Federal Oil and Gas Leases:

Opportunities Exist to Capture Vented and Flared Natural Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases

GAO-11-34: Published: Oct 29, 2010. Publicly Released: Nov 29, 2010.

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The Department of the Interior (Interior) leases public lands for oil and natural gas development, which generated about $9 billion in royalties in 2009. Some gas produced on these leases cannot be easily captured and is released (vented) directly to the atmosphere or is burned (flared). This vented and flared gas represents potential lost royalties for Interior and contributes to greenhouse gas emissions. GAO was asked to (1) examine available estimates of the vented and flared natural gas on federal leases, (2) estimate the potential to capture additional gas with available technologies and associated potential increases in royalty payments and decreases in greenhouse gas emissions, and (3) assess the federal role in reducing venting and flaring. In addressing these objectives, GAO analyzed data from Interior, the Environmental Protection Agency (EPA), and others and interviewed agency and industry officials.

Estimates of vented and flared natural gas for federal leases vary considerably, and GAO found that data collected by Interior to track venting and flaring on federal leases likely underestimate venting and flaring because they do not account for all sources of lost gas. For onshore federal leases, operators reported to Interior that about 0.13 percent of produced gas was vented or flared. Estimates from EPA and the Western Regional Air Partnership (WRAP) showed volumes as high as 30 times higher. Similarly, for offshore federal leases, operators reported that 0.5 percent of the natural gas produced was vented and flared, while data from an Interior offshore air quality study showed that volume to be about 1.4 percent, and estimates from EPA showed it to be about 2.3 percent. GAO found that the volumes operators reported to Interior do not fully account for some ongoing losses such as the emissions from gas dehydration equipment or from thousands of valves--key sources in the EPA, WRAP, and Interior offshore air quality studies. Data from EPA, supported by information obtained from technology vendors and GAO analysis, suggest that around 40 percent of natural gas estimated to be vented and flared on onshore federal leases could be economically captured with currently available control technologies. According to GAO analysis, such reductions could increase federal royalty payments by about $23 million annually and reduce greenhouse gas emissions by an amount equivalent to about 16.5 million metric tons of CO2--the annual emissions equivalent of 3.1 million cars. Venting and flaring reductions are also possible offshore, but data were not available for GAO to develop a complete estimate. As part of its oversight responsibilities, Interior is charged with minimizing vented and flared gas on federal leases. To minimize lost gas, Interior has issued regulations and guidance that limit venting and flaring during routine procedures. However, Interior's oversight efforts to minimize these losses have several limitations, including that its regulations and guidance do not address some significant sources of lost gas, despite available control technologies to potentially reduce them. Although EPA does not have a role in managing federal leases, it has voluntarily collaborated with the oil and gas industry through its Natural Gas STAR program, which encourages oil and gas producers to use gas saving technology, and through which operators reported venting reductions totaling about 0.4 percent of natural gas production in 2008. To reduce lost gas, increase royalties, and reduce greenhouse gas emissions, GAO recommends that Interior improve its venting and flaring data and address limitations in its regulations and guidance. Interior generally concurred with these recommendations.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to consider the expanded use of infrared cameras, where economical, to improve reporting of emission sources and to identify opportunities to minimize lost gas.

    Agency Affected: Department of the Interior

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to assess the potential use of venting and flaring reduction technologies to minimize the waste of natural gas in advance of production where applicable, and not solely for purposes of air quality.

    Agency Affected: Department of the Interior

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to revise its guidance to operators to make it clear that technologies should be used where they can economically capture sources of vented and flared gas, including gas from liquid unloading, well completions, pneumatic valves, and glycol dehydrators. BOEMRE should consider extending its requirement that gas be captured where economical to "lease-use" sources of gas.

    Agency Affected: Department of the Interior

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to ensure that Interior's data are complete and accurate, the Secretary of the Interior should direct BLM and BOEMRE to take additional steps to ensure that each agency has a complete and accurate picture of vented and flared gas, for both onshore and offshore leases, by (1) BLM developing more complete data on lost gas by taking into consideration additional large onshore sources and ways to estimate them not currently addressed in regulations--sources that EPA's newly proposed greenhouse gas reporting rule addresses--and (2) BOEMRE reconciling differences in reported offshore venting and flaring volumes in Oil and Gas Operations Report (OGOR) and Gulfwide Offshore Activities Data System (GOADS) data systems and making adjustments to ensure the accuracy of these systems. Page

    Agency Affected: Department of the Interior

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to collect information on the extent that larger operators use venting and flaring reduction technology and periodically review this information to identify potential opportunities for oil and gas operators to reduce their emissions, and BOEMRE should use existing information in its GOADS data system for this same purpose, to the extent possible.

    Agency Affected: Department of the Interior

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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