A method and apparatus for surveying a borehole using a rotating sensor package. A sensor tool preferably including a magnetometer sensor array is disposed in the bottom hole assembly of a drillstring. Conditioning circuitry in the sensor tool processes the sensor readings from the sensor array taken while the drillstring is rotating. In one embodiment, the conditioning circuitry includes processing circuitry adapted to adjust the sensor readings to account for an analytically predicted level of axial current induced in the drillstring as a result of its rotation in the Earth's magnetic field. In another embodiment, a current generator is provided to generate a counter-current intended to cancel the analytically predicted level of axial current induced in the drillstring as a result of rotation in the Earth's magnetic field. In another embodiment, insulating members are disposed above and/or below the sensor tool to prevent conduction of rotation-induced current therein. In still another embodiment, the sensor tool is disposed in a drill collar that is composed of a non-conducting material, such that no rotation-induced current is conducted through the sensor tool.