Energy chairman’s gas and oil investments raise ethics questions

Despite personal investments in at least 30 oil and gas companies, the chairman of Indiana’s powerful House energy committee plans to forge ahead with a bill that would strip local governments of their ability to regulate gas and oil drilling.

The legislation, authored by Rep. Eric Koch, R-Bedford, is stoking new concerns about potential conflicts of interest in the legislature — even as Koch and other members of a House ethics panel voted Tuesday to strengthen ethics rules.

Moments after the vote, Koch told The Indianapolis Star that he doesn’t believe his oil and gas investments represent a conflict of interest — even under the stricter language of the new ethics rules.

Those rules prohibit lawmakers from authoring or voting on legislation that “could reasonably be expected to have a unique, direct, and substantial” impact on their income or businesses in which they hold an ownership interest.

Koch said any personal financial benefit to him from his proposed legislation would be “very indirect, unsubstantial and not unique.”

But the new rules, which must still gain approval of the full House, also would require lawmakers to “conduct official duties in a manner that avoids the appearance of impropriety and bolsters public trust.”

Ethics experts say Koch’s actions fall well short of that standard.

Koch’s measure, House Bill 1321, would prevent local governments from regulating or prohibiting “oil and gas exploration, development, or production activities.” The bill is now pending before the House Natural Resources Committee.

Environmental groups oppose the measure because they say it would prevent local communities from keeping oil and gas wells away from water supplies, schools and parks. The legislation also would prevent cities and counties from putting a moratorium on hydraulic fracturing, as some communities in other states have done.

But ethics experts are concerned for another reason — Koch’s investment portfolio.

He is a member of at least 28 gas and oil companies, according to his most recent financial disclosure form. Some of those companies and their affiliates have interests in Indiana, including wells, pipelines and storage facilities. They include Buckeye Partners, Enbridge Energy Partners, Enterprise Products Partners and Kinder Morgan Energy Partners.

Koch also lists several energy companies, including TransCanada Corp., in which he owns “stock or stock options having a fair market value in excess of $10,000.”

Those investments are likely unique among lawmakers and, by definition, provide Koch with a share of any profits, said Stuart Yoak, executive director of Indiana University’s Association for Practical and Professional Ethics.

The only other question is how substantial the impact on Koch’s personal income would be, but that’s difficult to determine because he won’t share any details about the size of his ownership interests.

At the very least, Yoak said, the sheer number of oil and gas companies in which Koch is a member “calls on him to explain how this is not a direct financial benefit.”

“Does this preponderance of ownership interest in oil and gas companies create an appearance of impropriety? I don’t know how you get away from that,” Yoak said. “Certainly it wouldn’t seem to pass the implication of impropriety.”

Koch’s case is the second in less than a week to raise concerns about conflicts of interest among Indiana House members.

The Star reported last week that House Education Chairman Robert Behning had formed an education lobbying firm, Berkshire Education Strategies, and was planning to do education lobbying in other states. His potential clients included student-testing company Questar Assessments, which is being paid $6.4 million this year to create and run Indiana’s end-of-course assessments.

Behning announced Friday that he was backing off his plans to represent Questar and had ended talks with the company.

The new House ethics rules are part of a broader set of sweeping ethics reforms that Republican and Democratic leaders are crafting in an effort to increase transparency about lawmakers’ financial interests and address what many perceive as a revolving door among state officials and the industries they oversee.

The ethics debate has been particularly stinging for House lawmakers, many of whom have quietly worried about conflicts of interest after the scandal that led to the resignation of House Speaker Pro Tem Eric Turner, R-Cicero, in November.

Turner privately scuttled legislation that would have cost him millions of dollars in profits through his family nursing home business. He did not disclose his ownership stake in the company, Mainstreet Property Group, or half a dozen other nursing home companies because he held them through a second company, Mainstreet Capital Partners.

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.