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BLM Hasn't Inspected High-Risk NatGas and Oil Wells, Says GAO

The Bureau of Land Management (BLM) is falling short in its charge to manage and oversee oil and natural gas development on federal and Indian lands, failing to inspect thousands of wells that may pose a threat to the environment, according to the Government Accountability Office (GAO).

As the use of hydraulic fracturing, horizontal drilling and other technological advances has increased, federal agencies have proposed new or revised rules governing development of federal and Indian resources, but "BLM's continued reliance on outdated rules and guidance, limited coordination with state regulatory agencies, incomplete data on the location of resources and industry activities, and delayed reviews of communitization agreements" hinder the agency's ability to effectively manage and oversee development of those resources," GAO said in a report released Monday.

A GAO review of BLM's Automated Fluid Minerals Support System found that more than 2,100 of the 3,702 high-priority wells drilled from fiscal 2009 through fiscal 2012 were not inspected.

"BLM officials told us that the agency has limited staff to complete drilling inspections, which is consistent with our prior report stating that Interior's human capital challenges have made it more difficult to carry out some oversight activities and that the agency conducted fewer inspections because of inspector vacancies," GAO said (see Shale DailyApril 2).

In 2011, President Obama signed an executive order calling for a government-wide review of regulations that were claimed to discourage job creation and make the U.S. economy less competitive (see Daily GPIJan. 19, 2011), but BLM has yet to establish a process to ensure that all rules and guidance "are reviewed and periodically updated consistent with technological advances," said the GAO report.

"Without such a process, BLM cannot provide reasonable assurance that oil and gas rules are keeping pace with and are consistent with technological advances." BLM may be missing opportunities to improve the efficiency and effectiveness of its inspection program, GAO said.

"In particular, BLM has not developed formal agreements, in the form of memorandums of understanding, as called for by its internal guidance, to coordinate inspections with state oil and gas regulatory agencies. As a result, it has conducted duplicative inspections of some wells and left other wells uninspected, as well as missing opportunities to deploy its inspection resources more effectively.

"Moreover, BLM does not have comprehensive data on the location of resources and new and existing wells. Even in instances where key data are available, BLM's use of the data is inconsistent because, in part, the agency has not provided sufficient direction to staff responsible for using the data. Without such data, the agency cannot accurately and efficiently identify whether federal and Indian resources are properly protected or that federal and Indian resources are at risk of being extracted without agency approval."

And GAO concluded that because BLM "is not able to review communitization agreements within required timeframes, the federal government, tribes and individual Indian oil and gas resource owners are not paid for the development of their resources in a timely manner."

GAO recommended that the secretary of the Interior Department instruct the director of the BLM to:

  • Take steps to establish a documented process that will provide reasonable assurance that oil and gas rules and guidance is reviewed and periodically updated;
  • Take steps to establish formal agreements with all relevant state regulatory agencies regarding oil and gas inspection activities; better leverage state inspection resources to avoid duplicative oversight activities, to the extent possible;
  • Ensure that all BLM field offices with responsibility for protecting federal and Indian resources have the data and direction needed to efficiently identify the location of federal and Indian resources and new and existing oil and gas wells and consistently use the data to identify situations in which federal and Indian resources are at risk of being extracted without approval from BLM; and
  • Identify and take necessary steps to ensure communitization agreements are reviewed within required timeframes.

The report was created in response to a request from Congress that GAO review oversight of federal and Indian oil and gas resources. The agency reviewed federal and selected state agency's rules and guidance, data from federal agencies and other documentation. GAO selected a sample of 14 states (Arkansas, California, Colorado, Louisiana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West Virginia, and Wyoming) based, in part, on their involvement with oil and gas development.

A recent report from the Congressional Research Service found that U.S. natural gas production from federal lands has declined substantially as producers have pursued shale gas plays, which typically are on non-federal lands (see Shale DailyApril 17). Meanwhile, the federal lands share of the nation's crude oil production has also fallen as producers are drawn to more favorable geology and leasing practices on non-federal lands.

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