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[This report was revised on May 16, 2014 to include Representative 
Peter DeFazio in the list of requesters on page 41 as follows: “The 
Honorable Peter DeFazio, Ranking Member, Committee on Natural 
Resources, House of Representatives”] 

United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

May 2014: 

Oil and Gas: 

Updated Guidance, Increased Coordination, and Comprehensive Data Could 
Improve BLM's Management and Oversight: 

GAO-14-238: 

GAO Highlights: 

Highlights of GAO-14-238, a report to congressional requesters. 

Why GAO Did This Study: 

Federal and state regulatory agencies manage and oversee the 
development of federal and Indian oil and gas resources by issuing 
rules and guidance, reviewing drilling applications, and inspecting 
wells to ensure compliance with environmental, safety, and other 
regulations. In fiscal year 2013, federal and Indian energy 
production, including oil and gas, generated almost $15 billion in 
revenue. Recent advances in drilling technologies have greatly 
expanded the ability to develop oil and gas resources, particularly 
from shale and tight sandstone rock formations. 

GAO was asked to review oversight of federal and Indian oil and gas 
resources. This report (1) discusses the changes to federal and 
selected state agencies' rules over the past 5 years and (2) examines 
the effectiveness of BLM's management and oversight of federal and 
Indian resources. GAO reviewed federal and selected state agencies' 
rules and guidance, data from federal agencies, and other 
documentation. GAO selected a sample of 14 states based, in part, on 
their involvement with oil and gas development. This information 
cannot be generalized to all states. 

What GAO Found: 

Federal and state agencies in states that GAO reviewed have taken or 
initiated some actions to change rules, in part, as a response to 
certain technological advances that have led to more than a 5-fold 
increase in annual production of domestic onshore oil and gas from 
shale and tight sandstone formations from 2007 through 2012 (see 
figure). For example, the Bureau of Land Management (BLM)—the key 
agency responsible for managing and overseeing oil and gas development 
on federal and Indian lands—proposed a new rule in 2012 to regulate 
hydraulic fracturing. In addition, in 2013, Texas updated its rules 
for well integrity by establishing new casing and cementing standards. 

Figure: Increased Domestic Oil and Gas Production from Shale and Tight 
Sandstone Formations from 2007 to 2012: 

[REfer to PDF for image: 2 line graphs] 

Oil (in million barrels per day): 

2007: 0.34; 
2008: 0.61; 
2009: 0.69; 
2010: 0.87; 
2011: 1.31; 
2012: 2.25. 

Gas (in trillion cubic feet): 

2007: 1.99; 
2008: 2.87; 
2009: 3.96; 
2010: 5.82; 
2011: 8.50; 
2012: 10.30. 

Source: Energy Information Administration. 

[End of figure] 

The effectiveness of BLM's management and oversight of federal and 
Indian oil and gas resources is hindered by a number of factors, 
including BLM's reliance on outdated rules and guidance, limited 
coordination with states, and delayed reviews of revenue sharing 
agreements. For example, BLM has not followed Interior's guidance to 
routinely review rules and update them consistently along with 
technological advances. As a result, some of BLM's rules and guidance 
governing oil and gas development have not kept pace with 
technological advancements, such as its guidance on well spacing, 
which, among other things, determines how to maximize oil and gas 
production from a formation. Improper spacing guidance could lead to 
lower levels of oil and gas production and, therefore, less revenue 
for the federal government and tribes. In addition, BLM has not 
developed formal agreements to improve coordination with state 
regulatory agencies, as called for in its internal guidance. As a 
result, BLM and state agency officials told GAO that agencies conduct 
duplicative inspections of some wells, while leaving other wells 
uninspected. Further, based on GAO's review of selected revenue-
sharing agreements, BLM does not always review these agreements within 
the statutorily required time frames. These agreements identify the 
production allocation based on ownership and must be approved before 
operators can pay royalties to the resource owner. By statute, BLM is 
to review agreements within 120 days of receipt, but GAO found 
instances in which the agency had taken more than a year to review, 
resulting in delayed royalty payments to resource owners—-who may rely 
on these payments for part or all of their income. 

What GAO Recommends: 

GAO recommends that, among other things, BLM ensure that its rules 
governing oil and gas development are consistent with technological 
advances, improve coordination of inspections with states, and improve 
the timeliness of revenue sharing agreement reviews. In commenting on 
a draft of this report, BLM agreed with GAO's recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-14-238]. For more 
information, contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Federal and Selected State Agencies Have Taken Some Actions to Change 
Rules in Response to Technological Advances: 

BLM's Management and Oversight of Federal and Indian Oil and Gas 
Resources Is Hindered by Several Factors: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of the Interior: 

Appendix III: Comments from the Department of Agriculture: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Figures: 

Figure 1: Example of a Multiple Lease Unit with Wells Developing a 
Conventional Gas Reservoir: 

Figure 2: Example of a Multiple Lease Unit with Horizontal Wells 
Developing a Shale Formation: 

Figure 3: States with Proposed or Required Chemical Disclosure Rules 
That GAO Reviewed: 

Figure 4: Example of a Horizontal Wellbore Traversing Mineral Parcels 
with Different Owners: 

Abbreviations: 

AFMSS: Automated Fluid Minerals Support System: 

APD: application for permit to drill: 

BIA: Bureau of Indian Affairs: 

BLM: Bureau of Land Management: 

CAA: Clean Air Act: 

CWA: Clean Water Act: 

ELG: Effluent Limitations Guidelines and Standards: 

EPA: Environmental Protection Agency: 

FLPMA: Federal Land Policy and Management Act: 

FOGRMA: Federal Oil and Gas Royalty Management Act of 1982: 

FWS: Fish and Wildlife Service: 

GIS: geographic information system: 

IEED: Office of Indian Energy and Economic Development: 

NEPA: National Environmental Policy Act of 1969: 

NIOGEMS: National Indian Oil and Gas Evaluation and Management System: 

NPS: National Park Service: 

NTL: notice to lessees: 

SDWA: Safe Drinking Water Act: 

STRONGER: State Review of Oil and Natural Gas Environmental 
Regulations: 

USDA: Department of Agriculture: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

May 5, 2014: 

Congressional Requesters: 

In recent years, domestic onshore production of oil and gas has been 
steadily rising, providing an important source of energy and creating 
jobs for the United States. For example, from 2007 through 2012, 
annual production from shale and tight sandstone formations increased 
more than 6-fold for oil and approximately 5-fold for gas.[Footnote 1] 
Horizontal drilling and hydraulic fracturing--technologies largely 
credited with spurring the boom in oil and gas production in the 
United States--have advanced significantly over the last decade and 
become increasingly common methods to recover oil and gas from 
geological formations once thought inaccessible, including shale and 
tight sandstone.[Footnote 2] Oil and gas are produced on private, 
state-owned, federal, and Indian lands across the United States, and 
recovery of these resources from federal and Indian lands is a 
significant source of revenue for the federal government and tribes. 
For example, federal energy production generates one of the largest 
nontax sources of federal government revenue, accounting for more than 
$14 billion in fiscal year 2013, according to the Department of the 
Interior (Interior).[Footnote 3] In addition, development of Indian 
energy resources provided almost $1 billion in revenue to tribes and 
individual Indians in fiscal year 2013. 

Domestic onshore oil and gas development is governed by a framework of 
federal, state, tribal, and local laws and regulations. Several 
federal agencies--including Interior's Bureau of Land Management 
(BLM), Bureau of Indian Affairs (BIA), and the Office of Natural 
Resource Revenue (ONRR), as well as the Environmental Protection 
Agency (EPA)--and state regulatory agencies have responsibility for 
oversight and management of oil and gas development on federal or 
Indian lands.[Footnote 4] BLM has overseen the development of federal 
and Indian oil and gas resources for decades and is responsible for 
ensuring that these resources are developed in a timely, economically 
efficient, and environmentally sound manner. BLM's responsibilities 
include: (1) reviewing drilling plans and issuing permits for wells 
developing federal and Indian resources; (2) inspecting wells to 
ensure compliance with environmental, safety, and other regulations; 
(3) approving revenue-sharing agreements--known as communitization 
agreements--for federal and Indian resources; and (4) ensuring the 
maximum recovery of federal and Indian resources.[Footnote 5] 

Our past work has highlighted the importance of Interior's oversight 
of the roughly 700 million subsurface acres for which the federal 
government holds mineral rights, and we identified a range of 
weaknesses. For example, we reported, in March 2010, that Interior did 
not have reasonable assurance that it was collecting its share of 
revenue from oil and gas produced on federal lands, and that it 
continued to experience problems hiring, training, and retaining 
sufficient staff to provide oversight and management of oil and gas 
operations in part because of the department's human capital 
challenges.[Footnote 6] In February 2011, we added Interior's 
management of federal oil and gas resources to our list of government 
programs at high risk of waste, fraud, abuse, and mismanagement or in 
need of broad reform.[Footnote 7] In 2012, we reported that the extent 
and severity of environmental and public health risks associated with 
oil and gas development depend, in part, on federal and state 
regulations.[Footnote 8] 

In this context, you asked us to review the effectiveness of several 
aspects of federal oversight of oil and gas development on federal and 
Indian lands. Our objectives in this review were to (1) report on the 
actions, if any, that federal agencies and selected states have taken 
in the past 5 years to change rules or guidance in response to 
advances in oil and gas development technologies and (2) examine the 
effectiveness of BLM's management and oversight of federal and Indian 
resources. 

To conduct this work, we reviewed federal and selected state laws, 
regulations, rules, and guidance regarding the management of domestic 
onshore federal and Indian oil and gas resources. To identify examples 
of changes to state rules and requirements governing oil and gas 
development over the past 5 years, we reviewed state laws, 
regulations, and rules and interviewed officials from 14 states we 
selected--Arkansas, California, Colorado, Louisiana, New Mexico, North 
Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West 
Virginia, and Wyoming. We selected these states based on a number of 
factors, including (1) experience levels with oil and gas development, 
(2) the presence of federal lands, and (3) the presence of Indian 
lands. Because this was a nonprobability sample, our results are not 
generalizable to all states but provide examples of state actions. We 
did not compare the changes in states' rules and regulations because 
development of oil and gas, as well as the environmental and public 
health risks, can vary based on the geological characteristics of the 
formation being developed. As a result, changes to rules in one state 
may not be appropriate for other states. 

We obtained data on drilling inspections performed from fiscal year 
2009 through fiscal year 2012 from BLM's Automated Fluid Minerals 
Support System (AFMSS)--the central database that BLM uses to track 
oil and gas information on federal and Indian lands. To assess the 
reliability of the inspection data, we performed electronic testing of 
the data and interviewed agency officials about the data. We 
determined that the inspection data were sufficiently reliable to 
present results on the number of inspections performed by BLM from 
fiscal year 2009 through fiscal year 2012. However, BLM data on wells 
and whether they were identified as high-or low-priority for 
inspections were not available for a significant number of wells; 
therefore we determined that these data were not sufficiently reliable 
to comprehensively assess BLM's compliance with its internal goal to 
inspect all high-priority wells. We also reviewed communitization 
agreements from BLM's Oklahoma office to identify dates that 
agreements were submitted to and approved by BLM. We selected BLM's 
Oklahoma office based on a number of factors, including: (1) the high 
levels of oil and gas development, (2) the probability that 
development will traverse multiple mineral owners, and (3) the 
availability of data. 

To obtain additional perspectives on issues related to oil and gas 
rules and BLM's management and oversight, we interviewed a 
nonprobability sample of stakeholders representing numerous agencies 
and organizations, including officials from four agencies within 
Interior--BLM, BIA, the Fish and Wildlife Service (FWS), the National 
Park Service (NPS)--EPA, the U.S. Army Corps of Engineers (Corps), the 
Forest Service within the U.S. Department of Agriculture (USDA), 
several tribal nations, and representatives from the oil and gas 
industry. The federal offices were selected based on their regulatory 
oversight authorities or land management responsibilities. 

We conducted this performance audit from September 2012 to May 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

This section includes an overview of (1) oil and gas resource 
ownership in the United States, (2) the oil and gas development 
process, and (3) key stakeholders and regulations. 

Oil and Gas Resource Ownership in the United States: 

As the exploration and development of oil and gas has increased 
significantly in recent years, newly identified oil and gas reserves 
are creating opportunities across the United States. In some cases, 
oil and gas development occurs on lands where surface rights and the 
right to extract oil and gas resources--called mineral rights--are 
owned by different parties. In these cases, known as split estates, 
each party has its own set of property rights.[Footnote 9] In a number 
of states, mineral rights are considered the dominant estate, meaning 
those rights take precedence over the rights of surface owners. 
However, the mineral owner is not free to completely disregard the 
rights of surface owners and generally must limit surface interference 
to what is reasonably necessary to extract oil and gas. 

The severance of mineral and surface estates has occurred through 
various means, including the transfer of surface or mineral interests 
through private party contracts, federal land grants acts, 
homesteading laws, and other congressional actions. Specifically, 
federal land grant acts and homesteading laws created split estates by 
granting surface rights to homesteaders while reserving mineral rights 
for the federal government.[Footnote 10] For instance, the Stock 
Raising Homestead Act of 1916 allowed a settler to claim 640 acres of 
land designated by the Secretary of the Interior as ranch land, but 
where the federal government retained mineral rights. Tribal and 
individual Indian estates were split through several congressional 
acts, including the General Allotment Act of 1887, the Indian 
Reorganization Act of 1934, and legislation to create or dissolve 
Indian reservations.[Footnote 11] Split estates and changing ownership 
for both surface and mineral estates have created a patchwork of 
ownership patterns, and it is not uncommon to find federal, Indian, 
private, state, and county parcels of land intermingled together in 
some areas of the country--giving land ownership maps the appearance 
of a checkerboard. 

Oil and Gas Development Process: 

Developing oil and gas resources involves a variety of activities and 
the specific steps to extract the resource vary based on a number of 
factors, such as the characteristics of the rock formation in which 
the resource is located. Our review focuses on the following 
activities: (1) planning and leasing; (2) permitting; (3) drilling, 
well construction, and hydraulic fracturing; and (4) production and 
unitization. 

Planning and leasing. Operators locate suitable oil and gas targets 
using seismic methods of exploration.[Footnote 12] Once a suitable 
target is found, the operator must acquire the necessary leases for 
the right to drill. For federal lands, the process begins when 
industry, the public, or BLM nominates a parcel of land for lease 
consideration. BLM then determines if the parcel is available for 
leasing based on a land use plan.[Footnote 13] Consistent with a 
completed land use plan and associated environmental impact statement, 
BLM can offer for lease those resources identified in the plan. For 
Indian leases, BIA approves lease terms for parcels nominated by 
tribes or individual Indian mineral owners. State governments and 
private landowners also lease land to companies for the development of 
oil and gas resources. 

Permitting. Operators that have obtained a lease for federal or Indian 
minerals must submit an application for permit to drill (APD) to BLM 
and obtain BLM's approval prior to drilling. A complete APD must 
include a drilling plan, among other things, which the agency uses to 
determine the technical adequacy of the proposed drilling operation. 
BLM reviews APDs and may approve them as submitted or approve them 
subject to certain conditions to ensure environmental protection, 
safety, or conservation of resources. After BLM approves an APD, an 
operator generally has 2 years to drill on leased lands before the APD 
expires. 

Drilling, well construction, and hydraulic fracturing. Prior to 
drilling, an operator prepares the area of land where drilling will 
take place--referred to as a well pad.[Footnote 14] In some cases, the 
operator will build new access roads to transport equipment to the 
well pad or install new pipelines to transport produced oil or gas. 
The operator may place storage tanks or construct pits on the well pad 
for temporarily storing fluids. Once the well pad is constructed, 
operators drill a vertical hole referred to as the wellbore. At 
several points in the drilling process, casing and cement may be 
inserted to maintain wellbore integrity and prevent any communication 
between the formation fluids and the wellbore.[Footnote 15] After 
vertical drilling is complete, operators may extend the wellbore 
horizontally. Horizontal drilling is conducted by slowly angling the 
drill bit until it is drilling horizontally. Horizontal stretches of 
the well typically range from 2,000 to 6,000 feet long but can be as 
long as 12,000 feet. Throughout the drilling process, operators may 
release some natural gas, a byproduct of oil development, directly 
into the atmosphere--known as venting--or burn it--known as flaring--
in response to maintenance needs, equipment failures, or because 
natural gas is a byproduct of oil development, and the area does not 
have the infrastructure to transport the resource to a processing 
facility. 

Oil and natural gas are found in a variety of geologic formations, and 
the specific steps to extract the resource vary based on 
characteristics of the formation. For instance, conventional oil and 
natural gas are often found in deep, porous rock or reservoirs and 
flow under natural pressure to the wellbore and on to the surface 
after drilling. In contrast to the free-flowing resources found in 
conventional formations, the low permeability of some tight 
formations, including shale and tight sandstone, means that oil and 
gas trapped in the formation cannot move easily within the rock into 
the wellbore. In order to extract oil and gas from formations with low 
permeability, operators hydraulically fracture the formation. 
Hydraulically fracturing a well involves making small holes in the 
casing and cementing[Footnote 16] and then injecting fracturing fluid 
and proppant--usually sand or ceramic beads--into the wellbore at high 
pressure to cause the rock in the target formation to 
fracture.[Footnote 17] After the fractures are created, the proppant 
stays in the formation to hold open the fractures and allow the 
release of oil and gas into the wellbore and then up to the surface. 
Hydraulic fracturing has become an increasingly common method to 
recover oil and gas over the last decade across the country. For 
example, Interior estimates that about 90 percent of wells developing 
federal and Indian resources are stimulated using hydraulic 
fracturing. Some of the fracturing fluid that was injected into the 
well will return to the surface--commonly referred to as flowback--
along with water that occurs naturally in the oil-or gas-bearing 
formation--collectively referred to as produced water. The produced 
water is brought to the surface and collected by the operator, where 
it can be stored on-site in impoundments, re-injected into underground 
wells drilled specifically for that purpose, transported to a 
wastewater treatment plant, or reused by the operator in other ways. 

Production and unitization. Once a well is producing oil or natural 
gas, the operator may remove the equipment and temporary 
infrastructure associated with drilling and hydraulic fracturing, 
leaving only the infrastructure required to collect and process the 
oil or gas and produced water. 

Regulations and rules that govern the location and density of wells--
known as spacing rules--significantly affect oil and gas production. 
Spacing rules, established by state agencies and BLM, limit the number 
and location of wells that may be drilled into a reservoir and are 
necessary to (1) ensure the most efficient and economic recovery of 
oil and gas resources, (2) prevent the drilling of unnecessary wells, 
(3) minimize waste or unnecessary surface disturbance and the 
associated environmental effects, and (4) protect the correlative 
rights of mineral owners. 

Spacing rules combine multiple tracts and leases into a single unified 
block that range in size--called a unit. For the purposes of oil and 
gas development, the tracts and leases included within the unit 
boundaries are considered a single entity. According to literature on 
oil and gas development, combining leases into a unit allows for wells 
to be located and drilled based on the reservoir or formation being 
developed, rather than lease boundaries, for the purpose of developing 
the resource efficiently and economically. Production from a well 
located within the unit is attributed to the entire area--meaning that 
all owners share a percentage of the drilling costs and royalties 
based on their percentage of surface ownership, regardless of where 
wells are located. The ideal size and shape of the unit may vary 
considerably depending, in part, on whether the geologic formation 
being developed is a conventional reservoir or a tight formation. For 
example, in a conventional oil deposit, in which oil flows relatively 
easily through the formation, ideal spacing may allow for fewer wells 
that are spaced further apart than wells in a tight formation, which 
may require wells and fractures to saturate the formation as the oil 
does not travel as easily through the formation. Figure 1 shows a 
hypothetical lease unit of multiple wells developing a conventional 
gas reservoir. 

Figure 1: Example of a Multiple Lease Unit with Wells Developing a 
Conventional Gas Reservoir: 

[Refer to PDF for image: illustration] 

Depicted: 

Gas reserves; 
4 wells. 

Source: GAO. 

[End of figure] 

The advent of horizontal--or more broadly, directional--drilling may 
allow multiple wells to be drilled long distances from a single well 
pad so that the underlying oil and gas deposit is more uniformly 
accessed, while limiting the surface disturbance to a smaller area. 
Figure 2 shows a hypothetical unit consisting of multiple leases in a 
single unit in a shale formation. 

Figure 2: Example of a Multiple Lease Unit with Horizontal Wells 
Developing a Shale Formation: 

[Refer to PDF for image: illustration] 

Depicted: 

Shale; 
Well. 

Source: GAO. 

[End of figure] 

Technological advances have also resulted in changes to the size and 
shape of units. Because horizontal drilling and a longer lateral 
wellbore allow an operator to access more of the resource, the ideal 
size of the unit may be larger than for a conventional formation, and 
the resource can be more efficiently developed with fewer wells and 
well pads, thereby minimizing surface disruption. If the unit is 
smaller than the length that the lateral wellbore can extend, then 
more wells and well pads than are ideal to efficiently develop the 
resource may be the result. Fewer well pads reduce disruption to the 
surface and surrounding area by, among other things, reducing the 
number of access roads and pipelines. In addition, units with 
horizontal wells are generally rectangular because tight geologic 
formations may require parallel wells to optimally recover the oil and 
gas. 

If federal or Indian leases are included within the unit, the operator 
is required to obtain a communitization agreement approved by BLM for 
federal resources or BIA for Indian resources. The agreement 
identifies production allocations among mineral rights owners for the 
distribution of royalties and must be approved before operators can 
distribute royalty payments for federal and Indian leases. 

Key Stakeholders and Regulations: 

A range of stakeholders can be involved in the development of federal 
or Indian resources, including federal and state agencies and tribes 
that administer key laws and regulations governing the various phases 
of oil and gas development. 

Federal Agencies: 

BLM. Interior's BLM is responsible for most of the management and 
regulatory oversight of federal and Indian resources.[Footnote 18] In 
addition to issuing leases, processing APDs, and reviewing 
communitization agreements, officials located in BLM field offices 
perform drilling inspections for wells that develop federal and Indian 
resources to ensure operations are in compliance with regulations. 
[Footnote 19] BLM tracks data on federal and Indian oil and gas wells, 
including data on drilling inspections, in its AFMSS database. BLM 
guidance does not call for a drilling inspection of all wells, or 
specify when a well should be inspected. Instead, BLM guidance calls 
for drilling inspections on all wells rated high priority and allows 
for BLM to witness critical points in the drilling, blowout 
prevention, casing, and cementing processes. According to BLM 
officials, the criteria to identify high-priority wells is based on 
geologic factors, such as the need to protect usable water, high-
pressure zones, or zones that contain hydrogen sulfide. 

BLM is also responsible for protecting the federal government and 
Indian oil and gas owners from loss of royalties by ensuring that 
resources are developed in an economically efficient and 
environmentally sound manner.[Footnote 20] To meet this 
responsibility, the agency must protect federal and Indian resources 
from being drained by adjacent wells and from mineral trespass--
extracting minerals, including oil and gas, without the right to do 
so.[Footnote 21] One way that the agency protects federal and Indian 
resources is by conducting drainage reviews. Drainage is the gradual 
removal of oil and gas from beneath a specific property by a producing 
well on an adjoining property. Drainage reviews evaluate wells on 
lands that are adjacent to or nearby federal and Indian leases to 
determine if drainage is occurring. BLM is also responsible for 
maintaining a system of records that identifies the location of 
federal and Indian resources.[Footnote 22] 

BIA. Interior's BIA administers oil and gas leasing for Indian 
resources, maintains current surface and subsurface ownership records, 
approves communitization agreements, and approves agreements for all 
surface related actions.[Footnote 23] BIA also directs the Office of 
the Special Trustee to distribute royalty payments to the beneficial 
owners of Indian resources. 

ONRR. Interior's ONRR manages revenues from federal and Indian 
resources. Revenue sources include royalties, rents, and bonuses 
generated by energy and mineral leases. 

Office of Indian Energy and Economic Development (IEED). Interior's 
IEED serves tribes by assisting with the exploration, development, and 
management of their energy resources in order to generate new jobs and 
economic self-sufficiency. 

Corps. Under Section 404 of the Clean Water Act (CWA), the Corps is 
authorized to issue or deny permits for the discharge of dredged or 
fill material into waters of the United States. For example, 
construction of a well pad or access road may require the discharge of 
dredged or fill material into waters of the United States. Under 
Section 10 of the Rivers and Harbors Act of 1899, the Corps has 
regulatory authority to oversee all work or structures in, over, or 
under navigable waters of the United States.[Footnote 24] In 
connection with the Corps' mission, the agency has acquired certain 
private or easement lands that require written authorization of the 
Corps before oil and gas exploration and development may occur. 

EPA. EPA administers and enforces key federal laws, such as the Safe 
Drinking Water Act (SDWA), the Clean Air Act (CAA), the CWA, and 
others, to protect human health and the environment. The SDWA is the 
main federal law that ensures the quality of drinking water. Two key 
aspects of the SDWA--the Underground Injection Control (UIC) program 
and the imminent and substantial endangerment provision--pertain to 
oil and gas development. Under its UIC program, EPA either implements 
or approves authority to states and eligible Indian tribes to 
implement a program regulating the injection of fluids underground, 
such as produced water from oil and gas development. EPA has lead 
implementation authority in 10 states and most Indian country; 33 
states and two tribes have assumed primary responsibility, or primacy, 
for the UIC program; and 7 states share authority with EPA for the 
program.[Footnote 25] The SDWA also gives EPA the authority to issue 
orders when the agency receives information about present or likely 
contamination of a public water system or an underground source of 
drinking water that may present an imminent and substantial 
endangerment to human health. EPA and its regional offices work with 
states and eligible Indian tribes that implement aspects of some of 
these laws, as well as additional state or tribal requirements. The 
agency's focus and obligations are to provide oversight, guidance and, 
where appropriate, rulemaking to achieve the best possible protection 
of air, water, and land. 

Other land management agencies. Other land management agencies, 
including Interior's FWS and NPS, as well as the Forest Service, 
manage federal lands. FWS and NPS manage federal lands primarily for 
conservation and restoration of wildlife and their habitat and park 
resources, though some lands may be used for oil and gas development. 
The Forest Service manages land for multiple uses, such as recreation, 
timber harvesting, and energy development, including oil and gas. 
[Footnote 26] 

State Regulatory Agencies: 

In addition to their responsibilities for permitting and inspecting 
oil and gas development, states may implement and enforce certain 
aspects of federal requirements. For example, the CAA allows EPA to 
authorize states to issue air quality permits.[Footnote 27] Under the 
CAA, EPA sets national ambient air quality standards for six criteria 
pollutants--ground level ozone, carbon monoxide, particulate matter, 
sulfur dioxide, nitrogen oxides, and lead--at levels it determines are 
necessary to protect public health and welfare. States then develop 
implementation plans establishing how they will attain air quality 
standards through regulation, permits, policies, and other means. 
Further, states may require operators to meet more stringent 
regulations than federal regulations. 

Tribes: 

Indian tribes may have their own set of laws and regulations covering 
oil and gas development and may also implement and enforce various 
federal regulations. For example, under the Indian Mineral Development 
Act, subject to BIA approval, tribes may enter into an agreement to 
develop minerals in which the tribe owns an interest.[Footnote 28] In 
addition, under the CAA, EPA's Tribal Authority Rule provides the 
opportunity for Indian tribes to seek EPA authorization to be treated 
in the same manner as a state government.[Footnote 29] Under the rule, 
eligible tribes may submit a Tribal Implementation Plan for review by 
EPA. According to EPA documents, a Tribal Implementation Plan is a set 
of regulatory programs a tribe can develop and adopt to help attain 
and/or maintain national air quality standards. 

Federal and Selected State Agencies Have Taken Some Actions to Change 
Rules in Response to Technological Advances: 

Federal and state agencies in the states we reviewed have taken or 
initiated some actions to develop new rules and guidance or update 
existing rules in response to technological advances. 

Federal Agencies: 

BLM, EPA, FWS, NPS, and the Corps have proposed or made changes to 
some rules and guidance governing oil and gas development in response 
to technological advances. 

BLM. BLM has proposed a new rule to regulate hydraulic fracturing and 
is working to revise its existing onshore orders governing oil and gas 
development. 

Hydraulic fracturing rule. In May 2012, BLM proposed a rule to 
regulate hydraulic fracturing for oil and gas development on federal 
and Indian lands to improve BLM's ability to manage well integrity and 
wastewater and require operators to publicly disclose chemicals 
present in fracturing fluid.[Footnote 30] After initially receiving 
more than 177,000 public comments, the proposed rule was revised and 
proposed again in May 2013. The new proposal includes important safety 
standards and improves integration with existing state and tribal 
standards.[Footnote 31] It also retains three components of the 
initial proposal by requiring operators to (1) disclose the chemicals 
they use in hydraulic fracturing fluid, (2) improve wellbore integrity 
to better ensure that fluids used during hydraulic fracturing are not 
contaminating groundwater, and (3) establish a water management plan 
for fluids that flow back to the surface. According to BLM officials, 
the agency has not established a date by which it expects the rule to 
be final. 

Onshore orders. BLM is currently working to revise and codify some of 
its onshore orders and a notice to lessees (NTL) governing oil and gas 
measurement, site security, and production accountability.[Footnote 
32] According to BLM officials, the agency is currently updating and 
revising the various rules regulating production accountability and 
the measurement of oil and gas, which were last updated in 1989, to 
keep pace with changing industry practices and new 
technologies.[Footnote 33] For example, BLM is proposing a new rule to 
establish standards to minimize the amount of venting and flaring at 
oil and gas production facilities on federal and Indian lands, as well 
as establishing standards for determining avoidable versus unavoidable 
losses of natural gas. 

EPA. EPA has proposed or adopted several new rules to mitigate the 
environmental and safety risks associated with hydraulic fracturing, 
including the following. 

Indian Country New Source Review rule. EPA finalized the Indian 
Country New Source Review rule, which outlines preconstruction 
permitting of air pollution control requirements for facilities, 
including future permits for oil and gas development, in Indian 
country under the authority of the CAA. More specifically, the Indian 
Country New Source Review rule is designed to create a pre-
construction permitting mechanism for all minor sources in Indian 
Country and major sources in areas of Indian Country that do not meet 
the national ambient air quality standards. It imposes essentially the 
same permitting requirements as in areas of the country where air 
pollution levels persistently exceed the national ambient air quality 
standards in states that do not have approved state implementation 
plans. The Indian Country New Source Review rule was promulgated in 
July 2011 and will take full effect in 2014 for tribes that have not 
been approved by EPA to regulate air pollution under a tribal 
implementation plan.[Footnote 34] According to EPA documentation, the 
agency plans to propose additional source categories for permits in 
the near future that will address additional oil and natural gas 
development activities. 

UIC guidance. In February 2014, EPA published guidance on how its UIC 
permit writers should address hydraulic fracturing with diesel in the 
context of the UIC program.[Footnote 35] The guidance outlines 
existing statutory and regulatory requirements for permitting wells 
where diesel fuels are used for hydraulic fracturing, technical 
recommendations for permitting those wells, and a description of 
diesel fuels for EPA UIC permitting.[Footnote 36] 

New Source Performance Standards. In August 2012, EPA published final 
New Source Performance Standards for the oil and natural gas sector. 
[Footnote 37] According to EPA officials, this rule includes the first 
federal air standards for natural gas wells that are hydraulically 
fractured, along with requirements for several other sources of 
volatile organic compound (VOC) emissions that were not regulated at 
the federal level.[Footnote 38] In addition to the VOC control 
requirements for gas well completions, the New Source Performance 
Standards require control of VOC emissions from storage vessels, 
compressors, pneumatic controllers and equipment leaks at gas 
processing plants. Although the New Source Performance Standards 
directly regulate VOC emissions, according to EPA officials, the 
control requirements also substantially reduce methane emissions. 
[Footnote 39] 

National Emission Standards for Hazardous Air Pollutants. In August 
2012, concurrent with the New Source Performance Standards, EPA 
published final National Emission Standards for Hazardous Air 
Pollutants, updating its air toxics standards for oil and natural 
gas.[Footnote 40] These standards cover hazardous air pollutants 
emitted from glycol dehydrators--used to remove water from gas--and 
storage vessels, and equipment leaks at natural gas processing plants. 

Effluent Limitations Guidelines and Standards. EPA is updating its 
proposed rules for wastewater discharges related to oil and gas 
development. The CWA directs EPA to develop a plan for the issuance of 
new regulations, or revision of existing regulations, for technology-
based treatment standards, known as Effluent Limitations Guidelines 
and Standards (ELG), for categories of industrial wastewater 
discharges. On a biennial cycle, EPA publishes a preliminary plan for 
public comment and then a final plan, identifying industrial 
categories for rulemaking. Based on its identification in the 2010 
plan, EPA is currently developing a proposed rule to amend the ELGs 
for the Oil and Gas Extraction Category that is scheduled to be 
published in 2014. According to its preliminary plan published in 
August 2013, the agency is proposing to discontinue revisions to the 
Oil and Gas ELGs to regulate pollutant discharges from the development 
of gas from coalbed methane formations.[Footnote 41] However, EPA 
officials told us the agency will continue to revise the Onshore Oil 
and Gas ELGs to provide additional controls, known as pretreatment 
standards, on wastewater pollutant discharges from the development of 
shale gas to publicly-owned wastewater treatment facilities. 

FWS. FWS is drafting rules to consistently manage activities 
associated with non-federal oil and gas development, by private 
parties, on lands and waters of the National Wildlife Refuge System. 
While the federal government manages the surface lands in the system, 
in many cases, private parties own the mineral rights and have the 
legal right to develop underlying oil and gas resources. In August 
2003, we reported that oversight and management of oil and gas 
activities varies widely among wildlife refuges and found that some 
refuges issue permits that establish operating conditions for oil and 
gas activities--giving these refuges greater control over oil and gas 
activities--while other refuges exercise little control.[Footnote 42] 
According to FWS officials, the draft rule is intended to clarify and 
expand upon existing regulations that relate to the ownership of 
mineral rights in wildlife refuges.[Footnote 43] On February 24, 2014, 
FWS published an Advance Notice of Proposed Rulemaking seeking 
comments to assist in the development of a proposed rule to avoid or 
minimize adverse effects on natural and cultural resources, wildlife-
dependent recreation, public health and safety, and refuge 
infrastructure and management, while also ensuring a consistent and 
effective regulatory environment for oil and gas operators on refuge 
land. In the notice, FWS acknowledged that it is not proposing any 
specific approach for managing non-federal oil and gas operations. 

NPS. NPS officials noted that the agency's current regulations 
governing oil and gas development on NPS lands have not been 
substantively updated for over 30 years. As a result, NPS is updating 
its regulations, referred to as "9B Regulations," which govern 
nonfederal oil and gas development in national parks.[Footnote 44] 
According to NPS officials, about 60 percent of the 534 nonfederal oil 
and gas wells located on national parks fall outside the scope of the 
9B Regulations or received grandfathered status because of regulatory 
exemptions, meaning that the wells are not required to obtain an NPS 
permit and meet NPS operating standards. Consequently, one NPS 
official said that significant park resources and values are not 
properly protected. According to NPS officials, under the revised 
regulations, no oil and gas wells will be exempt, and all wells must 
meet the same standards. NPS officials also stated that the agency 
analyzed its current regulations with regard to new proposals that use 
federal access and include horizontal drilling and hydraulic 
fracturing and found these regulations could fully address and 
mitigate activities for shale development. In addition, according to 
NPS officials, the revised regulations will clarify permit information 
requirements and operating standards associated with horizontal 
drilling and hydraulic fracturing, such as the public disclosure of 
chemicals used in hydraulic fracturing fluid. According to agency 
officials, NPS expects to issue the final regulations by 2015. 

Corps. Corps officials told us the agency is developing national 
guidance for oil and gas development on Corps-managed lands, but the 
agency does not have an issuance date. Some Corps division and 
district offices recently issued guidance for oil and gas development. 
For example, the Corps' Southwestern Division developed guidance in 
2011 for hydraulic fracturing and the removal of oil and natural gas 
from formations in close proximity to Corps dams and other key 
structures.[Footnote 45] Officials from another Corps' district told 
us the office prepared interim guidance in 2012 to address the 
numerous requests from operators for permits to store water used for 
oil and gas development in Corps managed lakes. 

State Agencies: 

All 14 of the states we reviewed have made some changes to rules 
governing oil and gas development in the past 5 years. At least 6 of 
the 14 states we reviewed that have changed or are proposing to change 
their oil and gas rules have done so as a result of regulatory 
reviews. Some of the oil and gas regulatory agencies in these states 
are required to review their oil and gas rules and regulations on a 
routine basis--once a year or up to every 5 years--and amend 
regulations as needed. For example, North Dakota officials told us 
that they review and revise state rules at least once every 2 years to 
keep pace with advances in technology. Ohio officials told us they 
review and revise state rules every 5 years. In addition, 12 of the 14 
states we reviewed participated in a review of their oil and gas rules 
and regulations by the State Review of Oil and Natural Gas 
Environmental Regulations (STRONGER).[Footnote 46] STRONGER review 
teams have reviewed 22 state programs to identify, among other things, 
whether states have standards to prevent the contamination of 
groundwater and surface water.[Footnote 47] In 2009, STRONGER formed a 
Hydraulic Fracturing Workgroup that examined hydraulic fracturing 
standards in six states--Arkansas, Colorado, Louisiana, Ohio, 
Oklahoma, and Pennsylvania. Officials we interviewed from at least 7 
of the 14 states told us that the regular state reviews or 
recommendations made by STRONGER initiated positive changes to state 
rules and requirements governing oil and gas development. 
Specifically, we found that all of the states we reviewed changed some 
rules related to (1) the disclosure of chemicals used in hydraulic 
fracturing, (2) baseline testing, (3) well integrity, (4) water and 
waste management, (5) setback distances, (6) well spacing, and (7) air 
emissions, as described below. 

Chemical Disclosure: 

The composition of fracturing fluid varies with the nature of the 
formation, but it contains about 98 percent water and proppant mixed 
with a small percentage of chemical additives, according to a report 
about shale gas development by the Ground Water Protection 
Council.[Footnote 48] All of the states included in our review adopted 
or proposed rules requiring the public disclosure of certain 
information pertaining to the chemicals used in fracturing fluid (see 
fig. 3).[Footnote 49] For example, in 2012, Utah passed a rule 
regulating the hydraulic fracturing process, which, among other 
things, requires operators to report the chemicals used in fracturing 
fluids for each well within 60 days of the completion of the process. 

Figure 3: States with Proposed or Required Chemical Disclosure Rules 
That GAO Reviewed: 

[Refer to PDF for image: illustrated U.S. map] 

Chemical disclosure proposed: 
California. 

Chemical disclosure required: 
Arkansas; 
Colorado; 
Louisiana; 
New Mexico; 
North Dakota; 
Ohio; 
Oklahoma; 
Pennsylvania; 
South Dakota; 
Texas; 
Utah; 
West Virginia. 
Wyoming. 

Sources: GAO; Map Resources (map). 

[End of figure] 

Baseline Testing: 

In September 2012, we reported that oil and gas development poses a 
risk to water quality from contamination of surface water and 
groundwater as a result of spills and releases of produced water, 
chemicals, and drill cuttings; erosion from ground disturbances; or, 
underground migration of gases and chemicals.[Footnote 50] During this 
review, we found some states recently established or amended rules 
requiring baseline water sampling prior to drilling to compare water 
conditions prior to and after drilling activities.[Footnote 51] For 
example, Colorado established new rules in 2012 for statewide 
groundwater sampling and monitoring near new oil and gas wells. 
Colorado's revisions include initial baseline testing and subsequent 
monitoring of all available water sources, up to a maximum of four 
sources, within a half mile radius of a proposed oil and gas well, 
multi-well pad site, or dedicated injection well. 

Well Integrity Requirements: 

In September 2012, we reported that well integrity is essential to 
isolate the well and protect the environment, including the 
groundwater. Some states we reviewed have revised regulations for well 
construction to require well-integrity testing, pressure monitoring 
testing, and new casing and cementing standards. For instance, in 
2013, Texas updated its rules for cement quality, cementing, well 
equipment, centralizers, and well control. Specifically, the state 
established a minimum cement thickness for casing strings and 
consolidated requirements for well control and blowout preventers. The 
revised rule also adds requirements for wells that will be 
hydraulically fractured, such as pressure testing of the casing, and 
it requires operators to notify the state when a test fails and 
remedial work is necessary. 

Water and Waste Management: 

We reported in September 2012 that oil and gas development poses a 
risk to water quality from spills or releases of toxic chemicals and 
waste, such as produced water. Some states that we reviewed are 
considering or have adopted changes to waste disposal and management 
rules that will address the recycling and transport of produced water, 
such as fluid storage options, pit liner requirements, and wastewater 
transportation. For example, in 2011, California established new rules 
to require secondary containment features around fluid containers, 
regular testing and maintenance of tanks and pipelines, and a detailed 
spill contingency plan. In another example, Oklahoma established new 
requirements in 2010 addressing the increased use of large flowback 
water recycling pits that pertain to the construction, siting, and 
maintenance of noncommercial storage pits and commercial recycling 
pits. 

Setbacks: 

Setback rules, which regulate the distance between wells and other 
entities such as schools, homes, streams, and water wells, are created 
to protect the safety and welfare of the general public from 
environmental and nuisance effects resulting from oil and gas 
development, including spills, odors, noise, dust, and lighting. Some 
states we reviewed have recently amended their setback rules. For 
example, in 2013, Colorado established a uniform, state-wide 500-foot 
setback and imposed technically advanced best management practices and 
protective measures for all oil and gas locations within 1,000 feet of 
occupied buildings. The new rules stipulate that oil and gas locations 
may not be located within 1,000 feet of "high occupancy buildings," 
such as schools, day care centers, hospitals, nursing homes, and 
correctional facilities, without a public hearing and state approval. 

Well Spacing: 

In response to the increased use of horizontal drilling, which allows 
operators to develop resources underlying larger land areas than 
vertical drilling, some states have implemented changes to 
requirements establishing spacing units--administratively combined 
contiguous leases--and the location of wells. For example, North 
Dakota changed its well spacing rules in 2012 to allow larger spacing 
units with more wells per unit. Specifically, the state modified 
existing well spacing rules to account for increases in horizontal 
drilling and long lateral wellbores. According to North Dakota 
officials, laterals are now extending from 4,000 to 9,000 feet long--
allowing units to be from 640 acres to 1,280 acres. State officials 
told us that allowing larger units has doubled oil and gas recovery 
per unit while reducing surface disturbances caused by development. In 
another example, Oklahoma passed legislation in 2011 providing the 
state with the authority to modify or vacate existing drilling and 
well spacing units to accommodate horizontal drilling and long-lateral 
wellbore development that state officials say, in some cases, may 
exceed 5,280 feet in length. 

Air Emissions: 

In September 2012, we reported that oil and gas development poses 
risks to air quality, generally as a result of engine exhaust from 
increased truck traffic, emissions from diesel-powered pumps used to 
power equipment, gas that is flared or vented for operational reasons, 
and unintentional emissions of pollutants from faulty equipment. 
[Footnote 52] Officials from some states we reviewed told us that 
their state is considering rules to reduce air emissions. For example, 
Colorado is currently considering changes to a rule that would expand 
the state's existing air quality control program and establish new 
strategies to address the most significant sources of hydrocarbon 
emissions from oil and gas operators, such as requiring that the gas 
stream at well production facilities be connected to a pipeline or 
routed to a control device. 

In addition to federal and state changes to rules governing oil and 
gas development, tribal governments are also taking actions to address 
changes in technological advances. For example, the Assiniboine and 
Sioux Tribes of the Fort Peck Reservation, Montana, developed best 
management practices for BIA and BLM to include in all leases and APDs 
as stipulations for approval. These best management practices are 
related to waste disposal, air emissions, noise and light pollution, 
surface disturbances, water use, and water protection. For example, 
the tribes require operators to conduct baseline groundwater sampling 
prior to commencement of drilling and minimize truck usage on roads by 
using, when practical, alternate transport methods for liquids--such 
as pipeline and rail. The tribes also prohibit the use of pits to 
store produced water, drilling mud, and flowback fluids. 

BLM's Management and Oversight of Federal and Indian Oil and Gas 
Resources Is Hindered by Several Factors: 

The effectiveness of BLM's management and oversight of federal and 
Indian oil and gas resources is hindered by the following five 
factors: (1) outdated BLM rules and guidance, (2) limited formal 
coordination between BLM and state regulatory agencies on inspections, 
(3) incomplete BLM inspections and limited oversight of inspection 
activities, (4) incomplete data on onshore oil and gas resources and 
drilling activities, and (5) BLM delays reviewing communitization 
agreements. 

BLM Does Not Ensure Its Rules and Guidance are Reviewed and Updated: 

BLM does not ensure that its rules and guidance governing oil and gas 
development have been reviewed and updated, as called for by 
Interior's guidance and executive order, to reflect technological 
advances, such as hydraulic fracturing and horizontal drilling. 
Without a documented process, most of BLM's rules governing oil and 
gas have not been reviewed and updated to reflect technological 
advances in over 2 decades.[Footnote 53] In 1998, Interior released 
guidance requiring each bureau to evaluate its rules every 5 years to 
ensure that, among other things, they are needed and up to date. 
Moreover, in January 2011, Executive Order 13563 called for federal 
agencies to develop and submit a plan to facilitate the periodic 
review of existing significant regulations. The executive order states 
that the federal regulatory system should be based on the best 
available science. As such, the executive order requires agencies to 
consider how best to promote the retrospective analysis of rules that 
may be outmoded, ineffective, or excessively burdensome. In response, 
Interior outlined its plans in its 2011 Plan for Retrospective 
Regulatory Review to ensure that its regulations are more functional, 
credible, and efficient by retrospectively reviewing them as part of 
its annual planning process. 

However, according to BLM officials, some of its rules and guidance 
have not been periodically reviewed by the agency.[Footnote 54] For 
example, BLM has not recently reviewed its guidance related to 
communitization agreements, which addresses well spacing. BLM's 
guidance states that the agency usually will not approve or, in the 
case of Indian lands, recommend approval of agreements combining more 
than 640 acres for oil or gas production irrespective of well location 
and federal or Indian acreage within a unit.[Footnote 55] According to 
federal officials and industry representatives we spoke with, BLM's 
guidance on communitization agreements is inconsistent with industry 
practices because the limit of 640 acres does not accommodate 
horizontal drilling. As we previously mentioned, horizontal drilling 
allows operators to extend a well through a formation on a parallel 
plane, thereby exposing the well to more of the formation holding the 
oil and gas than a vertical well could achieve. As a result, a unit 
larger than 640 acres may be needed to allow operators to maximize oil 
and gas resource recovery and prevent waste. Due to the economic and 
strategic importance of oil and gas, BLM's guidance should provide 
reasonable assurance that well spacing will provide for maximum 
allowable production, thereby ensuring the federal government, tribes, 
and individual Indian resource owners are capitalizing on the 
development of the resource. Similarly, BLM officials told us that the 
agency has not updated its guidance on oil and gas drainage protection 
since 1999 and has not updated its guidance on mineral trespass since 
2003. 

BLM officials told us that the agency has conducted some reviews of 
rules and guidance, which are driven by program needs or as conditions 
warrant, but budgetary and staffing constraints have hindered regular 
comprehensive reviews of existing oil and gas rules and guidance. BLM 
officials also told us they are aware that some rules and guidance may 
be outdated and said that the agency will review and update guidance 
for communitization agreements and mineral trespass in 2014. Until BLM 
ensures its guidance for well spacing is up to date, the agency cannot 
ensure that federal and Indian resources are being managed and 
developed in a manner that provides for the maximum recovery potential 
of these resources, thereby maximizing the potential revenue provided 
to the federal government and tribes. It is also important to note 
that updating the guidance one time does not ensure compliance with 
Interior's guidance that calls for periodic reviews and updating. 
Currently, BLM does not have a documented process to ensure that oil 
and gas rules are periodically reviewed and updated. Without such a 
process, BLM cannot provide reasonable assurance that all oil and gas 
rules and guidance will be evaluated in the context of technological 
advances, as required by Interior's guidance and executive order. 

Limited Formal Coordination Between BLM and State Regulatory Agencies 
May Result in Duplicative Inspections: 

BLM and state regulatory agencies generally have overlapping authority 
to issue drilling permits and conduct drilling inspections for oil and 
gas development of federal and Indian resources, regardless of whether 
the surface estate owner is federal, Indian, state, or private. 
Specifically, BLM issues drilling permits to operators developing 
federal or Indian resources, regardless of the surface owner.[Footnote 
56] State regulatory agencies generally issue drilling permits to 
operators developing oil and gas resources within the boundary of the 
state, regardless of whether the owners of the resources or the 
surface are federal, state, tribal nations, individual Indians, or 
private entities.[Footnote 57] Figure 4 shows a horizontal wellbore 
traversing mineral parcels owned by different entities. In this 
example, the operator is developing federal, Indian, state, and 
private oil and gas resources and would generally be required to 
obtain a drilling permit from both BLM and the state regulatory agency. 

Figure 4: Example of a Horizontal Wellbore Traversing Mineral Parcels 
with Different Owners: 

[Refer to PDF for image: illustration] 

Depicted: 

Surface: 
Well. 

Subsurface parcels: 
Private; 
Private; 
Federal; 
Indian; 
State. 

Source: GAO. 

[End of figure] 

BLM and state regulatory agencies also have overlapping authorities to 
conduct drilling inspections. BLM has the authority to conduct a 
drilling inspection on any well that is being drilled into federal or 
Indian resources, regardless of surface ownership or if federal or 
Indian resources are collocated in a unit with private or state 
resources. According to state regulatory officials we spoke with, 
state regulatory agencies generally have the authority to conduct 
drilling inspections of all operations within state boundaries. Both 
BLM and state regulatory agency officials told us that some wells have 
been inspected by both BLM and state regulatory inspectors, and other 
wells have not been inspected at all. In addition, state regulatory 
officials said that the increasing number of horizontal wells that 
will likely traverse federal or Indian resources and state or private 
resources is expected to increase the number of duplicative 
inspections. 

BLM recognizes the importance of coordination, as evidenced by its 
internal guidance that directs BLM's state and field offices to pursue 
memorandums of understanding with state and tribal entities to help 
meet oil and gas inspection and enforcement goals. Moreover, according 
to BLM officials, the agency has limited staff to complete drilling 
inspections and therefore entering into agreements with the states 
could help leverage their limited resources and provide more effective 
oversight.[Footnote 58] In some states, BLM has developed formal 
agreements through memorandums of understanding with state regulatory 
agencies--including in California, Colorado, Nevada, and Wyoming--that 
are intended to, in part, improve coordination of inspection 
activities and, in some cases, minimize duplication of oil and gas 
inspections. However, BLM has not developed formal agreements in other 
states with oil and gas development activities, such as New Mexico, 
North Dakota, Oklahoma, or Utah, and not all of the existing 
memorandums of understanding address coordination of inspections. 
Without formal agreements to coordinate inspections with state 
regulatory agencies or a process to leverage or utilize state 
inspection resources, BLM is not maximizing the number of oil and gas 
wells that can be inspected with existing resources. According to a 
state regulatory official, by minimizing or eliminating duplicate 
inspections between BLM and the state regulatory agency, the agencies 
could increase the total number of inspections conducted within the 
state. BLM officials told us the agency is working with the states of 
New Mexico and Utah to develop memorandums of understanding to improve 
coordination between the agencies regarding the management of energy 
development activities, including oil and gas inspections. 

BLM Has Limited Assurance That Inspections Are Completed: 

BLM has limited assurance that inspections--the primary mechanism to 
ensure that operators are complying with various laws and regulations-
-are completed, as called for by its internal guidance, because the 
agency does not (1) inspect all high-priority wells, (2) have key data 
on wells, and (3) review and monitor inspection activities at its 
state and field offices. 

BLM does not inspect all high-priority wells. According to BLM's Oil 
and Gas Inspection and Enforcement Handbook, the agency is to conduct 
drilling inspections for all wells identified as high priority. Our 
review of available data from AFMSS determined that more than 2,100 of 
the 3,702 wells that were identified as high priority in BLM's AFMSS 
database and drilled from fiscal year 2009 through fiscal year 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. 
[Footnote 59] 

BLM does not have key data on wells. The extent to which BLM has 
conducted inspections of high-priority wells, as called for by its 
internal guidance, is not known because BLM's AFMSS database is 
missing key data. Specifically, of the more than 14,000 federal and 
Indian oil and gas wells drilled from fiscal year 2009 through fiscal 
year 2012 on lands managed by BLM that we reviewed, BLM's AFMSS 
database is missing data on whether 1,784 wells were identified as 
high-or low-priority.[Footnote 60] Without these data, the extent to 
which the agency inspects high-priority wells is not known. BLM 
officials said that the agency is in the process of replacing AFMSS 
with a new system that, among other things, will require staff to 
indicate whether a well is high-or low-priority. As of December 2013, 
officials told us that the new system will be fully functional by 
fiscal year 2015. 

BLM does not review and monitor inspection activities at its state and 
field offices. BLM's headquarters office reported in fiscal year 2011 
that the agency should establish annual reviews of its field offices 
to ensure oil and gas inspections are completed; however, BLM reviewed 
only one field office since issuing the report. Federal internal 
control standards call for agencies to compare actual performance with 
planned or expected results, monitor performance in the course of 
normal operations, and collect operational data to ensure that 
agencies are meeting their goals.[Footnote 61] Without monitoring its 
field offices, BLM cannot provide reasonable assurance that they are 
meeting their inspection goals. BLM headquarters officials told us 
that they are developing a schedule to conduct field office reviews, 
but the agency does not have the resources needed to conduct the 
annual reviews. As we recently reported,[Footnote 62] the dramatic 
increase in domestic oil and gas development has exacerbated BLM's 
long-standing challenges hiring and retaining staff needed to ensure 
effective oversight of oil and gas activities. 

Data on Drilling Activities and Oil and Gas Resources Are Incomplete: 

BLM is also hindered in its ability to provide reasonable assurance 
that federal and Indian resources are properly managed and protected 
because not all BLM field offices have comprehensive and reliable data 
identifying the location of federal and Indian oil and gas resources 
or existing and new wellbores--data needed to protect oil and gas 
resources. In an internal guidance document, BLM states that efficient 
management of oil and gas resources requires key data--including the 
location of federal and Indian leased and unleased resources, the 
location of existing and new wellbores, and the status of existing 
wells. Several BLM offices we visited during our review have access to 
key data, including the location of federal and Indian resources and 
new and existing wellbores. For example, BLM's North Dakota field 
office uses a geographic information system (GIS) to compile and 
compare data on the location of federal and Indian resources with data 
identifying the location of new and existing wellbores to identify 
potential cases of drainage and mineral trespass. Officials from BLM's 
North Dakota field office told us that they used the GIS data to 
identify several potential cases of mineral trespass. In addition, 
Interior's IEED is working to identify and digitize the location of 
Indian oil and gas resources and make these data available through a 
GIS--the National Indian Oil and Gas Evaluation and Management System 
(NIOGEMS). A BIA official from the Fort Berthold office in North 
Dakota told us that NIOGEMS has helped officials identify potential 
mineral parcels for development and more effectively manage ongoing 
development.[Footnote 63] However, not all BLM offices have access to 
these data. BLM officials from one field office recently reported that 
the number of wells extracting Indian resources without prior approval 
is a major concern for the agency. Without access to data on the 
location of resources and wells, BLM cannot provide reasonable 
assurance that federal and Indian resource owners' rights are 
protected. 

Even in instances where key data are available, BLM's use of the data 
is inconsistent. For example, officials from one BLM field office told 
us that they have access to well data through a BLM contract with a 
third-party vendor but do not typically use the data because they do 
not have enough staff to review them. These findings are consistent 
with a BLM review conducted in August 2010 that found the agency had 
funded nationwide contracts to obtain information on the location of 
oil and gas wells for the purpose of identifying drainage cases but 
had not provided sufficient direction to staff responsible for using 
the data.[Footnote 64] As a result, BLM does not have reasonable 
assurance that staff use the software and information to maximize the 
value of the contracts. 

In addition, federal and tribal officials told us that the data on the 
location of federal and Indian resources are not reliable and that 
inaccurate boundary surveys for Indian resources are hindering 
development. This is a particular concern for riparian areas (narrow 
vegetated areas adjoining rivers, streams, and lakes) because riverbed 
boundaries are continuously changing, and lands must be resurveyed by 
BLM to establish legal ownership before oil and gas development can 
take place. According to BLM officials, the agency is aware of the 
concerns about the accuracy of data for oil and gas resources, 
particularly under riverbeds, but the agency is not able to complete 
additional surveys of federal or Indian resources due to funding 
shortfalls. Our findings are consistent with a report by Interior's 
Inspector General that raised concerns about the reliability and 
completeness of Interior's data on the location of Indian resources. 
The report stated that Interior's data on Indian resources was 
outdated; resulting in the potential loss of millions of dollars in 
revenue to tribes from oil and gas development. 

BLM Does Not Always Approve Communitization Agreements within Required 
Time Frames: 

Based on our review of select communitization agreements, BLM does not 
always review communitizaton agreements within established time 
frames.[Footnote 65] By statute, BLM is to issue all determinations of 
allocations of production for units within 120 days of a request for 
determination.[Footnote 66] In addition, according to Interior's 
Interagency Standard Operating Procedures, BLM is to review 
communitization agreements for Indian leases within 30 days of a 
request.[Footnote 67] However, we found examples where BLM has not 
issued allocation determinations or reviewed communitization 
agreements within these time frames. For instance, we reviewed data 
for 61 Indian and federal wells drilled from fiscal year 2009 through 
fiscal year 2012 in the state of Oklahoma and found that BLM averaged 
229 days to approve Indian communitization agreements and 126 days to 
review federal communitization agreements. BLM officials told us that 
they are unable to review the agreements within the required time 
frame because, in part, the agency does not have the staff needed to 
review them. In 2012, an official with ONRR reported that the increase 
in oil and gas development in North Dakota resulted in a backlog of 
communitization agreements awaiting review. Without an approved 
communitization agreement, ONRR cannot distribute royalties correctly 
or in a timely manner because communitization agreements establish 
production allocation--information needed before operators can pay 
royalties. 

As a result of these delays, approval of a communitization agreement 
may lag production and delay royalty payments to the federal 
government, tribal nations, and individual Indian oil and gas resource 
owners.[Footnote 68] According to several tribal and federal officials 
we met with during our review, the delay to process communitization 
agreements has resulted in a delay of royalty payments. This is a 
concern because, according to a 2010 BLM report, individual Indian oil 
and gas resource owners may rely on revenue from oil and gas 
development to pay for daily expenses such as food, shelter, health, 
and education.[Footnote 69] 

BLM's Eastern Montana/Dakotas District Office has taken steps to 
improve its capacity to process communitization agreements within 
required time frames. Specifically, the BLM district office entered 
into a memorandum of agreement with the North Dakota Petroleum Council 
that, among other things, allows the council to fund additional staff 
at BLM to review communitization agreements. In addition, BLM 
officials told us the BLM district office began a pre-communitization 
agreement approval process to provide initial approval to 
communitization agreements as they are received from the operator. 
Through this approval, production allocations are established, and 
operators can begin to make royalty payments. After the initial 
approval, BLM conducts a thorough review of the communitization 
agreement to identify any concerns. In contrast, BLM officials in 
Oklahoma's field office told us that they do not believe this process 
would work for their office because it would add another step to the 
process after which BLM would still need to complete a full review at 
a later time. As a result, officials from Oklahoma's BLM office told 
us that they are not considering initial approval as an option for 
improving communitization agreement approval times. BLM headquarters 
officials told us that the agency is committed to allocating staff and 
resources to meet its needs by considering communitization agreements 
along with the needs of the entire oil and gas program, such as 
permitting and inspections. The agency stated it will develop a 
corrective action plan in fiscal year 2014 to address the pending 
communitization agreement applications. 

Conclusions: 

As the use of technological advances in hydraulic fracturing and 
horizontal drilling have increased, federal and state regulatory 
agencies have undertaken some actions to evaluate and, in some cases, 
have proposed new rules or revised rules governing the development of 
federal and Indian resources, which can help to ensure a balance 
between protecting the environment, public health, and safety with the 
benefits of efficient production of domestic oil and gas on federal 
and Indian lands. However, 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 BLM's ability 
to effectively manage and oversee the development of federal and 
Indian resources. Specifically, BLM has not established a process to 
ensure that all rules and guidance are reviewed and periodically 
updated consistent with technological advances, as called for by 
Interior's guidance and executive order. Without such a process, BLM 
cannot provide reasonable assurance that oil and gas rules are keeping 
pace with and are consistent with technological advances. In addition, 
BLM's inspection program is fundamental to ensuring sound oil and gas 
operations. However, BLM may be missing opportunities to improve the 
efficiency and effectiveness of this program. 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. Finally, because BLM is not able to review 
communitization agreements within required time frames, 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. 

Recommendations for Executive Action: 

We recommend that the Secretary of the Interior direct the Director of 
the Bureau of Land Management to take the following four actions: 

* 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. 

* Identify and take necessary steps to ensure communitization 
agreements are reviewed within required time frames. 

Agency Comments and Our Evaluation: 

We provided a draft of this report for review and comment to Interior, 
EPA, the Department of Defense, and the Department of Agriculture. The 
four agencies provided technical comments on early or final drafts, 
which we incorporated as appropriate. 

Interior and USDA also provided a letter in which they generally 
agreed with our findings and recommendations. See appendix II for 
Interior's letter and appendix III for USDA's letter. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of the Interior, the appropriate congressional 
committees, and other interested parties. In addition, this report 
will be available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix IV. 

Signed by: 

Frank Rusco: 
Director, Natural Resources and Environment: 

List of Requesters: 

The Honorable Barbara Boxer: 
Chairman: 
Committee on Environment and Public Works: 
United States Senate: 

The Honorable Sheldon Whitehouse: 
Chairman: 
Subcommittee on Oversight: 
Committee on Environment and Public Works: 
United States Senate: 

The Honorable Benjamin L. Cardin: 
Chairman: 
Subcommittee on Water and Wildlife: 
Committee on Environment and Public Works: 
United States Senate: 

The Honorable Henry A. Waxman: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Peter DeFazio: 
Ranking Member: 
Committee on Natural Resources: 
House of Representatives: 

The Honorable Diana DeGette: 
Ranking Member: 
Subcommittee on Oversight and Investigations: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Robert P. Casey, Jr. 
United States Senate: 

The Honorable Edward J. Markey: 
United States Senate: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives for this review were to examine: (1) actions, if any, 
that federal agencies and selected states have taken to change rules 
governing oil and gas development over the past 5 years and (2) the 
effectiveness of the Bureau of Land Management's (BLM) management and 
oversight of federal and Indian resources. 

To examine the actions, if any, that federal agencies and selected 
states have taken to change rules and requirements governing oil and 
gas development over the past 5 years, we reviewed federal and 
selected state laws, regulations, rules, and guidance regarding the 
management of domestic onshore oil and gas resources owned or held in 
trust by the federal government. For our review of federal laws, 
regulations, rules, and guidance, we focused on stakeholders involved 
in the development of federal and Indian resources, such as BLM, the 
Environmental Protection Agency (EPA), the U.S. Fish and Wildlife 
Service (FWS), the National Park Service (NPS), and the U.S. Army 
Corps of Engineers (Corps). In particular, we identified and reviewed 
several proposed or current federal laws governing oil and gas 
development, such as BLM's proposed hydraulic fracturing rule, BLM's 
onshore orders, BLM's current well spacing guidance, EPA's Indian 
Country New Source Review rule, EPA's draft guidance on hydraulic 
fracturing with diesel, and EPA's Effluent Limitations Guidelines and 
Standards for oil and gas. 

In addition, we examined the extent to which BLM periodically reviewed 
oil and gas rules, as called for by the Department of the Interior's 
(Interior) guidance. We limited the evaluation of periodic updates to 
BLM because BLM has primary responsibility for oversight of oil and 
gas drilling operations on federal and Indian lands. For our review of 
state laws, regulations, and rules, we selected 14 states--Arkansas, 
California, Colorado, Louisiana, New Mexico, North Dakota, Ohio, 
Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West Virginia, and 
Wyoming. We selected these states based on a number of factors, 
including: (1) experience levels with oil and gas development, (2) the 
presence of federal lands, and (3) the presence of Indian lands. We 
interviewed officials from all 14 states concerning any changes to 
rules and regulations governing oil and gas development in these 
states. We asked officials to identify changes in their state, such as 
changes to well spacing rules for oil and gas development. Because 
this was a nonprobability sample, our results are not generalizable to 
all states, but they provide examples of state actions. The 
development of oil and gas, as well as the environmental and public 
health risks, can vary based on the geological characteristics of the 
formation being developed. As a result, changes to rules in one state 
may not be appropriate for other states. Therefore, changes to 
regulations in one state cannot be compared to the activities in other 
states. Our review focused on the following oil and gas development 
activities: (1) planning and leasing; (2) permitting; (3) drilling, 
well construction, and hydraulic fracturing; and (4) production and 
unitization. 

To examine the effectiveness of BLM's management and oversight of 
federal and Indian resources, we collected and assessed federal data; 
reviewed agency policy, guidance, and procedures; and, obtained 
additional perspectives from a variety of stakeholders. Specifically, 
we obtained data on drilling inspections performed from fiscal year 
2009 through fiscal year 2012 from BLM's Automated Fluid Minerals 
Support System (AFMSS)--the central database that BLM uses to track 
oil and gas information on federal and Indian lands. To assess the 
reliability of the inspection data, we performed electronic testing of 
the data and interviewed agency officials about the data. We 
determined that the inspection data were sufficiently reliable to 
report the number of inspections performed by BLM from fiscal year 
2009 through fiscal year 2012. However, we determined that BLM's data 
on whether a well was identified as high-or low-priority were not 
sufficiently reliable because data were not available for a 
significant number of wells. As such, we were not able to 
comprehensively assess BLM's compliance with the requirement to 
inspect all high-priority wells. 

We also reviewed revenue sharing agreements--known as communitization 
agreements--from BLM's Oklahoma office to identify dates that 
agreements were submitted to and approved by BLM. The results of this 
analysis cannot be generalized to all BLM field offices. Rather, we 
selected Oklahoma based on a number of factors, including: (1) the 
high levels of oil and gas development, (2) the probability that 
development will traverse multiple mineral owners, and (3) the 
availability of data. Finally, to obtain additional perspectives on 
issues related to oil and gas rules and oversight, we interviewed a 
nonprobability sample of officials representing numerous agencies and 
organizations, including officials from BLM, BIA, FWS, NPS, EPA, the 
Corps, the Forest Service, several tribal nations, 14 state oil and 
gas regulatory agencies, and representatives from the oil and gas 
industry. The federal offices were selected based on their regulatory 
oversight authorities or land management responsibilities. We also 
conducted site visits to Colorado, North Dakota, Oklahoma, Texas, and 
Utah. We selected these locations based on a number of factors, 
including (1) experience level with oil and gas development, (2) 
states with federal lands, and (3) states with Indian lands. 

We conducted this performance audit from September 2012 to May 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of the Interior: 

United States Department of the Interior: 
Office of The Secretary: 
Washington, D.C. 20240: 

April 24, 2014: 

Mr. Frank Rusco: 
Director: 
Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Rusco: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office draft report titled, Oil and Gas: Updated 
Guidance, Increased Coordination, and Comprehensive Data Could Improve 
BLM's Management and Oversight (GAO-14-238). 

The Department of the Interior concurs with the recommendations. 
However, we found some technical errors in the report related to the 
Bureau of Land Management's (BLM) drilling inspection process and the 
extent of BLM's review process of its rules and regulations. The 
enclosure provides general and technical comments on the draft report. 
We hope the comments will assist you in drafting the final report. 

If you have any questions, please contact Steven Wells, Chief, 
Division of Fluid Minerals, at 202-912-7143, or LaVanna Stevenson, BLM 
Audit Liaison Officer, at 202-912-7077. 

Sincerely, 

Signed by: 

Tommy P. Beaudreau: 
Principal Deputy Assistant Secretary: 
Land and Minerals Management: 

Enclosure: 

[End of section] 

Appendix III: Comments from the Department of Agriculture: 

United States Department of Agriculture: 
Forest Service: 
Washington Office: 
1400 Independence Avenue, SW: 
Washington, DC 20250: 

File Code: 1420/2800: 
Date: April 21, 2014: 

Mr. Frank Rusco: 
Director: 
U.S. Government Accountability Office: 
Natural Resources and Environment: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Rusco: 

The U.S. Depar1ment of Agriculture (USDA) appreciates the opportunity 
to respond to the U.S. Government Accountability Office (GAO) draft 
report "Oil and Gas - Updated Guidance. Increased Coordination, and 
Comprehensive Data Could Improve BLM's Management and Oversight (GAO-
14-238)." The Forest Service generally agrees with the GAO report. The
agency places great value on our collaborative relationship with the 
Bureau of Land Management and our joint roles in managing oil and gas 
resources on the National Forest System lands for the benefit of the 
American public. 

The agency requests GAO consider the following changes before 
finalizing the report: 

* Page 13, last paragraph, "Other land management agencies": Change 
last sentence stating, "The forest Service manages land for multiple 
uses, such as recreation, timber harvesting, and energy development, 
including oil and gas" to "The Forest Service manages National Forest 
System lands for multiple use of various renewable resources such as 
recreation, range, timber, water, wild life, and fish." 

* Page 13. Footnote 26: Add to the existing note. "In order for oil 
and gas development to occur with in a National Forest, the Forest 
Service must: (a) authorize BLM to proceed with lease issuance based 
on the Forest Service·s analysis of lands available for leasing
and (b) analyze and approve a surface use plan of operations. 36 
C.F.R. 228. Subpart E." 

Thank you again for the opportunity to review the draft report. If you 
have any questions, please contact Thelma Strong, Chief Financial 
Officer,at 202-205-0429 or tstrong@fs.fed.us. 

Sincerely, 

Signed by: 

Thomas L. Tidwell: 
Chief: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Christine Kehr (Assistant 
Director), Carolyn Blocker, Cindy Gilbert, Alison O'Neill, Dan Royer, 
Jay Spaan, Barbara Timmerman, and Amy Ward-Meier made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] Shale is a sedimentary rock that is predominantly composed of 
consolidated clay-sized particles. 

[2] Hydraulic fracturing involves pumping water, sand, and chemical 
additives into oil and gas wells at high enough pressure to fracture 
underground rock formations and allow oil or gas to flow. When 
combined with horizontal drilling, hydraulic fracturing allows 
operators to fracture the rock formation along the entire horizontal 
portion of a well, increasing the number of pathways through which oil 
or gas can flow. 

[3] The $14 billion in revenue includes energy production on both 
federal lands and offshore waters. 

[4] Indian lands are defined to include federal property held in trust 
by the United States for individual Indians or Indian tribes; other 
designated lands held by individual Indians or Indian tribes; and 
public land owned by the United States that is designated for the sole 
use and benefit of individual Indians or Indian tribes. For a complete 
definition, see 20 U.S.C. § 7713(7). For the purposes of this report, 
Indian lands include both the surface and subsurface estates. 

[5] For the purposes of this review, we use the term federal resources 
to include oil and gas minerals owned and managed by the federal 
government and Indian resources to include Indian oil and gas minerals 
that are held in trust by the United States for individual Indians or 
Indian tribes. 

[6] GAO, Oil and Gas Management: Interior's Oil and Gas Production 
Verification Efforts Do Not Provide Reasonable Assurance of Accurate 
Measurement of Production Volumes, [hyperlink, 
http://www.gao.gov/products/GAO-10-313] (Washington, D.C.: Mar. 15, 
2010). 

[7] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[8] GAO, Oil and Gas: Information on Shale Resources, Development, and 
Environmental and Public Health Risks, [hyperlink, 
http://www.gao.gov/products/GAO-12-732] (Washington, D.C.: Sept. 5, 
2012). 

[9] In some cases, the subsurface estate can be further segregated by 
mineral or stratum. 

[10] These land grant statutes include the Coal Lands Acts of 1909 and 
1910 (30 U.S.C. §§ 81, 83), the Stock Raising Homestead Act of 1916 
(43 U.S.C. §§ 299, 301 (remainder of the act repealed by act of Oct. 
21, 1976, Pub.L. No. 94-579, 90 Stat. 2787, 2792), and the 
Agricultural Entry Act of 1914 (30 U.S.C. §§ 121-123). 

[11] Under the General Allotment Act, surface lands allotted to 
Indians were to remain in trust for 25 years and not allowed to be 
sold during this period. However, the time period could be extended by 
the BIA if deemed to be in the allottee's best interest. The trust 
period was extended indefinitely by the Indian Reorganization Act of 
1934. As a result, allotted lands cannot be transferred or leased 
without approval of the BIA. 

[12] The seismic method of exploration introduces energy into the 
subsurface through explosions in shallow "shot holes" by striking the 
ground forcefully (with a truck-mounted thumper), or by using 
vibrations. A portion of the energy returns to the surface after being 
reflected from the subsurface strata. This energy is detected by 
surface instruments, called geophones, and the information carried by 
the energy is processed by computers to interpret subsurface 
conditions. 

[13] Land use plans identify federal lands and mineral resources 
available for oil and gas development and other activities and guide 
management decisions and actions on public lands. As part of 
developing or revising land use plans, BLM is required under the 
National Environmental Policy Act of 1969 (NEPA), as amended, to 
evaluate likely environmental effects of decisions in the plan, such 
as selecting areas for oil and gas development. The Federal Land 
Policy and Management Act (FLPMA) requires the Secretary of the 
Interior to evaluate these plans for potential revision. In addition, 
Interior generally prepares an environmental impact statement--a 
detailed statement of the likely environmental effects of the proposed 
action--in preparing land use plans. 

[14] In some cases, multiple wells will be located on a single well 
pad. 

[15] Casing is a metal pipe that is inserted inside the wellbore to 
prevent high-pressure fluids outside the formation from entering the 
well and to prevent drilling mud inside the well from fracturing 
fragile sections of the wellbore. 

[16] A perforating tool is inserted in the casing in order to make the 
holes that allow the fracturing fluid to enter into the formation. 

[17] Fracturing fluid generally contains a number of chemical 
additives, each of which is designed to serve a particular purpose. 
For example, operators may use a friction reducer to minimize friction 
between the fluid and the pipe, acid to help dissolve minerals and 
initiate cracks in the rock, and a biocide to eliminate bacteria in 
the water that cause corrosion. The number of chemicals used and their 
concentrations depend on the particular conditions of the well. 

[18] BLM's Onshore Oil and Gas Orders and notice to lessees (NTL) 
implement and supplement the oil and gas regulations for conducting 
oil and gas operations on federal and Indian lands (43 C.F.R. § 
3164.1). 

[19] BLM has 33 offices with oil and gas responsibilities located 
primarily in the Mountain West. BLM's headquarters, state, and 
district offices oversee and provide guidance and support to the field 
offices that implement BLM's oil and gas program. BLM's authority for 
inspecting wells is, in large part, derived from the Federal Oil and 
Gas Royalty Management Act of 1982 (FOGRMA). The act requires, among 
other things, the Secretary of the Interior to develop guidelines that 
specify the coverage and frequency of inspections. 

[20] 25 C.F.R. §§ 211-212, 43 C.F.R. § 3100, and BLM Instruction 
Memorandum No. 99-051, Jan. 27, 1999. 

[21] Mineral trespass can be done intentionally (with knowledge that 
it has crossed subsurface property lines) or inadvertently (under a 
genuinely mistaken belief of a right to extract the minerals). 
Secretarial Order 3215 provides that management of Interior's Indian 
trust assets (BLM and BIA) must protect Indian trust assets from loss, 
damage, unlawful alienation, waste, and depletion, and maintain a 
system of records that identifies the location and value of Indian 
resources. 

[22] 43 C.F.R. § 3160.0-9. 

[23] BIA's decisions and actions are to be based on the best interest 
of the Indian mineral owner. 

[24] Pub. L. No. 69-560, 44 Stat. 1010; Pub. L. No. 71-520, 46 Stat. 
918. 

[25] EPA uses the term Indian country, defined in 40 C.F.R. § 71.2, to 
include all land within the limits of an Indian reservation under the 
jurisdiction of the U.S. government, all dependent Indian communities 
within the borders of the United States, and all Indian allotments, 
the Indian titles to which have not been extinguished. 

[26] In order for oil and gas development to occur within a national 
park, the NPS Regional Director must consent to the lease and permit, 
and can do so only upon determination that the activity permitted will 
not have significant adverse effect upon the resources or 
administration of the unit. 43 C.F.R. § 3109.2(b). 

[27] In September 2012, we reported that oil and gas development poses 
risks to air quality, generally as the result of (1) engine exhaust 
from increased truck traffic, (2) emissions from diesel-powered pumps 
used to power equipment, (3) gas that is flared (burned) or vented 
(released directly into the atmosphere) for operational reasons, and 
(4) unintentional emissions of pollutants from faulty equipment or 
impoundments--temporary storage areas. 

[28] Pub. L. No. 97-382, Dec. 22, 1982, 96 Stat. 1938 (codified at 25 
U.S.C. §§ 2101-2108). 

[29] According to EPA's website, 32 tribes have received eligibility 
determinations under the Tribal Authority Rule; 2 tribes have been 
approved to implement their own air quality control plans to address 
air quality issues on their reservations, with several more under 
development; and 1 tribe has received a delegation to implement a 
Title V operating permit program for its reservation. 

[30] 77 Fed. Reg. 27691. 

[31] 78 Fed. Reg. 31636. 

[32] Several of these orders are being revised in response to 
recommendations from GAO, Interior's Office of Inspector General, and 
Interior's Subcommittee on Royalty Management. 

[33] The revisions are being considered for onshore order #3, which 
applies to site security; onshore order #4, which applies to the 
measurement of oil; onshore order #5, which applies to the measurement 
of gas; and NTL-4A, which applies to waste prevention and the 
beneficial use of oil and gas. 

[34] On January 17, 2014, the United States Court of Appeals for the 
District of Columbia Circuit vacated EPA's Indian Country New Source 
Review Rule with respect to non-reservation lands. In Oklahoma Dept. 
of Env. Quality v. EPA, No. 11-1307 (D.C. Cir. Jan. 17, 2014), the 
court found that EPA overstepped its statutory limitations by applying 
a Federal Implementation Plan governing air permitting to lands 
outside formal reservation boundaries without first demonstrating that 
a tribe has jurisdiction over such lands. 

[35] The UIC program was not historically used to regulate hydraulic 
fracturing, even though fracturing involves the injection of fluid 
underground. However, in 2001, a U.S. Court of Appeals found that 
EPA's UIC requirements apply to hydraulic fracturing (Legal Envtl. 
Assistance Found., Inc. v. EPA, 276 F. 3d 1253 (11th Cir. 2001) reh'g 
en banc denied, 34 Fed. App'x 392 (11th Cir. 2002), cert. denied, 527 
U.S. 989 (2002). In 2005, Congress amended the SDWA to exempt 
hydraulic fracturing from the UIC program, except if diesel fuel is 
injected as part of hydraulic fracturing. Therefore, the SDWA, as 
amended, continues to require the regulation of hydraulic fracturing 
using diesel. 

[36] We are conducting a separate review of EPA's UIC program. 

[37] U.S. EPA, Oil and Natural Gas Sector: New Source Performance 
Standards and National Emission Standards for Hazardous Air Pollutants 
Reviews Final Rule, 77 Fed. Reg. 49490 (Aug. 16, 2012) (codified at 40 
C.F.R. Parts 60 and 63). 

[38] According to EPA's website, VOCs are emitted as gases from 
certain solids or liquids. VOCs include a variety of chemicals, some 
of which may have short-and long-term adverse health effects. 

[39] Methane emissions represent a waste of resources and a fractional 
contribution to greenhouse gas levels. 

[40] 77 Fed. Reg. 49490 (Aug. 16, 2012) (codified at 40 C.F.R. Parts 
60 and 63). 

[41] To develop natural gas from coalbed formations, water from the 
coal bed is withdrawn to lower the reservoir pressure and allow the 
methane to release from the coal. 

[42] GAO, National Wildlife Refuges: Opportunities to Improve the 
Management and Oversight of Oil and Gas Activities on Federal Lands, 
[hyperlink, http://www.gao.gov/products/GAO-03-517] (Washington, D.C.: 
Aug. 28, 2003). 

[43] 50 C.F.R. § 29.32. 

[44] 36 C.F.R. Pt. 9, Sbpt. B. 

[45] Corps guidance recommends establishing a 3,000 foot exclusionary 
zone around critical structures, including dams, spillways, intake 
structures, and embankments. No oil and gas exploration and production 
would be allowed in exclusionary zones. 

[46] STRONGER is a non-profit, multi-stakeholder organization formed 
in 1999 to help states share innovative techniques, environmental 
protection strategies, and opportunities to improve environmental 
regulation and oversight of the exploration, development and 
production of oil and natural gas. 

[47] The STRONGER review teams are composed of stakeholders from the 
oil and gas industry, state environmental regulatory programs, and 
members of environmental and public interest communities. 

[48] Ground Water Protection Council and ALL Consulting. "Modern Shale 
Gas Development in the United States: A Primer." Prepared for the 
Department of Energy and National Energy Technology Laboratory (April 
2009). 

[49] California SB4 was enacted in September 2013, with regulations to 
be adopted for provisions governing, among other things, disclosure of 
the composition of hydraulic fracturing fluid by January 1, 2015. 

[50] [hyperlink, http://www.gao.gov/products/GAO-12-732]. 

[51] In some states, operators routinely conduct baseline testing. For 
example, we reported that, although Pennsylvania does not require 
baseline testing, the state law presumes operators to be liable for 
any pollution of water wells within 2,500 feet of a shale oil or gas 
well that occurs within 12 months of drilling activities, therefore, 
many operators in the state routinely conduct their own baseline 
testing of nearby water wells prior to drilling. 

[52] [hyperlink, http://www.gao.gov/products/GAO-12-732]. 

[53] Six of the seven Onshore Oil and Gas Orders were promulgated in 
the late 1980s and early 1990s. Onshore Order 1 was revised more 
recently in 2007, and it pertains to the approval of operations on 
federal and Indian oil and gas leases. 

[54] BLM officials told us that they consider updating guidance to be 
a part of the process to review rules. 

[55] BLM Communitization Manual 3160-9. 

[56] According to BLM officials we spoke with, the agency would not 
issue a drilling permit if an operator was cutting through federal or 
Indian minerals, but not developing from those minerals. In commenting 
on a draft of this report, BLM stated that there is a difference of 
opinion among BLM officials on whether BLM would issue a drilling 
permit in this scenario. 

[57] In addition to drilling permits, operators must obtain other 
types of permits from various federal, state, tribal, and local 
agencies to develop oil and gas resources, depending on a number of 
factors, including location of the well and the operator's actions. 
For example, the Wyoming Department of Environmental Quality requires 
permit coverage for stormwater discharges from all construction 
activities disturbing 1 or more acres. 

[58] We recently reported 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, Oil and Gas: Interior Has Begin to Address Hiring and 
Retention Challenges but Needs to Do More, [hyperlink, 
http://www.gao.gov/products/GAO-14-205] (Washington, D.C.: Jan. 31, 
2014). 

[59] [hyperlink, http://www.gao.gov/products/GAO-14-205]. 

[60] Our findings from this review are consistent with those of our 
August 2013 report--see GAO, Oil and Gas Development: BLM Needs Better 
Data to Track Permit Processing Times and Prioritize Inspections, 
[hyperlink, http://www.gao.gov/products/GAO-13-572] (Washington, D.C.: 
Aug 23, 2013)--and those of Interior's Office of Inspector General. In 
August 2013, we found that BLM's AFMSS does not include information 
needed to identify wells that pose the greatest environmental risk--
key criteria needed for determining which wells will receive 
environmental inspections. In addition, in December 2010, Interior's 
Office of Inspector General also reported that BLM cannot completely 
verify which oil and gas wells have or have not been inspected because 
of concerns about the reliability of data in the AFMSS database. 
Specifically, the report states that data entry controls are 
inadequate. 

[61] GAO, Internal Control: Standards for Internal Control in the 
Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C. 
November 1999). 

[62] [hyperlink, http://www.gao.gov/products/GAO-14-205]. 

[63] In 2012, Interior's Inspector General reported that NIOGEMS 
represents a significant improvement over Interior's current database 
for managing oil and gas activities on Indian lands. 

[64] BLM, Oil and Gas Drainage and Indian Diligent Development: 
Operations and Policy Review (August, 2010). 

[65] The Secretary of the Interior receives requests for approval of 
allocation schedules pursuant to federal communitization agreements. 
Additionally, according to BLM officials, the agency is to review 
communitization agreements to ensure that, among other things, they 
conform to spacing rules and are in the best interest of the United 
States or the Indian mineral owner. 

[66] 30 U.S.C. § 1721(l). 

[67] BLM officials told us that the memorandum of agreement that calls 
for the review of communitization agreements within 30 days was not 
official because it was not signed. However, several BLM officials we 
met with told us that they operated under the agreement as if it was 
official. 

[68] Our findings are consistent with a 2006 Royalty Policy Committee 
report that recommended BLM review annually the status of 
communitization agreements awaiting field office approval and 
communitization agreement approval timelines to identify any 
prioritization, resource allocation, and/or training needs. The 
Royalty Policy Committee is an advisory committee appointed by the 
Secretary of the Interior that reviews and provides advice to Interior 
on mineral-related issues and policies. 

[69] BLM, Oil and Gas Drainage and Indian Diligent Development: 
Operations and Policy Review (August, 2010). 

[End of section] 

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