Congress Should Consider Eliminating Requirement for Interior's Report on Shut-in or Flaring Wells

GAO presented its fifth annual report to Congress on the methodology used by the Secretary of the Interior in allowing offshore oil and gas wells to be nonproducing (shut-in) or to burn off (flare) natural gas.

GAO found that the Department of the Interior's fiscal year 1982 report used the same methodology for allowing offshore wells to be shut-in or to flare natural gas as was used in previous reports. Congress initially required that Interior submit an annual shut-in and flaring wells report to determine whether well operators were deliberately withholding production in anticipation of higher prices once controls were lifted. However, the environment under which the reporting requirement was enacted has changed. Legislation and administrative actions to fully decontrol oil prices and to phase out controls over natural gas prices make the report's value questionable because the incentive to withhold production in anticipation of higher prices resulting from decontrol has been largely eliminated. Thus, the costs incurred by Interior in preparing the report and by GAO in evaluating it do not appear justified. Abolishing the reporting requirement would not alter Interior's continuing responsibilities for inspecting and monitoring Outer Continental Shelf lease activities to ensure the efficient development of oil and gas resources. GAO found that Interior has taken appropriate action on prior GAO recommendations for improving its oversight of offshore shut-in and flaring activities and that Interior effectively monitors these activities.

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.

Director: Michael Gryszkowiec Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 275-5514