* Led the government's response to BP oil spill
* Would be second of Obama's energy team to depart
* Known for signature bolo tie and cowboy hat
By Ayesha Rascoe
WASHINGTON, Jan 16 (Reuters) - U.S. Interior Secretary Ken Salazar, who helped lead the government's response to the largest offshore oil spill in U.S. history, said on Wednesday he is stepping down from his post by the end of March to return to his ranch in Colorado.
The former U.S. senator came to office pledging to clean up the "mess" at the Interior Department, but it was the massive 2010 BP oil spill in the Gulf of Mexico that ultimately spurred the dramatic overhaul of the nation's offshore drilling regulator.
Salazar's departure comes as President Barack Obama's cabinet undergoes the typical make-over for his second term, and will be part of an opportunity to remake the energy team.
Obama said in a release that Salazar played an integral role in his administration's "successful efforts to expand responsible development of our nation's domestic energy resources," and that he worked to promote renewable energy and increase oil and gas output on public lands.
The Denver Post said Obama had wanted him to remain at the department, which has a key role in regulating industries such as energy and mining on public lands.
Environmental Protection Agency head Lisa Jackson has announced she also will not be staying on. Energy Secretary Steven Chu is also widely tipped to leave.
Salazar is the second Hispanic cabinet member to leave the administration, following last week's resignation by Labor Secretary Hilda Solis.
A successor to Salazar at the Interior Department, which manages hundreds of millions acres including national parks and forests, will likely come from a western state, where most federally-owned lands are located.
Potential candidates for the Interior post include outgoing Washington Governor Christine Gregoire, former Senator Jeff Bingaman, who was chairman of the Senate energy committee, and Bill Ritter, former governor of Colorado. All three have also been talked about as in the running for the EPA or the Department of Energy.
Salazar said in a statement that Interior undertook the "most aggressive oil and gas safety and reform agenda in U.S. history" and that the country is now on a promising path to energy independence.
Raised on his family's ranch in Colorado, Salazar was often spotted sporting his signature bolo tie and cowboy hat while leading Interior. During his tenure the department established seven new national parks and 10 new wildlife refuges.
BP OIL SPILL
The former Colorado attorney general was thrust into the national spotlight in April 2010 when a blowout on the Deepwater Horizon rig caused an explosion that killed 11 workers in the Gulf of Mexico.
In the aftermath, BP's Macondo well spewed more than 4 million barrels of oil into the Gulf as BP struggled to cap the well for nearly three months.
Facing an unprecedented environmental disaster, Salazar famously pledged to keep a "boot on the neck" of BP during the response efforts.
The catastrophe exposed shortcomings in the government's offshore drilling oversight, with officials conceding that regulations had not kept up with technological advances that allowed drillers to enter deeper and deeper waters.
In response to the Gulf spill, the Obama administration implemented a controversial months-long moratorium on deepwater drilling and instituted a raft of new drilling rules aimed at preventing another disaster.
The temporary ban, which was followed by longer waits for permits in the Gulf, angered oil and gas drillers, who said the administration was unnecessarily slowing production.
"We remember the tough days that followed the Deepwater Horizon incident during which Secretary Salazar presided over a moratorium on permits that created significant uncertainty for energy production and energy security," said Jim Noe, head of the Shallow Water Energy Security Coalition, an industry group that lobbied against Interior's lengthy permitting process after the spill.
Noe said the coalition hopes that Salazar's replacement will take a "more balanced" approach to energy development.
After the spill, Salazar also oversaw the transformation of the department's offshore drilling regulatory agency, the Minerals Management Service, which had been accused of being too cozy with industry.
Long before the Gulf spill, the service was plagued by scandal. A 2008 Inspectors General report said employees responsible for collecting royalties were using illegal drugs, having sex and accepting gifts from workers at the oil companies they were hired to oversee.
Under Salazar, the Minerals Management Service was broken into three separate entities, separately focusing on leasing, enforcement and revenue collection.
From early on, Salazar's relationship with the oil and gas industry and with many Republicans in Congress was contentious. Critics accused Salazar of putting up roadblocks to development.
The sharp-tongued Salazar rarely shied from sparring with his opponents. In 2012 he accused Republicans in the House of Representatives of living in a world of "fairy tales and falsehoods" when it comes to energy policy.