Oil and Gas Lease Management:

BLM Could Improve Oversight of Lease Suspensions with Better Data and Monitoring Procedures

GAO-18-411: Published: Jun 4, 2018. Publicly Released: Jun 19, 2018.

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Oil and gas leases on federal land generate billions of dollars in revenues to the government. Lease holders typically have 10 years to begin drilling for oil and gas. However, the clock is stopped (sometimes for decades) and payments can be halted if the Bureau of Land Management suspends the lease—for example, due to permit issues or environmental reviews.

We looked at a sample of lease suspensions and found that BLM doesn't consistently monitor them or track the reasons for suspensions in their database. We recommended that BLM develop a procedure to monitor lease suspensions, and that it track the reasons for suspensions in its database.

Location of Oil and Gas Leases and Recorded Suspensions, as of September 30, 2016

This map shows Montana, Wyoming, Utah, Colorado, and New Mexico as the states with the most suspended leases.

This map shows Montana, Wyoming, Utah, Colorado, and New Mexico as the states with the most suspended leases.

Additional Materials:

Contact:

Frank Rusco
(202) 512-3841
ruscof@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

According to data at the end of fiscal year 2016 from the Bureau of Land Management (BLM), a small portion of oil and gas leases were suspended for various lengths of time (as shown below), but the reasons for the suspensions were difficult to determine. During a suspension, the government generally does not collect revenues from the lease. Determining the reasons for suspensions is difficult, in part because BLM does not require the inclusion of this information in its database. To obtain this information, BLM officials would have to review the official lease files, of which many are in hard copy. Under Standards for Internal Control in the Federal Government , management should use quality information to achieve the entity's objectives. BLM field officials GAO interviewed said that additional, more detailed information in the database on reasons for suspensions would be helpful in tracking lease suspensions. By including a data field in the database to record the reasons for suspensions, BLM could better ensure that federal lands are not being inappropriately kept from development—potentially foregoing revenue—or from other valuable uses of public lands.

Active Oil and Gas Leases and Leases Recorded as in Suspension by Length of Suspension, as of September 30, 2016

Active Oil and Gas Leases and Leases Recorded as in Suspension by Length of Suspension, as of September 30, 2016

Note: Numbers represented in the figure have been rounded.

The approach BLM uses to monitor lease suspensions does not ensure consistent and effective oversight because BLM does not have procedures in place for monitoring. BLM state offices generally delegate responsibility for monitoring lease suspensions to their field offices. Officials from 12 selected field offices in two states with relatively large numbers of lease suspensions reported various frequencies in their monitoring of suspensions, ranging from every few months to rarely or not at all. In the absence of BLM monitoring procedures, field officials have discretion in how and when to monitor. By developing procedures for monitoring lease suspensions, including when to conduct monitoring efforts, BLM could better ensure that lease suspensions in effect are warranted.

Why GAO Did This Study

Oil and gas leases on federal lands generate billions of dollars in rents and royalty payments for the federal government each year, but these revenues can be reduced if leases are suspended (i.e., placed on hold). Questions have been raised about whether some suspensions, particularly those in effect for more than 10 years, may hinder oil and gas production or adversely affect the use of federal lands for other purposes, such as recreation.

GAO was asked to review oil and gas lease suspensions on federal lands managed by BLM. This report examines, among other things, (1) the extent of and reasons for such suspensions and (2) the approach BLM uses to monitor the status of lease suspensions. GAO analyzed all data on suspensions in a BLM database and the official lease files for a nongeneralizable sample of 48 leases recorded as suspended in, Montana and Wyoming, which GAO selected based in part on the large number of suspensions these states had. GAO also reviewed BLM documents and interviewed BLM officials.

What GAO Recommends

To better ensure that federal lands are not being inappropriately kept from development, GAO is making four recommendations, including that BLM record the reasons for lease suspensions in its database and develop procedures for monitoring suspensions. Interior concurred with GAO's recommendations.

For more information, contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: BLM concurred with this recommendation. In June 2019, BLM issued Permanent Instruction Memorandum 2019-007, which we reviewed, to its state offices. In the memorandum, BLM reiterated to cognizant state officials, who are responsible for inputting information in BLM's central database, LR2000, that the reasons for lease suspensions must be entered in the appropriate section of LR2000.

    Recommendation: As BLM updates or replaces its database, the Director of BLM should include a data field to record the reasons for suspensions. (Recommendation 1)

    Agency Affected: Department of the Interior: Bureau of Land Management

  2. Status: Closed - Implemented

    Comments: BLM concurred with this recommendation. In June 2019, BLM issued Permanent Instruction Memorandum 2019-007, which calls for cognizant BLM state officials to regularly review suspended leases and to develop procedures for monitoring lease suspensions to ensure that lease suspensions in effect are still warranted. The instruction memorandum, which we reviewed, also calls for an annual reporting of the results of these reviews to the BLM Washington Office beginning March 31, 2020. Additionally, the memorandum reiterates that cognizant state officials are to enter the reasons for the suspension in BLM's central database, LR2000, as well as an estimated date of when to review the suspended lease.

    Recommendation: The Director of BLM should develop official agency procedures for monitoring oil and gas lease suspensions, including when to conduct monitoring activities. (Recommendation 2)

    Agency Affected: Department of the Interior: Bureau of Land Management

  3. Status: Open

    Comments: BLM concurred with this recommendation. However, the Bureau has yet to provide information concerning the current status of this recommendation. We will update the recommendation's status when we receive such information.

    Recommendation: The Director of BLM should require cognizant officials in headquarters and state offices to conduct top-level reviews of field offices' monitoring of oil and gas lease suspensions, as well as of official lease files and databases to ensure they are current and complete. (Recommendation 3)

    Agency Affected: Department of the Interior: Bureau of Land Management

  4. Status: Closed - Implemented

    Comments: BLM concurred with this recommendation. In June 2019, BLM issued Permanent Instruction Memorandum 2019-007, which we reviewed, to its state offices. One of the items discussed in the memorandum included a new summary report that the BLM National Operations Center developed on oil and gas leases in a suspended status. This new oil and gas lease suspensions report is currently available to users of LR2000, BLM's central database. Additionally, BLM's memorandum calls for cognizant BLM officials to review the report at the beginning of every calendar year to verify that LR2000 accurately reflects information on all leases that are recorded as being suspended.

    Recommendation: As BLM updates or replaces LR2000, the Director of BLM should ensure the development of mechanisms, such as standardized summary reports on lease suspensions, to assist cognizant officials in headquarters and state offices with oversight of field offices' monitoring efforts. (Recommendation 4)

    Agency Affected: Department of the Interior: Bureau of Land Management

 

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