Energy regulation gets personal

By Shelley DuBois, reporter


FORTUNE -- On Monday, the Obama administration issued a policy mandating that employees of the Bureau of Ocean Energy Management -- one of the three agencies spawned from the MMS -- disclose personal relationships with employees of companies that they regulate. When BOEM workers identify a conflict of interest, they are supposed to opt out of regulating in that situation. Industry workers and regulators in the Gulf often have the same social circles and live in the same communities. It's going to be tough for the government to watch them closely.

On the other hand, if the government turns towards actively monitoring those employees, social networking sites like Facebook and Twitter could open up a wealth of information about the relationships government employees have. But there's no indication the government is going from voluntary disclosure to active snooping of its workers' private lives.

The MMS had been on the Department of the Interior's ethical radar since 2008, when the inner workings of the organization could have made for a reality show. Then, it came out that MMS workers in certain branches were trading sex and drugs for contracts with oil industry employees.

Oil industry regulation falls under the Department of the Interior, so when Kenneth Salazar was tapped to be its secretary in 2009, the MMS fell under his jurisdiction. This year, in light of the BP (BP) disaster, the agency looks incapable of appropriately regulating drilling contracts. On May 30, Salazar issued a drilling moratorium (that was banned by a judge in June but reissued by the government in July) to try to tighten regulation for gulf drilling. The friendship disclosure rule is part of that effort.

Can rules about regulating friends be effective?

Similar rules were hard to enforce when the Securities and Exchange Commission tried to clarify standards for executives accepting personal benefits. The agency issued strict new guidelines for personal disclosure. But that was in 2006 -- about a year before an onslaught of insider trading cases. 2009 was quieter in terms of insider trading, due to an SEC crackdown. But information for these cases came from expensive federal investigations and wiretaps, not execs confessing about having a barbecue or golf trip with a regulator.

Rules for gulf regulators won't be any easier, and the lines will get fuzzier. For example, the Inspector General found this year that people working for companies regulated by the MMS in Louisiana had bought meals and tickets to sporting events for MMS employees. Are Saints tickets worth the price of a federal investigation? Trading sex and cocaine for a contract, on the other hand, is obviously a problem. But chances are that the employees doing the latter won't be keen to put it on a government personal disclosure report. To top of page

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