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updated 8/31/2010 4:06:32 PM ET 2010-08-31T20:06:32

Scandalized by federal regulators who had sex with oil company executives and negotiated with them for jobs, the agency that oversees offshore drilling is imposing a first-ever ethics policy that bars inspectors from dealing with a company that employs a family member or personal friend.

Michael Bromwich, head of the Bureau of Ocean Energy Management, said the new policy should help restore credibility to his beleaguered agency, which was widely criticized under its former name — the Minerals Management Service — for being too close with oil and gas companies.

President Barack Obama and Interior Secretary Ken Salazar have pledged to end the agency's "cozy relationship" with industry and slow the revolving door between government and the energy industry.

Under the new policy, agency employees must notify a supervisor about any potential conflict of interest and step aside when inspections or other official duties involve a company that employs a family member or close personal friend.

Inspectors who join the agency from the oil industry cannot perform inspections or other work involving their former employers for two years.

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The new policy, which takes effect immediately, comes after a series of jaw-dropping reports documenting the close relationship between agency workers and energy company representatives.

In May, the Interior Department's acting inspector general found that MMS employees in the Lake Charles, La., office accepted meals, football tickets, hunting trips and other gifts from the oil and gas companies they were regulating. In at least one case, an inspector admitted using crystal methamphetamine and said he might have been under the influence of the drug the next day at work.

A separate 2008 inspector general report singled out workers in the agency's Lakewood, Colo., office for having sexual relationships with energy company executives and accepting gifts from them.

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Mary Kendall, Interior's acting inspector general, said her biggest concern was the ease with which drilling agency employees moved between industry and government. Inspectors and oil company workers have often known one another since childhood, and their relationships took precedence over their jobs, Kendall said.

The new policy is directed toward the most clear-cut conflicts of interest and acknowledges that drilling regulators often live near rig workers and supervisors they see in the field. The guidelines don't require recusal in all those situations, as long as the neighbors have limited personal knowledge of each other and only share general conversations.

In a memo to the drilling agency's 1,700 employees, Bromwich acknowledged that the new policy responds to widespread criticism. But he said it was a significant reform that "underscores the importance of independence, objectivity and the absence of real or apparent bias on the part of any of our employees in the discharge of their duties."

An investigator with the Washington-based Project on Government Oversight, Mandy Smithberger, called the ethics policy long overdue. She also said it should be expanded to other agencies within the Interior Department and high-ranking officials in the agency's Washington headquarters.

Bromwich, a lawyer and former inspector general at the Justice Department, has pledged a lifetime ban on working in the energy industry, but Smithberger said a more formal policy restricting political appointees from working in the industry is needed.

At least two former MMS directors have served as president of the National Ocean Industries Association, an offshore energy trade group. Randall Luthi, who was MMS director from 2007 to 2009, took over the industry post in March, replacing Tom Fry, who had been president of the group since 2000. Fry headed the drilling agency during the Clinton administration.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Photos: Month 4

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  1. The Blue Dolphin, left, and the HOS Centerline, the ships supplying the mud for the static kill operation on the Helix Q4000, are seen delivering mud through hoses at the site of the Deepwater Horizon Oil Spill in the Gulf of Mexico, off the coast of Louisiana, on Aug. 3, 2010. In the background is the Development Driller III, which is drilling the primary relief well. (Gerald Herbert / AP) Back to slideshow navigation
  2. Eddie Forsythe and Don Rorabough dump a box of blue crabs onto a sorting table at B.K. Seafood in Yscloskey, La., on Aug. 3, 2010. The crabs were caught by fisherman Garet Mones. Commercial and recreational fishing has resumed, with some restrictions in areas that were closed by the Deepwater Horizon oil spill. (Chuck Cook / AP) Back to slideshow navigation
  3. Sea turtle hatchlings that emerged from eggs gathered on the northern Gulf Coast of Florida are released at Playalinda Beach on the Canaveral National Seashore near Titusville, Fla., on Aug. 2, 2010. The sea turtles were born at a Kennedy Space Center incubation site, where thousands of eggs collected from Florida and Alabama beaches along the Gulf of Mexico have been sent. (Craig Rubadoux / Florida Today via AP) Back to slideshow navigation
  4. A crab, covered with oil, walks along an oil absorbent boom near roso-cane reeds at the South Pass of the Mississippi River in Plaquemines Parish, Louisiana on Aug. 1, 2010. BP is testing the well to see if it can withstand a "static kill" which would close the well permanently. (Pool / Reuters) Back to slideshow navigation
  5. A boat motors through a sunset oil sheen off East Grand Terre Island, where the Gulf of Mexico meets Barataria Bay on the La. coast, on the evening of July 31. (Gerald Herbert / AP) Back to slideshow navigation
  6. Oil approaches a line of barges and boom positioned to protect East Grand Terre Island, partially seen at top right, on July 31. (Gerald Herbert / AP) Back to slideshow navigation
  7. Oil from the Deepwater Horizon oil spill is seen near an unprotected island in the Gulf of Mexico near Timbalier Bay, off the coast of Louisiana on Wednesday, July 28. (Gerald Herbert / AP) Back to slideshow navigation
  8. Greenpeace activists stand outside a BP gas station in London, England, on July 27 after they put up a fence to cut off access. Several dozen BP stations in London were temporarily shut down to protest the Gulf spill. (Leon Neal / AFP - Getty Images) Back to slideshow navigation
  9. James Wilson sells T-shirts to those arriving in Grand Isle, La., for the music festival Island Aid 2010 on July 24. (Dave Martin / AP) Back to slideshow navigation
  10. Activists covered in food coloring made to look like oil protest BP's Gulf oil spill in Mexico City on July 22. The sign at far left reads in Spanish "Petroleum kills animals." (Alexandre Meneghini / AP) Back to slideshow navigation
  11. People in Lafayette, La., wear "Keep Drilling" tee shirts at the "Rally for Economic Survival" opposing the federal ban on deepwater drilling in the Gulf of Mexico on Wednesday, July 21. Supporters at the rally want President Obama to lift the moratorium immediately to protect Louisiana's jobs and economy. (Ann Heisenfelt / EPA) Back to slideshow navigation
  12. A flock of white ibis lift off from marsh grass on Dry Bread Island in St. Bernard Parish, La., July 21. Crews found about 130 dead birds and 15 live birds affected by oil from the Deepwater Horizon oil spill on July 19 in the eastern part of the parish behind the Chandeleur Islands. (Patrick Semansky / AP) Back to slideshow navigation
  13. Kenneth Feinberg, administrator of the BP Oil Spill Victim Compensation Fund testifies during a hearing before the House Judiciary Committee on July 21 in Washington, D.C. The hearing was to examine the claim process for victims of the Gulf Coast oil spill. (Alex Wong / Getty Images) Back to slideshow navigation
  14. An American white pelican has its wings checked during a physical examination at Brookfield Zoo’s Animal Hospital by Michael Adkesson and Michael O’Neill on July 21. The bird, along with four other pelicans, was rescued from the Gulf Coast oil spill and will be placed on permanent exhibit at the zoo. (Jim Schulz / Chicago Zoological Society via AP) Back to slideshow navigation
  15. Native people of the Gwich'in Nation form a human banner on the banks of the Porcupine River near Ft. Yukon, Alaska July 21, in regard to the BP oil spill with a message to protect the Arctic National Wildlife Refuge from oil development. The images include a Porcupine caribou antler and a threatened Yukon River Salmon. (Camila Roy / Spectral Q via Reuters) Back to slideshow navigation
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