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05/25/2010 12:08 pm ET | Updated May 25, 2011

Interior Department IG Report: Regulators Accepted Oil-Company Gifts, Lunches, Sports Tickets

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The government regulator with oversight of offshore drilling allowed industry officials to fill in their own inspection reports and federal employees accepted gifts -- including meals and tickets to sporting events -- from oil and natural gas companies, according to a new report by the Interior Department's Inspector General.

In addition, Mineral Management Service employees viewed porn on government computers -- similar to a recent scandal involving the Securities and Exchange Commission -- according to the report.

Interior Secretary Ken Salazar called the latest report "deeply disturbing," stating that it demonstrates the need for reforms, including a plan to split up the agency and replace it with three new entities.

The report "is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry," Salazar said Tuesday. "I appreciate and fully support the Inspector General's strong work to root out the bad apples in MMS."

In the wake of the nation's worst oil spill currently polluting the Gulf of Mexico, with headlines trumpeting the agency's lax regulation of the oil industry, the report is sure to prompt even more calls to overhaul MMS though none of the activities described relate to the tragic accident. Already, the agency has been criticized for allowing the industry to largely regulate itself, ignoring environmental permits and for skipping monthly inspections of oil rigs, among other problems. The agency has a checkered history -- in 2008, another IG described a "fraternity-house atmosphere" in which MMS officials engaged in illicit sex with employees of energy companies, used cocaine and accepted golf and ski trips from industries they were regulating.

Acting Inspector General Mary Kendall wrote to Interior Secretary Ken Salazar that her "greatest concern... is the environment in which these inspectors operate -- particularly the ease with which they move between industry and government. 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."

The report was prompted by an anonymous letter dated October 28, 2008 which alleged that several MMS employees accepted gifts, including skeet-shooting contests, crawfish boils and fishing trips, from the Island Operating Company, an oil and gas production company that works on oil platforms. Among the employees was an MMS supervisor in the New Orleans office, who was later fired.

One inspector was flown on an oil company plane to the Peach Bowl college football game to watch LSU play the University of Miami. Later, the official emailed his colleagues that "The 40 to 3 ass whipping LSU put on Miami was a lot more impressive in person. My daughter and I had a blast."

In addition, MMS employees admitted using crystal meth -- one IG source "claimed to have heard that this inspector might have used these drugs offshore on the platforms." And the IG found that staffers were sending emails to each other containing "inappropriate humor and pornography on their government computers."

Among the most serious cases, the IG found that one government inspector conducted four inspections of platforms run by Island Operating Company (IOC) after engaging in employment negotiations with the oil company -- he was later hired by IOC.

The New York Times, which first obtained the report, noted that MMS officials "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...'

To illustrate the cozy relationship between industry and regulators, MMS Lake Charles District Manager Larry Williamson told the IG that many agency inspectors had worked for oil and gas companies and continued to be friends with industry representatives:

"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."

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