* Separating Interior agency to end conflict of interest
* White House to seek $29 million for more inspections
* 30-day limit to issue drill permits would go to 90 days
(adds comments from Interior Secretary, lawmaker)
By Tom Doggett
WASHINGTON, May 11 (Reuters) - In response to the BP (BP.L) oil spill, U.S. Interior Secretary Ken Salazar said on Tuesday that the federal agency that oversees offshore drilling will be split to separate the collection of oil royalties from safety inspection duties.
The Minerals Management Service currently carries out both roles, drawing criticism from some U.S. lawmakers and environmental groups that it is a conflict of interest for one agency to be responsible for regulating the safety of offshore oil production while also being charged with keeping the oil flowing so the government can collect royalties.
"The job of ensuring energy companies are following the law and protecting the safety of their workers and the environment is a big one, and should be independent from other missions of the agency," Salazar said.
"We will responsibly and thoughtfully move to establish independence and separation for this critical mission so that the American people know they have a strong and independent organization holding energy companies accountable and in compliance with the law of the land," Salazar said.
The conflict with MMS' dual roles was highlighted with the explosion of the Deepwater Horizon drilling rig last month that killed 11 workers and set off what is likely to become the biggest oil spill in U.S. history.
Senator Jeff Bingaman, the chairman of the Senate Energy and Natural Resources Committee, said on Tuesday at a hearing on the accident that regulators were partly at fault.
"Given this disaster in the Gulf, one has to ask whether leasing and safety policing are like oil and water and simply do not mix," said Representatives Nick Rahall, chairman of the House Natural Resources Committee, who sponsored legislation to reform the MMS.
Salazar said he does not need congressional approval to split up the responsibilities of the MMS and he can implement them administratively.
There is no timeline for when this will happen, but a department spokesman said it would likely take place after the government's investigation of the rig accident is over.
As part of the MMS overhaul, the White House will ask Congress for an additional $29 million to pay for more inspections of offshore platforms and for a thorough review of procedures. The agency's current inspection budget is $23 million.
Salazar said the administration will also ask Congress to extend the time limit the MMS has to decide on oil and gas exploration plans submitted by energy companies to 90 days from 30 days. This would allow more time for the agency to conduct environmental analysis on an exploration plan.
When Salazar arrived at Interior, the department already had a questionable history of whether it was able to properly regulate the oil industry.
The department's inspector general found in 2008 there was "a culture of substance abuse and promiscuity" among a dozen department employees who accepted gifts, had sex and used illegal drugs with workers at oil and gas companies drilling on federal lands.
Reporting by Tom Doggett; Editing by Rebekah Kebede