The Department of Interior (DOI) has improved its natural gas and oil production verification efforts over the past seven years, and the agency's royalty data have improved, but "key challenges still remain" to protect the environment and ensure fair returns to taxpayers, according to the Government Accountability Office (GAO).
The department also has failed to follow up on rules to reduce venting and flaring of natural gas that would increase revenues and limit pollution.
"Interior has not updated its regulations for onshore oil and gas measurement in over 25 years and, as a result, they do not reflect newer measurement technologies and standards adopted by industry, hampering Interior's ability to have reasonable assurance that oil and gas are being measured accurately," GAO said in a report released Wednesday.
DOI plans to issue draft regulations in fiscal year 2015 and finalize them in fiscal year 2016, but "Interior has twice before unsuccessfully attempted to update these regulations," GAO said.
"Interior officials noted that updating the regulations has been a lengthy process, in part, because the agency has been focused on updating other regulations. Until its regulations better reflect current measurement technologies and standards, Interior cannot provide reasonable assurance that companies have a consistent and sound basis from which to measure the production of oil and gas."
GAO found that a DOI team of oil and natural gas measurement specialists tasked with improving the consistency of measurement policies has not meet officially since September, 2011. "By ensuring the team meets, Interior could increase communication among its staff with measurement expertise and better ensure consistent measurement policies," GAO said.
And, GAO said, DOI issued guidance almost two years ago outlining criteria for approving agreements that allow oil or gas produced from onshore federal leases to be commingled with oil or gas produced from other federal, state or private leases before being measured, but it did not schedule or complete a review of its effectiveness after its implementation. By completing a review, "Interior would be better informed about the extent to which its staff are consistently applying the new guidance to commingling agreement requests and whether the guidance is effective and has corrected identified deficiencies or produced improvements," GAO said.
In 2010, GAO found that nearly half of the flared or vented natural gas estimated to be produced on federal lands could be economically captured, which would boost royalties and reduce greenhouse gas emissions (see Daily GPI, Dec. 3, 2010; Aug. 18, 2004). But DOI has only partially implemented a series of recommendations GAO made beginning in 2004 to limit venting and flaring of natural gas from federal leases, according to the latest GAO report.
A trio of lawmakers who requested the GAO study -- Sen. Ron Wyden (D-OR), Rep. Peter DeFazio (D-MA) and Rep. Raul Grijalva (D-AZ) -- called on DOI to implement all of the GAO recommendations. "Despite years of effort, Interior has not completed action on measures to reduce the negative economic and environmental impacts of venting and flaring," the lawmakers wrote in a letter to DOI Secretary Sally Jewell. "We would like your assurance that the Department will redouble its efforts to regulate those wasteful practices."