By Mark Olaide, PALM SPRINGS DESERT SUN
July 15, 2020
The California Department of Conservation, which has for years weathered accusations of a cozy relationship with the oil industry, has quietly introduced a new ethics policy that has drawn praise from advocates of good governance.
The new conflict-of-interest manual, which came into force in late March and applies across the department’s five agencies, forbids employees from maintaining financial holdings, such as stocks, in businesses they regulate without written approval from the department’s director. The manual was recently obtained by Consumer Watchdog, a nonprofit group that advocates for California taxpayers, which shared it with The Desert Sun.
“We really applaud the Newsom administration for biting the bullet and doing this,” said Liza Tucker, a consumer advocate at the nonprofit, who added that the policy was not only new but also “progressive.”
“The new policy provides important clarification that conflicts of interest are not acceptable and will not be tolerated,” department spokesperson Teresa Schilling said in an email. “DOC sought to clarify this policy as a result of concerns raised in summer 2019. The new policy is strong and we are proud that it is in place.”
The new standards came less than a year after articles and reports in July 2019 by The Desert Sun, Consumer Watchdog and environmental advocacy group FracTracker Alliance exposed a rise in permits granted by the state for hydraulic fracturing, or “fracking.” The reports also found that leadership in the Division of Oil, Gas and Geothermal Resources, or DOGGR, held investments in major oil companies, including Chevron, which has a large footprint in the state. (That agency’s name has since been changed to CalGEM.)
In the wake of those reports, Gov. Gavin Newsom quickly ordered the firing of Ken Harris, who at the time was the head oil and gas regulator. The state’s Fair Political Practices Commission also launched investigations into two members of the agency.
Although Tucker applauded some of the Newsom administration’s recent steps, she said she was “not entirely clear why there should be exceptions” to the new rules.
And the Department of Conservation left itself one clear loophole, as employees can maintain financial ties to the industry if they obtain “written approval by DOC’s director.”
While Schilling did not explain exactly why that loophole existed or who has used it, she said that a documented review must be conducted on every request for an exemption. To date, 17 requests have been approved and nine more are pending in the 703-person department.
Rewriting the book on ethics
The Department of Conservation oversees a range of matters including oil and gas development, mine reclamation, earthquake research and land management policy.
The California Geologic Energy Management Division (CalGEM) in particular has been the target of accusations of impropriety related to its leadership’s ethics. “This is a very long-standing, a very entrenched culture at the division of oil and gas, that it’s been very sympathetic to the oil industry,” Tucker said.
The new ethics guide, however, specifically bars staff from maintaining financial holdings in companies their division regulates, whether or not the company in which they’re invested does business in California.
It also lays out examples of conflicts to avoid in each agency. In the oil and gas division, that list includes: “financial interests in businesses whose activities include exploration, extraction, processing, refining, retailing, or recycling hydrocarbon or geothermal resources.”
Prior to adopting the new policy, Schilling said ethics guidelines were last updated in the early 1990s.
Schilling said the department immediately began enforcing the new guidelines when they published, and employees were required to file a new financial disclosure form to prove they had divested. Consumer Watchdog also obtained those forms, which showed that agency personnel who last year were found to have a financial stake in the industry had indeed divested.
Cleaning up their image
The oil and gas regulatory agency’s industry ties were especially apparent, environmentalists claimed, during former Gov. Jerry Brown’s administration.
Kyle Ferrar is the western program coordinator at FracTracker, and he often butts heads with California oil regulators over issues of transparency and public health. He attributes this in part to a misalignment in the agency’s mission. “It is just the nature of a regulator that is meant to prioritize oil and gas development and also regulate it at the same time,” he said. “You have a conflict of interest there.”
A group of Democratic lawmakers has taken notice in recent years and responded by launching legislation to reshape CalGEM, increase the amount of money oil companies must set aside for cleanup and create a nearly half-mile buffer zone between oil infrastructure and communities, a contentious fight that’s currently underway.
The division was compelled to change its name from DOGGR to CalGEM after Newsom signed AB 1057 in October 2019 in an attempt to shift the agency’s goals.
“There has been concern that DOGGR has had too much focus regulating production practices based on what will increase oil and natural gas production,” according to the Legislature’s analysis of the bill in 2019. “This focus has been at the cost of protection of groundwater, occupational safety, and public health.”
But Department of Conservation staff say their new ethics policy will maintain the right course for the department.
“The DOC implemented this broad, new policy in order to set high government ethical standards and to enhance public confidence in DOC’s decision-making,” Schilling said. “Our new policy and review processes will ensure that DOC employees avoid conflicts of interest or even perceived conflicts of interest.”
Tucker called on other state agencies to adopt new ethics policies that are as strict as that department’s.
“There are major changes underway but all of us advocates for the public need to keep pushing and pushing,” she said. “It’s not just the monetary efforts. There’s a whole culture that needs to change.”