Interior Department Activities Concerning Proposed Natural Gas Tight Formations in Montana

In response to a congressional request, GAO answered questions relating to a petroleum firm's application for the designation of proposed natural gas formations as tight formations. Under the provisions of the Natural Gas Policy Act, gas produced from tight formation areas may qualify for higher prices. The Minerals Management Service had first recommended that the State responsible for the land not designate the area for tight formations and then reversed its position after meeting with the firm's representatives.

GAO could find no regulation which prohibited the Minerals Management Service's staff from meeting with the petroleum firm's representatives. GAO found that the original recommendation that the areas not be designated as tight formation areas contained factual errors, including an incorrect description of the area. After a meeting with the firm's representatives, the agency's staff revised its recommendation to correct the errors and, after analysis of additional information, reversed its recommendation. However, the agency's recommendation to the State did not give the reason for the reversal or indicate that the previous objections were no longer valid. In addition, GAO found that the positive recommendation was not well supported by agency analysis and the applicant had failed to present adequate supporting documentation for its request.