OPINION NO. 80-13
The Governor's appointments office has requested an opinion as to whether an individual may be nominated to serve as a public member of the Board of Well Drillers if he is the President of a private consulting firm that has contractual dealings with the Department of Natural Resources (DNR) and also with private well drillers.
The Nominee is a geologist whose field of expertise is ground-water resources. He is the Department of Natural Resources recommendation to the Governor for nomination to the "public" position of the State Board of Well Drillers. His firm is a nationally-established firm based in Annapolis, that provides ground-water geology and hydrology consulting services to industrial and governmental entities. The firm currently has one contract with the State of Maryland through the Maryland Environmental Services (A "public corporate utility enterprise" in the Department of Natural Resources, "MES").
The Nominee indicates that his firm does not engage in well drilling, but may be called upon to contract with a well drilling firm to handle the drilling aspects of the firm's study efforts. Though much of the firm's work is for private industrial clients, the Nominee has indicated that he would not wish to constrain his firm's ability to accept any client, including Maryland governmental entities such as DNR. He indicates that he would disqualify himself from any Board activities involving a well drilling entity with which he is connected.
The Board of Well Drillers (the Board) is a statutory board established in §§8-6038-613 of the Natural Resources Article. It is in the Department of Natural Resources and its members are appointed by the Secretary of DNR with the approval of the Governor. While several of its members must be well drillers, there are three positions reserved as general public seats or for nominees from the Water Resources Administration and the Department of Health and Mental Hygiene. The general member (which would be the Nominee) is designated as the Board's Chairperson. The Board has general responsibility for regulating the activities of well drillers in the State of Maryland. It:
1) establishes licensing qualifications for well drillers;
2) designs and conducts licensing examinations;
3) processes applications, collects fees and issues licenses to well drillers (who must be licensed);
4) reviews regulations developed by the Water Resources Administration and the Department of Health and Mental Hygiene governing well drilling; and
5) hears complaints against well drillers.
The Board has the authority to revoke or suspend a license based on findings of gross negligence or incompetence, fraud in obtaining a license, or violation of the regulations. This revocation authority is the only basis for denying a license, as the statute provides that once acquired (by examination) a license is automatically renewable upon payment of a fee. In view of this apparently a very small percentage of well drillers actually come before the Board.
This request raises issues under §3-103(a) of the Maryland Public Ethics Law (Md. Code Ann., Art. 40A, §3-103(a); the Law) arising out of two aspects of this situations: 1) the Nominee's business dealings with well drillers, and 2) his firm's present and potential contractual dealings with State entities. Section 3-103(a) of the Law prohibits an official from being employed by or having an interest in an entity under the authority of his agency. Section 1-201(m) defines "interest" to include any legal or equitable interest owned or held by the official.
With regard to the first issue, §3-103(a) would prohibit him, as a public official, from being employed by or having an interest in an entity that is subject to the authority of his agency, the Board. The well drilling firms with which he deals would appear to be subject to the Board's authority, even though as a general matter they may be unlikely to appear in licensing or complaint actions before the Board. All well drillers are subject to regulations adopted with the Board's participation, and all are potentially subject to the Board's enforcement authority, even if they have not in the past been the subject of complaints heard by the Board.
The issue, then, is whether the Nominee has an interest in these entities. He or his firm would appear to have a general practical interest that entities whose services he regularly uses should have continued economic viability and should continue with their licenses and operating approvals intact. His actual direct economic interest, however, is in his firm, which is incorporated, and it is our view that these interests of the corporation need not be attributed to him. Even if the corporation's interest in the well drilling firms is attributed to him, we do not believe that in this situation his interest as an employer or user of services constitutes a "legal or equitable economic interest...owned or held" by him as contemplated by §1-201(a) and 3-103(a) of the Law.
The second issue raised under §3-103(a) is raised by the Nominee's firm's present and potential contractual dealings with the State. Section 3-103(a) prohibits an official from being employed by or having an interest in an entity having contractual dealings with his agency, and the Nominee clearly has an interest in his firm. The question is whether the firm's contractual dealings are with his agency: is his agency the Board of Well Drillers or the Department of Natural Resources? This issue was addressed by the Board of Ethics under the Code of Ethics; it adopted the general position that in situations involving transactions with an employee's agency that prohibition applied to State agencies as "indivisible entities." (Title 19 COMAR, Opinions No. 7, 35, 36 and 108). In one exception to this principle, the Board held that Boards within the Department of Licensing and Regulation were separate agencies, since "there is a large degree of autonomy and independence with respect to the functions and operations of the separate units within this Department." (Title 19, COMAR, Opinion No. 57.) This opinion did not address similarly autonomous Boards organizationally located in other agencies, though we believe the rationale set forth there could apply to such situations.
We do not believe these two approaches of the Board of Ethics need be viewed as inconsistent. Most of the situations where primary Departments were viewed as "indivisible entities" involved regular employees of subunits of integrally interrelated Departments, where there was some actual or potential connection between their State and private activities. Independent boards and commissions such as those in Licensing and Regulation are less likely to have these substantive connections but are related to each other only for organizational purposes. This same rationale could apply to boards, such as the Board of Well Drillers, that are in other agencies but which exercise similar autonomous authority. These boards also have a part-time membership which could be viewed as less likely to be involved in the other operations and activities of the parent agency.
We believe that the approach of Opinion No. 57 appropriately followed in the specific facts of this case and the apparently autonomous regulatory authority of the Board. The Nominee's firm's current contract with MES, a separate entity in DNR, would thus not result in a relationship prohibited under §3-103(a). We therefore believe that as the situation currently stands, §3-103(a) would not bar appointment of the Nominee to the Board of Well Drillers. Nor, as a general matter, would future contracts between his firm and DNR (or other components thereof) as long as certain cautions are kept in mind. First a contract directly with the Board would be a contract with his agency clearly giving rise to a prohibited relationship under §3-103(a); and second, §3-105 prohibits employment with an entity having a contract (over $1,000) with any State agency the subject matter of which is within the official's duties (such as a DNR contract, the results of which may accrue to the Board's benefit).
Also, the Nominee should keep in mind that §3-101 of the Law establishes certain nonparticipation provisions. Particularly, §3-101(a)(4) prohibits an official from participating in any non-ministerial way in any matter which involves as a party "any business entity which is a party to an existing contract with the official or employee...if the contract could reasonably be expected to result in a conflict between the private interests of the official or employee and his official State duties." The Nominee would thus need to disqualify himself from participation in any matter before the Board involving a welldriller with whom he has a contractual relationship. He must also, of course, as he has indicated, refrain from participation in any matter in which he has a personal interest.
Mr. Calvert was a member when this case was considered and decided, but resigned prior to the issuance of the formal opinion.
Herbert J. Belgrad, Chairman
William B. Calvert
Jervis S. Finney
Reverend John Wesley Holland
Barbara M. Steckel
Date: June 27, 1980