Mineral Resources:

BLM Needs to Improve Controls Over Oil and Gas Lease Acreage Limitation

RCED-95-56: Published: Dec 29, 1994. Publicly Released: Dec 29, 1994.

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Pursuant to a congressional request, GAO reviewed the Bureau of Land Management's (BLM) administration of oil and gas leases on public lands, focusing on BLM controls to ensure that federal oil and gas leases are not issued to parties who have exceeded the acreage limitation.

GAO found that: (1) BLM does not have adequate controls to ensure that oil and gas leases are not issued to parties who have exceeded the acreage limitation; (2) BLM allows lessees to self-certify that they have not exceeded the acreage limitation; (3) although it has audit procedures in place, BLM has not performed compliance audits on gas and oil leases since 1993 because it gives these audits a low priority; (4) BLM did not focus its earlier audits on those lessees who were approaching the acreage limitation; (5) BLM considers affiliated companies having the same officers, directors, and stockholders to be separate leaseholders; and (6) five companies that shared the same officers, directors, and shareholders significantly exceeded the acreage limitation in three states.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On August 16, 1996, the Director of BLM issued Instruction Memorandum 96-161 to all State Directors revising BLM's procedure for auditing acreage holdings of oil and gas lessees. The revised procedures require BLM to identify proprietors holding chargeable acreage equal to or greater than 200,000 acres, and to perform a full audit of each identified proprietor. BLM Handbook 3102-1 is expected to be revised accordingly by the end of calendar year 1996.

    Recommendation: To ensure that oil and gas lessees do not exceed the acreage limitation, the Secretary of the Interior should direct the Director, BLM, to revise BLM audit strategy to better target parties whose lease holdings are approaching or exceeding the acreage limitation.

    Agency Affected: Department of the Interior

  2. Status: Closed - Not Implemented

    Comments: The Bureau of Land Management's Assistant Director for Resource Use and Protection issued Instruction Memorandum 96-150, which stated BLM's policy that lessees' oil and gas acreage holdings take into account the acreage directly held by the lessee and the lessee's proportionate share of corporate leaseholdings. This represents no change from the previous policy. This Instruction Memorandum is based upon a Solicitor's opinion dated June 14, 1996, which concluded that the Mineral Leasing Act, as amended, does not require holdings of affiliated corporations to be considered. The Solicitor's opinion also concluded that any effort to restrict the amount of acreage controlled by a proprietor should await additional rulemaking on the subject.

    Recommendation: To ensure that oil and gas lessees do not exceed the acreage limitation, the Secretary of the Interior should direct the Director, BLM, to adopt a policy similar to the policies of the Minerals Management Service and the Office of Surface Mining and Reclamation Enforcement on the affiliations between parties when determining whether companies are under common control.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: The August 16, 1996, Instruction Memorandum 96-161 directed state directors to implement the revised audit strategy upon receipt of the memorandum. In another Instruction Memorandum (number 95-123), the director instructed the state directors of Nevada, New Mexico, and Wyoming, to audit the lease acreage interest holdings of the lessees GAO identified as exceeding the acreage limitation.

    Recommendation: To ensure that oil and gas lessees do not exceed the acreage limitation, the Secretary of the Interior should direct the Director, BLM, to perform audits of lessees' compliance with the acreage limitation.

    Agency Affected: Department of the Interior

 

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