Offshore Oil and Gas Resources:

Interior Can Improve Its Management of Lease Abandonment

RCED-94-82: Published: May 11, 1994. Publicly Released: Jun 14, 1994.

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Pursuant to a congressional request, GAO reviewed the Department of the Interior's management of Outer Continental Shelf (OCS) oil and gas lease abandonment, focusing on the: (1) Minerals Management Service's (MMS) actions in the Gulf of Mexico to minimize the environmental impact of federal oil and gas lease abandonment; and (2) estimated costs of lease abandonment and the MMS approach for ensuring that the government is not burdened with those costs.

GAO found that: (1) to protect the environment, MMS has limited the use of explosives to remove oil well structures and required that wells be plugged and lease sites cleared when a lease is abandoned; (2) MMS has not encouraged the development of nonexplosive structure removal technologies to minimize environmental damage; (3) MMS does not have an inspection strategy targeting its limited resources to ensure that wells are properly plugged and lease sites cleared; (4) MMS does environmental impact statements and studies to gather information on the environmental consequences of oil and gas leases; (5) MMS has not had to pay any lease abandonment costs, since it requires a general bond for all leases and supplemental bonds to cover abandonment costs; (6) in March 1993, the active OCS leases in the Gulf of Mexico had estimated lease abandonment costs of about $4.4 billion, but were covered by bonds that totalled only $68 million; (7) MMS revised its financial capability criteria and increased bond requirements, since its previous assessments of financial capabilities were inadequate; and (8) MMS plans to phase in the increased bond amounts over time, with no deadline for completion.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: MMS contracted for an assessment of techniques for removing offshore structures, which provided a basis for updating federal requirements that minimize damage to the marine environment. The study was issued in March 1996, and MMS conducted a public workshop in April 1996 to discuss these techniques.

    Recommendation: In order to better protect the environment from the effects of OCS oil and gas lease abandonment and the federal government from incurring the costs of such abandonment, the Secretary of the Interior should direct the Director, MMS, to encourage the use of nonexplosive technologies for removing offshore structures, whenever possible, that will eliminate or minimize the risk of harm to the environment, in accordance with the OCS Lands Act's purpose.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: MMS has contracted for an assessment of techniques for removing offshore structures. The study will provide a basis for updating federal requirements that minimize damage to the marine environment. The study is expected to be completed by the fall of 1995, at which time MMS will conduct a public workshop to discuss techniques.

    Recommendation: In order to better protect the environment from the effects of OCS oil and gas lease abandonment and the federal government from incurring the costs of such abandonment, the Secretary of the Interior should direct the Director, MMS, to study the feasibility, benefits, and costs (including the potential effects on the environment and the safety of humans) of mandating the use of nonexplosive methods of removing offshore structures, whenever possible, because of the harm that explosives do to marine life.

    Agency Affected: Department of the Interior

  3. Status: Closed - Not Implemented

    Comments: After reviewing the results of the March 1996 study of techniques for removing offshore structures, MMS has decided that its inspection program is adequate. MMS does not intend to develop a different inspection strategy.

    Recommendation: In order to better protect the environment from the effects of OCS oil and gas lease abandonment and the federal government from incurring the costs of such abandonment, the Secretary of the Interior should direct the Director, MMS, to require MMS to develop an inspection strategy for targeting its limited resources to ensure the proper plugging and abandonment of OCS wells and the clearance of lease sites.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: On May 22, 1997, MMS published its final rule establishing December 8, 1997, as the deadline for Outer Continental Shelf (OCS) oil and gas lessees to comply with new levels of bond coverage established in 1993. The rule became effective on August 20, 1997.

    Recommendation: In order to better protect the environment from the effects of OCS oil and gas lease abandonment and the federal government from incurring the costs of such abandonment, the Secretary of the Interior should direct the Director of MMS to complete a rulemaking to place time limits on the phase-in of both the increased general bond amounts and supplemental bonding under the new criteria.

    Agency Affected: Department of the Interior

 

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