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entitled 'Oil and Gas Bonds: BLM Needs a Comprehensive Strategy to 
Better Manage Potential Oil and Gas Well Liability' which was released 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

February 2011: 

Oil and Gas Bonds: 

BLM Needs a Comprehensive Strategy to Better Manage Potential Oil and 
Gas Well Liability: 

GAO-11-292: 

GAO Highlights: 

Highlights of GAO-11-292, a report to congressional requesters. 

Why GAO Did This Study: 

The number of oil and gas wells on leased federal land has increased 
dramatically. To help manage the environmental impacts of these wells, 
the Department of the Interior’s (Interior) Bureau of Land Management 
(BLM) requires oil and gas operators to reclaim disturbed land in a 
manner it prescribes. To help ensure operators reclaim leased land, 
BLM requires them to provide a bond before beginning drilling 
operations. BLM refers to oil and gas wells and leased land that will 
require reclamation as potential liabilities because BLM may have to 
pay for reclamation if the operators fail to do so. GAO was asked to 
determine (1) BLM’s policies for managing potential federal oil and 
gas well liability, (2) the extent to which BLM has implemented these 
policies, and (3) the challenges, if any, BLM faces in managing 
potential oil and gas well liability. GAO analyzed agency data on 
bonding and wells and interviewed BLM officials. We surveyed all 48 
BLM field offices with an oil and gas program, and received 33 
responses covering these offices. 

What GAO Found: 

To manage potential liability on federal land, BLM has developed 
policies for reviewing bond adequacy and for managing idle wells 
(wells that have not produced for at least 7 years) and orphan wells 
(wells that generally have no responsible or liable parties). The bond 
adequacy policy is intended to ensure that bonds are regularly 
reviewed by BLM field offices when certain events occur, or 
periodically, and increased as necessary to ensure that they reflect 
the level of risk posed by the operator. BLM’s idle and orphan well 
policy is intended to ensure that nonproducing wells are either 
plugged or returned to production; this policy directs BLM field 
offices to develop an inventory of such wells and rank and prioritize 
them for reclamation based on potential environmental harm, among 
other things. 

BLM has not consistently implemented its policies for managing 
potential liabilities. Specifically, for fiscal years 2005 through 
2009, GAO found that 13 of the 33 field office survey respondents 
reported that they either did not conduct any reviews or did not know 
the number of reviews conducted. Most field office officials told GAO 
that a lack of resources and higher priorities were the primary 
reasons for not conducting these reviews. In addition, BLM state 
offices also did not consistently interpret BLM policy on when to 
increase bond amounts. For example, officials in three state offices 
told GAO that they generally require evidence of operator 
noncompliance before raising a bond amount, while another state office 
increased bond amounts for most operators because it viewed them as a 
potential risk to the government. With regard to reviews of idle or 
orphan wells, 11 of the 33 field office survey respondents reported 
that they had not conducted any reviews in one or more fiscal years 
during the 5-year period GAO examined. The shortage of resources was 
identified by officials as the primary reason that these reviews were 
not conducted. In addition, 2 BLM state offices and 22 field offices 
have not created action plans for reviewing bond adequacy and idle and 
orphan wells, as BLM policies call for. 

BLM faces two challenges in managing potential liability, according to 
field office officials. First, its bonding system impairs BLM’s 
ability to manage potential liability. Specifically, the minimum bond 
amounts-—not updated in more than 50 years-—may not be sufficient to 
encourage all operators to comply with reclamation requirements. These 
officials also stated that criteria in the policy for deciding when to 
increase a bond is vague, creating ambiguity about whether a request 
for an increase should be submitted and whether it will be approved. 
Second, limitations with the data system BLM uses to track oil and gas 
information on public land restrict the agency’s ability to evaluate 
potential liability and monitor agency performance. For example, the 
BLM field offices GAO surveyed reported a total of about 2,300 idle 
wells that had been inactive for 7 years or more as of fiscal year 
2009. However, other Interior data indicate that the number of idle 
wells on federal land is nearly double the amount reported by the BLM 
field offices. 

What GAO Recommends: 

GAO recommends that BLM develop a comprehensive strategy to, among 
other things, increase minimum bond amounts over time and improve its 
data system to better evaluate potential liability and agency 
performance. In commenting on a draft of this report BLM agreed with 
GAO’s recommendations and noted that it has already taken steps to 
improve the completeness and accuracy of its oil and gas data. 

View [hyperlink, http://www.gao.gov/products/GAO-11-292] or key 
components. For more information, contact Anu K. Mittal at (202) 512-
3841 or mittala@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

BLM Has Policies to Manage Potential Liabilities on Federal Land: 

BLM Has Not Consistently or Completely Implemented Its Policies for 
Managing Potential Liability: 

BLM Faces Challenges in Managing the Potential Liability on Federal 
Land: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Interior: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: BLM State Offices and Field Offices with an Oil and Gas 
Program, and the Number of Wells They Manage: 

Table 2: Overview of BLM Oil and Gas Bond Adequacy Policy: 

Table 3: Number of Bond Adequacy Reviews, Fiscal Years 2005 through 
2009, by Field Office: 

Table 4: Number of Wells Reviewed under BLM's Idle and Orphan Well 
Policy by Field Office, Fiscal Years 2005 through 2009: 

Table 5: Number of Wells Plugged and Wells Returned to Production by 
Field Office, September 1, 2007 to November 9, 2010: 

Table 6: Bond Adequacy Action Plans and the Elements They Contain for 
Eight State Offices: 

Table 7: Idle Well Action Plans at 11 Field Offices and the Elements 
They Contain, by Field Office: 

Table 8: Bond Increases Requested and Approved from May 2008 through 
November 2010, by State Office: 

Table 9: Idle Wells Reported by BLM Field Offices and Calculated Using 
OGOR Data for Fiscal Year 2009, by Field Office: 

Table 10: Bond Adequacy Reviews Reported by Field Offices From Fiscal 
Years 2005 through 2009 and the Total Number of Bond Adequacy Reviews 
In AFMSS from May 1, 1990 through March 17, 2010: 

Table 11: Idle and Orphan Well Reviews Reported from Fiscal Year 2005 
through Fiscal Year 2009, and Total Idle and Orphan Well Reviews In 
AFMSS from April 25, 2002 through March 12, 2010: 

Table 12: BLM State and Field Office Officials Surveyed, Interviewed, 
and Visited: 

Figures: 

Figure 1: Boundaries of the 12 BLM State Offices: 

Figure 2: Current Individual, Statewide, and Nationwide Bond Minimums 
Adjusted to 2009 Dollars: 

Figure 3: Idle Wells on Federal Land, by Number of Years Idle, as of 
July 7, 2010: 

Abbreviations: 

AFMSS: Automated Fluid Minerals Support System: 

APD: Application for a Permit to Drill: 

BLM: Bureau of Land Management: 

EPAct 2005: Energy Policy Act of 2005: 

IM: Instructional Memoranda: 

Interior: Department of the Interior: 

OGOR: Oil and Gas Operations Report: 

ONRR: Office of Natural Resource Revenue: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 25, 2011: 

The Honorable Jeff Bingaman:
Chairman:
Committee on Energy and Natural Resources:
United States Senate: 

The Honorable Jim Costa:
The Honorable Nick J. Rahall, II:
House of Representatives: 

The oil and natural gas resources located on federal land are 
important to the U.S. energy supply. In fiscal year 2010, wells on 
federal land produced 11 percent of the nation's gas supply and 5 
percent of the nation's oil supply. Due in part to an interest in 
reducing our nation's reliance on foreign energy sources, the number 
of oil and gas wells on federal land has increased dramatically in 
recent years. Of the approximately 93,000 wells on federal land in 
fiscal year 2010, roughly 19,000 (about 20 percent) were drilled 
within the past 5 years. 

The Department of the Interior's (Interior) Bureau of Land Management 
(BLM) is responsible for managing onshore federal oil and gas 
resources.[Footnote 1] On BLM land, the agency is also responsible for 
implementing the Federal Land Policy and Management Act of 1976, as 
amended, which directs Interior to manage federal land for multiple 
uses, such as recreation and mineral extraction, while also taking any 
action required to prevent the "unnecessary or undue degradation" of 
federal land, including federal land that has been leased for oil and 
gas operations. 

To carry out these responsibilities, BLM, among other things, issues 
leases to oil and gas operators that require the operators to reclaim 
the leased land once operations have ceased. Reclamation is intended 
to return land disturbed by oil and gas operations to as close to its 
original condition as is reasonably practical, including plugging 
wells, removing structures, and reshaping and revegetating the land 
around the wells.[Footnote 2] BLM requires that operators provide a 
bond to the agency before beginning drilling operations to ensure that 
operators reclaim the land that they disturb, as well as to satisfy 
the lease's other terms and conditions. 

All operators are required to complete reclamation, but they do not 
always do so. In these circumstances, BLM may use the bond to help 
defray some of the cost of completing reclamation. Wells become 
orphaned if an operator does not perform the required reclamation and 
if the bond is not sufficient to cover well plugging and surface 
reclamation and there are no other responsible or liable parties to do 
so. In these cases, BLM uses appropriated funds to complete the 
reclamation. 

BLM is also concerned with the status of idle wells. These are wells 
that an operator has decided not to operate for a period of time 
because, for example, the operator is waiting for oil and gas prices 
to rise or for a pipeline to be constructed. Under certain conditions, 
BLM must approve a well's "idle" status. BLM may also review the 
adequacy of bond amounts and the status of idle wells that have not 
been in production for a period of time. BLM refers to oil and gas 
wells and leased land that require reclamation as potential 
liabilities because BLM may have to pay for reclamation if the 
operators fail to do so.[Footnote 3] BLM uses its bond adequacy and 
idle well status reviews to guide its management of idle wells. 

In this context, you asked us to address a range of issues concerning 
BLM's bonding requirements and efforts to ensure that operators 
reclaim federal land after oil and gas operations cease. We have 
previously reported on the number, value, and coverage of bonds BLM 
holds for oil and gas operations; the amount that BLM has paid to 
reclaim orphaned wells over the past 20 years ($3.8 million to reclaim 
295 orphaned wells) and the number of orphaned wells BLM has 
identified but has not yet reclaimed (144 orphaned wells); and the 
bonding requirements of the 12 western states for oil and gas 
operations on state and private land and other Interior agencies' 
bonding requirements for other resources.[Footnote 4] This report 
provides the results of our work focused on BLM's policies and efforts 
to ensure that the federal government does not have to pay for oil and 
gas well reclamation. Specifically, our objectives were to (1) 
identify BLM's policies for managing potential federal oil and gas 
well liability, (2) determine the extent to which BLM has implemented 
these policies, and (3) identify the challenges, if any, BLM faces in 
managing potential oil and gas well liability. 

To address these objectives, we reviewed federal laws and regulations 
regarding BLM's management of leases for onshore oil and gas 
production. To identify BLM's policies for managing potential federal 
oil and gas liabilities, we interviewed officials in BLM's Washington, 
D.C., headquarters office and reviewed and summarized relevant BLM 
policies. To determine the extent to which BLM has implemented these 
policies, we surveyed all 48 BLM field offices with an oil and gas 
program to gather data on their efforts to implement bond adequacy and 
idle well polices, including, among other things, the number of bond 
reviews and idle well reviews they had conducted. We received 
responses representing all of the 48 BLM field offices that we 
surveyed. However, because some field offices work together to 
implement these policies by sharing staff resources, 15 of the 48 
field offices combined their responses with that of another field 
office, resulting in a total of 33 survey responses covering all 48 
offices. In addition, as part of this survey, we asked BLM field 
offices to provide additional data on the increases in amounts to 
existing bonds and progress made in reducing their inventory of idle 
wells--that is, having the wells plugged or returned to production. To 
identify the number of idle wells in BLM's inventory, we obtained oil 
and gas well production and injection data, referred to as Oil and Gas 
Operations Report (OGOR) data, from Interior's Office of Natural 
Resource Revenue (ONRR)--formerly a component of the Minerals 
Management Service. We analyzed these data to determine which wells on 
federal land were idle and the length of time since they had last 
produced oil or gas. To assess the reliability of the OGOR data, we 
electronically tested all fields related to our analysis and met with 
agency officials who administer the systems, among other things. We 
found that these data were sufficiently reliable for the purpose of 
this report. We then compared these results with the information from 
BLM's Automated Fluid Minerals Support System (AFMSS)--a database that 
BLM uses to track oil and gas information on public land. AFMSS 
contains data on, among other things, lease ownership and on well 
identification, location, and production. To assess the reliability of 
these data, we conducted electronic testing and met with BLM officials 
who administer the AFMSS database. We also interviewed officials in 16 
of the 33 BLM field offices that have an oil and gas program. These 16 
field offices collectively manage more than 85 percent of the oil and 
gas wells on federal land. We also interviewed officials in the 
corresponding six BLM state offices that have jurisdiction over these 
16 field offices. In these interviews, we discussed BLM policies, 
steps these officials had taken to implement the policies, whether 
they had fully implemented them, and if not, the reasons for not doing 
so. During these interviews, we also discussed the challenges, if any, 
BLM field office officials face in managing their potential 
reclamation liability. We present data from AFMSS regarding the number 
of wells managed by each of the 33 field offices. We conducted 
electronic testing of this data and met with BLM officials who 
administer the AFMSS database. We believe AFMSS data are sufficiently 
reliable for this purpose, although our audit work determined 
reliability issues for other AFMSS data used in other contexts. To 
better understand the perspectives of operators and their views of BLM 
bonding requirements, we interviewed industry officials with the 
Independent Petroleum Association of New Mexico and the Interstate Oil 
and Gas Compact Commission. Appendix I describes our scope and 
methodology in more detail. 

We conducted this performance audit from January 2010 to February 2011 
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: 

BLM is responsible for issuing leases for oil and gas resources on and 
underneath BLM land, underneath other federal agencies' land, and 
underneath private land where the federal government owns the mineral 
rights--amounting to roughly 700 million subsurface acres. 
Approximately 44.5 million of these acres are leased for oil and gas 
operations, of which about 11.7 million acres have active oil and gas 
production. In addition, BLM manages about 250 million federal surface 
acres, of which 472,000 acres have surface disturbance related to oil 
and gas production. 

BLM's Headquarters, State, and Field Office Structure: 

To manage its responsibilities, BLM administers its programs through 
its headquarters office in Washington, D.C.; 12 state offices; 38 
district offices; and 127 field offices. BLM headquarters develops 
guidance and regulations for the agency, while the state, district, 
and field offices manage and implement the agency's programs. Because 
BLM has few acres of land in the eastern half of the United States, 
the Eastern States State Office, in Springfield, Virginia, is 
responsible for managing land in 31 states, while the remaining state 
offices generally conform to the boundaries of one or more states. 
Figure 1 shows the boundaries of the 12 BLM state offices. 

Figure 1: Boundaries of the 12 BLM State Offices: 

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

The map depicts the administrative boundaries for the following 12 BLM 
State Offices: 

National headquarters: Washington, D.C. 

Alaska: 
BLM State Office: Anchorage. 

Arizona: 
BLM State Office: Phoenix. 

California: 
BLM State Office: Sacramento. 

Colorado: 
BLM State Office: Denver. 

Eastern States: 
BLM State Office: Springfield, Virginia. 

Idaho: 
BLM State Office: Boise. 

Montana: 
BLM State Office: Billings. 

Nevada: 
BLM State Office: Reno. 

New Mexico:
BLM State Office: Santa Fe. 

Oregon: 
BLM State Office: Portland. 

Utah: 
BLM State Office: Salt Lake City. 

Wyoming: 
BLM State Office: Cheyenne. 

Sources: GAO analysis of BLM data; Map Resources (map). 

[End of figure] 

BLM has 48 field offices with an oil and gas program managed by 33 of 
its field offices that fall under the jurisdiction of 10 BLM state 
offices.[Footnote 5] The Idaho and Oregon BLM state offices do not 
contain a field office with an oil and gas program. Table 1 shows the 
number of wells managed by the 33 field offices and their associated 
BLM state office, as of May 26, 2010. 

Table 1: BLM State Offices and Field Offices with an Oil and Gas 
Program, and the Number of Wells They Manage: 

State office: Alaska State Office; 
Field office: Alaska field offices; 
Number of wells: 176. 

State office: Arizona State Office; 
Field office: Arizona Strip Field Office; 
Number of wells: n/a[A]. 

State office: California State Office; 
Field office: Bakersfield Field Office; 
Number of wells: 7,584. 

State office: Colorado State Office; 
Field office: Colorado River Valley Field Office; 
Number of wells: 1,868. 

State office: Colorado State Office; 
Field office: Grand Junction Field Office; 
Number of wells: 568. 

State office: Colorado State Office; 
Field office: Little Snake Field Office; 
Number of wells: 555. 

State office: Colorado State Office; 
Field office: Royal Gorge Field Office; 
Number of wells: 445. 

State office: Colorado State Office; 
Field office: San Juan Public Lands Center; 
Number of wells: 433. 

State office: Colorado State Office; 
Field office: White River Field Office; 
Number of wells: 2,358. 

State office: Eastern States State Office; 
Field office: Jackson Field Office; 
Number of wells: 1,009. 

State office: Eastern States State Office; 
Field office: Milwaukee Field Office; 
Number of wells: 1,164. 

State office: Montana State Office; 
Field office: Great Falls Field Office; 
Number of wells: 1,451. 

State office: Montana State Office; 
Field office: Miles City Field Office; 
Number of wells: 1,480. 

State office: Montana State Office; 
Field office: North Dakota Field Office; 
Number of wells: 1,114. 

State office: Nevada State Office; 
Field office: Nevada State Office; 
Number of wells: 134. 

State office: New Mexico State Office; 
Field office: Carlsbad Field Office; 
Number of wells: 13,077. 

State office: New Mexico State Office; 
Field office: Farmington Field Office; 
Number of wells: 15,838. 

State office: New Mexico State Office; 
Field office: Las Cruces Field Office; 
Number of wells: n/a[B]. 

State office: New Mexico State Office; 
Field office: Oklahoma Field Office; 
Number of wells: 1,307. 

State office: New Mexico State Office; 
Field office: Roswell Field Office; 
Number of wells: 1,603. 

State office: Utah State Office; 
Field office: Moab Field Office; 
Number of wells: 1,306. 

State office: Utah State Office; 
Field office: Price Field Office; 
Number of wells: n/a[C]. 

State office: Utah State Office; 
Field office: Richfield Field Office; 
Number of wells: 18. 

State office: Utah State Office; 
Field office: Vernal Field Office; 
Number of wells: 6,478. 

State office: Wyoming State Office; 
Field office: Buffalo Field Office; 
Number of wells: 13,952. 

State office: Wyoming State Office; 
Field office: Casper Field Office; 
Number of wells: 3,504. 

State office: Wyoming State Office; 
Field office: Kemmerer Field Office; 
Number of wells: 830. 

State office: Wyoming State Office; 
Field office: Lander Field Office; 
Number of wells: 914. 

State office: Wyoming State Office; 
Field office: Newcastle Field Office; 
Number of wells: 1,545. 

State office: Wyoming State Office; 
Field office: Pinedale Field Office; 
Number of wells: 5,479. 

State office: Wyoming State Office; 
Field office: Rawlins Field Office; 
Number of wells: 2,338. 

State office: Wyoming State Office; 
Field office: Rock Springs Field Office; 
Number of wells: 1,500. 

State office: Wyoming State Office; 
Field office: Worland Field Office; 
Number of wells: 2,927. 

State office: Total; 
Number of wells: 92,955. 

Source: GAO analysis of AFMSS data, as of May 26, 2010. 

[A] Wells managed by the Arizona Strip Field Office are included in 
the total with the Farmington Field Office (New Mexico). 

[B] Wells managed by the Las Cruces Field Office are included in the 
total with the Roswell Field Office (New Mexico). 

[C] Wells managed by the Price Field Office are included in the total 
with the Moab Field Office (Utah). 

[End of table] 

BLM's Process for Oil and Gas Development on Federal Land: 

The Federal Land Policy and Management Act of 1976 requires BLM to 
develop resource management plans, known as land use plans, which 
identify parcels of land that will be available for oil and gas 
development. BLM then offers for lease parcels of land nominated by 
industry and the public as well as some the agency identifies. The 
number of acres covered by a lease varies: the maximum number covered 
is 2,560 acres for leases in the lower 48 states and 5,760 acres for 
leases in Alaska. Similarly, the number of wells on a lease can also 
vary from 1 to more than 1,000, and well depths can range from a few 
hundred feet to more than 26,000 feet deep. 

Operators who have obtained a lease must submit an application for a 
permit to drill (APD) to BLM before beginning to prepare land or 
drilling any new oil or gas wells.[Footnote 6] The complete permit 
application package is a lengthy and detailed set of forms and 
documents, which, among other things, must include proof of bond 
coverage and a surface use plan. This surface use plan must include a 
reclamation plan that details the steps operators propose to take to 
reclaim the site, including redistribution of topsoil, configuring the 
reshaped topography, and seeding or other steps to re-establish 
vegetation. However, operators generally do not have to submit cost 
estimates for completing the reclamation. 

In reviewing the APD, BLM (1) evaluates the operator's proposal to 
ensure that the proposed drilling plan conforms to the land use plan 
and applicable laws and regulations and (2) inspects the proposed 
drilling site to determine if additional site-specific conditions must 
be addressed before the operator can begin drilling. After BLM 
approves a drilling permit, the operator can drill the well and begin 
production.[Footnote 7] 

BLM's Bonding Regulations: 

The Mineral Leasing Act of 1920, as amended, requires that federal 
regulations ensure that an adequate bond is established before 
operators begin to prepare land for drilling to ensure complete and 
timely reclamation. Accordingly, BLM regulations require the operator 
to submit a bond in order to ensure compliance with all of the terms 
and conditions of the lease, including, but not limited to, paying 
royalties, plugging wells, and reclaiming disturbed land.[Footnote 8] 
To ensure operators meet legal requirements, including reclamation, 
BLM regulations require them to have one of the following types of 
bond coverage: 

* individual lease bonds, which cover all the wells an operator drills 
under one lease;[Footnote 9] 

* statewide bonds, which cover all of an operator's leases in one 
state;[Footnote 10] 

* nationwide bonds, which cover all of an operator's leases in the 
United States;[Footnote 11] or: 

* other bonds, which include both unit operator bonds that cover all 
operations conducted on leases within a specific unit agreement, and 
bonds for leases in the National Petroleum Reserve in Alaska.[Footnote 
12][Footnote 13] 

BLM accepts two types of bonds: surety bonds and personal bonds. A 
surety bond is a third-party guarantee that an operator purchases from 
a private insurance company approved by the Department of Treasury. 
The operator must pay a premium to the surety company to maintain the 
bond. These premiums can vary depending on various factors, including 
the amount of the bond and the assets and financial resources of the 
operator, among other factors. If the operator fails to reclaim the 
land they disturb, the surety company either pays the amount of the 
bond to BLM to help offset reclamation costs, or in some 
circumstances, BLM may allow the surety company to perform the 
required reclamation. A personal bond must be accompanied by one of 
the following financial instruments: 

* certificates of deposit issued by a financial institution whose 
deposits are federally insured, granting the Secretary of the Interior 
authority to redeem it in case of default in the performance of the 
terms and conditions of the lease; 

* cashier's checks; 

* certified checks; 

* negotiable Treasury securities, including U.S. Treasury notes or 
bonds, with conveyance to the Secretary of the Interior to sell the 
security in case of default in the performance of the lease's terms 
and conditions; or: 

* irrevocable letters of credit that are issued for a specific term by 
a financial institution whose deposits are federally insured and meet 
certain conditions. 

If the operator fails to reclaim the land they disturb, BLM redeems 
the certificate of deposit, cashes the check, sells the security, or 
makes a demand on the letter of credit in order to pay the reclamation 
costs. 

The regulations establish a minimum bond amount in order to ensure 
compliance with all legal requirements. As we reported in 2010, these 
minimum bond amounts were set in the 1950s and 1960s and have not been 
updated.[Footnote 14] Specifically, the bond minimum of $10,000 for 
individual bonds was last set in 1960, and the bond minimums for 
statewide bonds ($25,000) and for nationwide bonds ($150,000) were 
last set in 1951. 

BLM regulations require BLM to increase the bond amount when an 
operator applies for a new drilling permit who had previously failed 
to plug a well or reclaim land in a timely manner, resulting in BLM 
having to make a demand on a bond in the prior 5 years.[Footnote 15] 
For such an operator, BLM must require a bond in an amount equal to 
its cost estimate for plugging the well and reclaiming the disturbed 
area if BLM's cost estimate is higher than the regulatory minimum 
amount.
BLM regulations state that BLM officials may require an increase in 
the amount of any bond when the operator poses a risk because of 
factors that include, but are not limited to, a history of previous 
violations,[Footnote 16] a notice from ONRR of uncollected royalties 
due, or the total cost of plugging existing wells and reclaiming land 
exceeds the present bond amount according to BLM's estimates.[Footnote 
17] 

When a BLM field office determines that an increase in the bond amount 
is warranted, it forwards its recommendation to the BLM state office, 
which decides whether and how much to increase the bond amount. 

Idle and Orphan Wells: 

After production has ceased, the operator may delay performing 
reclamation and instead allow the well to remain idle for various 
reasons. For example, expected higher oil and gas prices may once 
again make the well economically viable to operate in the future, or 
the operator may decide to use the well for enhanced recovery 
operations. Enhanced recovery operations involve, for example, using 
the well to inject water into the oil reservoir and push any remaining 
oil to operating wells. Idle wells include: 

* Temporarily abandoned wells. These are wells that are physically or 
mechanically incapable of producing oil or gas of sufficient value to 
exceed direct operating costs but may have value for a future use. 
Operators must receive BLM approval prior to placing a well in 
temporarily abandoned status for more than 30 days. This approval, 
which lasts for up to 12 months, can be renewed annually at BLM's 
discretion. All temporarily abandoned wells must have current approval 
after the initial 30 days. 

* Shut-in wells. These wells are physically and mechanically capable 
of producing oil or gas in quantities that are economically viable but 
that have not produced for 30 days. According to BLM officials, 
operators do not have to obtain BLM approval to place wells in shut-in 
status. 

Wells become orphaned if an operator does not perform the required 
reclamation and if the bond is not sufficient to cover well plugging 
and surface reclamation and there are no other responsible or liable 
parties to do so. This situation may occur, for example, when an 
operator has declared bankruptcy. For orphan wells, BLM uses the bond 
and appropriated funds as necessary to complete the reclamation. As we 
reported in 2010, according to BLM data, the agency spent a total of 
about $3.8 million to reclaim 295 orphan wells in 10 states from 
fiscal years 1988 through 2009.[Footnote 18] BLM also estimated that 
there were an additional 144 orphan wells in seven states that needed 
to be reclaimed, with an estimated cost of approximately $1.7 million 
for 102 of these wells. 

According to BLM officials, idle wells have the potential to create 
environmental, safety, and public health hazards if they fall into 
disrepair, and they are at greater risk than other wells for becoming 
orphan wells. Therefore, these officials told us that it is important 
to manage idle wells so that they do not become orphan wells. The 
Energy Policy Act of 2005 (EPAct 2005) directs the Secretary of the 
Interior, in cooperation with the Secretary of Agriculture, to 
establish a program to remediate, reclaim, and close idle or orphan 
oil and gas wells located on federal land.[Footnote 19] For the 
purposes of this requirement, the act defines idle wells to be those 
wells that have been nonoperational for 7 years or longer and for 
which there is no anticipated beneficial use for the well. 
Specifically, the program must, among other things, 

* include a means of ranking idle or orphan well sites for priority in 
remediation, reclamation, and closure, based on public health and 
safety, potential environmental harm, and other land use priorities, 
and: 

* provide for the identification of the costs of remediation, 
reclamation, and closure from those providing a bond or other 
financial assurance required under state or federal law for an oil or 
gas well that is idle or orphan and provide for the recovery of those 
costs from those operators or entities providing the bond or other 
financial assurance or their sureties or guarantors.[Footnote 20] 

BLM Has Policies to Manage Potential Liabilities on Federal Land: 

BLM has developed two policies--one for bond adequacy and one for idle 
and orphan wells--to manage the potential liabilities on federal land. 
First, the bond adequacy policy directs BLM offices to review bonds 
and increase amounts as necessary to ensure, among other things, that 
the bond amount reflects the risk posed by the operator. Second, BLM's 
idle and orphan well policy, which implements EPAct 2005, directs 
field offices to review these wells and ensure they are either plugged 
and reclaimed or returned to production. 

BLM's Bond Adequacy Policy Directs BLM Field and State Offices to 
Regularly Review Bonds and Increase Them as Necessary: 

BLM has established a bond adequacy policy that directs its field and 
state offices to periodically review bonds and increase the bond 
amounts as necessary. This policy is documented in three instruction 
memorandums (IM) sent to the BLM state offices administering an oil 
and gas program.[Footnote 21] The first of these IMs--IM 2006-206, 
issued in August 2006--directs each BLM state office administering an 
oil and gas program to establish an action plan. The goal of these 
plans is to develop a process to ensure the review of operations on 
federal oil and gas leases, including steps to increase bond amounts 
when necessary. Two subsequent IMs--IM 2008-122, issued in May 2008, 
and IM 2010-161, issued in July 2010--continue and build on the bond 
adequacy policy established in IM 2006-206. Table 2 provides an 
overview of BLM's oil and gas bond adequacy policy based on these 
three IMs. 

Table 2: Overview of BLM Oil and Gas Bond Adequacy Policy: 

IM 2006-206: Oil and Gas Bond Adequacy Reviews (issued August 2006): 

Policy or action: Each state office administering an oil and gas 
program is to establish an action plan with a goal that operators on 
federal oil and gas leases are reviewed for risk assessment and bond 
adequacy. 

Goal: To develop a process to ensure review of operations on federal 
oil and gas leases and include steps to increase bond amounts when it 
is determined necessary. 

Bond adequacy and bond increase guidance: 
* Bond adequacy reviews should be performed when any of the following 
actions occur: 
- A record title is assigned as workload permits; 
- Operating rights are transferred as workload permits; 
- A notification of change of operator occurs as workload permits; 
- BLM field office staff perform an idle well liability review; 
- BLM field office staff determine that the operator poses a risk 
(e.g., operator compliance history, current level of plugging and 
surface reclamation liabilities); 
- An operator requests a bond to be released; 
- When BLM field office staff periodically review operating leases; 
* If the review reveals that an increase in bonding is necessary 
because the operator poses a risk, the field office staff must 
determine the adequate level of coverage. The judgment and experience 
of field staff is paramount in determining whether the bond should be 
increased; 
* The bond may be increased to any level specified by BLM field office 
staff, although the bond amount should not be increased solely on the 
number of wells on the lease. However, the bond amount cannot exceed 
the total of the estimated cost of plugging and reclamation, the 
amount of uncollected royalties due, plus the amount of monies owed 
due to previous violations remaining outstanding; 
* BLM staff are to be mindful of the need to maintain an acceptable 
risk level, yet not to place an undue burden on industry; 
* BLM staff determine whether the field office's recommendation to 
increase the bond is tenable and whether the existing bond amount has 
been verified as inadequate. If an operator's bond coverage is 
determined inadequate, the bonded party will be contacted and 
requested to increase its bonding or negotiate a plan to reduce 
plugging obligations or conduct reclamation work; 
* The increase may be to an existing statewide or nationwide bond, as 
well as an individual lease bond, to cover a specific liability on one 
or several federal leases. This type of bond increase can be 
accomplished via a bond rider that is reserved solely for the 
liability specified, so that other demands on the statewide or 
nationwide bond could not draw on that increased amount of the bond; 
* It is important that idle wells be reviewed and that continuous 
reclamation monitoring be conducted to identify potential problems and 
liabilities and to assess adequacy of existing bond amounts. 

IM 2008-122: Oil and Gas Bond Adequacy Reviews (issued May 2008): 

Policy or action: Each state office is to maintain and implement its 
action plan developed from IM 2006-206 so that operators on federal 
oil and gas leases are reviewed for risk assessment and bond adequacy. 

Goal: To ensure regular review of operations on federal oil and gas 
leases and include steps to increase bond amounts when it is 
determined necessary. 

Bond adequacy and bond increase guidance: 
* Maintains guidance as established in IM 2006-206, but modifies when 
the bond adequacy review should occur. Specifically, the bond adequacy 
review should occur when: 
- A record title is assigned; 
- Operating rights are transferred; 
- A notification of change of operator occurs; 
- BLM field office staff perform an idle well liability review; 
- BLM field office staff determine that the operator poses a risk 
(e.g., operator compliance history, current level of plugging and 
surface reclamation liabilities); 
- An operator requests a bond to be released; 
- When BLM field office staff periodically review operating leases; 
- A surety seeks to terminate a bond's period of liability; 
* Clarifies that BLM state office officials will determine whether the 
field office's recommendation to increase the bond is tenable and the 
existing bond amount has been verified as inadequate; 
* Reiterates that BLM is mindful of the need to maintain an acceptable 
risk level, yet not to place an undue burden on industry. 

Semiannual reporting requirement: At mid-year and year-end, the BLM 
state directors must report on the bonds increased during the previous 
6 months and the amount of any government expenditures to plug and 
reclaim wells. 

IM 2010-161: Federal Oil and Gas Bonds (issued July 2010): 

Policy or action: Each BLM state office will continue to review 
operations on federal oil and gas leases for risk assessment and bond 
adequacy in accordance with IM 2006-206. 

Goal: That the process established ensures review of operations on 
federal oil and gas leases and include steps to increase bond amounts 
when it is determined necessary. 

Bond adequacy and bond increase guidance: 
* Maintains guidance as established in IM 2006-206 and IM 2008-122, 
but: 
- Clarifies that the bond adequacy review should be performed when (1) 
record title is assigned, (2) operating rights are transferred, (3) a 
change of operator occurred, (4) the bondholder requests its release 
or decrease, (5) there is a periodic review of lease operations, and 
(6) when a surety seeks to terminate the bond's period of liability; 
- Further clarifies the BLM state office's role in the review process; 
- Specifies that increases to bonds to cover potential liabilities on 
a lease because of water impoundment structures, wells with 
significant actual or potential federal liabilities, surface 
production facilities, or other surface uses with significant 
reclamation liabilities will be accomplished by (1) increasing the 
face amount of a lease or unit bond or (2) a bond rider to a statewide 
or nationwide bond that specifies the designated liability so that 
other demands on the bond would not draw on that rider; 
* Additionally, calls for bond reviews to be documented in AFMSS and 
the lease file. 

Source: GAO analysis of BLM IM 2006-206, IM 2008-122, and IM 2010-161. 

[End of table] 

In summary, according to BLM policy, when the specified activities 
occur--for example, when record title or operating rights are 
transferred or when operators change--BLM field office staff must 
perform a review to determine whether the existing bond amount is 
adequate. When determining bond adequacy, BLM field staff are to take 
into account a number of factors, including, but not limited, to the 
following: 

* Liabilities. Liabilities may include ponds containing excess water 
and other materials produced from the well, wells with significant 
actual or potential liabilities, surface production facilities, or 
other surface uses with significant reclamation liabilities. The 
policy states that it is important that idle wells be reviewed to 
identify potential problems and liabilities and to assess adequacy of 
existing bond amounts. 

* A history of previous violations. Previous violations may include 
failing to comply with the lease terms and notices or orders issued by 
BLM, particularly with regard to the proper plugging and abandonment 
of wells or reclamation of the disturbed surface area. 

* Unique or unusual conditions. Unique or unusual conditions may occur 
either in the planned drilling operations or in the surrounding 
environment that will make the operations potentially more hazardous 
or the potential for significant environmental damage resulting from 
an accident. 

* Unpaid royalties. BLM receives a notice from ONRR that royalties are 
due. 

* Costs higher than bond amount. As estimated by BLM field staff, the 
total cost of plugging existing wells and reclaiming land exceeds the 
bond amount. 

Taking these conditions into account, the policy gives broad 
discretion to BLM field office staff to determine if a bond is 
adequate or should be increased. For example, if, while performing a 
bond adequacy review, BLM field staff determine that the operator 
poses a risk because the cost of well plugging and reclamation exceeds 
the bond amount, BLM can require an increase to the existing bond to 
cover the potential liabilities. The policy also allows BLM field 
staff to reduce the amount of the bond if the potential federal 
liability is reduced, but not to a level below the regulatory minimums. 

When it has been determined that a bond amount is inadequate, BLM 
policy states that the bond may be increased to any amount specified 
by BLM staff. While the policy does not specify how the exact bond 
increase amount is determined, it stipulates that the bond amount 
should not be increased solely on the number of wells on the lease. 
Moreover, the bond amount is not to, in any circumstances, exceed the 
total of the estimated cost of plugging and reclamation, the amount of 
uncollected royalties due, and the amount of monies owed to the 
federal government due to outstanding violations. BLM policy stresses 
that the judgment and experience of its staff is paramount in deciding 
whether a bond needs to be increased or is adequate. When BLM field 
staff determine that a bond increase is warranted, BLM state office 
officials review the proposed increase and process or deny it. 

According to BLM's 2006 and 2008 bond adequacy policies, BLM is 
"mindful" of the need to maintain an acceptable risk level, yet to not 
place an undue financial burden on operators. Industry officials told 
us that increasing bond amounts for small operators can be burdensome 
in that surety companies may be unwilling to provide small operators a 
surety bond without a financial audit of their business, which in some 
circumstances can cost the operator between $25,000 and $30,000. As a 
result, these officials told us that small operators frequently rely 
on personal bonds to meet BLM's bonding requirements, which in some 
circumstances can further tie-up their already limited financial 
resources and impair their ability to perform the required 
reclamation. Further, BLM officials told us that in recognition of the 
potential burden on small operators, they may work directly with a 
small operator to develop and implement a plan for having the operator 
reduce their risk instead of requesting a bond increase. 

BLM's Idle and Orphan Well Policy Directs Field Offices to Review 
These Wells and Ensure They Are Either Plugged or Returned to 
Production: 

By issuing IM 2007-192 in September 2007, BLM established a program to 
rank all idle and orphan oil and gas wells on federal land, as 
required by EPAct 2005. According to BLM officials the review process 
established by this policy is used to manage potential liabilities. 
[Footnote 22] The policy directs the field offices to rank idle and 
orphan wells and makes the field offices responsible for using the 
priority rankings to take action to have the idle wells either plugged 
and reclaimed or returned to production or service and to have the 
orphan wells properly plugged and the surface reclaimed. 

Specifically, under this policy the field offices are to develop an 
inventory of the idle and orphan wells under their jurisdiction and 
then rank them for priority in remediation, reclamation, and closure 
based on factors such as public health and safety, sensitive 
environmental resource, and other land use priorities. In order to aid 
the field offices with this work, IM 2007-192 provides guidance on 
procedures for determining priorities for plugging wells and 
reclaiming land. The policy contains factors for the field offices to 
use when determining the idle wells' priority ranking: (1) the 
percentage of idle to active wells;[Footnote 23] (2) the number of 
years the well has remained idle; (3) environmental, safety, and 
public health concerns; and (4) sensitive environmental resource and 
other land use priorities, such as the intensity of recreational use 
of the land and whether the well is located in a significant wildlife 
area. These factors are each assigned a score and the total sum is 
used to determine whether a well has a high-, medium-, or low-priority 
ranking. BLM field office officials are then expected to work with 
well operators to either plug these wells or return them to 
production, or they may use this information to help support an 
increase in the bond amount. 

For orphan wells, field offices are to evaluate 14 factors to 
determine the well's priority ranking. The following 13 individual 
factors have specific point scores associated with them; field office 
staff are to review each factor, assign a point score, and then total 
them. 

* Well leaking at the surface. 

* Well not leaking at surface--possible pressure. 

* Well bore configuration. 

* Age of the well. 

* Presence of surface contamination. 

* Presence of vessels containing fluid (e.g., storage tanks). 

* Hydrogen sulfide (H2S) concentration. 

* Proximity to surface water. 

* Proximity to water wells. 

* Contaminated water wells. 

* Proximity to residences or public buildings. 

* Sensitive environmental resources and other land use priorities. 

* Other environmental and safety concerns. 

The 14th factor used to determine an orphan well's priority ranking is 
the cost for plugging and reclaiming the oil or gas well. The field 
office may provide an estimate of this cost or use the standard 
estimate of $5 per foot to determine the estimated cost. The policy 
then directs each field office to send to the BLM Washington Office 
its priority ranking of orphan wells. According to IM 2007-192, the 
Washington Office staff reviews the information, develops a nationwide 
priority listing for all orphan wells on federal land, and allocates 
available funds to properly plug and reclaim the surface of these 
wells. 

BLM's idle and orphan well policy also directs each field office to 
develop an action plan for having these wells plugged or returned to 
production. The action plan is to include a timeline for when the 
field office expects to have its current inventory of idle wells 
properly plugged or returned to production. In addition, the action 
plan must discuss the field office's plan to manage wells that become 
idle in the future. 

BLM Has Not Consistently or Completely Implemented Its Policies for 
Managing Potential Liability: 

BLM field and state offices have not consistently or completely 
implemented BLM's policies for managing the oil and gas wells on 
federal land to reduce the likelihood that BLM will need to pay for or 
perform reclamation. According to our analysis of 33 survey responses 
from 48 field offices,[Footnote 24] these offices did not (1) 
consistently conduct bond adequacy reviews in accordance with BLM 
policy and their reliance on professional judgment has resulted in 
varying interpretations of the policy's criteria for increasing bond 
amounts, (2) consistently review all their idle and orphan wells or 
reduce their inventory of idle wells, and (3) develop consistent or 
complete plans for bond adequacy and idle and orphan well reviews. 

BLM Field Offices Have Not Always Conducted Bond Adequacy Reviews and 
Have Not Consistently Interpreted Criteria for Increasing Bonds: 

According to our analysis of the number of bond reviews reported by 33 
survey respondents, the field offices do not always regularly review 
bonds and increase bond amounts as necessary. BLM policy calls for 
field offices to conduct a bond adequacy review when certain events 
occur. For example, 13 of the 33 survey respondents reported that they 
either did not conduct any reviews or did not know the number of 
reviews they conducted for fiscal years 2005 through 2009. For 
example, the Vernal Field Office did not conduct any bond adequacy 
reviews during this period. According to officials we interviewed in 
the Vernal Field Office, they did not have sufficient staff resources 
to conduct any bond adequacy reviews, in part because of a backlog in 
processing APDs. Table 3 shows the number of bond adequacy reviews 
conducted by BLM field offices from fiscal years 2005 through 2009. 

Table 3: Number of Bond Adequacy Reviews, Fiscal Years 2005 through 
2009, by Field Office: 

Field office (state office): Alaska field offices (AK)[A]; 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Arizona Strip (AZ); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 1; 
2009: 0; 
Total reported: 1. 

Field office (state office): Bakersfield (CA); 
Bond adequacy reviews by fiscal year: 
2005: 39; 
2006: 104; 
2007: 127; 
2008: 128; 
2009: 69; 
Total reported: 467. 

Field office (state office): Buffalo (WY); 
Bond adequacy reviews by fiscal year: 
2005: 35; 
2006: 31; 
2007: 49; 
2008: 38; 
2009: 74; 
Total reported: 227. 

Field office (state office): Carlsbad (NM); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 1; 
2009: 0; 
Total reported: 1. 

Field office (state office): Casper (WY); 
Bond adequacy reviews by fiscal year: 
2005: 3; 
2006: 6; 
2007: 7; 
2008: 46; 
2009: 19; 
Total reported: 81. 

Field office (state office): Colorado River Valley (CO); 
Bond adequacy reviews by fiscal year: 
2005: 3; 
2006: 5; 
2007: 4; 
2008: 1; 
2009: 1; 
Total reported: 14. 

Field office (state office): Farmington (NM)[B]; 
Bond adequacy reviews by fiscal year: 
2005: 14; 
2006: 12; 
2007: 15; 
2008: 123; 
2009: 20; 
Total reported: 184. 

Field office (state office): Grand Junction (CO); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Great Falls (MT); 
Bond adequacy reviews by fiscal year: 
2005: 4; 
2006: 0; 
2007: 0; 
2008: 71; 
2009: 4; 
Total reported: 79. 

Field office (state office): Jackson (Eastern States); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 91; 
2009: 12; 
Total reported: 103. 

Field office (state office): Kemmerer (WY); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: n/a[C]; 
Total reported: 0. 

Field office (state office): Lander (WY); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Las Cruces (NM); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Little Snake (CO)[D]; 
Bond adequacy reviews by fiscal year: 
2005: 1; 
2006: 11; 
2007: 6; 
2008: 3; 
2009: 7; 
Total reported: 28. 

Field office (state office): Miles City (MT); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 55; 
2008: 133; 
2009: 126; 
Total reported: 314. 

Field office (state office): Milwaukee (Eastern States); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Moab (UT)[E]; 
Bond adequacy reviews by fiscal year: 2005: 
n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: n/a[C]; 
2009: n/a[C]; 
Total reported: 0. 

Field office (state office): Nevada State Office (NV)[F]; 
Bond adequacy reviews by fiscal year: 
2005: 1; 
2006: 2; 
2007: 6; 
2008: 2; 
2009: 5; 
Total reported: 16. 

Field office (state office): Newcastle (WY); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: n/a[C]; 
2009: 6; 
Total reported: 6. 

Field office (state office): North Dakota (MT); 
Bond adequacy reviews by fiscal year: 
2005: 7; 
2006: 10; 
2007: 14; 
2008: 4; 
2009: 4; 
Total reported: 39. 

Field office (state office): Oklahoma (NM); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 3; 
2007: 2; 
2008: 0; 
2009: 1; 
Total reported: 6. 

Field office (state office): Pinedale (WY); 
Bond adequacy reviews by fiscal year: 
2005: 2; 
2006: 4; 
2007: 15; 
2008: 5; 
2009: 24; 
Total reported: 50. 

Field office (state office): Price (UT); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: n/a[C]; 
2009: 0; 
Total reported: 0. 

Field office (state office): Rawlins (WY); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: 8; 
2008: 8; 
2009: 8; 
Total reported: 24. 

Field office (state office): Richfield (UT); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: n/a[C]; 
2009: n/a[C]; 
Total reported: 0. 

Field office (state office): Rock Springs (WY); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: 20; 
2009: 15; 
Total reported: 35. 

Field office (state office): Roswell (NM); 
Bond adequacy reviews by fiscal year: 
2005: n/a[C]; 
2006: n/a[C]; 
2007: n/a[C]; 
2008: n/a[C]; 
2009: n/a[C]; 
Total reported: 0. 

Field office (state office): Royal Gorge (CO); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): San Juan Public Lands Center (CO)[G]; 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 7; 
2007: 18; 
2008: 11; 
2009: 14; 
Total reported: 50. 

Field office (state office): Vernal (UT); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): White River (CO); 
Bond adequacy reviews by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Worland (WY)[H]; 
Bond adequacy reviews by fiscal year: 
2005: 5; 
2006: 0; 
2007: 9; 
2008: 7; 
2009: 14; 
Total reported: 35. 

Field office (state office): Total; 
Bond adequacy reviews by fiscal year: 
2005: 114; 
2006: 195; 
2007: 335; 
2008: 693; 
2009: 423; 
Total reported: 1,760. 

Source: GAO analysis of BLM data. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] This survey response includes BLM's Rio Puerco Field Office. 

[C] Information not available. 

[D] This survey response includes BLM's Kremmling Field Office. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[H] This survey response includes BLM's Cody Field Office. 

[End of table] 

In addition, the total number of bond adequacy reviews conducted by 
the field offices varied substantially each year, from a low of 114 in 
fiscal year 2005 to a high of 693 in fiscal year 2008. BLM officials 
said that the fluctuation in the number of reviews is typically the 
result of a higher priority placed on other BLM activities such as 
completing APDs. As table 3 also shows, the bulk of the bond adequacy 
reviews was conducted by just a few field offices. In particular, 
Bakersfield and Miles City conducted 781, or nearly 45 percent, of the 
total reported 1,760 bond adequacy reviews conducted by the field 
offices included in our survey from fiscal years 2005 through 2009. 

Lack of resources was a recurring theme at many of the 16 field 
offices where we interviewed field office staff. For example, 
officials at 14 field offices reported that they face resource 
limitations for conducting bond adequacy reviews. Officials in seven 
field offices told us that their offices had not reviewed bonds in all 
instances called for in the policy, in part because of a lack of staff 
resources.[Footnote 25] Similarly, at 13 field offices, officials told 
us that they found it difficult to conduct bond adequacy reviews 
because BLM headquarters and state offices give priority to other work 
activities through annual work plans. 

We found that while many field offices use similar methodologies for 
evaluating bond adequacy and deciding whether to increase bonds, some 
apply other approaches. Some field office officials told us that they 
generally rely on their professional judgment to evaluate bond 
adequacy, as allowed by BLM policy. These officials said that they 
typically gather and evaluate a variety of information, such as the 
location and depth of the wells, the ratio of idle wells to active 
wells, and whether any money is owed by the operator for previous 
violations, as well as any other pertinent or unusual facts regarding 
the operator or the wells. They then use their professional judgment 
to decide (1) whether to keep the current amount of the bond; (2) work 
with the operator to reduce the risk the operator poses, for example, 
by developing a plan and a schedule to plug wells or bring wells back 
into production; or (3) increase the bond. Officials in two field 
offices stated that their offices took the following additional steps 
when making bond adequacy determinations: 

* The Carlsbad Field Office evaluated the remaining oil and gas 
reserves available and the estimated remaining lifespan of the well-- 
known as the production decline curve--to determine when the well 
might become idle. 

* The Farmington Field Office developed an electronic spreadsheet for 
evaluating potential liability and automating the process of analyzing 
of data. The spreadsheet uses formulas to uniformly assess the number, 
depth, and production of wells; the bonding amount; the inflation 
rate; and operator compliance history. It then identifies whether 
there is a need to increase the bond and the amount of the bond 
increase. Officials in the Farmington Field Office told us that the 
goal is to use this spreadsheet to ensure that all operators are 
reviewed for bond adequacy at least once every 2 years. 

According to our analysis, BLM state offices, like the field offices, 
have varied in how they interpret BLM's policy for deciding whether to 
approve an increase to a bond amount requested by a field office. As 
mentioned earlier, BLM's 2006 and 2008 bond adequacy policies stated 
that "BLM is mindful of the need to maintain an acceptable risk level, 
yet not to place an undue burden on industry." However, the current 
policy does not include this statement and none of the policies define 
the term "acceptable risk" or offer guidance on when to increase a 
bond. Instead, the policy instructs BLM to rely on the judgment of BLM 
state office officials in deciding when to increase a bond, and we 
found that these officials have varied in their approaches to 
increasing bond amounts. For example, BLM state office officials in 
Colorado, Montana, Utah, and Wyoming told us that they generally 
interpreted BLM policy as only allowing bond increases when the 
operator is not in compliance, among other things. In contrast, 
officials in BLM's California State Office told us that in 2002 they 
broadly interpreted BLM regulations and policy as allowing them to 
increase bond amounts for all wells identified as a potential risk to 
the government. In coordination with the Bakersfield Field Office, 
they therefore raised the bond amounts on all but 40 of their more 
than 300 leases from regulatory minimum bond amounts to $20,000 for an 
individual bond and $75,000 for a statewide bond. In addition, in 
situations where an operator only has a nationwide bond, they require 
the operator to post a rider to the bond to cover their wells in 
California. This is because they were concerned that nationwide bonds 
could cover other wells and that other BLM state and field offices 
could draw upon them to reclaim orphan wells, leaving the wells in 
California without adequate bond coverage. BLM officials in the 
California state office were the only state level officials we 
interviewed who interpreted the policy in this manner. According to 
BLM headquarters officials responsible for overseeing the oil and gas 
program, the policy was intended to allow states some flexibility in 
making these decisions, and they have not done a comprehensive review 
of the implementation of the policy. 

BLM's Field Offices Have Not Reviewed All Their Idle and Orphan Wells 
and Vary in Their Ability to Reduce the Idle Well Inventory: 

According to our survey of BLM field offices, not all field offices 
have conducted reviews to identify wells that were idle or orphan on 
an annual basis as specified in BLM policy. In particular, 11 of the 
33 survey responses indicate that many field offices had not conducted 
reviews for at least one of the years from fiscal year 2005 through 
fiscal year 2009, and 16 responses indicate that several did not know 
how many wells they had reviewed for at least one of the years during 
this period. Furthermore, three field offices--Bakersfield, 
Farmington, and Worland--had reviewed 76 percent of the 15,660 wells 
reviewed by the field offices included in our survey.[Footnote 26] 
Table 4 shows the number of wells each field office reviewed from 
fiscal years 2005 through 2009. 

Table 4: Number of Wells Reviewed under BLM's Idle and Orphan Well 
Policy by Field Office, Fiscal Years 2005 through 2009: 

Field office (state office): Alaska field offices (AK)[A]; 
Wells reviewed by fiscal year: 2005: 
n/a[B]; 
2006: n/a[B]; 
2007: 31; 
2008: 36; 
2009: 31; 
Total reported: 98. 

Field office (state office): Arizona Strip (AZ); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Bakersfield (CA); 
Wells reviewed by fiscal year: 
2005: 585; 
2006: 1,059; 
2007: 1,092; 
2008: 807; 
2009: 975; 
Total reported: 4,518. 

Field office (state office): Buffalo (WY); 
Wells reviewed by fiscal year: 
2005: 84; 
2006: 99; 
2007: 85; 
2008: 153; 
2009: 109; 
Total reported: 530. 

Field office (state office): Carlsbad (NM); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: 95; 
Total reported: 95. 

Field office (state office): Casper (WY); 
Wells reviewed by fiscal year: 
2005: 2; 
2006: 0; 
2007: 4; 
2008: 45; 
2009: 49; 
Total reported: 100. 

Field office (state office): Colorado River Valley (CO); 
Wells reviewed by fiscal year: 
2005: 9; 
2006: 13; 
2007: 22; 
2008: 26; 
2009: 16; 
Total reported: 86. 

Field office (state office): Farmington (NM)[C]; 
Wells reviewed by fiscal year: 
2005: 1,000; 
2006: 1,000; 
2007: 1,000; 
2008: 1,000; 
2009: 1,000; 
Total reported: 5,000. 

Field office (state office): Grand Junction (CO); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: 7; 
2009: 7; 
Total reported: 14. 

Field office (state office): Great Falls (MT); 
Wells reviewed by fiscal year: 
2005: 59; 
2006: 8; 
2007: 31; 
2008: 113; 
2009: 132; 
Total reported: 343. 

Field office (state office): Jackson (Eastern States); 
Wells reviewed by fiscal year: 
2005: 8; 
2006: 5; 
2007: 2; 
2008: 1; 
2009: 5; 
Total reported: 21. 

Field office (state office): Kemmerer (WY); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: 12; 
Total reported: 12. 

Field office (state office): Lander (WY); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: n/a[B]; 
Total reported: n/a[B]. 

Field office (state office): Las Cruces (NM); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Little Snake (CO)[D]; 
Wells reviewed by fiscal year: 
2005: 1; 
2006: 5; 
2007: 9; 
2008: 4; 
2009: 12; 
Total reported: 31. 

Field office (state office): Miles City (MT); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: 55; 
2008: 133; 
2009: 126; 
Total reported: 314. 

Field office (state office): Milwaukee (Eastern States); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Moab (UT)[E]; 
Wells reviewed by fiscal year: 
2005: 20; 
2006: 20; 
2007: 20; 
2008: 30; 
2009: 50; 
Total reported: 140. 

Field office (state office): Nevada State Office (NV)[F]; 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: 30; 
2007: 52; 
2008: 110; 
2009: 10; 
Total reported: 202. 

Field office (state office): Newcastle (WY); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: 34; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: n/a[B]; 
Total reported: 34. 

Field office (state office): North Dakota (MT); 
Wells reviewed by fiscal year: 
2005: 27; 
2006: 4; 
2007: 42; 
2008: 49; 
2009: 33; 
Total reported: 155. 

Field office (state office): Oklahoma (NM); 
Wells reviewed by fiscal year: 
2005: 19; 
2006: 4; 
2007: 10; 
2008: n/a[B]; 
2009: 19; 
Total reported: 52. 

Field office (state office): Pinedale (WY); 
Wells reviewed by fiscal year: 
2005: 60; 
2006: 60; 
2007: 60; 
2008: 60; 
2009: 60; 
Total reported: 300. 

Field office (state office): Price (UT); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: 0; 
Total reported: 0. 

Field office (state office): Rawlins (WY); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: 200; 
2008: 200; 
2009: 200; 
Total reported: 600. 

Field office (state office): Richfield (UT); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 0; 
2007: 0; 
2008: 0; 
2009: 0; 
Total reported: 0. 

Field office (state office): Rock Springs (WY); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: 8; 
2009: 70; 
Total reported: 78. 

Field office (state office): Roswell (NM); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: n/a[B]; 
2007: 154; 
2008: n/a[B]; 
2009: n/a[B]; 
Total reported: 154. 

Field office (state office): Royal Gorge (CO); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: n/a[B]; 
Total reported: n/a[B]. 

Field office (state office): San Juan Public Lands Center (CO)[G]; 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 2; 
2007: 2; 
2008: 2; 
2009: 1; 
Total reported: 7. 

Field office (state office): Vernal (UT); 
Wells reviewed by fiscal year: 
2005: 0; 
2006: 0; 
2007: 290; 
2008: 116; 
2009: 22; 
Total reported: 428. 

Field office (state office): White River (CO); 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: n/a[B]; 
2009: n/a[B]; 
Total reported: n/a[B]. 

Field office (state office): Worland (WY)[H]; 
Wells reviewed by fiscal year: 
2005: n/a[B]; 
2006: n/a[B]; 
2007: n/a[B]; 
2008: 0; 
2009: 2,348; 
Total reported: 2,348. 

Field office (state office): Total; 
Wells reviewed by fiscal year: 
2005: 1,874; 
2006: 2,343; 
2007: 3,161; 
2008: 2,900; 
2009: 5,382; 
Total reported: 15,660. 

Source: GAO analysis of BLM data. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] Information not available. 

[C] This survey response includes BLM's Rio Puerco Field Office. 

[D] This survey response includes BLM's Kremmling Field Office. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[H] This survey response includes BLM's Cody Field Office. 

[End of table] 

BLM field office officials cited a number of reasons why field offices 
have not conducted reviews under the idle and orphan well policy. In 
addition to the shortage of resources and other higher priority work 
mentioned earlier, some officials told us that they do not have access 
to complete and accurate well data, which we believe can impact their 
ability to conduct well reviews. For example, officials in the Rock 
Springs Field Office in Wyoming told us that they rely on BLM's AFMSS 
data to determine which wells are idle. However, BLM officials have 
told us that well status data in AFMSS are not routinely updated on 
the basis of production data, which makes it difficult to identify 
idle wells from these data. In contrast, field offices that rely on 
well data that are compiled and updated by the state in which they are 
located are more easily able to identify idle well status. For 
example, the Farmington and Carlsbad field offices in New Mexico have 
access to data compiled by the New Mexico Oil Conservation District, a 
New Mexico state agency that regulates oil and gas wells. According to 
officials we interviewed, these state data are more complete, 
accurate, and user-friendly than BLM well data. 

Finally, field offices we surveyed reported mixed results in getting 
wells plugged or returned to production. For example, while three 
field offices--Buffalo, Carlsbad, and Casper--had plugged or returned 
to production more than 100 wells since fiscal year 2007, several 
offices we surveyed had not reduced their number of idle or orphan 
wells. In addition, officials in the Newcastle Field Office reported 
that due to staffing issues they did not know how many wells had been 
plugged or returned to production since fiscal year 2007. Table 5 
shows the actions taken by the field offices we surveyed to either 
plug or return wells to production since fiscal year 2007. 

Table 5: Number of Wells Plugged and Wells Returned to Production by 
Field Office, September 1, 2007 to November 9, 2010: 

Field office (state office): Alaska field offices (AK)[A]; 
Wells plugged: 2; 
Wells returned to production: 1. 

Field office (state office): Arizona Strip (AZ); 
Wells plugged: 2; 
Wells returned to production: 0. 

Field office (state office): Bakersfield (CA); 
Wells plugged: 4; 
Wells returned to production: 8. 

Field office (state office): Buffalo (WY); 
Wells plugged: 347; 
Wells returned to production: 0. 

Field office (state office): Carlsbad (NM); 
Wells plugged: 126; 
Wells returned to production: 69. 

Field office (state office): Casper (WY); 
Wells plugged: 55; 
Wells returned to production: 53. 

Field office (state office): Colorado River Valley (CO); 
Wells plugged: 5; 
Wells returned to production: 1. 

Field office (state office): Farmington (NM)[B]; 
Wells plugged: 10; 
Wells returned to production: 0. 

Field office (state office): Grand Junction (CO); 
Wells plugged: 22; 
Wells returned to production: 0. 

Field office (state office): Great Falls (MT); 
Wells plugged: 26; 
Wells returned to production: 24. 

Field office (state office): Jackson (Eastern States); 
Wells plugged: 0; 
Wells returned to production: 0. 

Field office (state office): Kemmerer (WY); 
Wells plugged: 11; 
Wells returned to production: 2. 

Field office (state office): Lander (WY); 
Wells plugged: 0; 
Wells returned to production: 7. 

Field office (state office): Las Cruces (NM); 
Wells plugged: 2; 
Wells returned to production: 0. 

Field office (state office): Little Snake (CO)[C]; 
Wells plugged: 16; 
Wells returned to production: 0. 

Field office (state office): Miles City (MT); 
Wells plugged: 11; 
Wells returned to production: 5. 

Field office (state office): Milwaukee (Eastern States); 
Wells plugged: n/a[D]; 
Wells returned to production: n/a[D]. 

Field office (state office): Moab (UT)[E]; 
Wells plugged: 30; 
Wells returned to production: 4. 

Field office (state office): Nevada State Office (NV)[F]; 
Wells plugged: 0; 
Wells returned to production: 0. 

Field office (state office): Newcastle (WY); 
Wells plugged: n/a[D]; 
Wells returned to production: n/a[D]. 

Field office (state office): North Dakota (MT); 
Wells plugged: 0; 
Wells returned to production: 0. 

Field office (state office): Oklahoma (NM); 
Wells plugged: 0; 
Wells returned to production: 0. 

Field office (state office): Pinedale (WY); 
Wells plugged: 33; 
Wells returned to production: n/a[D]. 

Field office (state office): Price (UT); 
Wells plugged: 7; 
Wells returned to production: 0. 

Field office (state office): Rawlins (WY); 
Wells plugged: 12; 
Wells returned to production: 5. 

Field office (state office): Richfield (UT); 
Wells plugged: 0; 
Wells returned to production: 0. 

Field office (state office): Rock Springs (WY); 
Wells plugged: 10; 
Wells returned to production: 0. 

Field office (state office): Roswell (NM); 
Wells plugged: 11; 
Wells returned to production: 0. 

Field office (state office): Royal Gorge (CO); 
Wells plugged: 4; 
Wells returned to production: 1. 

Field office (state office): San Juan Public Lands Center (CO)[G]; 
Wells plugged: 13; 
Wells returned to production: 2. 

Field office (state office): Vernal (UT); 
Wells plugged: n/a[D]; 
Wells returned to production: n/a[D]. 

Field office (state office): White River (CO); 
Wells plugged: 25; 
Wells returned to production: 11. 

Field office (state office): Worland (WY)[H]; 
Wells plugged: 1; 
Wells returned to production: 12. 

Field office (state office): Total; 
Wells plugged: 785; 
Wells returned to production: 205. 

Source: GAO analysis of BLM data. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] This survey response includes BLM's Rio Puerco Field Office. 

[C] This survey response includes BLM's Kremmling Field Office. 

[D] Information not available. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[H] This survey response includes BLM's Cody Field Office. 

[End of table] 

Some of the field offices that had taken steps to have wells plugged 
or returned to production were assisted by state programs that create 
funds for plugging and reclaiming idle and orphan wells. For example, 
New Mexico has created an oil and gas well reclamation fund that is 
paid for by production taxes on oil and gas operations. Using this 
fund, the BLM Carlsbad Field Office has plugged 26 orphan wells from 
August 1995 to December 2008. 

A Few BLM State Offices and Many Field Offices Have Not Created Action 
Plans for Bond Adequacy and Idle Wells, and the Plans Varied in the 
Elements They Contain: 

Two of BLM's 10 state offices (Alaska and Arizona) have not developed 
an action plan to help ensure that bonds are regularly reviewed for 
adequacy, as directed by BLM's policy in IM 2008-122. In addition, two 
of the other eight state offices' action plans--California and 
Wyoming--do not contain an element specified in the IM (i.e., 
indicates the steps to take when a bond increase is considered 
necessary). Some of the eight plans also vary in the elements they 
contain that would be useful to field offices in meeting the IM's 
goals, according to our analysis and comments provided by officials at 
BLM field offices. For example, none of the state bond adequacy action 
plans we reviewed contained guidance for field offices on how to 
determine the amount a bond should be increased by, an element that 
some field office officials we interviewed said would be helpful. 
Table 6 shows the elements that we identified as contained in or 
missing from the BLM state office's bond adequacy action plans. 

Table 6: Bond Adequacy Action Plans and the Elements They Contain for 
Eight State Offices: 

State office: California; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: No; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: No; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: No; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: No. 

State office: Colorado; 
Indicates when to conduct a bond adequacy review: No; 
Indicates how to determine if a bond increase is necessary: No; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: No; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

State office: Eastern States; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: No; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: Yes; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

State office: Montana; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: No; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: Yes; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

State office: Nevada; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: Yes; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: No; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: n/a[B]. 

State office: New Mexico; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: Yes; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: Yes; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

State office: Utah; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: Yes; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: Yes; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: Yes; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

State office: Wyoming; 
Indicates when to conduct a bond adequacy review: Yes; 
Indicates how to determine if a bond increase is necessary: No; 
Indicates the steps to take when a bond increase is deemed 
necessary[A]: No; 
Indicates how to decide how much the bond increase should be: No; 
Lists specific potential liabilities or risk factors that can lead to 
an increased bond: No; 
Indicates how the state office and field offices coordinate work on 
bond adequacy reviews: Yes. 

Sources: GAO analysis of BLM state office bond adequacy review action 
plans and BLM IM 2008-122. 

[A] BLM policy calls for this element to be included in state office 
action plans. 

[B] According to BLM Nevada's action plan, all bond adequacy 
determinations are performed at the state office level. 

[End of table] 

At the field office level, 22 of the 33 survey respondents reported 
that they did not have an idle well action plan as directed by BLM's 
IM 2007-192. While 11 field offices reported that they had developed 
idle well action plans, our review of these plans indicated that the 
plans lacked elements that the IM states should be included, such as 
the timeline for having its current inventory of idle wells properly 
plugged or returned to production. Table 7 shows the elements 
contained in or missing from the BLM field office's idle well action 
plans for the 11 field offices that had developed such a plan. 

Table 7: Idle Well Action Plans at 11 Field Offices and the Elements 
They Contain, by Field Office: 

Field office (state office): Bakersfield (CA); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: 
Yes; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): Grand Junction (CO); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: Yes; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): Royal Gorge (CO); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: Yes; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: 
Yes; 
Discusses plan to manage wells which become idle in the future[A]: Yes. 

Field office (state office): White River (CO); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): Great Falls (MT); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: No; 
Sets priorities for addressing the current inventory of idle wells: 
Yes; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): Miles City (MT); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: n/a[B]; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: n/a[B]; 
Sets priorities for addressing the current inventory of idle wells: 
n/a[B]; 
Discusses plan to manage wells which become idle in the future[A]: Yes. 

Field office (state office): Nevada State Office (NV)[C]; 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: No; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): Farmington (NM); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: No; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Field office (state office): North Dakota (MT); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: Yes. 

Field office (state office): Casper (WY); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: Yes; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: Yes; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: Yes. 

Field office (state office): Rock Springs (WY); 
Establishes a timeline to have the current inventory of idle wells 
plugged or returned to production[A]: No; 
Indicates steps to be taken to have the current inventory of idle 
wells plugged or returned to production: No; 
Sets priorities for addressing the current inventory of idle wells: No; 
Discusses plan to manage wells which become idle in the future[A]: No. 

Sources: GAO analysis of BLM field office idle well review action 
plans and BLM IM 2007-192. 

[A] BLM policy call for these elements to be included in field office 
action plans. 

[B] According to the Miles City Field Office's plan, the office does 
not have any idled or orphaned wells as defined in IM 2007-192. 

[C] This covers BLM's Egan, Humboldt River, Mount Lewis, Schell, 
Stillwater, Tonopah, and Tuscarora field offices. 

[End of table] 

BLM Faces Challenges in Managing the Potential Liability on Federal 
Land: 

According to most field office officials we interviewed, they face 
challenges in two interrelated areas for managing potential liability 
on federal land. First, BLM's bonding system--including the minimum 
bond amounts and inconsistent interpretation of policy for increasing 
bond amounts--impairs BLM's ability to manage potential liability. 
Second, limitations with BLM data restrict the agency's ability to 
evaluate potential liability and measure agency performance in 
managing potential liabilities on federal land. 

BLM's Bonding System Impairs the Agency's Ability to Manage BLM's 
Potential Liability: 

At 15 of the 16 field offices, BLM officials we interviewed noted 
challenges associated with the agency's outdated minimum bonding 
amounts. Specifically, the bond minimum of $10,000 for individual 
bonds was last set in 1960, and the bond minimums for statewide bonds 
and for nationwide bonds--$25,000 and $150,000 respectively--were last 
set in 1951. As we reported in 2010, if adjusted to 2009 dollars, 
these minimum amounts would be $59,360 for an individual bond, 
$176,727 for a statewide bond, and $1,060,364 for a nationwide bond. 
[Footnote 27] Figure 2 shows the current amounts set in 1951 and 1960 
and these amounts adjusted to 2009 dollars. 

Figure 2: Current Individual, Statewide, and Nationwide Bond Minimums 
Adjusted to 2009 Dollars: 

[Refer to PDF for image: vertical bar graph] 

Bond: Individual bond; 
Bond minimum: $10,000; 
Bond minimum in 2009 dollars: $59,360. 

Bond: Statewide bond; 
Bond minimum: $25,000; 
Bond minimum in 2009 dollars: $175,727. 

Bond: Nationwide bond; 
Bond minimum: $150,000; 
Bond minimum in 2009 dollars: $1,060,364. 

Source: GAO analysis of BLM data. 

[End of figure] 

According to BLM officials we interviewed at 12 of the 16 field 
offices, these minimum bond amounts are inadequate for managing 
potential liability. This is because these minimum amounts may not be 
sufficient to serve as an incentive to encourage operators to comply 
with plugging and reclamation requirements and the cost to plug and 
reclaim a well site may far outweigh the value of the bond. For 
example, these officials told us that the cost to plug a well ranges 
from approximately $2.50 to $20 per foot depth of well and that wells 
can range from being just a few hundred feet deep to more than 26,000 
feet deep. In addition, the reclamation costs can range from $200 to 
$15,000 per acre. In other situations, these officials noted, the cost 
to plug and reclaim a single well may cost more than $100,000, and it 
can cost more than $10,000 simply to get a work crew to the well site. 
Consequently, in most circumstances, a $10,000 individual lease bond 
is insufficient to cover the plugging and reclamation costs for one 
well, according to the officials we interviewed. 

Given these factors, a few field office officials we surveyed noted 
that some operators, particularly small, independent operators with 
wells producing only small amounts of oil and gas, may be inclined to 
declare bankruptcy and default on the bond rather than pay to properly 
plug and reclaim the well site. These officials also told us that 
raising bond amounts for these small operators may in some situations 
make matters worse because the operators may not be able to provide 
the higher bond amount, and BLM's effort to seek a bond increase may 
only hasten their decision to declare bankruptcy. To avoid this 
situation, BLM officials told us that they must devote significant 
time and resources to supervising these small operators and persuading 
them to properly plug and reclaim their wells, which places a drain on 
staff resources. Officials at 12 of the 16 field offices reported that 
they had too few resources to effectively manage potential liability. 

Officials in 15 of the 16 field offices we interviewed said that they 
face challenges conducting bond adequacy reviews. They noted the 
following examples: 

* BLM staff have a limited amount of time available for conducting 
bond adequacy reviews because a significant amount of staff resources 
are needed to complete the process--potentially months of work--and 
BLM places a higher priority on other activities, such as processing 
APDs. 

* The criteria for increases outlined in IM 2008-122 are vague, 
creating ambiguity about whether a request for an increase should be 
submitted and whether it will be approved. 

* The BLM state office process for reviewing requests for a bond 
increase can, in some circumstances, be time consuming--sometimes 
taking a year or longer before a decision is made, by which time the 
conditions supporting the request may have changed or worsened. 

The Bakersfield Field Office in California was the only field office 
that did not report facing challenges conducting bond adequacy 
reviews. This is because this office is the only field office that 
raised bond amounts above the regulatory minimums for the majority of 
its bonds. 

Our analysis of data reported by the officials we surveyed indicates 
that about one-third of the field offices requested bond increases and 
many of the increases requested by field offices have not been 
approved by state offices. According to our survey of field offices, 
13 of the 33 survey respondents reported that they did not request any 
bond increases, and 3 survey respondents reported that they did not 
know the number of bond increases they had requested. The 17 survey 
respondents that did request bond increases from May 2008 through 
November 2010 sought 93 bond increases worth about $19 million, and 
BLM state offices approved 59 (63 percent) of these increases, worth 
about $7 million, or 38 percent of the total value of increases 
sought, as shown in table 8. 

Table 8: Bond Increases Requested and Approved from May 2008 through 
November 2010, by State Office: 

State office: Alaska; 
Number of bond increases requested by field offices: 0; 
Number of bond increases approved by state office: 0; 
Percent approved: n/a; 
Amount of bond increase requested by field offices: 0; 
Amount of bond increase approved by state office: 0; 
Percent approved: n/a. 

State office: Arizona; 
Number of bond increases requested by field offices: 0; 
Number of bond increases approved by state office: 0; 
Percent approved: n/a; 
Amount of bond increase requested by field offices: 0; 
Amount of bond increase approved by state office: 0; 
Percent approved: n/a. 

State office: California; 
Number of bond increases requested by field offices: 15; 
Number of bond increases approved by state office: 15; 
Percent approved: 100%; 
Amount of bond increase requested by field offices: $340,000; 
Amount of bond increase approved by state office: $340,000; 
Percent approved: 100%. 

State office: Colorado; 
Number of bond increases requested by field offices: 7; 
Number of bond increases approved by state office: 2; 
Percent approved: 29%; 
Amount of bond increase requested by field offices: $4,364,814; 
Amount of bond increase approved by state office: $139,000; 
Percent approved: 3%. 

State office: Eastern States; 
Number of bond increases requested by field offices: 0; 
Number of bond increases approved by state office: 0; 
Percent approved: n/a; 
Amount of bond increase requested by field offices: 0; 
Amount of bond increase approved by state office: 0; 
Percent approved: n/a. 

State office: Montana; 
Number of bond increases requested by field offices: 1; 
Number of bond increases approved by state office: 1; 
Percent approved: 100%; 
Amount of bond increase requested by field offices: $25,000; 
Amount of bond increase approved by state office: $25,000; 
Percent approved: 100%. 

State office: Nevada; 
Number of bond increases requested by field offices: 0; 
Number of bond increases approved by state office: 0; 
Percent approved: n/a; 
Amount of bond increase requested by field offices: 0; 
Amount of bond increase approved by state office: 0; 
Percent approved: n/a. 

State office: New Mexico; 
Number of bond increases requested by field offices: 48; 
Number of bond increases approved by state office: 29; 
Percent approved: 60%; 
Amount of bond increase requested by field offices: $4,495,500; 
Amount of bond increase approved by state office: $2,433,500; 
Percent approved: 54%. 

State office: Utah; 
Number of bond increases requested by field offices: 3; 
Number of bond increases approved by state office: 1; 
Percent approved: 33%; 
Amount of bond increase requested by field offices: $775,000; 
Amount of bond increase approved by state office: $125,000; 
Percent approved: 16%. 

State office: Wyoming; 
Number of bond increases requested by field offices: 19; 
Number of bond increases approved by state office: 11; 
Percent approved: 58%; 
Amount of bond increase requested by field offices: $9,130,230; 
Amount of bond increase approved by state office: $4,225,920; 
Percent approved: 46%. 

State office: Total; 
Number of bond increases requested by field offices: 93; 
Number of bond increases approved by state office: 59; 
Percent approved: 63%; 
Amount of bond increase requested by field offices: $19,130,544; 
Amount of bond increase approved by state office: $7,288,420; 
Percent approved: 38%. 

Source: GAO analysis of BLM data. 

[End of table] 

BLM Data Limitations Restrict the Agency's Ability to Evaluate 
Potential Liability and Measure Performance: 

We identified three limitations in BLM's data systems that restrict 
the ability of BLM field and state offices to evaluate potential 
liability and measure performance of BLM field offices' implementation 
of the agency's policies: (1) incomplete bond information in AFMSS, 
(2) unreliable field office counts of the number of idle wells, and 
(3) incomplete AFMSS data on the number of reviews for bond adequacy 
and idle wells.[Footnote 28] 

Incomplete Bond Information in AFMSS: 

According to our analysis of AFMSS data, of the approximately 93,000 
individual wells recorded in the database, more than 22,500 (about 24 
percent) lack an associated bond number. Consequently, BLM field 
office officials told us it is difficult to accurately determine the 
oil and gas wells covered by a particular bond. To address this 
problem, BLM has developed a process to link well data from AFMSS to 
bond data in the LR2000 Bond & Surety System--which contains data on 
the amount and value of bonds held by BLM--to provide field office 
officials conducting bond adequacy reviews with the number of wells 
covered by a particular bond. For this system to work, however, BLM 
field office staff must manually enter bond data into AFMSS, yet they 
are not required to do so. As a result, the data necessary to make 
this process useful for evaluating potential liability across field 
offices are incomplete. The link between AFMSS and the LR2000 Bond & 
Surety System could address this problem for future bond entries if 
BLM required field office staff to enter and maintain bond number data 
into AFMSS.[Footnote 29] 

In addition, BLM field office officials told us that it is difficult 
to evaluate which bonds are associated with which potential 
liabilities when the wells are covered by a statewide or nationwide 
bond because BLM field offices generally cannot access AFMSS data for 
wells in areas managed by other field offices. Therefore, the data 
available to them have been insufficient to fully evaluate all of the 
potential liabilities that are covered by a particular statewide or 
nationwide bond. The link between AFMSS and the LR2000 Bond & Surety 
System will not fully address this problem since the link only shows 
the number of wells associated with a bond, and does not show further 
details about the wells, such as their production status, age, or 
condition. 

Unreliable Counts of the Number of Idle Wells: 

The 33 BLM field offices that responded to our survey reported a total 
of about 2,300 idle wells that had been inactive for 7 years or more 
as of fiscal year 2009. However, according to our analysis of ONRR's 
Oil and Gas Operations Report (OGOR) data system, into which operators 
input monthly oil and gas production quantities, the number of idle 
wells on federal land under the jurisdiction of these offices is 
nearly double what was reported to us by BLM field offices--about 
4,600 wells.[Footnote 30] Table 9 shows the number of wells we 
identified as inactive for 7 years or more using OGOR data and the 
number of idle wells reported by the 33 BLM field offices. 

Table 9: Idle Wells Reported by BLM Field Offices and Calculated Using 
OGOR Data for Fiscal Year 2009, by Field Office: 

Field office (state office): Alaska field offices (AK)[A]; 
Idle wells reported to GAO: 6; 
Total idle wells as indicated by OGOR data: 37; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 31. 

Field office (state office): Arizona Strip (AZ); 
Idle wells reported to GAO: 0; 
Total idle wells as indicated by OGOR data: 0; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 0. 

Field office (state office): Bakersfield (CA); 
Idle wells reported to GAO: 153; 
Total idle wells as indicated by OGOR data: 1,398; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 1,245. 

Field office (state office): Buffalo (WY); 
Idle wells reported to GAO: 475; 
Total idle wells as indicated by OGOR data: 1,008; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 533. 

Field office (state office): Carlsbad (NM); 
Idle wells reported to GAO: 389; 
Total idle wells as indicated by OGOR data: 274; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -115. 

Field office (state office): Casper (WY); 
Idle wells reported to GAO: 121; 
Total idle wells as indicated by OGOR data: 259; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 138. 

Field office (state office): Colorado River Valley (CO); 
Idle wells reported to GAO: 7; 
Total idle wells as indicated by OGOR data: 12; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 5. 

Field office (state office): Farmington (NM)[B]; 
Idle wells reported to GAO: 11; 
Total idle wells as indicated by OGOR data: 55; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 44. 

Field office (state office): Grand Junction (CO); 
Idle wells reported to GAO: 114; 
Total idle wells as indicated by OGOR data: 101; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -13. 

Field office (state office): Great Falls (MT); 
Idle wells reported to GAO: 6; 
Total idle wells as indicated by OGOR data: 41; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 35. 

Field office (state office): Jackson (Eastern States); 
Idle wells reported to GAO: n/a[C]; 
Total idle wells as indicated by OGOR data: 43; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: n/a[C]. 

Field office (state office): Kemmerer (WY); 
Idle wells reported to GAO: 3; 
Total idle wells as indicated by OGOR data: 10; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 7. 

Field office (state office): Lander (WY); 
Idle wells reported to GAO: n/a[C]; 
Total idle wells as indicated by OGOR data: 174; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: n/a[C]. 

Field office (state office): Las Cruces (NM); 
Idle wells reported to GAO: 0; 
Total idle wells as indicated by OGOR data: 0; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 0. 

Field office (state office): Little Snake (CO)[D]; 
Idle wells reported to GAO: n/a[C]; 
Total idle wells as indicated by OGOR data: 27; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: n/a[C]. 

Field office (state office): Miles City (MT); 
Idle wells reported to GAO: 0; 
Total idle wells as indicated by OGOR data: 145; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 145. 

Field office (state office): Milwaukee (Eastern States); 
Idle wells reported to GAO: n/a[C]; 
Total idle wells as indicated by OGOR data: 2; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: n/a[C]. 

Field office (state office): Moab (UT)[E]; 
Idle wells reported to GAO: 78; 
Total idle wells as indicated by OGOR data: 103; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 25. 

Field office (state office): Nevada State Office (NV)[F]; 
Idle wells reported to GAO: 14; 
Total idle wells as indicated by OGOR data: 11; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -3. 

Field office (state office): Newcastle (WY); 
Idle wells reported to GAO: 183; 
Total idle wells as indicated by OGOR data: 258; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 75. 

Field office (state office): North Dakota (MT); 
Idle wells reported to GAO: 2; 
Total idle wells as indicated by OGOR data: 45; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 43. 

Field office (state office): Oklahoma (NM); 
Idle wells reported to GAO: 72; 
Total idle wells as indicated by OGOR data: 36; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -36. 

Field office (state office): Pinedale (WY); 
Idle wells reported to GAO: n/a[C]; 
Total idle wells as indicated by OGOR data: 53; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: n/a[C]. 

Field office (state office): Price (UT); 
Idle wells reported to GAO: 4; 
Total idle wells as indicated by OGOR data: 17; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 13. 

Field office (state office): Rawlins (WY); 
Idle wells reported to GAO: 36; 
Total idle wells as indicated by OGOR data: 66; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 30. 

Field office (state office): Richfield (UT); 
Idle wells reported to GAO: 0; 
Total idle wells as indicated by OGOR data: 0; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 0. 

Field office (state office): Rock Springs (WY); 
Idle wells reported to GAO: 69; 
Total idle wells as indicated by OGOR data: 84; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 15. 

Field office (state office): Roswell (NM); 
Idle wells reported to GAO: 153; 
Total idle wells as indicated by OGOR data: 125; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -28. 

Field office (state office): Royal Gorge (CO); 
Idle wells reported to GAO: 1; 
Total idle wells as indicated by OGOR data: 6; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 5. 

Field office (state office): San Juan Public Lands Center (CO)[G]; 
Idle wells reported to GAO: 27; 
Total idle wells as indicated by OGOR data: 29; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 2. 

Field office (state office): Vernal (UT); 
Idle wells reported to GAO: 205; 
Total idle wells as indicated by OGOR data: 169; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: -36. 

Field office (state office): White River (CO); 
Idle wells reported to GAO: 54; 
Total idle wells as indicated by OGOR data: 150; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 96. 

Field office (state office): Worland (WY)[H]; 
Idle wells reported to GAO: 141; 
Total idle wells as indicated by OGOR data: 183; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 42. 

Field office (state office): Total; 
Idle wells reported to GAO: 2,324; 
Total idle wells as indicated by OGOR data: 4,622; 
Difference between idle wells indicated by OGOR and the number 
reported by BLM field offices: 2,298. 

Source: GAO analysis of BLM data. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] This survey response includes BLM's Rio Puerco Field Office. 

[C] Information not available. 

[D] This survey response includes BLM's Kremmling Field Office. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[H] This survey response includes BLM's Cody Field Office. 

[End of table] 

BLM field offices did not question the accuracy of the OGOR data, but 
they noted three challenges associated with identifying idle wells 
that are likely the cause of the discrepancy. First, information on 
idle well status may be incomplete because BLM policy allows operators 
to keep wells in a shut-in status without alerting the field office 
that the well is not producing. According to our analysis of AFMSS 
data, about 1,600, or 32 percent, of the idle wells we identified from 
OGOR data are in shut-in status. However, this number may actually be 
higher because operators do not have to notify BLM when they place 
their well in shut-in status. As a result, BLM officials cannot solely 
rely on AFMSS data to accurately identify all wells that have been 
idle for 7 years or more, as directed by EPAct 2005 and BLM policy. 

Second, until October 1, 2010, a process BLM had developed in 2007 to 
link BLM's well data in AFMSS with oil and gas production data from 
ONRR's OGOR reports had not worked properly, according to BLM 
officials. OGOR data are based on information directly entered into an 
ONRR database by oil and gas operators. ONRR staff conduct data 
reliability checks and make corrections as appropriate. BLM officials 
told us that the problems with the linkage were addressed on October 
1, 2010. However, even with this link between OGOR and AFMSS, it is 
still difficult to reconcile the data from the two systems. 
Reconciliation requires staff to manually compare well status data in 
AFMSS with production data from OGOR. Officials in BLM field offices 
told us that this process can be time consuming, depending on the 
total number of wells that must be reviewed, and can involve months of 
work looking through significant quantities of data. 

Third, according to some BLM field office officials, while some field 
offices have access to other more reliable sources of production data 
gathered by state conservation commissions and the global energy 
information provider IHS,[Footnote 31] these data sources also have 
limitations. For example, they generally do not distinguish between 
wells on federal, state, and private land. To use these data, field 
offices typically have to reconcile the wells from the state and IHS 
data with federal well numbers contained in AFMSS to identify those 
wells overseen by BLM. 

In addition, OGOR data show that BLM has a significant number of long 
term idle wells--which BLM officials told us pose the greatest risk 
for causing environmental degradation. Our analysis of OGOR data as of 
July 7, 2010, shows that of the approximately 5,100 wells idle for 7 
years or longer, roughly 45 percent, or about 2,300 wells, have not 
produced oil or gas for more than 25 years. Figure 3 shows the total 
number of idle wells calculated using OGOR data, by the number of 
years they have been idle. 

Figure 3: Idle Wells on Federal Land, by Number of Years Idle, as of 
July 7, 2010: 

[Refer to PDF for image: pie-chart] 

1 year (1,706): 16%; 
2 years (1,380): 13%; 
3 years (962): 9%; 
4 years( 694): 6%; 
5 years (490): 5%; 
6 years (450): 4%; 
7 to 24 years (2,789): 26%; 
25 years or more (2,313): 21%. 

Source: GAO analysis of OGOR data. 

Note: We have aggregated the number of wells that have been idle for 
25 year or more because the ONRR data system does not contain annual 
well production data prior to 1983. 

[End of figure] 

Incomplete AFMSS Data on the Number of Reviews for Bond Adequacy and 
Idle Wells: 

Field offices vary in how they use AFMSS to record bond adequacy 
reviews; as a result, AFMSS data on the number of reviews for bond 
adequacy are inconsistently entered and therefore incomplete. This 
makes it difficult for BLM officials to track the efforts of BLM field 
offices in managing potential liability. Although BLM field office 
staff manually enter bond review data into AFMSS, the bond adequacy 
review policy did not instruct staff to do so until July 2010. In 
addition, as mentioned earlier, some field offices did not know the 
number of bond adequacy reviews they conducted in some fiscal years 
from 2005 through 2009. Consequently, the data that have been entered 
into AFMSS do not reflect the actual number of reviews that a field 
office may have conducted. For example, 8 of the 33 field offices 
survey respondents reported to us that they had conducted more bond 
adequacy reviews from fiscal years 2005 through 2009 than the total 
number recorded in AFMSS covering the period from May 1, 1990 through 
March 17, 2010. Table 10 shows the number of bond adequacy reviews 
reported to us by the BLM field offices we surveyed and the number of 
bond adequacy reviews recorded in AFMSS. 

Table 10: Bond Adequacy Reviews Reported by Field Offices From Fiscal 
Years 2005 through 2009 and the Total Number of Bond Adequacy Reviews 
In AFMSS from May 1, 1990 through March 17, 2010: 

Field office (state office): Alaska field offices (AK)[A]; 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 13; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Arizona Strip (AZ); 
Total number of bond adequacy reviews reported to GAO: 1; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Bakersfield (CA); 
Total number of bond adequacy reviews reported to GAO: 467; 
Total number of bond adequacy reviews in AFMSS: 101; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Buffalo (WY); 
Total number of bond adequacy reviews reported to GAO: 226; 
Total number of bond adequacy reviews in AFMSS: 271; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Carlsbad (NM); 
Total number of bond adequacy reviews reported to GAO: 1; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Casper (WY); 
Total number of bond adequacy reviews reported to GAO: 81; 
Total number of bond adequacy reviews in AFMSS: 84; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Colorado River Valley (CO); 
Total number of bond adequacy reviews reported to GAO: 13; 
Total number of bond adequacy reviews in AFMSS: 12; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Farmington (NM)[C]; 
Total number of bond adequacy reviews reported to GAO: 184; 
Total number of bond adequacy reviews in AFMSS: 31; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Grand Junction (CO); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 6; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Great Falls (MT); 
Total number of bond adequacy reviews reported to GAO: 79; 
Total number of bond adequacy reviews in AFMSS: 81; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Jackson (Eastern States); 
Total number of bond adequacy reviews reported to GAO: 103; 
Total number of bond adequacy reviews in AFMSS: 98; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Kemmerer (WY); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 16; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Lander (WY); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 35; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Las Cruces (NM); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Little Snake (CO)[D]; 
Total number of bond adequacy reviews reported to GAO: 28; 
Total number of bond adequacy reviews in AFMSS: 41; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Miles City (MT); 
Total number of bond adequacy reviews reported to GAO: 314; 
Total number of bond adequacy reviews in AFMSS: 26; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Milwaukee (Eastern States); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 3; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Moab (UT)[E]; 
Total number of bond adequacy reviews reported to GAO: n/a[B]; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Nevada State Office (NV)[F]; 
Total number of bond adequacy reviews reported to GAO: 16; 
Total number of bond adequacy reviews in AFMSS: 21; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Newcastle (WY); 
Total number of bond adequacy reviews reported to GAO: 6; 
Total number of bond adequacy reviews in AFMSS: 156; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): North Dakota (MT); 
Total number of bond adequacy reviews reported to GAO: 39; 
Total number of bond adequacy reviews in AFMSS: 62; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Oklahoma (NM); 
Total number of bond adequacy reviews reported to GAO: 6; 
Total number of bond adequacy reviews in AFMSS: 3; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Pinedale (WY); 
Total number of bond adequacy reviews reported to GAO: 50; 
Total number of bond adequacy reviews in AFMSS: 48; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Price (UT); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Rawlins (WY); 
Total number of bond adequacy reviews reported to GAO: 24; 
Total number of bond adequacy reviews in AFMSS: 2; 
Incomplete bond adequacy review data in AFMSS: [Check]. 

Field office (state office): Richfield (UT); 
Total number of bond adequacy reviews reported to GAO: n/a[B]; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Rock Springs (WY); 
Total number of bond adequacy reviews reported to GAO: 35; 
Total number of bond adequacy reviews in AFMSS: 59; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Roswell (NM); 
Total number of bond adequacy reviews reported to GAO: n/a[B]; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Royal Gorge (CO); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 26; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): San Juan Public Lands Center (CO)[G]; 
Total number of bond adequacy reviews reported to GAO: 50; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Vernal (UT); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: n/a[B]; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): White River (CO); 
Total number of bond adequacy reviews reported to GAO: 0; 
Total number of bond adequacy reviews in AFMSS: 4; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Field office (state office): Worland (WY)[H]; 
Total number of bond adequacy reviews reported to GAO: 35; 
Total number of bond adequacy reviews in AFMSS: 59; 
Incomplete bond adequacy review data in AFMSS: [Empty]. 

Source: GAO analysis of BLM data. 

Note: In this table, zero bond adequacy reviews means either that the 
field offices reported that they did not conduct any bond adequacy 
reviews or did not conduct reviews for some years and reported 
information not available for others. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] Information not available. 

[C] This survey response includes BLM's Rio Puerco Field Office. 

[D] This survey response includes BLM's Kremmling Field Office. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[H] This survey response includes BLM's Cody Field Office. 

[End of table] 

A similar discrepancy occurs with data for idle and orphan well 
reviews in part because BLM's policy does not direct field office 
staff to record idle and orphan well reviews in AFMSS. Consequently, 
the data that have been entered into AFMSS do not reflect the actual 
number of idle and orphan well reviews that a field office may have 
conducted. For example, 11 of the 33 field office survey respondents 
reported to us that they had conducted more idle and orphan well 
reviews from fiscal years 2005 through 2009 than the total number 
recorded in AFMSS covering the period from April 25, 2002 through 
March 12, 2010. In addition, of the almost 10,000 idle and orphan well 
reviews in AFMSS for all field offices, more than 68 percent of the 
records have blank date fields, making it impossible for BLM staff to 
know when an idle and orphan well review occurred by looking at data 
in AFMSS. Table 11 shows the number of idle and orphan well reviews 
reported to us by the BLM field offices we surveyed and the total 
number of idle and orphan well reviews recorded in AFMSS. 

Table 11: Idle and Orphan Well Reviews Reported from Fiscal Year 2005 
through Fiscal Year 2009, and Total Idle and Orphan Well Reviews In 
AFMSS from April 25, 2002 through March 12, 2010: 

Field office (state office): Alaska field offices (AK)[A]; 
Total Idle and orphan well reviews reported to GAO: 98; 
Total idle and orphan well reviews in AFMSS: 154; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Arizona Strip (AZ); 
Total Idle and orphan well reviews reported to GAO: 0; 
Total idle and orphan well reviews in AFMSS: n/a[B]; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Bakersfield (CA); 
Total Idle and orphan well reviews reported to GAO: 4,515; 
Total idle and orphan well reviews in AFMSS: 2,091; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Buffalo (WY); 
Total Idle and orphan well reviews reported to GAO: 530; 
Total idle and orphan well reviews in AFMSS: 2,444; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Carlsbad (NM); 
Total Idle and orphan well reviews reported to GAO: 95; 
Total idle and orphan well reviews in AFMSS: 333; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Casper (WY); 
Total Idle and orphan well reviews reported to GAO: 97; 
Total idle and orphan well reviews in AFMSS: 670; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Colorado River Valley (CO); 
Total Idle and orphan well reviews reported to GAO: 86; 
Total idle and orphan well reviews in AFMSS: 72; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Farmington (NM)[C]; 
Total Idle and orphan well reviews reported to GAO: 5,000; 
Total idle and orphan well reviews in AFMSS: 428; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Grand Junction (CO); 
Total Idle and orphan well reviews reported to GAO: 14; 
Total idle and orphan well reviews in AFMSS: 178; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Great Falls (MT); 
Total Idle and orphan well reviews reported to GAO: 343; 
Total idle and orphan well reviews in AFMSS: 211; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Jackson (Eastern States); 
Total Idle and orphan well reviews reported to GAO: 21; 
Total idle and orphan well reviews in AFMSS: 126; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Kemmerer (WY); 
Total Idle and orphan well reviews reported to GAO: 12; 
Total idle and orphan well reviews in AFMSS: 35; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Lander (WY); 
Total Idle and orphan well reviews reported to GAO: n/a[B]; 
Total idle and orphan well reviews in AFMSS: 302; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Las Cruces (NM); 
Total Idle and orphan well reviews reported to GAO: 0; 
Total idle and orphan well reviews in AFMSS: n/a[B]; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Little Snake (CO)[D]; 
Total Idle and orphan well reviews reported to GAO: 31; 
Total idle and orphan well reviews in AFMSS: 56; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Miles City (MT); 
Total Idle and orphan well reviews reported to GAO: 314; 
Total idle and orphan well reviews in AFMSS: 302; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Milwaukee (Eastern States); 
Total Idle and orphan well reviews reported to GAO: 0; 
Total idle and orphan well reviews in AFMSS: 37; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Moab (UT)[E]; 
Total Idle and orphan well reviews reported to GAO: 140; 
Total idle and orphan well reviews in AFMSS: 142; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Nevada State Office (NV)[F]; 
Total Idle and orphan well reviews reported to GAO: 202; 
Total idle and orphan well reviews in AFMSS: 12; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Newcastle (WY); 
Total Idle and orphan well reviews reported to GAO: 34; 
Total idle and orphan well reviews in AFMSS: 242; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): North Dakota (MT); 
Total Idle and orphan well reviews reported to GAO: 155; 
Total idle and orphan well reviews in AFMSS: 65; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Oklahoma (NM); 
Total Idle and orphan well reviews reported to GAO: 52; 
Total idle and orphan well reviews in AFMSS: 580; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Pinedale (WY); 
Total Idle and orphan well reviews reported to GAO: 300; 
Total idle and orphan well reviews in AFMSS: 88; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Price (UT)[G]; 
Total Idle and orphan well reviews reported to GAO: 0; 
Total idle and orphan well reviews in AFMSS: n/a[B]; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Rawlins (WY); 
Total Idle and orphan well reviews reported to GAO: 600; 
Total idle and orphan well reviews in AFMSS: 104; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): Richfield (UT); 
Total Idle and orphan well reviews reported to GAO: 0; 
Total idle and orphan well reviews in AFMSS: n/a[B]; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Rock Springs (WY); 
Total Idle and orphan well reviews reported to GAO: 78; 
Total idle and orphan well reviews in AFMSS: 108; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Roswell (NM); 
Total Idle and orphan well reviews reported to GAO: 154; 
Total idle and orphan well reviews in AFMSS: 362; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Royal Gorge (CO); 
Total Idle and orphan well reviews reported to GAO: n/a[B]; 
Total idle and orphan well reviews in AFMSS: 13; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): San Juan Public Lands Center (CO)[H]; 
Total Idle and orphan well reviews reported to GAO: 7; 
Total idle and orphan well reviews in AFMSS: 138; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Vernal (UT); 
Total Idle and orphan well reviews reported to GAO: 428; 
Total idle and orphan well reviews in AFMSS: 235; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Field office (state office): White River (CO); 
Total Idle and orphan well reviews reported to GAO: n/a[B]; 
Total idle and orphan well reviews in AFMSS: 247; 
Incomplete idle and orphan well review data in AFMSS: [Empty]. 

Field office (state office): Worland (WY)[I]; 
Total Idle and orphan well reviews reported to GAO: 2,348; 
Total idle and orphan well reviews in AFMSS: 108; 
Incomplete idle and orphan well review data in AFMSS: [Check]. 

Source: GAO analysis of BLM data. 

[A] This survey response includes BLM's Anchorage and Arctic field 
offices. 

[B] Information not available. 

[C] This survey response includes BLM's Rio Puerco Field Office. 

[D] This survey response includes BLM's Kremmling Field Office. 

[E] This survey response includes BLM's Monticello Field Office. 

[F] This survey response includes BLM's Egan, Humboldt River, Mount 
Lewis, Schell, Stillwater, Tonopah, and Tuscarora field offices. 

[G] Until fiscal year 2009, all idle well reviews for the Price Field 
Office were conducted and recorded in the Moab Field Office. 

[H] This survey response includes BLM's Dolores, Pagosa, and 
Uncompahgre field offices. 

[I] This survey response includes BLM's Cody Field Office. 

[End of table] 

Conclusions: 

To ensure that federal taxpayers do not have to cover the costs of 
reclamation for each of the approximately 93,000 oil and gas wells in 
BLM's inventory, BLM has established a number of policies. However, 
most BLM offices have not fully implemented these policies because 
they have not always conducted bond adequacy reviews, consistently 
interpreted the policy for increasing bonds, identified all idle or 
orphan wells on federal land, or made progress in reducing their 
inventory of these wells. These deficiencies have the potential to 
increase the federal government's exposure to paying for reclamation 
costs for idle and orphan wells on federal land. 

BLM's ability to effectively manage potential liabilities is further 
impaired by a number of interrelated challenges. Because minimum bond 
amounts have not been updated or adjusted for inflation in more than 
50 years, they may not be sufficient to serve as an incentive to 
encourage operators to comply with plugging and reclamation 
requirements and the cost to plug and reclaim a well site may far 
outweigh the value of the bond. As a result, BLM officials must devote 
additional time and resources to manage the potential liability, which 
is difficult given their limited resources and other agency 
priorities. This situation is further exacerbated by BLM's vague 
policy for increasing bond amounts, which field offices have 
interpreted differently, and have not led to consistent and regular 
bond increases. BLM staff are also challenged by a lack of complete, 
consistent, and reliable data that can help them readily evaluate 
potential liabilities, make informed decisions about them, and 
evaluate agency performance for conducting bond adequacy and idle and 
orphan well reviews. We believe that the challenges BLM faces in 
managing potential liabilities are interdependent and cannot be solved 
in a piecemeal fashion. Instead we believe that BLM needs a 
comprehensive approach to address these challenges in a holistic 
fashion that will ensure that the agency has (1) a complete 
understanding of the extent of the potential liability, (2) adequate 
bond amounts to ensure that operators and not taxpayers pay for 
reclamation, and (3) appropriate processes to ensure that the agency 
is able to effectively manage and reduce this liability. 

Recommendations for Executive Action: 

To better manage potential liability on federal land, we recommend 
that the Secretary of the Interior direct the Director of BLM to 
develop a comprehensive strategy to include four actions: 

* increasing regulatory minimum bonding amounts over time to 
strengthen bonding as a tool for ensuring operators' compliance, 

* revising the bond adequacy review policy to more clearly define 
terms and the conditions that warrant a bond increase, 

* implementing an approach for ensuring complete and consistent well 
records in AFMSS so that BLM field and state offices can better 
evaluate potential liability and improve decisionmaking, and: 

* implementing an approach for better monitoring agency performance in 
conducting reviews for bond adequacy and idle wells. 

Agency Comments and Our Evaluation: 

GAO provided Interior with a draft of this report for its review and 
comment. Interior concurred with all four of our recommendations and 
noted that, among other things, it has already started to take steps 
to improve the data in AFMSS to ensure the completeness and accuracy 
of these data. Interior's written comments are presented in appendix 
II of this report. 

We are sending copies of this report to the appropriate congressional 
committees, the Secretary of the Interior, the Director of BLM, and 
other interested parties. The report also is available at no charge on 
the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-3841 or mittala@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 major 
contributions to this report are listed in appendix III. 

Signed by: 

Anu K. Mittal: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Scope and Methodology: 

This appendix details the methods we used to examine the Department of 
the Interior's (Interior) Bureau of Land Management's (BLM) policies 
and efforts to ensure that the bonds for oil and gas wells are 
adequate to cover the cost of reclaiming land disturbed by oil and gas 
operations. Specifically, we were asked to (1) identify BLM's policies 
for managing potential federal oil and gas liabilities, (2) determine 
the extent to which BLM has implemented these policies, and (3) 
describe the challenges, if any, BLM faces in managing potential oil 
and gas well liability. 

To identify BLM's policies for managing potential liabilities, we 
first interviewed officials in BLM's Washington, D.C., headquarters 
office to identify the BLM policies intended to manage these potential 
liabilities. These officials identified policies in two areas: bond 
adequacy and idle and orphan wells. The bond adequacy policy, which 
implements the increased bond amount regulation, included 
instructional memorandums (IM) IM 2006-206, Oil and Gas Bond Adequacy 
Reviews; IM 2008-122, Oil and Gas Bond Adequacy Reviews; and IM 2010-
161 Federal Oil and Gas Bonds. The idle and orphan well policy 
included IM 2007-192, Priority Ranking of Orphaned and Idled Wells; 
Section 349(b) of the Energy Policy Act of 2005, which implements 
Section 349 of EPAct of 2005. We analyzed these policies to summarize 
the actions they outlined for BLM state and field offices. 

To determine the extent to which BLM has implemented its policies for 
managing potential liabilities, we reviewed laws and federal 
regulations related to onshore oil and gas bonding and idle wells on 
federal land and interviewed officials at BLM's Washington D.C., 
headquarters office. We developed a Web-based survey, which we sent to 
all 48 BLM field offices with an oil and gas program and received 
responses from all these offices. Because some field offices work 
together to implement these policies by sharing staff resources, 15 of 
the 48 field offices we surveyed combined their responses, resulting 
in a total of 33 survey responses. We also interviewed officials in 
the 16 BLM field offices that collectively manage more than 85 percent 
of the oil and gas wells on federal land, as well as officials in the 
corresponding 6 state offices in which the 16 field offices are 
located. We also visited 12 BLM field and state offices. Table 12 
shows the 10 BLM state offices and 48 field offices and notes which 
field offices combined their responses. 

Table 12: BLM State and Field Office Officials Surveyed, Interviewed, 
and Visited: 

State and field offices: Alaska State Office; 
Surveyed: [Empty]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Anchorage Field Office[A]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Arctic Field Office[A]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Arizona State Office; 
Surveyed: [Empty]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Arizona Strip Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: California State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Bakersfield Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Colorado State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Colorado River Valley Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Columbine Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Dolores Field Office[B]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Grand Junction Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Kremmling Field Office[C]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Little Snake Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Pagosa Field Office[B]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Royal Gorge Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: San Juan Public Lands Center[B]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Uncompahgre Field Office[B]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: White River Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Eastern States Office; 
Surveyed: [Empty]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Jackson Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Milwaukee Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Montana State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Great Falls Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Miles City Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: North Dakota Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Nevada State Office; 
Surveyed: [Empty]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Egan Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Humboldt River Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Mount Lewis Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Schell Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Stillwater Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Tonopah Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Tuscarora Field Office[D]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: New Mexico State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Carlsbad Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Farmington Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Las Cruces Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Oklahoma Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Rio Puerco Field Office[E]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Roswell Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Utah State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Moab Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Monticello Field Office[F]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Price Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Richfield Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Vernal Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Wyoming State Office; 
Surveyed: [Empty]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Buffalo Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Check]. 

State and field offices: Casper Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Cody Field Office[G]; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Kemmerer Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Lander Field Office; 
Surveyed: [Check]; 
Interviewed: [Empty]; 
Visited: [Empty]. 

State and field offices: Newcastle Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Pinedale Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Rawlins Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Rock Springs Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Worland Field Office; 
Surveyed: [Check]; 
Interviewed: [Check]; 
Visited: [Empty]. 

State and field offices: Total; 
Surveyed: 48; 
Interviewed: 22; 
Visited: 12. 

Source: GAO. 

[A] These offices combined their survey responses and are referred to 
as Alaska field offices throughout the report. 

[B] These offices combined their survey responses with Colorado's San 
Juan Public Lands Center Field Office. 

[C] This office combined its survey response with Colorado's Little 
Snake Field Office. 

[D] These offices combined their survey responses and are referred to 
as Nevada State Office throughout the report. 

[E] This office combined its survey response with the New Mexico's 
Farmington Field Office. 

[F] This office combined its survey response with the Utah's Moab 
Field Office. 

[G] This office combined its survey response with the Wyoming's 
Worland Field Office. 

[End of table] 

Among other things, we asked officials in the 48 BLM field offices we 
surveyed to provide information on the number of bond adequacy and 
idle well reviews conducted each fiscal year from 2005 to 2009. We 
also asked these officials whether their field office had created an 
idle well action plan and completed the ranking procedures outlined in 
the idle and orphan well instruction memorandum. 

We also asked the field office officials to provide information on the 
most current inventory of idle wells their office manages. To evaluate 
the accuracy and completeness of these data, we compared the 
information the field offices provided with the oil and gas well 
production data, referred to as Oil and Gas Operation Report (OGOR) 
data, from Interior's Office of Natural Resource Revenue (ONRR)-- 
formerly a component of the Minerals Management Service--on all wells 
that had been idle for 1 year or longer. The OGOR data was extracted 
by ONNR on July 7, 2010. We present this data of idle wells on federal 
land, broken out by the number of years idle, in figure 3. To compare 
the OGOR data to the data provided by BLM field offices, we limited 
our set of OGOR data to cover a period through fiscal year 2009--the 
most current year with complete BLM data. This comparison is presented 
in table 9. To assess the reliability of the OGOR data provided by 
ONRR, among other things, we electronically tested all elements 
related to our analysis and met with agency officials who administer 
the systems. We found that these data were sufficiently reliable for 
the purpose of this report. We analyzed the production data to 
determine which wells on federal land are idle and the length of time 
since they last produced oil or gas. 

In our Web-based survey, we also requested the BLM field offices to 
submit detailed information on requests for increases in bond amounts 
from May 1, 2008 to December 16, 2010. We asked the field offices for 
information on the amount of the requested increases and the 
disposition of the requests. We used this information to determine the 
total number of bond increases requested, the value of the requested 
bond increases, the percentage of requests that were approved, and the 
total value of approved bond increases. We also asked the field 
offices to provide information on the wells they have plugged or 
returned to production since September 1, 2007. We used this 
information to determine the progress BLM field offices have made in 
reducing their inventory of idle wells. We also analyzed the 
information officials in the 16 BLM field offices provided during our 
interviews on BLM policies and steps these officials had taken to 
implement these policies. If the officials had not fully implemented 
the policies, we asked them why they had not done so. 

The practical difficulties of developing and administering a survey 
may introduce errors--from how a particular question is interpreted, 
for example, or from differences in the sources of information 
available to respondents when answering a question. Therefore, we 
included steps in developing and administering the survey to minimize 
such errors. We obtained comments on a draft of the survey from 
officials in BLM's Washington, D.C., headquarters office. We also 
pretested the survey in person at three BLM field offices--
Bakersfield, California, and Carlsbad and Farmington, New Mexico. We 
conducted these pretests to check that (1) the questions were clear 
and unambiguous, (2) terminology was used correctly, (3) the 
information could feasibly be obtained, and (4) the survey was 
comprehensive and unbiased. We made changes to the content and format 
of the Web-based survey after these pretests, based on the feedback we 
received. 

To identify the challenges BLM faces in managing potential 
liabilities, we analyzed the information officials in the 16 BLM field 
offices and the corresponding six state offices provided during our 
interviews on what challenges they face, if any, in implementing BLM 
policies for managing the potential liability on federal land; whether 
they had sufficient tools and resources to implement the policies; and 
what their views were on BLM's bonding system and minimum bonding 
amounts. 

To assess challenges related to the electronic data available to BLM 
officials when evaluating and managing potential oil and gas 
liabilities, we requested electronic data, including OGORs from ONRR 
and data on bond adequacy reviews and idle well reviews from BLM's 
Automated Fluid Minerals Support System (AFMSS). The OGOR data was 
extracted by ONNR on July 7, 2010. The AFMSS data was extracted by BLM 
on March 17, 2010; May 26, 2010; and October 1, 2010. First, we 
analyzed the OGOR and AFMSS data to count the number of idle wells 
(i.e., wells that have not produced for 7 years more) as of fiscal 
year 2009 for each field office, and we compared these data with idle 
well data provided by the 33 field offices we surveyed. We also 
grouped the idle wells we identified by the number of years they have 
remained idle. Second, we counted the number of bond adequacy reviews 
and idle well reviews in AFMSS and compared them with the number of 
reviews reported by the BLM field offices in our Web-based survey. 
Third, to determine the number of well records without bond numbers, 
we selected current well records in AFMSS without any information on 
their associated bond numbers and counted them by their unique 10-
digit American Petroleum Institute number to identify individual wells 
that could not be easily associated with a bond. 

We present data from AFMSS regarding the number of wells managed by 
each of the 33 field offices. We believe AFMSS data are sufficiently 
reliable for this purpose although our audit work determined 
reliability issues for other AFMSS data used in other contexts. 

To better understand the perspectives of operators regarding BLM 
bonding requirements, we interviewed industry officials with the 
Independent Petroleum Association of New Mexico and the Interstate Oil 
and Gas Compact Commission. 

We conducted this performance audit from January 2010 to February 2011 
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 Interior: 

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

February 15 2011: 	 

Ms. Ann K. Mittal
Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20543: 

Dear Ms. Mittal: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office (GAO) draft report entitled, Oil and Gas Bonds: 
BLM Needs a Comprehensive Strategy to Better Manage Potential Oil and 
Gas Well Liability, (GAO-11-292). 

The Department of the Interior (DOI) concurs with all four 
recommendations. The Bureau of Land Management (BLM) has the primary 
responsibility for managing Federal onshore oil and gas and accounting 
for fluid mineral production, and thus is the responsible bureau. 

The BLM acknowledges GAO's concern in Recommendation I that the 
minimum bond amounts for oil and gas operations have not been updated 
in over 50 years. Although existing regulations provide BLM with the 
authority to set bond amounts higher than the regulatory minimum, the 
BLM will complete an evaluation of the appropriate minimum bonding 
amounts and increase minimum amounts through a rulemaking process. 

In addition to the actual bond amounts, it is important to note the 
other incentives that BLM's bonding system provides to ensure operator 
compliance and deter default on an operator's reclamation obligations. 
The BLM's oil and gas program uses a "performance" bonding system. By 
regulation, operators seeking approval of an Application for Permit to 
Drill, who within the previous 5 years have caused BLM to demand a 
bond or financial guarantee upon the operator's failure to plug and 
reclaim, are required to post a bond equal to the full cost of 
reclaiming the site. Further, bond holders who default and fail to 
reimburse the Bureau for the full cost of site reclamation may subject 
all of their leases under the bond to cancellation. Hence, apart from 
the bond amount, these regulations expose operators -- particularly 
those with extensive operations on Federal lands -- to potentially 
severe consequences for defaulting on their reclamation obligations 
under the lease. An increase in the minimum bond amounts would enhance 
the protections currently in place. 

In response to Recommendation 2, the band adequacy review policy will 
be updated to provide additional clarity to assist field offices in 
determining when to increase a bond. The BLM will explore options to 
standardize the process and factors to be considered when setting bond 
amounts. 

Recommendation 3 addresses the need for complete and consistent well 
records. Specifically, the GAO report references the need to document 
bond information such as the bond number. BLM's well records are 
maintained in the Automated Fluid Minerals Support System (AFMSS). As 
noted in the report, BLM has taken steps to improve bond information 
and documentation or bond adequacy review data by issuing Instruction 
Memorandum (IM) No. 2010-161, "Federal Oil and Gas Bonds." in July 
2010. This IM requires bond reviews to be documented in AFMSS and the 
lease file. 

In addition, improvements to documentation of well records in the 
AFMSS database should result from the issuance in August 2009 of the 
"Inspection and Enforcement Documentation and Strategy Development 
Handbook." The Handbook requires documentation of inspection and 
enforcement actions and well records necessary for bond review, such 
as the status of each well, production history, and noncompliance 
history. The BLM will continue to address the need for complete and 
consistent well records, including by more closely monitoring existing 
policy implementation related to data entry to ensure the completeness 
and accuracy of the data in AFMSS. 

In response to Recommendation 4, the above improvements will be used 
to develop an approach to better monitor agency performance in 
conducting reviews both for bond adequacy and idle well determinations. 

We appreciate your recommendations for improving the regulatory 
oversight of Federal oil and gas operations. If you have any questions 
about this response, please contact Mike Nedd, Assistant Director, 
Minerals and Realty Management at (202) 208-4201. 

Sincerely, 

Signed by: 

Wilma A. Lewis: 
Assistant Secretary: 
Land and Minerals Management: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Anu K. Mittal, (202) 512-3841 or mittala@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Andrea Wamstad Brown 
(Assistant Director), Jeffrey B. Barron, Casey L. Brown, Ying Long, 
Kevin Remondini, Jerome Sandau, JulieMarie Shepherd, Carol Herrnstadt 
Shulman, Jeanette Soares, and Walter Vance made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] BLM is responsible for managing about 250 million acres of surface 
federal land, as well as approximately 700 million acres of subsurface 
land. Approximately 58 million acres of federal subsurface land are 
located beneath privately owned land—a situation commonly known as a 
split estate. 

[2] For the purposes of this report, “operator” refers to lessees, 
owners of operating rights, and operators of an oil or gas operation 
unless indicated otherwise and “reclamation” refers to all of the 
actions and costs to reclaim a well site, including well plugging and 
surface reclamation, and to restore any lands or surface waters 
adversely affected by oil and gas operations. 

[3] In this report, we do not use “potential liability” in the legal 
or financial accounting sense. We also do not address how BLM 
recognizes and accounts for environmental liabilities in its financial 
statements. 

[4] GAO, Oil and Gas Bonds: Bonding Requirements and BLM Expenditures 
to Reclaim Orphaned Wells, [hyperlink, 
http://www.gao.gov/products/GAO-10-245] (Washington, D.C.: Jan. 27, 
2010). The 12 western states were Alaska, Arizona, California, 
Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, 
Washington, and Wyoming. 

[5] See appendix I for a list of the 48 field offices with an oil and 
gas program. 

[6] Land preparation involves, among other things, road construction, 
removal of topsoil, building a well drill pad, and digging pits to 
store waste drilling liquids. 

[7] In some circumstances, approval from state officials may also be 
required before operators can begin drilling and production. 

[8] 43 C.F.R. § 3104(a). 

[9] With the consent of the surety provider, an individual lease bond 
posted by a lessee may cover all operators on a lease. Otherwise, each 
operator on a lease must provide a separate bond covering just the 
wells operated by that operator. According to BLM officials, most 
leases have only one operator. 

[10] A statewide bond posted by a lessee can cover all well operators 
with the consent of the surety provider. 

[11] A nationwide bond posted by a lessee can cover all well operators 
with the consent of the surety provider. 

[12] Unit agreements refer to multiple lessees who unite to adopt and 
operate under a single plan for the development of any oil or gas 
pool, field, or like area. 

[13] The amount of a unit operator bond is determined on a case-by-
case basis by BLM officials, and the minimum amount of a National 
Petroleum Reserve in Alaska bond is set in regulation—not less than 
$100,000 for a single lease or not less than $300,000 for a 
reservewide bond (submitted separately or as a rider to an already 
existing nationwide bond). 

[14] [hyperlink, http://www.gao.gov/products/GAO-10-245]. 

[15] The increased bond amount is only required if the operator, and 
not the lessees or owners of operating rights, has failed to plug a 
well or reclaim lands. 

[16] Violations occur when an operator fails to comply with applicable 
laws, lease terms and conditions, the APD, or orders issued by BLM and 
violations may cause impacts on public health and safety, the 
environment, production accountability, or royalty income. 

[17] The increase in bond amount is only authorized when the operator, 
and not lessees or owners of operating rights, poses a risk. 

[18] [hyperlink, http://www.gao.gov/products/GAO-10-245]. The 10 
states where orphaned wells were reclaimed include California, 
Colorado, Montana, New Mexico, North Dakota, Oklahoma, Ohio, Utah, 
West Virginia, and Wyoming. 

[19] Pub. L. No. 109-58, § 349(b) (2005), codified at 42 U.S.C. § 
15907. EPAct 2005 also requires the program to remediate, reclaim, and 
close abandoned wells. Because BLM defines abandoned wells as those 
which have been properly plugged and have had final reclamation 
completed but have not been approved by the surface managing agency or 
those properly plugged that have not completed final reclamation, the 
agency has not included those wells in the program, and we do not 
discuss abandoned wells in this report. 

[20] EPAct of 2005 also requires BLM to conduct an orphaned well 
reclamation pilot program. Under this program, BLM is authorized, when 
issuing new oil and gas leases, to require lessees to remediate, 
reclaim, and close all orphaned wells on the leased land. BLM is also 
authorized to reimburse the lessee through a credit against the 
federal share of royalties or other means for the reasonable actual 
costs of remediation, reclamation, and well closure. In addition, BLM 
could provide such reimbursement for any lessee who reclaims an 
orphaned well on federal land for which the lessee is not legally 
responsible. 

[21] IM 2006-206, Oil and Gas Bond Adequacy Reviews; IM 2008-122, Oil 
and Gas Bond Adequacy Reviews; and IM 2010-161, Federal Oil and Gas 
Bonds. 

[22] IM 2007-192, Priority Ranking of Orphaned and Idled Wells; 
Section 349(b) of EPAct 2005. 

[23] The higher the percentage of idle to active wells, the greater 
the risk that the operator may not have the resources to reclaim the 
idle wells, according to BLM officials. 

[24] We surveyed all 48 BLM field offices with an oil and gas program. 
Because some field offices work together by sharing staff resources, 
15 of the 48 field offices we surveyed combined their responses with 
that of another field office, resulting in a total of 33 survey 
responses covering all 48 offices. 

[25] See table 2 for a list of events that should trigger a bond 
adequacy review. 

[26] Together, the Bakersfield, Farmington, and Worland field offices 
manage 26,349 wells, or about 28 percent of BLM’s 92,955 wells. 

[27] [hyperlink, http://www.gao.gov/products/GAO-10-245]. 

[28] AFMSS is the database that BLM uses to track oil and gas 
information on public land. It contains data on, among other things, 
lease ownership and well identification, location, and production. 

[29] The BLM Wyoming State Office has developed a system involving e-
mailing other state and field offices to identify potential 
liabilities associated with a statewide or nationwide bond. However, 
this process is not automated and is not used consistently throughout 
BLM. 

[30] EPAct 2005 defines an idle well as one which has been 
nonoperational for 7 years or more and for which there is no 
anticipated beneficial use for the well. For our analysis, we were 
unable to assess future economic benefit, and therefore relied on 
whether the well was inactive for 7 years or more to determine if it 
was idle. 

[31] IHS is an information services company based in Englewood, 
Colorado that, among other things, compiles and sells data on oil and 
gas well production. 

[End of section] 

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