Rival leasing agents and elected officials have complained for years that Capouillez's state job as director of the Bureau of Wildlife Habitat Management gives him an unfair advantage.
Jarad W. Handelman, Corbett's first executive deputy general counsel, on Tuesday wrote to the commission's chief counsel, Bradley C. Bechtel, and said Capouillez's dual role "projects a profoundly troubling appearance of impermissible commingling of public responsibility and private pecuniary interest."
The letter to the game commission, which was obtained by The Inquirer, reflects a growing rift between the governor's office and the independent wildlife agency, whose budget has been growing at a healthy pace thanks to inflows of royalties from Marcellus Shale leases on state game lands.
The game commission has long allowed Capouillez's outside activity, which it says does not constitute a conflict of interest. The agency has deflected calls to end the practice.
The State Ethics Commission is investigating Capouillez's business dealings, according to the Handelman letter and two sources who have been interviewed by ethics investigators. State Rep. Daryl D. Metcalfe (R., Butler), the chairman of the House Committee on State Government, sought the investigation last September after The Inquirer published its report.
Robert P. Caruso, executive director of the ethics commission, said Thursday that the agency could neither confirm nor deny that an investigation is underway.
The governor's office has limited power over the day-to-day operations of the independent agency, whose eight board members are appointed to staggered eight-year terms. Five of the board members were appointed by Gov. Rendell.
Capouillez, 48, who lives in Mifflin County, said last year that he disclosed his outside business, Geological Assessment & Leasing L.L.C., in state ethics filings and is careful not to do any private work on state time.
Capouillez does not charge clients an upfront fee, but is compensated only when he successfully negotiates a lease on their behalf. He gets a share of the signing bonus, and also gets a share of any future royalties when oil or gas is produced, potentially for decades.
His critics say he has earned millions from the tens of thousands of acres he has leased, but there is no way to tell because royalty payments are private.
News that the wildlife agency is considering promoting Capouillez to head its operations prompted Handelman to send the warning letter.
While the outcome of the ethics commission inquiry is uncertain, Handelman wrote, "we can state with certainty that it would not be in the public interest for the commission to select as its executive director an individual whose conduct as a commission employee raises such grave ethical concerns."
While the governor can't manage the wildlife agency's operations, he does have the authority to approve the appointment of the game commission's leader. In the letter, Handelman said he was "confident" the administration would not endorse Capouillez.
Capouillez did not return a phone call and an e-mail seeking comment.
Robert W. Schlemmer, president of the Board of Game Commissioners, who last year told The Inquirer that Capouillez's work record was "awesome," declined to identify Capouillez as a finalist in an interview Wednesday with LancasterOnline.
The flap over Capouillez is the latest clash between the governor's office and the agency, whose budget has grown dramatically in recent years from new money earned from Marcellus Shale drilling on state game lands. In 2012, the agency reported $92 million in revenue, including $20 million from natural gas. It also gets funding from hunting license fees and a share of the federal tax on ammunition sales.
The Pittsburgh Tribune-Review reported last week that the agency agreed to pay its former executive director $220,000 to take early retirement. The governor's office suggested that the payment to Carl Roe was tantamount to a severance, which is not permitted under state law.
The game commission characterized the payment as a settlement to resolve potential legal claims.
A Dec. 26 letter from Bechtel, the game commission's top lawyer, to a state Budget Office lawyer said the commission's board began talking about terminating Roe's employment in 2012 because of his job performance. Roe threatened a suit for wrongful termination, Bechtel wrote.
The state attorney general's office said Thursday that it was seeking more details as it reviews the agreement. The payment has not been made, pending a review.
Roe retired Jan. 17 from the $122,000-a-year position he had held since 2005. The agency appointed Roe's deputy, R. Matthew Hough, to assume the job, though Hough is near retirement himself and the commission is continuing its search for a long-term leader.
"The governor has been watching the actions of the commission's leadership and is extremely troubled by the decisions that have been made," said Jay Pagni, Corbett's spokesman. "It's clear that these actions erode the public trust in a public-service entity."