Elizabeth Matthews was communications director for Williams until he retired from politics on Dec. 3.
Opposition critics said her appointment to the Canada-Newfoundland and Labrador Offshore Petroleum Board was a cynical undermining of calls to separate the board’s safety focus from politics.
Matthews withdrew her candidacy for vice-chairperson of the board Monday.
There are now two vacancies on the seven-member board.
In a statement, Matthews defended her credentials and said she has been "sincerely heartsick" that her appointment was twisted to infer that offshore safety might suffer.
She said her work with the premier on major policy and energy files qualified her for the job.
"I have spent my entire professional career working alongside thousands of competent and dedicated people, developing progressive social and economic policy for this province, including in the area of offshore oil and gas.
"The depth to which the Opposition has taken this debate is a political agenda taken too far," said Matthews. "For this reason I am withdrawing my name from the nomination process.
"The Opposition will attempt to claim victory; but on the contrary, they have shamefully created this debate for political purposes."
Natural Resources Minister Shawn Skinner told reporters that Matthews’ name crossed his desk just after her former boss left politics.
Matthews was appointed as a member of the board as of Dec. 21 — a fact that wasn’t confirmed by the province even after news leaked out earlier this month that she was being considered for a senior vice-chairperson’s job. The six-year appointment pays between $165,000 and $195,000 a year.
Skinner said he never announced her initial appointment as he awaited required approval from Ottawa to promote Matthews to the more senior position.
He denied he kept the news quiet to avoid potential flak.
"There was no particular reason why I didn’t announce that she’d been appointed to the board."
Skinner said there was no political involvement in Matthews’ decision to withdraw her name as the Progressive Conservatives gear up for a provincial election slated for October.
He said it was a disappointing but not surprising move.
"I certainly think there was a lot of reaction. Ms. Matthews has her own reasons for doing what she has done. From our perspective, we put her forward because we felt she was a good candidate for the board.
"We stand by that."
Skinner said he first learned of her decision on Monday morning.
News of the Matthews appointment first broke as the province braced for the two-year anniversary of a helicopter crash off Newfoundland that killed 17 people on March 12, 2009.
It also followed the report of a related inquiry on offshore helicopter safety that recommended regulatory oversight should be a "non-political thing."
NDP Leader Lorraine Michael said Skinner’s comments underscore that the appointment was a political payoff that was kept quiet.
Liberal Leader Yvonne Jones thanked Matthews for stepping aside and called on Premier Kathy Dunderdale to hold a public competition for the post.