Interior's Report of Shut-In or Flaring Wells Unnecessary, but Oversight Should Continue

The Department of the Interior has the primary responsibility for the leasing, administration, and management of Outer Continental Shelf (OCS) resources. Through the Geological Survey, Interior regulates operational OCS activities to ensure prompt and efficient development and production of mineral resources, while preventing waste and conserving natural resources. The Outer Continental Shelf Lands Act Amendments address the need for increased oversight of OCS wells that are shut-in or are flaring natural gas and require the Secretary of the Interior to submit to Congress a report which (1) lists all shut-in oil and gas wells and wells flaring natural gas on leases issued under the Act, and (2) indicates the Secretary's intentions on whether to require production of shut-ins or order the cessation of flaring. Under the Amendments, GAO is required to review, evaluate, and report to Congress on the methodology that the Secretary of the Interior uses in allowing OCS wells to be shut-in or to flare natural gas. In its review, GAO used Interior's second annual report and focused primarily on meeting its legislative requirements.

GAO questions whether Interior's report fulfills the intent of Congress and whether continuing to require it serves a useful purpose. In enacting the annual reporting requirement, Congress was concerned with providing oversight of whether OCS operators were deliberately withholding production in anticipation of higher prices. Currently, the report does not satisfy that purpose, and the issue of withholding production seems less significant today due to recent price decontrol measures. Interior believes the report does not satisfy the congressional intent and favors its abolishment. Abolishing the report would not affect Interior's continuing responsibility for overseeing OCS activities. Until such time as Interior requests and Congress grants legislative relief, the required report should be as meaningful and responsive to Congress as possible. In identifying areas where the report needs to be improved, the following problems were found: (1) reporting on shut-in wells without adequately explaining the nature of and reasons for their being shut-in; (2) monitoring shut-in wells based primarily on data reported by OCS operators without reasonable verification of the data, followup efforts to ensure timely restoration of wells with production potential, and review of wells classified as having no future utility; and (3) allowing the flaring of natural gas without adequate monitoring.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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