NEW YORK TIMES

A version of this article appeared in print on May 25, 2010, on page A16 of the New York edition.

By IAN URBINA

WASHINGTON — Federal regulators responsible for oversight of drilling in the Gulf of Mexico allowed industry officials several years ago to fill in their own inspection reports in pencil — and then turned them over to the regulators, who traced over them in pen before submitting the reports to the agency, according to an inspector general’s report to be released this week.

The report, which describes inappropriate behavior by the staff at the Minerals Management Service from 2005 to 2007, also found that inspectors had accepted meals, tickets to sporting events and gifts from at least one oil company while they were overseeing the industry.

Although there is no evidence that those events played a role in the Deepwater Horizon oil spill, the report offers further evidence of what many critics of the Minerals Management Service have described as a culture of lax oversight and cozy ties to industry.

The report includes other examples of troubling behavior discovered by investigators.

In mid-2008, a minerals agency employee conducted four inspections on drilling platforms when he was also negotiating a job with the drilling company, a cover letter to the report said.

And an inspector from the Lake Charles office admitted to investigators that he had used crystal methamphetamine, an illegal drug. Investigators said they believe the inspector may have been under the influence of the drug during an inspection.

The report was provided to The New York Times by a person familiar with the investigation who is not authorized to speak to reporters. Previous inspector general investigations of the minerals agency have focused on inappropriate behavior by the royalty-collection staff in the agency’s Denver office.

The new report describes similar activities and improper relationships with industry representatives in the leasing and inspections staff in an agency gulf region office in Louisiana.

The report found that employees from the Lake Charles office had repeatedly accepted gifts, including hunting and fishing trips from the Island Operating Company, an oil and gas company working on oil platforms regulated by the Interior Department.

Taking such gifts “appears to have been a generally accepted practice,” said the report, written by department’s acting inspector general, Mary L. Kendall.

The investigation also found that at least two employees from the Lake Charles office of the minerals agency had admitted to using illegal drugs during their employment.

The report said the findings of the investigation had been presented to the United States Attorney’s Office for the Western District of Louisiana, which declined prosecution.

At least seven inspectors cited in the report as having been involved in inappropriate or illegal activities were still employed by the agency when the report was completed in March. Interior officials said the employees cited in the report would be placed on administrative leave pending the outcome of a personnel review.

Interior Secretary Ken Salazar said that he found the report “deeply disturbing,” and that the actions it found were 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 M.M.S.”

Mr. Salazar added that he had asked the inspector general to expand her inquiry to determine if any of the inappropriate behavior had persisted after he put the new ethics rules in place in 2009.

The inquiry began after investigators at the Office of the Inspector General received an anonymous letter, dated Oct. 28, 2008, addressed to the United States Attorney’s Office in New Orleans, alleging that a number of unnamed minerals agency employees had accepted gifts from oil and gas production company representatives, the report said.

On April 12, Elizabeth Birnbaum, director of the minerals agency, received the report for review. The findings were to be released this summer.

But after the Deepwater Horizon explosion, the Office of Inspector General sought to speed up the report’s release because it was too relevant to wait, a minerals agency official said.

This month, the Obama administration reorganized the agency in an effort to address conflicts of interest in its structure.

Shown the report, Representative Nick J. Rahall II, Democrat of West Virginia and the chairman of the Natural Resources Committee, said the agency was clearly dysfunctional. “These newly revealed ethical lapses among agency personnel puts M.M.S. in the penalty box indefinitely,” Mr. Rahall said.

The report said the inspector general had developed confidential sources “who provided additional information pertaining to M.M.S. employees at the Lake Charles District Office, including acceptance of a trip to the 2005 Peach Bowl game that was paid for by an oil and gas company; illicit drug use; misuse of government computers; and inspection report falsification.”

One of the confidential sources described regulators allowing company officials to fill out inspection forms in pencil after which inspectors would “write on top of the pencil in ink and turn in the completed form.”

Industry watchdogs say that much of the inappropriate behavior found by the Office of Inspector General had stopped with the new administration. But some repercussions continue.

Some industry experts have speculated that the Deepwater spill and the report’s findings could explain the sudden resignation this month of Chris C. Oynes, who led the Gulf of Mexico region for the Minerals Management Service for about 12 years until he was promoted to a senior position in Washington in 2007.

Mr. Oynes is not mentioned in the inspector general’s report, and Interior Department officials have declined to answer questions about his resignation.

In a cover letter to Mr. Salazar, Ms. Kendall, the acting inspector general, said she wanted to emphasize that all the conduct highlighted predated Mr. Salazar’s tenure and his January 2009 revamping of the ethics code.

She added, “Of greatest concern to me is the environment in which the inspectors operate — particularly the ease with which they move between industry and government.”

Some in Congress had been trying to get rid of Mr. Oynes for a while. In 2007, Representative Carolyn B. Maloney, Democrat of New York, voiced outrage that Mr. Oynes was, at the time, being promoted to gulf regional director at the minerals agency.

“It is completely ridiculous that M.M.S. would take the person most likely responsible for the royalty rip-off and put him in charge of the whole show,” she said, describing Mr. Oynes as the person who signed 700 of the 1,100 1998-99 oil and gas leases with missing price thresholds that limit royalty relief, to the agency’s associate director of the Offshore Minerals Management Program.

New York Times Article

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