings. Then-Inspector General Earl E. Devaney assailed “a culture of ethical failure” and an agency rife with conflicts of interest.

“To say that MMS has had a revolving door problem doesn’t even begin to describe how profoundly this agency has entangled itself with industry,” said Mandy Smithberger, an investigator with the Washington-based Project on Government Oversight, a private watchdog group. “The revolving door has spun so readily in this case that the lines between the regulators and the regulated are now virtually nonexistent.”

The government restricts certain practices by federal workers. Government employees who participate in contracts, grants or lawsuits generally are barred forever from representing anyone before a federal department or court on that matter. For employees who supervised such matters in the final year of their government service, that ban lasts for two years.

“Very senior” employees — such as Cabinet officers, the vice president and some high-level White House officials — are subject to a two-year cooling-off period, during which they are banned from contacting their former agencies or certain high-level executive branch employees in any federal agency. “Senior employees” — who include other presidential appointees — are subject to a one-year cooling-off period, although Obama made these people sign a pledge agreeing to extend it to two years as a condition of employment.

Grant’s name surfaced at a congressional hearing when Rep. Kathy Castor, D-Fla., asked BP America President Lamar McKay about former Interior officials who worked at his company and about former BP officials who work for the Interior Department. Grant did not return telephone and e-mail messages seeking comment, and BP declined to discuss his employment.

McKay also cited Sylvia Baca as someone who went from BP to Interior. She made the switch twice. In the Clinton administration, she served as the Interior Department’s assistant secretary for land and minerals management and worked as the department’s acting director of the Bureau of Land Management.

In 2001, Baca joined BP, where she worked in several senior management positions. Last June, Salazar brought her back to Interior, tapping her for the position of deputy assistant secretary for land and minerals management.

He cited her “professionalism and detailed knowledge of Interior’s land and energy responsibilities.”

Asked about her hiring at a House hearing Wednesday, Deputy Interior Secretary David Hayes said that Baca has recused herself from the oil spill because of her prior employment with BP.

“She has not been involved in offshore energy issues,” he added.

More generally, the offshore drilling industry has tapped the government’s expertise and connections. The National Ocean Industries Association, an offshore energy trade group, has plucked its last two presidents from the ranks of former MMS directors. In March, Randall Luthi, who was MMS director from July 2007 through January of last year, took over the industry post, replacing Tom Fry, who had been president of the group since December 2000.

Through a spokeswoman, Luthi declined an interview request. Fry did not return a message left through the National Marine Sanctuaries Foundation, where he serves as a trustee.

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