Policy Needed To Guide Natural Gas Regulation on Federal Lands

EMD-78-86: Published: Jun 15, 1979. Publicly Released: Jun 15, 1979.

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The management by the Department of the Interior of the exploration, development, and production of natural gas from federal lands in the Outer Continental Shelf (OCS) was studied. The Gulf of Mexico was chosen for the study because this region, which supplies almost all of the natural gas obtained from OCS areas, is responsible for about 18 percent of the nation's natural gas consumption.

The Department of Energy (DOE) and the Department of the Interior have taken little or no action to develop an overall natural gas policy. The only government requirement affecting the pace of exploration and development is the law which requires a lessee to produce economical quantities of natural gas within 5 years or relinquish its lease. There are no requirements controlling how rapidly the natural gas should be extracted. Interior could not gauge whether lessees in the Gulf of Mexico had been diligent with respect to the level of production that could be achieved with the facilities installed.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should not appropriate funds for the U.S. Geological Survey's (USGS) OCS Reservoir Shut-In/Diligence Program until the policy and regulations have been issued and the USGS program has been justified. Congress also should repeal those portions of legislation which require the government to establish, enforce, and report on production rates on federal lands.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: DOE should fulfill the requirement mandated by Congress to develop a policy establishing the role of natural gas in meeting the nation's energy needs. The policy should specifically address the role of natural gas from the federal domain. DOE should establish and issue regulations in cooperation with Interior and the Federal Energy Regulatory Commission to govern the diligence of lessees in the exploration, development, and production of natural gas on the federal domain. The regulations should require that lessees who have not submitted a development plan by the end of the third year of the primary term must submit a statement on problems that have prevented its preparation, actions the lessee is taking to overcome the problems, and the estimated time needed to take the actions. The regulations should provide for application of currently authorized sanctions against lessees who fail to meet the diligence requirements, both during the primary term and afterwards. DOE should include a schedule for issuing the policy and regulations in his written statement to the House Committee on Government Operations and the Senate Committee on Governmental Affairs. Interior should defer efforts to review additional Gulf of Mexico fields in order to identify opportunities to increase production until policy and implementing regulations for natural gas production have been established. Interior should provide DOE full assistance in the implementation of the above suggestions to DOE.

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