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Highlights

What GAO Found

Federal and state agencies in states that GAO reviewed have taken or initiated some actions to change rules, in part, as a response to certain technological advances that have led to more than a 5-fold increase in annual production of domestic onshore oil and gas from shale and tight sandstone formations from 2007 through 2012 (see figure). For example, the Bureau of Land Management (BLM)—the key agency responsible for managing and overseeing oil and gas development on federal and Indian lands—proposed a new rule in 2012 to regulate hydraulic fracturing. In addition, in 2013, Texas updated its rules for well integrity by establishing new casing and cementing standards.

Increased Domestic Oil and Gas Production from Shale and Tight Sandstone Formations from 2007 to 2012

Increased Domestic Oil and Gas Production from Shale and Tight Sandstone Formations from 2007 to 2012

The effectiveness of BLM's management and oversight of federal and Indian oil and gas resources is hindered by a number of factors, including BLM's reliance on outdated rules and guidance, limited coordination with states, and delayed reviews of revenue sharing agreements. For example, BLM has not followed Interior's guidance to routinely review rules and update them consistently along with technological advances. As a result, some of BLM's rules and guidance governing oil and gas development have not kept pace with technological advancements, such as its guidance on well spacing, which, among other things, determines how to maximize oil and gas production from a formation. Improper spacing guidance could lead to lower levels of oil and gas production and, therefore, less revenue for the federal government and tribes. In addition, BLM has not developed formal agreements to improve coordination with state regulatory agencies, as called for in its internal guidance. As a result, BLM and state agency officials told GAO that agencies conduct duplicative inspections of some wells, while leaving other wells uninspected. Further, based on GAO's review of selected revenue-sharing agreements, BLM does not always review these agreements within the statutorily required time frames. These agreements identify the production allocation based on ownership and must be approved before operators can pay royalties to the resource owner. By statute, BLM is to review agreements within 120 days of receipt, but GAO found instances in which the agency had taken more than a year to review, resulting in delayed royalty payments to resource owners—who may rely on these payments for part or all of their income.

Why GAO Did This Study

Federal and state regulatory agencies manage and oversee the development of federal and Indian oil and gas resources by issuing rules and guidance, reviewing drilling applications, and inspecting wells to ensure compliance with environmental, safety, and other regulations. In fiscal year 2013, federal and Indian energy production, including oil and gas, generated almost $15 billion in revenue. Recent advances in drilling technologies have greatly expanded the ability to develop oil and gas resources, particularly from shale and tight sandstone rock formations.

GAO was asked to review oversight of federal and Indian oil and gas resources. This report (1) discusses the changes to federal and selected state agencies' rules over the past 5 years and (2) examines the effectiveness of BLM's management and oversight of federal and Indian resources. GAO reviewed federal and selected state agencies' rules and guidance, data from federal agencies, and other documentation. GAO selected a sample of 14 states based, in part, on their involvement with oil and gas development. This information cannot be generalized to all states.

Reissued on May 16, 2014

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Recommendations

GAO recommends that, among other things, BLM ensure that its rules governing oil and gas development are consistent with technological advances, improve coordination of inspections with states, and improve the timeliness of revenue sharing agreement reviews. In commenting on a draft of this report, BLM agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Interior The Secretary of the Interior should direct the Director of the Bureau of Land Management to take steps to establish a documented process that will provide reasonable assurance that oil and gas rules and guidance is reviewed and periodically updated.
Closed - Not Implemented
Interior officials provided us with a tracking sheet on updates to BLM oil and gas regulations and guidance. They indicated that Executive Order 13771, "Reducing Regulation and Controlling Regulatory Costs" (January 2017), represents the administration and the Secretary of Interior's priorities related to the federal oil and gas program. We had recommended that Interior take steps to establish a documented process to ensure that all rules and guidance are reviewed and periodically updated consistent with technological advances, as called for by Interior's guidance in 1998 and 2011 and Executive Order 13563, "Improving Regulation and Regulatory Review". The tracking sheet does not demonstrate that a process was implemented to meet the intent of our recommendation and based on BLM's reference to Executive Order 13771, we do not believe BLM will take action to implement our recommendation in the future.
Department of the Interior The Secretary of the Interior should direct the Director of the Bureau of Land Management to take steps to establish formal agreements with all relevant state regulatory agencies regarding oil and gas inspection activities; better leverage state inspection resources to avoid duplicative oversight activities, to the extent possible.
Closed - Not Implemented
BLM officials are not aware of any current formal coordination between their agency and states regarding BLM's authority to conduct inspection and enforcement activities and do not believe formal agreements are needed. As such, we are closing this recommendation as not implemented.
Department of the Interior The Secretary of the Interior should direct the Director of the Bureau of Land Management to ensure that all BLM field offices with responsibility for protecting federal and Indian resources have the data and direction needed to efficiently identify the location of federal and Indian resources and new and existing oil and gas wells and consistently use the data to identify situations in which federal and Indian resources are at risk of being extracted without approval from BLM.
Closed - Implemented
BLM has taken steps to ensure that all BLM field offices with responsibility for protecting federal and Indian resources have the data and direction needed to identify situations in which federal and Indian resources are at risk of being extracted without approval, referred to as drainage, as GAO recommended. According to BLM documentation, it is actively working with the Office of Indian Energy and Economic Development to identify Indian mineral ownership data and has conducted several training sessions for all field office staff on the use of available data provided by a third-party vendor to identify the location of oil and gas wells. Specifically, BLM reported that training on drainage identification and software tools was provided on March 17 and March 31, 2015. In addition, BLM State and Field Office training was provided in New Mexico, Montana, and Oklahoma in 2015 that included information on available data and drainage identification responsibilities. Further, BLM updated its oil and gas drainage manual in September 2015, including the methods used to detect a potential drainage situation.
Department of the Interior The Secretary of the Interior should direct the Director of the Bureau of Land Management to identify and take necessary steps to ensure communitization agreements are reviewed within required time frames.
Open
As of August 2021, we are continuing to monitor Interior's response to this recommendation and a related recommendation to Interior in GAO-16-553 and will update both recommendations when we receive new information. Interior had updated its Onshore Energy and Mineral Lease Management Interagency SOP for Indian Fluid Minerals as of August 2020. The revised document notes that BLM will perform a technical review and make a recommendation on an Indian communitization agreement (CA) within 30 days of a BIA request, creating a required timeframe as we recommended. In addition, since September 2018, Interior added a tracking module for Indian CAs, as well as other mineral lease agreements, to its Trust Asset and Accounting Management System (TAAMS), allowing agency officials to determine whether this timeframe is being met.

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