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Oil and Gas Bonds: Bonding Requirements and BLM Expenditures to Reclaim Orphaned Wells

GAO-10-245 Published: Jan 27, 2010. Publicly Released: Feb 26, 2010.
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The Federal Land Policy and Management Act of 1976 directs the Department of the Interior (Interior) to manage lands for multiple uses while also taking any action to prevent "unnecessary or undue degradation" of the land. To do this, Interior's Bureau of Land Management (BLM), among other things, requires oil and gas operators to reclaim the land they disturb and post a bond to help ensure they do so. Despite these requirements, not all operators perform reclamation. If the bond is not sufficient to cover well plugging and surface reclamation and there are no responsible or liable parties, the well is considered "orphaned," and BLM uses federal dollars to fund reclamation. The 12 western states where most oil and gas production occurs and other Interior agencies also require bonds to ensure reclamation. GAO was asked to (1) determine the number, value, and coverage of bonds held by BLM for oil and gas operations; (2) determine the amount that BLM has paid to reclaim orphaned wells over the past 20 years and the number of orphaned wells BLM has identified but has not yet reclaimed; and (3) compare BLM's bonding requirements for oil and gas operations with those the 12 western states use for oil and gas operations on state and private lands and other Interior agencies' bonding requirements for other resources. Among other things, GAO analyzed BLM data on wells and BLM-held bonds, and interviewed BLM officials.

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Bonds (legal)Conservation complianceConservation practicesConservation programsEnvironment evaluationEnvironmental assessmentEnvironmental cleanupsEnvironmental monitoringEnvironmental policiesEnvironmental protectionstate relationsGas leasesGas resourcesLand leasesLand managementLand reclamationLand resourcesLand useLand use lawMineral leasesNatural resourcesOil drillingOil fieldsOil leasesOil pollutionOil resourcesPerformance managementProgram evaluationPublic landsRequirements definitionSoil conservationSurety bondsCompliance