HomeMy WebLinkAbout10-552 Shinkman
ADVICE OF COUNSEL
March 11, 2010
Susan Shinkman, Esquire, Chief Counsel
Office of Chief Counsel
Pennsylvania Department of Environmental Protection
Rachel Carson State Office Building
P.O. Box 2063
Harrisburg, PA 17105-2063
10-552
Dear Ms. Shinkman:
This responds to your letters of December 23, 2009, January 12, 2010, and
March 5, 2010, by which you requested advice from the State Ethics Commission.
Issue:
Whether the Public Official and Employee Ethics Act (“Ethics Act”), 65
Pa.C.S. § 1101 et seq., would present any prohibitions or restrictions upon an Oil and
Gas Inspector with the Pennsylvania Department of Environmental Protection with
regard to participating in inspections, recommending enforcement actions, or engaging
in other regulatory activity with respect to well sites operated by a natural gas drilling
and production company where: (1) such company sought to enter into a lease with
persons including the brother of the Oil and Gas Inspector for the rights to extract gas
from parcels including a parcel for which the brother owns the mineral rights; (2) the
aforesaid lease was not finally executed; and (3) the brother and others entered into a
lease with a different oil and gas company.
Facts:
As Chief Counsel for the Pennsylvania Department of Environmental
Protection (“DEP”), you request an advisory from the Pennsylvania State Ethics
Commission on behalf of Michael Panettieri (“Mr. Panettieri”), who is employed by DEP
as an Oil and Gas Inspector. You have submitted a copy of Mr. Panettieri’s official DEP
position description, which document is incorporated herein by reference. A copy of the
job classification specifications for the position of Oil and Gas Inspector (job code
71810) has been obtained and is also incorporated herein by reference. You have
submitted additional facts, the material portion of which may be fairly summarized as
follows.
You state that Mr. Panettieri recently conveyed his interests in the mineral rights
underlying a six-acre parcel of land to his brother (“the Brother”). Chesapeake Energy,
a natural gas drilling and production company, sought to enter into a lease with persons
including the Brother for the rights to extract gas from parcels including the parcel for
which the Brother now owns the mineral rights. However, the proposed lease with
Chesapeake Energy was not finally executed, and the Brother and others entered into a
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March 11, 2010
Page 2
lease with another company, Carrizo Oil and Gas, Inc. (“Carrizo”), on February 27,
2010.
The specific question that you have posed is whether Mr. Panettieri, as an Oil
and Gas Inspector, may participate in inspections, recommend enforcement actions, or
engage in other regulatory activity with respect to well sites operated by Chesapeake
Energy, from which no immediate family members or business with which Mr. Panettieri
or his family members might be associated will derive a pecuniary benefit.
You have not posed any questions involving Carrizo, but you have expressed a
general concern that DEP employees are likely to face issues as to whether they have a
conflict of interest where an immediate family member or associated business has a
financial interest in an oil and gas drilling operation. You note that the following
provision of the Administrative Code prohibits employees performing the functions and
duties of an Oil and Gas Inspector from having any direct financial interest in an oil and
gas drilling operation:
§ 510-28. (Adm. Code § 1928-A). Conflict of interest in
mining and oil and gas regulation
(b) No employe of the Department of Environmental
Resources performing the function or duty of an oil or gas
inspector shall act as a manager, employe or agent of any oil
or gas drilling operation or of any mine or mining operation,
nor shall he or she be interested in any pecuniary way in
such operations in this Commonwealth….
71 P.S. § 510-28(b). You note that the above provision does not address the ownership
of such interests by an employee’s family members or associated businesses.
Discussion:
It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester
based upon the facts that the requester has submitted. In issuing the advisory based
upon the facts that the requester has submitted, the Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts that have not
been submitted. It is the burden of the requester to truthfully disclose all of the material
facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a
defense to the extent the requester has truthfully disclosed all of the material facts.
As an Oil and Gas Inspector for DEP, Mr. Panettieri is a public employee as that
term is defined in the Ethics Act, and hence he is subject to the provisions of the Ethics
Act.
Sections 1103(a) and 1103(j) of the Ethics Act provide:
§ 1103. Restricted activities
(a)Conflict of interest.--
No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
(j)Voting conflict.--
Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or
by any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
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March 11, 2010
Page 3
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three-member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
65 Pa.C.S. §§ 1103(a), (j).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest."
Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment."
The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Immediate family."
A parent, spouse, child, brother
or sister.
"Business."
Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self-employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated."
Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or
has a financial interest.
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March 11, 2010
Page 4
"Financial interest."
Any financial interest in a legal
entity engaged in business for profit which comprises more
than 5% of the equity of the business or more than 5% of the
assets of the economic interest in indebtedness.
65 Pa.C.S. § 1102.
Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is
prohibited from using the authority of public office/employment or confidential
information received by holding such a public position for the private pecuniary benefit
of the public official/public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated. The term
“immediate family” is defined to include parents, spouses, children, and siblings. 65
Pa.C.S. § 1102.
In each instance of a conflict of interest, the public official/public employee would
be required to abstain fully from participation. The abstention requirement would not be
limited merely to voting, but would extend to any use of authority of office, including, but
not limited to, discussing, conferring with others, and lobbying for a particular result.
Juliante, Order 809.
Subject to certain statutory exceptions, in each instance of a voting conflict,
Section 1103(j) of the Ethics Act requires the public official/public employee to abstain
and to publicly disclose the abstention and reasons for same, both orally and by filing a
written memorandum to that effect with the person recording the minutes.
In addition, Sections 1103(b) and 1103(c) of the Ethics Act, 65 Pa.C.S. §§
1103(b), (c), pertaining to improper influence, provide in part that no person shall offer
or give to a public official/public employee anything of monetary value and no public
official/public employee shall solicit or accept anything of monetary value based upon
the understanding that the vote, official action, or judgment of the public official/public
employee would be influenced thereby.
It is noted that a conflict of interest under Section 1103(a) of the Ethics Act may
be based upon an ongoing business relationship (Kitner, Order 1542; Burchfield, Order
1492; Johnson, Order 1338; Confidential Opinion, 06-001; Kannebecker, Opinion 92-
010; Miller, Opinion 89-024), a reasonable and legitimate expectation that a business
relationship will form (Gerhard, Order 1460; Mann, Opinion 07-005; Moore, Opinion 04-
004; Confidential Opinion, 00-006; Amato, Opinion 89-002), or situations involving
“reciprocity of power.” See, e.g., Confidential Opinion, 05-004; Elisco, Opinion 00-003.
In considering the general concern that you have expressed, it would seem that
the aforesaid Administrative Code provision prohibiting a DEP oil or gas inspector from
being interested in any pecuniary way in oil or gas drilling operations in the
Commonwealth might lead to oil and gas inspectors conveying their mineral rights to
immediate family members or associated businesses, as legitimate conveyances or
straw party transactions. It would also seem that leases involving immediate family
members or associated businesses could result in potential conflicts of interest or
present opportunities for improper influence. Of course, in any given instance, a
violation of the Ethics Act would not be found unless each element of the violation would
be established.
In the instant matter, the answer to the question that you have posed is that Mr.
Panettieri, as a DEP Oil and Gas Inspector, would be permitted to participate in
inspections, recommend enforcement actions, or engage in other regulatory activity with
respect to well sites operated by Chesapeake Energy, from which there would be no
private pecuniary benefit to Mr. Panettieri, any immediate family member of Mr.
Panettieri, or any business with which Mr. Panettieri or an immediate family member of
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March 11, 2010
Page 5
Mr. Panettieri is associated. The submitted fact that Chesapeake Energy sought,
unsuccessfully, to enter into a lease with persons including the Brother would not in and
of itself result in a conflict of interest for Mr. Panettieri.
The propriety of the proposed conduct has only been addressed under the Ethics
Act; the applicability of any other statute, code, ordinance, regulation or other code of
conduct other than the Ethics Act has not been considered in that they do not involve an
interpretation of the Ethics Act.
Conclusion:
As an Oil and Gas Inspector for the Pennsylvania Department of
Environmental Protection (“DEP”), Michael Panettieri is a public employee subject to the
provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. §
1101 et seq. As a DEP Oil and Gas Inspector, Mr. Panettieri would be permitted to
participate in inspections, recommend enforcement actions, or engage in other
regulatory activity with respect to well sites operated by Chesapeake Energy--a natural
gas drilling and production company--from which there would be no private pecuniary
benefit to Mr. Panettieri, any immediate family member of Mr. Panettieri, or any
business with which Mr. Panettieri or an immediate family member of Mr. Panettieri is
associated. The submitted fact that Chesapeake Energy sought, unsuccessfully, to
enter into a lease with persons including the brother of Mr. Panettieri would not in and of
itself result in a conflict of interest for Mr. Panettieri. Lastly, the propriety of the
proposed conduct has only been addressed under the Ethics Act.
Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense
in any enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, provided the requester has disclosed
truthfully all the material facts and committed the acts complained of in reliance on the
Advice given.
This letter is a public record and will be made available as such
.
Finally, if you disagree with this Advice or if you have any
reason to challenge same, you may appeal the Advice to the full
Commission. A personal appearance before the Commission will be
scheduled and a formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually
received at the Commission within thirty (30) days of the date of this
Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be
received at the Commission by hand delivery, United States mail,
delivery service, or by FAX transmission (717-787-0806). Failure to
file such an appeal at the Commission within thirty (30) days may
result in the dismissal of the appeal.
Sincerely,
Robin M. Hittie
Chief Counsel