Oil and Gas Leasing: BLM Should Update Its Guidance and Review Its Fees

GAO-22-103968 Published: Nov 06, 2021. Publicly Released: Dec 09, 2021.
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Fast Facts

The Bureau of Land Management seeks to facilitate safe and responsible oil and gas development on federal lands while providing a fair return for the American people.

There have been several changes to the Bureau's oil and gas leasing process since it was established in 1987, but guidance and related fees haven't kept pace with those changes. For example, lease application fees were intended to cover the costs of administering the process—but the Bureau hasn't fully reviewed its application fees and the costs they cover since 2005.

Our recommendations are to help the Bureau update its oil and gas leasing guidance and examine its fees and costs.

Oil wells near the Bakken Formation in North Dakota

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Highlights

What GAO Found

The Department of the Interior's Bureau of Land Management (BLM), which leases federal lands for oil and gas development, has changed some of its leasing policies. For example, starting in fiscal year 2015, BLM was authorized to use online auctions, instead of in-person auctions, to award leases. In 2016, BLM launched an online system for submitting and processing nominations of lands for leasing. However, all of the agency's guidance documents for oil and gas leasing that GAO reviewed were out of date and did not fully reflect these changes, though agency policy requires guidance be updated promptly. Unless BLM reviews and revises its process for updating its guidance, the agency's outdated guidance may continue to lead to inefficiencies for industry and BLM state office staff that spend extra time interpreting outdated BLM guidance.

Parties, such as oil and gas companies, leased a small portion of lands nominated for onshore oil and gas leasing from 2009 through 2019, when about 87 million acres were nominated and about 14 million acres were leased (see figure).

Acreage Nominated, Offered for Lease, and Leased for Federal Onshore Oil and Gas Development, 2009 through 2019

Acreage Nominated, Offered for Lease, and Leased for Federal Onshore Oil and Gas Development, 2009 through 2019

BLM has not fully reviewed its application fees for oil and gas leases since 2005 despite changes to leasing that could affect program costs, such as the move from in-person to online auctions. BLM has conducted biennial reviews of its existing fees, but these reviews do not assess all of the costs the fees were intended to recover. Until BLM revises its approach to examine all relevant costs and adjusts fees accordingly, the agency may collect too much or too little in fees. In addition, BLM does not charge a fee to nominate lands for leasing and has not re-examined whether to charge such a fee since 2014. Without doing so, BLM risks continuing to expend resources to process nominations that do not result in leases. In addition, the agency may not strike the appropriate balance between encouraging nominations and controlling costs.

Why GAO Did This Study

BLM leases federal lands for oil and gas development through a process largely established with the Federal Onshore Oil and Gas Leasing Reform Act of 1987. Through this process, the public can suggest which federal lands should be made available for leasing by nominating them. BLM state offices review nominations, including to assess potential environmental impacts. BLM then offers leases at competitive auctions. While no fee is required to submit nominations, BLM charges an application fee for any leases that parties acquire.

GAO was asked to review oil and gas leasing on federal lands. This report examines: (1) changes to BLM's policies for oil and gas leasing since 1987, (2) outcomes for lands nominated for oil and gas leasing, and (3) the extent to which BLM reviews its oil and gas leasing fees in response to changing conditions.

GAO analyzed BLM policies and guidance as well as data on nominations, leasing, costs, and fees collected. GAO also interviewed BLM headquarters and state office officials as well as representatives of two stakeholder groups.

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Recommendations

GAO is making four recommendations, including that BLM (1) review and adjust its approach for updating agency guidance; (2) revise its approach to biennial fee reviews to include all relevant costs, and adjust fees accordingly; and (3) re-examine whether to charge parties a fee for nominating lands for oil and gas development. Interior agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Bureau of Land Management The Director of BLM should conduct a review to determine why the agency has had difficulty updating handbooks and its manual for oil and gas leasing as directed by BLM policy, and then adjust BLM's approach to updating them accordingly. (Recommendation 1)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Bureau of Land Management The Director of BLM should develop guidance regarding the status codes for nominations contained in NFLSS. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Bureau of Land Management The Director of BLM should revise the agency's approach to conducting biennial fee reviews to ensure that future biennial reviews examine all costs BLM intended to recover with its application fees and, where appropriate, adjust fees accordingly. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Bureau of Land Management The Director of BLM should re-examine whether to charge a fee for nominating lands for oil and gas development. (Recommendation 4)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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