Oil and Gas Management
Past Work Offers Insights to Consider in Restructuring Interior's Oversight Gao ID: GAO-10-888T July 22, 2010The catastrophic oil spill in the Gulf of Mexico has drawn attention to the exploration and production of oil and gas from leases on federal lands and waters. The Department of the Interior oversees oil and gas activities on federal lands and waters. Onshore, the Bureau of Land Management (BLM) has oversight responsibilities. Offshore, the newly created Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE), has oversight responsibilities. Prior to BOEMRE, the Minerals Management Service's (MMS) Offshore Energy and Minerals Management oversaw offshore oil and gas activities, while MMS's Minerals Revenue Management collected revenues from oil and gas produced. For the purposes of our testimony today, we present our findings in accordance with Interior's organizational structure prior to establishing BOEMRE. Over the past 5 years, GAO has issued numerous recommendations to the Secretary of the Interior to improve the agency's management of oil and gas resources--most recently in two reports issued in March 2010. Overall, GAO's work in this area can be useful in evaluating potential strategies for reorganizing and improving oil and gas management at Interior. Specifically, GAO's work can assist the Secretary and Congress as they are considering restructuring Interior's oversight of oil and gas development and production, revenue collection, and information technology (IT) systems.
GAO's recent evaluations of federal oil and gas management have identified key areas where Interior could provide more effective oversight. In October 2008, GAO reported that Interior policies and practices for leasing offshore and onshore oil and gas differed in key ways. Considering the ways that areas are selected for leasing, GAO found that MMS sets out a 5-year strategic plan identifying both a leasing schedule and the offshore areas it will lease. In contrast, BLM relies on industry and others to nominate onshore areas for leasing, then selects lands to lease from these nominations and from areas it has identified. Oil and gas activity has generally increased in recent years, and Interior has at times been unable to meet its legal and agency mandated oversight obligations in key areas. For example, in a June 2005 report, GAO found that Interior was unable to complete its environmental inspections because of increased onshore drilling activity. GAO also found in a September 2008 review that Interior was not consistently completing inspections to verify oil and gas volumes produced from federal leases. GAO found in a March 2010 report that MMS faces challenges conducting required environmental reviews in Alaska. In particular, MMS has no handbook providing guidance on how to conduct these reviews, although Interior policy directs it to prepare one. Interior may be missing opportunities to fundamentally shift the terms of federal oil and gas leases and increase revenues. In a September 2008 report, GAO reported that, compared to other countries, the United States receives one of the lowest shares of revenue for oil and gas. In addition, Interior's royalty rate, which does not change to reflect changing prices and market conditions, has at times led to pressure on Interior and Congress to periodically change royalty rates in response to market conditions. Interior also has done less than some states and private landowners to encourage lease development and may be missing opportunities to increase production revenues. Interior began studying ways to improve revenue collection and leasing practices earlier this year. Interior's oil and gas IT systems lack key functionalities. A September 2008 GAO review found that MMS's ability to maintain the accuracy of oil and gas production and royalty data was hampered by two key limitations in its IT system: (1) it did not limit companies' ability to adjust self-reported data after MMS had audited them and (2) it did not identify missing royalty reports. More recently, a March 2010 report found that Interior's long-standing efforts to implement two key technologies for verifying oil and gas production are behind schedule and years from widespread adoption.
GAO-10-888T, Oil and Gas Management: Past Work Offers Insights to Consider in Restructuring Interior's Oversight
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Testimony:
Before the Committee on Oversight and Government Reform, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Thursday, July 22, 2010:
Oil And Gas Management:
Past Work Offers Insights to Consider in Restructuring Interior's
Oversight:
Statement of Frank Rusco, Director:
Natural Resources and Environment:
GAO-10-888T:
GAO Highlights:
Highlights of GAO-10-888T, a testimony before the Committee on
Oversight and Government Reform, House of Representatives.
Why GAO Did This Study:
The catastrophic oil spill in the Gulf of Mexico has drawn attention
to the exploration and production of oil and gas from leases on
federal lands and waters. The Department of the Interior oversees oil
and gas activities on federal lands and waters. Onshore, the Bureau of
Land Management (BLM) has oversight responsibilities. Offshore, the
newly created Bureau of Ocean Energy Management, Regulation, and
Enforcement (BOEMRE), has oversight responsibilities. Prior to BOEMRE,
the Minerals Management Service‘s (MMS) Offshore Energy and Minerals
Management oversaw offshore oil and gas activities, while MMS‘s
Minerals Revenue Management collected revenues from oil and gas
produced. For the purposes of our testimony today, we present our
findings in accordance with Interior‘s organizational structure prior
to establishing BOEMRE.
Over the past 5 years, GAO has issued numerous recommendations to the
Secretary of the Interior to improve the agency‘s management of oil
and gas resources”most recently in two reports issued in March 2010
(see app. II for a list of GAO reports). Overall, GAO‘s work in this
area can be useful in evaluating potential strategies for reorganizing
and improving oil and gas management at Interior. Specifically, GAO‘s
work can assist the Secretary and Congress as they are considering
restructuring Interior‘s oversight of oil and gas development and
production, revenue collection, and information technology (IT)
systems.
What GAO Found:
GAO‘s recent evaluations of federal oil and gas management have
identified key areas where Interior could provide more effective
oversight, including:
* In October 2008, GAO reported that Interior policies and practices
for leasing offshore and onshore oil and gas differed in key ways.
Considering the ways that areas are selected for leasing, GAO found
that MMS sets out a 5-year strategic plan identifying both a leasing
schedule and the offshore areas it will lease. In contrast, BLM relies
on industry and others to nominate onshore areas for leasing, then
selects lands to lease from these nominations and from areas it has
identified.
* Oil and gas activity has generally increased in recent years, and
Interior has at times been unable to meet its legal and agency
mandated oversight obligations in key areas. For example, in a June
2005 report, GAO found that Interior was unable to complete its
environmental inspections because of increased onshore drilling
activity. GAO also found in a September 2008 review that Interior was
not consistently completing inspections to verify oil and gas volumes
produced from federal leases. GAO found in a March 2010 report that
MMS faces challenges conducting required environmental reviews in
Alaska. In particular, MMS has no handbook providing guidance on how
to conduct these reviews, although Interior policy directs it to
prepare one.
* Interior may be missing opportunities to fundamentally shift the
terms of federal oil and gas leases and increase revenues. In a
September 2008 report, GAO reported that, compared to other countries,
the United States receives one of the lowest shares of revenue for oil
and gas. In addition, Interior‘s royalty rate, which does not change
to reflect changing prices and market conditions, has at times led to
pressure on Interior and Congress to periodically change royalty rates
in response to market conditions. Interior also has done less than
some states and private landowners to encourage lease development and
may be missing opportunities to increase production revenues. Interior
began studying ways to improve revenue collection and leasing
practices earlier this year.
* Interior‘s oil and gas IT systems lack key functionalities. A
September 2008 GAO review found that MMS‘s ability to maintain the
accuracy of oil and gas production and royalty data was hampered by
two key limitations in its IT system: (1) it did not limit companies‘
ability to adjust self-reported data after MMS had audited them and
(2) it did not identify missing royalty reports. More recently, a
March 2010 report found that Interior‘s long-standing efforts to
implement two key technologies for verifying oil and gas production
are behind schedule and years from widespread adoption.
View [hyperlink, http://www.gao.gov/products/GAO-10-888T] or key
components. For more information, contact Frank Rusco at (202) 512-
3841 or ruscof@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to participate in this hearing to
discuss the Department of the Interior's management of federal oil and
gas leases and its proposed reorganization. Effective management and
oversight of our nation's oil and gas resources is critical,
especially in light of the tragic loss of life, damage to natural
resources, loss of livelihoods, and harm to local economies that
resulted from the explosion, fire, and catastrophic oil spill in the
Gulf of Mexico. Additionally, ensuring royalties are accurately paid
on oil and gas production is increasingly important as our country
faces serious fiscal challenges.
Interior plays an important role in managing federal oil and gas
resources. Under the current organizational structure, its bureaus are
responsible for regulating the processes that oil and gas companies
must follow when leasing, drilling, and producing oil and gas from
federal leases as well as ensuring that companies comply with all
applicable requirements. Specifically, the Bureau of Land Management
(BLM) oversees onshore federal oil and gas activities, and the newly
created Bureau of Ocean Energy Management, Regulation, and Enforcement
(BOEMRE) oversees offshore oil and gas activities.[Footnote 1] Prior
to BOEMRE, the Minerals Management Service's (MMS) Offshore Energy and
Minerals Management (OEMM) oversaw offshore oil and gas activities.
Additionally, MMS's Minerals Revenue Management (MRM) was responsible
for collecting royalties on oil and gas produced from both onshore and
offshore federal leases. For the purposes of our testimony today, we
present our findings in accordance with Interior's organizational
structure prior to the establishment of BOEMRE. In fiscal year 2009,
Interior reported collecting over $9 billion in royalties for oil and
gas produced on federal lands and waters, purchase bids for new oil
and gas leases, and annual rents on existing leases, making revenues
from federal oil and gas one of the largest nontax sources of federal
government funds.
In recent years, we and others, including Interior's Office of
Inspector General (OIG) have conducted numerous evaluations of federal
oil and gas management and revenue collection processes and practices
and have found many material weaknesses (see app. II for related GAO
reports). Our work has included reviews of Interior's oversight
practices, operations, and rules, and our conclusions have been
remarkably consistent: the agency has not done enough to meet the
challenges it faces. Others, including the Interior OIG and a panel of
experts convened by Interior have drawn similar conclusions. As a
result, Interior staff are in the midst of attempting to implement
over 100 recommendations spanning the scope of the department's
operations. We acknowledge Interior's efforts to reassess key oil and
gas policies addressing revenue collection and rates of development on
federal lands and waters as an important first step to address
material weaknesses. In addition, the Secretary of the Interior
announced several changes to BLM's leasing process in May 2010, and
has also announced plans to restructure MMS.
In this context, my testimony today discusses findings from our past
work on (1) differences in Interior's policies and practices for
offshore and onshore oil and gas leasing, (2) Interior's oversight of
oil and gas production, (3) Interior's policies to encourage revenues
from oil and gas development, and (4) Interior's oil and gas
information technology (IT) systems. This statement is based on our
extensive body of work on Interior's oil and gas leasing and royalty
collection programs issued from June 2005 through March 2010, as well
as preliminary results from our ongoing review on public challenges to
federal onshore oil and gas leasing decisions, to assist the committee
as it investigates Interior's oversight of oil and gas leasing,
drilling, and production. We developed these preliminary results from
June 2009 through July 2010 by reviewing federal laws, regulations,
and guidance; analyzing data from Interior on the four Mountain West
states (Colorado, New Mexico, Utah, and Wyoming) responsible for 69
percent of the oil and 94 percent of the natural gas produced on
federal lands during fiscal years 2007 to 2009;[Footnote 2] and
interviewing BLM officials and stakeholder groups--including
representatives from the energy industry, state government, and
nongovernmental organizations representing environmental, hunting,
fishing, and recreational interests. We conducted the performance
audit work that supports this statement in accordance with generally
accepted government auditing standards. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate
evidence to produce a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our statement today.
Interior's Policies and Practices for Offshore and Onshore Oil and Gas
Leases Differ in Key Ways:
In October 2008, we reported that Interior's policies and practices
for identifying and evaluating lease parcels and bids differ in key
ways depending on whether the lease is located offshore--and therefore
overseen by OEMM--or onshore--and therefore overseen by BLM.[Footnote
3]
Identifying lease parcels. OEMM's and BLM's methods for identifying
areas to lease vary significantly. Specifically:
* For offshore leases, OEMM--pursuant to the Outer Continental Shelf
Lands Act--lays out 5-year strategic plans for the areas it plans to
lease and establishes a schedule for offering leases. In addition,
OEMM offers all leases for competitive bidding, and all eligible
companies may submit written sealed bids, referred to as bonus bids,
for the rights to explore, develop, and produce oil and gas resources
on these leases, including drilling test wells.
* For onshore leases, BLM--which must follow the Federal Onshore Oil
and Gas Leasing Reform Act of 1987--is not required to develop a long-
term leasing plan and instead relies in part on the industry and the
public to nominate areas for leasing. In some cases, BLM, like OEMM,
offers leases through a competitive bidding process, but with bonus
bids received in an oral auction rather than in a sealed written form.
Evaluating bids. OEMM and BLM differ in their regulations and policies
for evaluating whether the bids received for areas offered for lease
are sufficient.
* For offshore leases, OEMM compares sealed bids with its own
independent assessment of the value of the potential oil and gas in
each lease. After the bids are received, OEMM--using a team of
geologists, geophysicists, and petroleum engineers assisted by a
software program--conducts a technical assessment of the potential oil
and gas resources associated with the lease and other factors to
develop an estimate of their fair market value. This estimate becomes
the minimally acceptable bid and is used to evaluate the bids
received. The bidder submitting the highest acceptable bonus bid that
meets or exceeds OEMM's estimate of the fair market value of a lease
is awarded the lease. The primary term of the lease, which may be 5,
8, or 10 years, depends on the water depth of the leased area. If no
bids equal or exceed the minimally acceptable bid, the lease is not
awarded but is offered at a subsequent lease sale. According to OEMM,
since 1995, the practice of rejecting bids that fall below the
minimally acceptable bid and re-offering these leases at a later sale
has resulted in an overall increase in bonus receipts of $373 million
between 1997 and 2006.
* For onshore leases, BLM relies exclusively on competitors,
participating in an oral auction, to determine the lease's market
value. Furthermore, BLM, unlike OEMM, does not currently employ a
multidisciplinary team with the appropriate range of skills or
appropriate software to develop estimates of the oil and gas reserves
for each lease parcel, and thus, establish a market and resource-based
minimum acceptable bid. Instead, BLM has established a uniform
national minimum acceptable bid of at least $2 per acre and has taken
the position that as long as at least one bid meets this $2 per acre
threshold, the lease will be awarded to the highest bidder.
Importantly, onshore leases that do not receive any bids in the
initial offer are available noncompetitively the day after the lease
sale and remain available for leasing for a period of 2 years after
the competitive lease sale. Any of these available leases may be
acquired on a first-come, first-served basis subject to payment of an
administrative fee. Prior to 1992, BLM offered primary terms of 5
years for competitively sold leases and 10 years for leases issued
noncompetitively. Since 1992, BLM has been required by law to only
offer leases with 10-year primary terms whether leases are sold
competitively or issued noncompetitively.
Interior's Oversight of Federal Oil and Gas Production Has Not Kept
Pace with Increased Activity:
Oil and gas activity has generally increased over the past 20 years,
and our reviews have found that Interior has--at times--been unable to
adequately oversee these activities: (1) completing environmental
inspections; (2) verifying oil and gas production; (3) hiring,
training, and retaining staff; (4) using categorical exclusions to
streamline environmental analyses required for certain oil and gas
activities;[Footnote 4] (5) performing environmental monitoring in
accordance with land use plans; (6) conducting environmental analyses;
and (7) responding to onshore lease protests. Specifically:
* Completing environmental inspections. In June 2005, we reported that
with the increase in oil and gas activity, BLM had not consistently
been able to complete its required environmental inspections--the
primary mechanism to ensure that companies are complying with various
environmental laws and lease stipulations.[Footnote 5] At the time of
our review, BLM officials explained that because staff were spending
increasing amounts of time processing drilling permits, they had less
time to conduct environmental inspections.
* Verifying oil and gas production. In September 2008, we reported
that neither BLM nor OEMM was meeting its statutory obligations or
agency targets for inspecting certain leases and metering equipment
used to measure oil and gas production, raising uncertainty about the
accuracy of oil and gas measurement.[Footnote 6] For onshore leases,
BLM only completed a portion of its production verification
inspections because its workload had substantially grown in response
to increases in onshore drilling. For offshore leases, OEMM only
completed about 50 percent of its required production inspections in
2007 because of ongoing cleanup work related to Hurricane Katrina and
Rita. Additionally, in March 2010, we found that Interior had not
consistently updated its oil and gas measurement regulations.[Footnote
7] Specifically, OEMM has routinely reviewed and updated its
measurement regulations, whereas BLM had not. Accordingly, OEMM had
updated its measurement regulations six times since 1998, whereas BLM
had not updated its measurement regulations since 1989. We made a
number of recommendations to the Secretary of the Interior for
improving oil and gas production verification, including providing for
more regular updates of measurement regulations.
* Hiring, training, and retaining staff. In March 2010, we reported
that Interior has faced difficulties in hiring, retaining, and
training staff in key oil and gas oversight positions.[Footnote 8]
Specifically, we found that staff within Interior's program for
verifying that oil and gas produced from federal leases are correctly
measured--including petroleum engineers and inspectors--lacked
critical skills because, according to agency officials, Interior (1)
had difficulty in hiring experienced staff, (2) struggled to retain
staff, and (3) did not consistently provided the appropriate training
for staff. Interior's challenges in hiring and retaining staff stem,
in part, from competition with the oil and gas industry, which
generally pays significantly more than the federal government.
Moreover, key technical positions responsible for oversight of oil and
gas activities have experienced high turnover rates, which, according
to Interior officials, impede these employees' capacity to oversee oil
and gas activities. These positions included petroleum engineers, who
process drilling permits and review oil and gas metering systems, and
inspection staff--including BLM's petroleum engineer technicians and
production accountability technicians onshore--who conduct drilling,
safety and oil and gas production verification inspections (see
appendix I). For example, we found that turnover rates for OEMM
inspectors at the four district offices we reviewed between 2004 and
2008 ranged from 27 to 44 percent. Furthermore, Interior has not
consistently provided training to the staff it has been able to hire
and retain. For example, neither onshore nor offshore petroleum
engineers had a requirement for training on the measurement of oil and
gas, which is critical to accurate royalty collections and can be
challenging at times because of such factors as the type of meter
used, the specific qualities of the gas or oil being measured, and the
rate of production. Additionally, although BLM offers a core
curriculum for its petroleum engineer technicians and requires that
they obtain official BLM certification and then be recertified once
every 5 years to demonstrate continued proficiency, the agency has not
offered a recertification course since 2002, negatively impacting its
ability to conduct inspections. It is important to note that BLM's
petroleum engineer technicians are the eyes and ears for the agency--
performing key functions and also perhaps the only Interior staff with
direct contact with the lease property itself. We recommended that the
Secretary of the Interior improve its training for staff responsible
for verifying oil and gas production and to determine what policies
are necessary to attract and retain qualified measurement staff at
sufficient levels to ensure an effective production verification
program.
* Using categorical exclusions. In September 2009, we reported that
BLM's use of categorical exclusions--authorized under section 390 of
the Energy Policy Act of 2005 to streamline the environmental analysis
required under the National Environmental Policy Act (NEPA)[Footnote
9] when approving certain oil and gas activities--had some benefits
but raises numerous questions about how and when BLM should use these
categorical exclusions.[Footnote 10] First, our analysis found that
BLM used section 390 categorical exclusions to approve over one-
quarter of its applications for drilling permits from fiscal years
2006 to 2008. While these categorical exclusions generally increased
the efficiency of operations, some BLM field offices, such as those
with recent environmental analyses already completed, were able to
benefit more than others. Second, we found that BLM's use of section
390 categorical exclusions was frequently out of compliance with both
the law and agency guidance and that a lack of clear guidance and
oversight by BLM were contributing factors. We found several types of
violations of the law, such as approving more than one oil or gas well
under a single decision document and drilling a new well after
statutory time frames had lapsed. We also found examples, in 85
percent of field offices reviewed, where officials did not comply with
agency guidance, most often by failing to adequately justify the use
of a categorical exclusion. While many of these violations and
noncompliance were technical in nature, others were more significant
and may have thwarted NEPA's twin aims of ensuring that BLM and the
public are fully informed of environmental consequences of BLM's
actions. Third, we found that a lack of clarity in both section 390 of
the act and BLM's guidance has raised serious concerns. Specifically:
(1) Fundamental questions about what section 390 categorical
exclusions are and how they should be used have led to concerns that
BLM may be using these categorical exclusions in too many--or too few--
instances. For example, there is disagreement as to whether BLM must
screen section 390 categorical exclusions for circumstances that would
preclude their use or whether their use is mandatory. (2) Concerns
about key concepts underlying the law's description of these
categorical exclusions have arisen--specifically, whether section 390
categorical exclusions allow BLM to exceed development levels, such as
number of wells to be drilled, analyzed in supporting NEPA documents
without conducting further analysis. (3) Definitions of key criteria
in the law and BLM guidance are vague or nonexistent, which led to
varied interpretations among field offices and concerns about misuse
and a lack of transparency. We recommended that BLM take steps to
improve the implementation of section 390 of the act by ensuring
compliance through more oversight, standardizing decision
documentation, and clarifying agency guidance. We also suggested that
Congress may wish to consider amending the Energy Policy Act of 2005
to clarify and resolve some of the key issues identified in our
report. Since the issuance of our report, BLM has taken steps to
implement some of our recommendations.[Footnote 11]
* Performing environmental monitoring. In June 2005, we reported that
four of the eight BLM field offices we visited had not developed any
resource monitoring plans to help track management decisions and
determine if desired outcomes had been achieved, including those
related to mitigating the environmental impacts of oil and gas
development.[Footnote 12] We concluded that without these plans, land
managers may be unable to determine the effectiveness of various
mitigation measures attached to drilling permits and decide whether
these measures need to be modified, strengthened, or eliminated.
Officials offered several reasons for not having these plans,
including increased workload due to an increased number of drilling
permits, as well as budget constraints.
* Conducting environmental analyses. In March 2010, we found that MMS
faces challenges in the Alaska Outer Continental Shelf (OCS) Region in
conducting reviews of oil and gas development under NEPA, which
requires MMS to evaluate the likely environmental effects of proposed
actions, including oil and gas development.[Footnote 13] Although
Interior policy directed its agencies to prepare handbooks providing
guidance on how to implement NEPA, we found that MMS lacked such a
handbook. The lack of comprehensive guidance in a handbook, combined
with high staff turnover in recent years, left the process for meeting
NEPA requirements ill defined for the analysts charged with developing
NEPA documents. It also left unclear MMS's policy on what constitutes
a significant environmental impact as well as its procedures for
conducting and documenting NEPA-required analyses to address
environmental and cultural sensitivities, which have often been the
topic of litigation over Alaskan offshore oil and gas development. We
also found that the Alaska OCS Region shared information selectively,
a practice that was inconsistent with agency policy, which directed
that information, including proprietary data from industry, be shared
with all staff involved in environmental reviews. According to
regional MMS staff, this practice has hindered their ability to
complete sound environmental analyses under NEPA. We recommended that
the Secretary of the Interior develop and set a deadline for issuing a
comprehensive NEPA handbook providing guidance on how to implement
NEPA.
* Responding to lease protests. In preliminary results from our
ongoing work on public challenges to BLM's federal oil and gas lease
sale decisions in the four Mountain West states responsible for most
onshore federal oil and gas development, we found the extent to which
BLM made publicly available information related to public protests
filed during the leasing process varied by state and was generally
limited in scope. We also found that stakeholders--nongovernmental
organizations representing environmental, recreational, and hunting
interests that filed protests to BLM lease offerings--wanted
additional time to participate in the leasing process and more
information from BLM about its leasing decisions. In May 2010, the
Secretary of the Interior announced several agencywide leasing reforms
that are to take place at BLM, some of which may address concerns
raised by these stakeholder groups. For instance, BLM state offices
are to provide an additional public review and comment opportunity
during the leasing process. They are also required to post on their
Web sites their responses to letters filed in protest of state office
decisions to offer specific parcels of land for oil and gas
development.
Interior May be Missing Opportunities to Fundamentally Shift the Terms
of Federal Oil and Gas Leases to Increase Revenues:
In our past work, we have identified several areas where Interior may
be missing opportunities to increase revenue by fundamentally shifting
the terms of federal oil and gas leases. As we reported in September
2008, (1) federal oil and gas leasing terms currently result in the
U.S. government receiving one of the smallest shares of oil and gas
revenue when compared to other countries and (2) Interior's inflexible
royalty rate structure has put pressure on Interior and Congress to
periodically change royalty rates.[Footnote 14] We also reported that
Interior is doing far less than some states to encourage development
of leases.[Footnote 15] Specifically:
* The U.S. government receives one of the lowest shares of revenue for
oil and gas resources compared with other countries and resource
owners. For example, we reported the results of a private study in
2007 showing that the revenue share the U.S. government collects on
oil and gas produced in the Gulf of Mexico ranked 93rd lowest of the
104 revenue collection regimes around the world covered by the study.
Further, the study showed that some countries recently increased their
shares of revenues as oil and gas prices rose and, as a result, will
collect between an estimated $118 billion and $400 billion, depending
on future oil and gas prices. However, despite significant changes in
the oil and gas industry over the past several decades, we found that
Interior has not systematically re-examined how the U.S. government is
compensated for extraction of oil and gas for over 25 years.
* Since 1980--in part due to Interior's inflexible royalty rate
structure--Congress and Interior have been pressured, with varying
success--to periodically adjust royalty rates to respond to current
market conditions. For example, in 1980, a time when oil prices were
high compared to today's prices, in inflation-adjusted terms, Congress
passed a windfall profit tax, which it later repealed in 1988 after
oil prices fell significantly from their 1980 level. Later, in
November 1995--during a period with relatively low oil and gas prices--
the federal government enacted the Outer Continental Shelf Deep Water
Royalty Relief Act (DWRRA) which provided for "royalty relief," the
suspension of royalties on certain volumes of initial production, for
certain leases in the Gulf of Mexico in depths greater than 200 meters
during the 5 years after passage of the act--1996 through 2000. For
leases issued during these 5 years, litigation established that MMS
lacked the authority under the act to impose thresholds. As a result,
companies are now receiving royalty relief even though prices are much
higher than at the time the DWRRA was enacted. In June 2008, we
estimated that future foregone royalties from all the DWRRA leases
issued from 1996 through 2000 could range widely--from a low of about
$21 billion to a high of $53 billion.[Footnote 16] Finally, in 2007,
the Secretary of the Interior twice increased the royalty rate for
future Gulf of Mexico leases. In January, the rate for deep-water
leases was raised to 16-2/3 percent. Later, in October, the rate for
all future leases in the Gulf, including those issued in 2008, was
raised to 18-3/4 percent. Interior estimated these actions will
increase federal oil and gas revenues by $8.8 billion over the next 30
years. The January 2007 increase applied only to deep-water Gulf of
Mexico leases; the October 2007 increase applied to all water depths
in the Gulf of Mexico.
We concluded that these royalty rate increases appeared to be a
response by Interior to the high prices of oil and gas that have led
to record industry profits and raised questions about whether the
existing federal oil and gas fiscal system gives the public an
appropriate share of revenues from oil and gas produced on federal
lands and waters. Furthermore, the royalty rate increases do not
address industry profits from existing leases. Existing leases, with
lower royalty rates, will likely remain highly profitable as long as
they produce oil and gas or until oil and gas prices fall
significantly. In addition, in choosing to increase royalty rates,
Interior did not evaluate the entire oil and gas fiscal system to
determine whether these increases were sufficient to balance
investment attractiveness and appropriate returns to the federal
government for oil and gas resources. On the other hand, according to
Interior, it did consider factors such as industry costs for outer
continental shelf exploration and development, tax rates, rental
rates, and expected bonus bids. Further, because the new royalty rates
are not flexible with respect to oil and gas prices, Interior and
Congress may again be under pressure from industry or the public to
further change the royalty rates if and when oil and gas prices either
fall or rise. Finally, these past royalty changes only affect Gulf of
Mexico leases and do not address onshore leases. To address weaknesses
in Interior's royalty program, we suggested that Congress may wish to
consider directing the Secretary of the Interior to:
* convene an independent panel to perform a comprehensive review of
the federal oil and gas fiscal system[Footnote 17] and:
* direct MMS and other relevant agencies within Interior to establish
procedures for periodically collecting data and information and
conducting analyses to determine how the federal government take and
the attractiveness for oil and gas investors in each federal oil and
gas region compare to those of other resource owners and report this
information to Congress.[Footnote 18]
Interior officials recently reported that the department is currently
undertaking an examination of this issue.
* OEMM and BLM vary in the extent to which they encourage development
of federal leases, and both agencies do less than some states and
private landowners to encourage lease development. As a result, we
concluded that Interior may be missing opportunities to increase
domestic oil and gas production and revenues. Specifically, in the
Gulf of Mexico, OEMM varies the lease length in accordance with the
depth of water over which the lease is situated. For example, leases
issued in shallow water depths typically have terms of 5 years,
whereas leases in the deepest areas of the Gulf of Mexico have 10-year
primary terms. This is because shallower water tends to be nearer to
shore and to be adjacent to already developed areas with pipeline
infrastructure in place, while deeper water tends to be further out,
have less available infrastructure to link to, and generally present
greater challenges associated with the depth of the wells themselves.
In contrast to OEMM's depth-based lease terms, BLM issues leases with
10-year primary terms, regardless of whether the lease is adjacent to
a fully developed field with the necessary pipeline infrastructure to
carry the product to market or in a remote location with no
surrounding infrastructure. Furthermore, BLM also uses 10-year primary
terms in the National Petroleum Reserve-Alaska, where it is
significantly more difficult to develop oil fields because of factors
including the harsh environment.
We also examined selected states and private landowners that lease
land for oil and gas development and found that some do more than
Interior to encourage lease development. For example, to provide a
greater financial incentive to develop leased land, the state of Texas
allows lessees to pay a 20 percent royalty rate for the life of the
lease if production occurs in the first 2 years of the lease, as
compared to 25 percent if production occurs after the 4th year. In
addition, we found that some states and private landowners also do
more to structure leases to reflect the likelihood of finding oil and
gas. For example, New Mexico issues shorter leases and can require
lessees to pay higher royalties for properties that are in or near
known producing areas, and allow longer leases and lower royalty rates
in areas believed to be more speculative. Officials from one private
landowners' association told us that they too are using shorter lease
terms, ranging from 6 months to 3 years, to ensure that lessees are
diligent in developing any potential oil and gas resources on their
land. Louisiana and Texas also issue 3-year onshore leases. While the
existence of lease terms that appear to encourage faster development
of some oil and gas leases suggests a potential for the federal
government to take steps, it is important to note that it can take
several years to complete the required environmental analyses needed
in order to receive approval to begin drilling on federal lands. To
address what we believe are key weaknesses in Interior's royalty
program while acknowledging potential differences between federal,
state, and private leases, we recommended that the Secretary of the
Interior develop a strategy to evaluate options to encourage faster
development of oil and gas leases on federal lands, including
determining whether methods to differentiate between leases according
to the likelihood of finding economic quantities of oil or gas and
whether some of the other methods states use could effectively be
employed, either across all federal leases or in a targeted fashion.
In so doing, Interior should identify any statutory or other obstacles
to using such methods and report the findings to Congress. Interior
officials recently reported that the department is currently
undertaking an examination of this issue.
Weaknesses Exist in Interior's IT Systems for Managing Oil and Gas
Royalty and Production Information:
Our past work has identified shortcomings in Interior's IT systems for
managing oil and gas royalty and production information. In September
2008, we reported that Interior's oil and gas IT systems did not
include several key functionalities, including (1) limiting a
company's ability to make adjustments to self-reported data after an
audit had occurred and (2) identifying missing royalty reports.
[Footnote 19]
* MMS's ability to maintain the accuracy of production and royalty
data has been hampered because companies can make adjustments to their
previously entered data without prior MMS approval. Companies may
legally make changes to both royalty and production data in MMS's
royalty IT system for up to 6 years after the initial reporting month,
and these changes may necessitate changes in the royalty payment.
However, at the time of our review, MMS's royalty IT system allowed
companies to make adjustments to their data beyond the allowed 6-year
time frame. As a result of the companies' ability to make these
retroactive changes, within or outside of the 6-year time frame, the
production data and required royalty payments could change over time--
even after MMS completes an audit--complicating efforts by agency
officials to reconcile production data and ensure that the proper
royalties were paid.
* MMS's royalty IT system's inability to automatically detect
instances when a royalty payor fails to submit the required royalty
report in a timely manner. Because MMS's royalty system did not detect
instances when a payor failed to submit a payment in a timely manner,
we found that cases in which a company stops filing royalty reports
and stops paying royalties may not be detected until more than 2 years
after the initial reporting date, when MMS's royalty IT system
completes a reconciliation of volumes reported on the production
reports with the volumes on their associated royalty reports.
Therefore, it was possible under MMS's strategy that the royalty IT
system would not identify instances in which a payor stopped reporting
until several years after the report is due. This created an
unnecessary risk that MMS was not collecting accurate royalties in a
timely manner.
To address these weaknesses, we recommended that the Secretary of the
Interior, among other things:
* finalize the adjustment line monitoring specifications for modifying
its royalty IT system and fully implement the IT system so that MMS
can monitor adjustments made outside the 6-year time frame, and ensure
that any adjustments made to production and royalty data after
compliance work has been completed are reviewed by appropriate staff,
and:
* develop processes and procedures by which MMS can automatically
identify when an expected royalty report has not been filed in a
timely manner and contact the company to ensure it is complying with
both applicable laws and agency policies.
Since September 2008, MMS has made improvements in its IT systems for
identifying missing royalty reports, but it is too early to assess
their effectiveness.
Additionally, in July 2009, we reported that MMS's IT system lacked
sufficient controls to ensure that royalty payment data were accurate.
[Footnote 20] While much of the royalty data we examined from fiscal
years 2006 and 2007 were reasonable, we found significant instances
where data were missing or appeared erroneous. For example, we
examined gas leases in the Gulf of Mexico and found that, about 5.5
percent of the time, lease operators reported production, but royalty
payors did not submit the corresponding royalty reports, potentially
resulting in $117 million in uncollected royalties. We also found that
a small percentage of royalty payors reported negative royalty values,
something that should not happen, potentially costing $41 million in
uncollected royalties. In addition, royalty payors claimed gas
processing allowances 2.3 percent of the time for unprocessed gas,
potentially resulting in $2 million in uncollected royalties.
Furthermore, we found significant instances where royalty payor-
provided data on royalties paid and the volume and or the value of the
oil and gas produced appeared erroneous because they were outside the
expected ranges. To address control weaknesses, we made a number of
recommendations to MMS intended to improve the quality of royalty data
by improving its IT systems' edit checks, among other things.
Moreover, in our March 2010 report, we found that Interior's
longstanding efforts to implement two key IT systems for facilitating
verification of produced volumes of oil and gas from federal leases
were behind schedule and years from widespread adoption.[Footnote 21]
For example, Interior's efforts to provide its inspection staff with
mobile computing capabilities for use in the field are moving slowly
and are years from full implementation. Interior inspectors continue
to rely on documenting inspection results on paper, and later
reentering these results into Interior databases. Specifically, BLM
and OEMM are independently developing the capacity for inspection
staff to (1) electronically document inspection results and (2) access
reference documents, such as American Petroleum Institute standards
and measurement regulations, via laptops while in the field. BLM
initiated work on developing this capacity in 2001, whereas OEMM is
now in the preliminary planning stages of a similar effort. According
to Interior officials, widespread implementation of a mobile computing
tool to assist with production verification and other types of
inspections, potentially including drilling and safety, is still
several years away. Interior officials said having such a tool would
allow inspection staff to not only easily reference technical
documents while conducting inspections to verify compliance with
regulations but also to document the results of those inspections
while in the field and subsequently upload them to Interior databases.
Similarly, BLM's efforts to use gas production data acquired remotely
from gas wells through its Remote Data Acquisition for Well Production
(RDAWP) program to facilitate production inspections have shown few
results after 5 years of funding and at least $1.5 million spent. At
the time of our review, we found that BLM was only receiving
production data from approximately 50 wells via this program, and it
had yet to use the data to complete a production inspection, making it
difficult to assess its utility. To address these shortcomings, we
made a number of recommendations to the Secretary including that BLM
reassess its current commitment to the RDAWP program in light of other
commercially available software and to implement a mobile computing
solution for the onshore inspection and enforcement staff and to
coordinate with the offshore inspection and enforcement staff as
appropriate.
In conclusion, over the past several years, we and others have found
Interior to be in need of fundamental reform. This past work has found
weaknesses across a wide range of Interior's oversight of onshore and
offshore oil and gas development. Secretary Salazar has taken notable
steps to begin comprehensive evaluations of leasing rules and
practices as well as the amount and ways in which the federal
government collects revenues. Interior is also currently implementing
a number of our recommendations aimed at making improvements within
the existing organization of Interior's functions.
As the Secretary and Congress consider what fundamental changes are
needed in how Interior structures its oversight of oil and gas
programs, we believe that our and others' past work provides a strong
rationale for broad reform of the agency's oil and gas oversight
functions--at MMS to be sure, but also across other parts of Interior,
including those responsible for oversight of onshore areas. If steps
are not taken to ensure effective independent oversight, we are
concerned about the agency's ability to manage the nation's oil and
gas resources, ensure the safe operation of onshore and offshore
leases, provide adequate environmental protection, and provide
reasonable assurance that the U.S. government is collecting the
revenue to which it is entitled. Reorganization and fundamental change
can be very difficult for an organization. We believe that regardless
of how MMS is ultimately reorganized, Interior's top leadership must
also address the wide range of outstanding recommendations for any
reorganization effort to be effective.
Mr. Chairman, this completes my prepared statement. I would be happy
to respond to any questions that you or other Members of the Committee
may have at this time.
GAO Contact and Staff Acknowledgment:
For further information on this statement, please contact Frank Rusco
at (202) 512-3841 or ruscof@gao.gov. Contact points for our
Congressional Relations and Public Affairs offices may be found on the
last page of this statement. Other staff that made key contributions
to this testimony include, Ron Belak, Glenn C. Fischer, Jon Ludwigson,
Ben Shouse, Kiki Theodoropoulos, and Barbara Timmerman.
[End of section]
Appendix I: Data on Turnover of Key Department of the Interior Staff:
Table 1: Total Turnover Rates for Bureau of Land Management (BLM)
Petroleum Engineers, Fiscal Years 2004-2008:
Field office: Buffalo;
Turnover percentage FY2004-08: 80;
Total number of employees in position, FY2004-08: 5;
Total employees leaving position, FY2004-08: 4;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 3;
2005: 1 of 2;
2006: 1 of 2;
2007: 0 of 2;
2008: 1 of 2;
Average number of employees in position, FY2004-08: 2.
Field office: Carlsbad;
Turnover percentage FY2004-08: 75;
Total number of employees in position, FY2004-08: 4;
Total employees leaving position, FY2004-08: 3;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 1;
2005: 0 of 0;
2006: 1 of 1;
2007: 0 of 3;
2008: 1 of 3;
Average number of employees in position, FY2004-08: 2.
Field office: Farmington;
Turnover percentage FY2004-08: 50;
Total number of employees in position, FY2004-08: 8;
Total employees leaving position, FY2004-08: 4;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 6;
2005: 0 of 6;
2006: 2 of 6;
2007: 0 of 5;
1 of 5;
Average number of employees in position, FY2004-08: 6.
Field office: Glenwood Springs;
Turnover percentage FY2004-08: 50;
Total number of employees in position, FY2004-08: 2;
Total employees leaving position, FY2004-08: 1;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 0;
2005: 0 of 0;
2006: 0 of 1;
2007: 0 of 1;
2008: 1 of 1;
Average number of employees in position, FY2004-08: 1.
Field office: White River;
Turnover percentage FY2004-08: 100;
Total number of employees in position, FY2004-08: 2;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 1;
2005: 1 of 1;
2006: 0 of 1;
2007: 0 of 1;
2008: 1 of 1;
Average number of employees in position, FY2004-08: 1.
Field office: Pinedale;
Turnover percentage FY2004-08: 100;
Total number of employees in position, FY2004-08: 2;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 1;
2005: 0 of 1;
2006: 0 of 1;
2007: 1 of 2;
2008: 1 of 1;
Average number of employees in position, FY2004-08: 1.
Field office: Roswell;
Turnover percentage FY2004-08: 80;
Total number of employees in position, FY2004-08: 5;
Total employees leaving position, FY2004-08: 4;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 5;
2005: 0 of 5;
2006: 2 of 5;
2007: 0 of 3;
2008: 2 of 3;
Average number of employees in position, FY2004-08: 4.
Field office: Vernal;
Turnover percentage FY2004-08: 33;
Total number of employees in position, FY2004-08: 6;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 2;
2005: 2 of 3;
2006: 0 of 2;
2007: 0 of 2;
2008: 0 of 4;
Average number of employees in position, FY2004-08: 3.
Source: GAO analysis of Interior data.
Note: We calculated the total turnover rate by (1) counting the number
of individual petroleum engineers who separated from BLM, plus those
who changed locations, plus those who changed from the petroleum
engineer position to another position within that office; (2) dividing
that by the number of individual petroleum engineers employed in each
BLM office from fiscal years 2004 through 2008. For those individuals
who changed jobs or locations, we did not determine whether they
changed jobs or locations because of a management decision, as opposed
to the employees' own decision.
[End of table]
Table 2: Total Turnover Rates for BLM Petroleum Engineer Technicians,
Fiscal Years 2004-2008:
Field office: Buffalo;
Turnover percentage FY2004-08: 30;
Total number of employees in position, FY2004-08: 20;
Total employees leaving position, FY2004-08: 6;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 12;
2005: 0 of 12;
2006: 2 of 13;
2007: 2 of 14;
2008: 1 of 15;
Average number of employees in position, FY2004-08: 13.
Field office: Carlsbad;
Turnover percentage FY2004-08: 47;
Total number of employees in position, FY2004-08: 19;
Total employees leaving position, FY2004-08: 9;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 10;
2005: 1 of 9;
2006: 4 of 9;
2007: 1 of 10;
2008: 2 of 12;
Average number of employees in position, FY2004-08: 10.
Field office: Farmington;
Turnover percentage FY2004-08: 54;
Total number of employees in position, FY2004-08: 37;
Total employees leaving position, FY2004-08: 20;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 22;
2005: 3 of 25;
2006: 7 of 24;
2007: 3 of 21;
2008: 6 of 22;
Average number of employees in position, FY2004-08: 23.
Field office: Glenwood Springs;
Turnover percentage FY2004-08: 67;
Total number of employees in position, FY2004-08: 3;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 0;
2005: 0 of 0;
2006: 0 of 0;
2007: 0 of 2;
2008: 2 of 3;
Average number of employees in position, FY2004-08: 3.
Field office: Hobbs;
Turnover percentage FY2004-08: 22;
Total number of employees in position, FY2004-08: 9;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 2 of 8;
2005: 0 of 6;
2006: 0 of 6;
2007: 0 of 6;
2008: 0 of 6;
Average number of employees in position, FY2004-08: 6.
Field office: White River;
Turnover percentage FY2004-08: 55;
Total number of employees in position, FY2004-08: 11;
Total employees leaving position, FY2004-08: 6;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 2;
2005: 2 of 3;
2006: 0 of 1;
2007: 1 of 2;
2008: 2 of 7;
Average number of employees in position, FY2004-08: 3.
Field office: Pinedale;
Turnover percentage FY2004-08: 83;
Total number of employees in position, FY2004-08: 12;
Total employees leaving position, FY2004-08: 10;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 2;
2005: 1 of 6;
2006: 2 of 6;
2007: 3 of 5;
2008: 3 of 5;
Average number of employees in position, FY2004-08: 5.
Field office: Roswell;
Turnover percentage FY2004-08: 57;
Total number of employees in position, FY2004-08: 7;
Total employees leaving position, FY2004-08: 4;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 4;
2005: 0 of 4;
2006: 1 of 4;
2007: 1 of 4;
2008: 2 of 5;
Average number of employees in position, FY2004-08: 4.
Field office: Vernal;
Turnover percentage FY2004-08: 17;
Total number of employees in position, FY2004-08: 18;
Total employees leaving position, FY2004-08: 3;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 13;
2005: 1 of 14;
2006: 1 of 13;
2007: 0 of 15;
2008: 0 of 15;
Average number of employees in position, FY2004-08: 14.
Source: GAO analysis of Interior data.
Note: We calculated the total turnover rate by (1) counting the number
of individual petroleum engineer technicians who separated from BLM,
plus those who changed locations, plus those who changed from the
petroleum engineer technician position to another position within that
office; (2) dividing that by the number of individual petroleum
engineer technicians employed in each BLM office from fiscal years
2004 through 2008. For those individuals who changed jobs or
locations, we did not determine whether they changed jobs or locations
because of a management decision, as opposed to the employees' own
decision.
[End of table]
Table 3: Total Turnover Rates for BLM Production Accountability
Technicians, Fiscal Years 2004-2008:
Field office: Buffalo;
Turnover percentage FY2004-08: 75;
Total number of employees in position, FY2004-08: 8;
Total employees leaving position, FY2004-08: 6;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 2;
2005: 0 of 2;
2006: 0 of 2;
2007: 3 of 4;
2008: 3 of 5;
Average number of employees in position, FY2004-08: 3.
Field office: Carlsbad;
Turnover percentage FY2004-08: 67;
Total number of employees in position, FY2004-08: 3;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 1;
2005: 0 of 0;
2006: 0 of 0;
2007: 0 of 0;
2008: 1 of 2;
Average number of employees in position, FY2004-08: 2.
Field office: Farmington;
Turnover percentage FY2004-08: 63;
Total number of employees in position, FY2004-08: 8;
Total employees leaving position, FY2004-08: 5;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 3;
2005: 1 of 4;
2006: 0 of 3;
2007: 2 of 5;
2008: 2 of 5;
Average number of employees in position, FY2004-08: 4.
Field office: Glenwood Springs;
Turnover percentage FY2004-08: 0;
Total number of employees in position, FY2004-08: 1;
Total employees leaving position, FY2004-08: 0;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 0;
2005: 0 of 0;
2006: 0 of 0;
2007: 0 of 1;
2008: 0 of 1;
Average number of employees in position, FY2004-08: 1.
Field office: Hobbs;
Turnover percentage FY2004-08: 50;
Total number of employees in position, FY2004-08: 4;
Total employees leaving position, FY2004-08: 2;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 1;
2005: 0 of 2;
2006: 0 of 2;
2007: 2 of 4;
2008: 0 of 2;
Average number of employees in position, FY2004-08: 2.
Field office: White River;
Turnover percentage FY2004-08: 50;
Total number of employees in position, FY2004-08: 2;
Total employees leaving position, FY2004-08: 1;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 0;
2005: 0 of 0;
2006: 0 of 0;
2007: 1 of 2;
2008: 0 of 1;
Average number of employees in position, FY2004-08: 2.
Field office: Pinedale;
Turnover percentage FY2004-08: 100;
Total number of employees in position, FY2004-08: 3;
Total employees leaving position, FY2004-08: 3;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 0;
2005: 0 of 1;
2006: 0 of 1;
2007: 1 of 1;
2008: 2 of 2;
Average number of employees in position, FY2004-08: 1.
Field office: Roswell;
Turnover percentage FY2004-08: 100;
Total number of employees in position, FY2004-08: 1;
Total employees leaving position, FY2004-08: 1;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 1;
2005: 0 of 0;
2006: 0 of 0;
2007: 0 of 0;
2008: 0 of 0;
Average number of employees in position, FY2004-08: 1.
Field office: Vernal;
Turnover percentage FY2004-08: 50;
Total number of employees in position, FY2004-08: 2;
Total employees leaving position, FY2004-08: 1;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 1;
2005: 0 of 1;
2006: 0 of 1;
2007: 0 of 2;
2008: 0 of 2;
Average number of employees in position, FY2004-08: 1.
Source: GAO analysis of Interior data.
Note: We calculated the total turnover rate by (1) counting the number
of individual production accountability technicians who separated from
BLM, plus those who changed locations, plus those who changed from the
production accountability technicians to another position within that
office; (2) dividing that by the number of individual production
accountability technicians employed in each BLM office from fiscal
years 2004 through 2008. For those individuals who changed jobs or
locations, we did not determine whether they changed jobs or locations
because of a management decision, as opposed to the employees' own
decision.
[End of table]
Table 4: Total Turnover Rates for Offshore Energy and Minerals
Management (OEMM) Petroleum Engineers who Approve Measurement, Fiscal
Years 2004-2008:
Regional office: Gulf of Mexico region;
Turnover percentage FY2004-08: 30;
Total number of employees in position, FY2004-08: 10;
Total employees leaving position, FY2004-08: 3;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 8;
2005: 1 of 7;
2006: 2 of 6;
2007: 0 of 7;
2008: 0 of 7;
Average number of employees in position: FY2004-08: 7.
Regional office: Pacific region;
Turnover percentage FY2004-08: 0;
Total number of employees in position, FY2004-08: 1;
Total employees leaving position, FY2004-08: 0;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 1;
2005: 0 of 1;
2006: 0 of 1;
2007: 0 of 1;
2008: 0 of 1;
Average number of employees in position: FY2004-08: 1.
Source: GAO analysis of Interior data.
Note: We calculated the total turnover rate by (1) counting the number
of individual petroleum engineers who separated from OEMM, plus those
who changed locations, plus those who changed from the petroleum
engineers to another position within that office; (2) dividing that by
the number of individual petroleum engineers employed in each OEMM
office from fiscal years 2004 through 2008. For those individuals who
changed jobs or locations, we did not determine whether they changed
jobs or locations because of a management decision, as opposed to the
employees' own decision.
[End of table]
Table 5: Total Turnover Rates for OEMM Inspectors, Fiscal Years 2004-
2008:
District office: New Orleans;
Turnover percentage FY2004-08: 42;
Total number of employees in position, FY2004-08: 19;
Total employees leaving position, FY2004-08: 8;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 1 of 13;
2005: 0 of 13;
2006: 2 of 13;
2007: 3 of 14;
2008: 2 of 13;
Average number of employees in position, FY2004-08: 13.
District office: Lake Jackson;
Turnover percentage FY2004-08: 27;
Total number of employees in position, FY2004-08: 11;
Total employees leaving position, FY2004-08: 3;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 9;
2005: 0 of 11;
2006: 2 of 11;
2007: 0 of 9;
2008: 1 of 9;
Average number of employees in position, FY2004-08: 10.
District office: Lake Charles;
Turnover percentage FY2004-08: 41;
Total number of employees in position, FY2004-08: 17;
Total employees leaving position, FY2004-08: 7;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 2 of 15;
2005: 0 of 13;
2006: 0 of 13;
2007: 1 of 13;
2008: 4 of 14;
Average number of employees in position, FY2004-08: 14.
District office: California;
Turnover percentage FY2004-08: 44;
Total number of employees in position, FY2004-08: 9;
Total employees leaving position, FY2004-08: 4;
Total employees leaving position, FY2004-08 (of the number employed in
that fiscal year):
2004: 0 of 7;
2005: 2 of 9;
2006: 0 of 7;
2007: 1 of 7;
2008: 1 of 6;
Average number of employees in position, FY2004-08: 7.
Source: GAO analysis of Interior data.
Note: We calculated the total turnover rate by (1) counting the number
of individual inspectors who separated from OEMM, plus those who
changed locations, plus those who changed from the inspectors to
another position within that office; (2) dividing that by the number
of individual inspectors employed in each OEMM office from fiscal
years 2004 through 2008. For those individuals who changed jobs or
locations, we did not determine whether they changed jobs or locations
because of a management decision, as opposed to the employees' own
decision.
[End of table]
[End of section]
Appendix II: Related Prior GAO Reports:
Oil and Gas Management: Key Elements to Consider for Providing
Assurance of Effective Independent Oversight, [hyperlink,
http://www.gao.gov/products/GAO-10-852T], (Washington, D.C.: June 17,
2010).
Oil and Gas Management: Interior's Oil and Gas Production Verification
Efforts Do Not Provide Reasonable Assurance of Accurate Measurement of
Production Volumes, [hyperlink,
http://www.gao.gov/products/GAO-10-313], (Washington, D.C.: Mar. 15,
2010).
Offshore Oil and Gas Development: Additional Guidance Would Help
Strengthen the Minerals Management Service's Assessment of
Environmental Impacts in the North Aleutian Basin, [hyperlink,
http://www.gao.gov/products/GAO-10-276], (Washington, D.C.: Mar. 8,
2010).
Energy Policy Act of 2005: Greater Clarity Needed to Address Concerns
with Categorical Exclusions for Oil and Gas Development under Section
390 of the Act, [hyperlink, http://www.gao.gov/products/GAO-09-872],
(Washington, D.C.: Sept. 26, 2009).
Federal Oil and Gas Management: Opportunities Exist to Improve
Oversight, [hyperlink, http://www.gao.gov/products/GAO-09-1014T],
(Washington, D.C.: Sept. 16, 2009).
Royalty-In-Kind Program: MMS Does Not Provide Reasonable Assurance It
Receives Its Share of Gas, Resulting in Millions in Forgone Revenue,
[hyperlink, http://www.gao.gov/products/GAO-09-744], (Washington,
D.C.: Aug. 14, 2009).
Mineral Revenues: MMS Could Do More to Improve the Accuracy of Key
Data Used to Collect and Verify Oil and Gas Royalties, [hyperlink,
http://www.gao.gov/products/GAO-09-549], (Washington, D.C.: July 15,
2009).
Strategic Petroleum Reserve: Issues Regarding the Inclusion of Refined
Petroleum Products as Part of the Strategic Petroleum Reserve,
[hyperlink, http://www.gao.gov/products/GAO-09-695T], (Washington,
D.C.: May 12, 2009).
Oil and Gas Management: Federal Oil and Gas Resource Management and
Revenue Collection In Need of Stronger Oversight and Comprehensive
Reassessment, [hyperlink, http://www.gao.gov/products/GAO-09-556T],
(Washington, D.C.: Apr. 2, 2009).
Oil and Gas Leasing: Federal Oil and Gas Resource Management and
Revenue Collection in Need of Comprehensive Reassessment, [hyperlink,
http://www.gao.gov/products/GAO-09-506T], (Washington, D.C.: Mar. 17,
2009).
Department of the Interior, Minerals Management Service: Royalty
Relief for Deepwater Outer Continental Shelf Oil and Gas Leases--
Conforming Regulations to Court Decision, [hyperlink,
http://www.gao.gov/products/GAO-09-102R], (Washington, D.C.: Oct. 21,
2008).
Oil and Gas Leasing: Interior Could Do More to Encourage Diligent
Development, [hyperlink, http://www.gao.gov/products/GAO-09-74],
(Washington, D.C.: Oct. 3, 2008).
Oil and Gas Royalties: MMS's Oversight of Its Royalty-in-Kind Program
Can Be Improved through Additional Use of Production Verification Data
and Enhanced Reporting of Financial Benefits and Costs, [hyperlink,
http://www.gao.gov/products/GAO-08-942R], (Washington, D.C.: Sept. 26,
2008).
Mineral Revenues: Data Management Problems and Reliance on Self-
Reported Data for Compliance Efforts Put MMS Royalty Collections at
Risk, [hyperlink, http://www.gao.gov/products/GAO-08-893R],
(Washington, D.C.: Sept. 12, 2008).
Oil and Gas Royalties: The Federal System for Collecting Oil and Gas
Revenues Needs Comprehensive Reassessment, [hyperlink,
http://www.gao.gov/products/GAO-08-691], (Washington, D.C.: Sept. 3,
2008).
Oil and Gas Royalties: Litigation over Royalty Relief Could Cost the
Federal Government Billions of Dollars, [hyperlink,
http://www.gao.gov/products/GAO-08-792R], (Washington, D.C.: June 5,
2008).
Strategic Petroleum Reserve: Improving the Cost-Effectiveness of
Filling the Reserve, [hyperlink,
http://www.gao.gov/products/GAO-08-726T], (Washington, D.C.: Apr. 24,
2008).
Mineral Revenues: Data Management Problems and Reliance on Self-
Reported Data for Compliance Efforts Put MMS Royalty Collections at
Risk, [hyperlink, http://www.gao.gov/products/GAO-08-560T],
(Washington, D.C.: Mar. 11, 2008).
Strategic Petroleum Reserve: Options to Improve the Cost-Effectiveness
of Filling the Reserve, [hyperlink,
http://www.gao.gov/products/GAO-08-521T], (Washington, D.C.: Feb. 26,
2008).
Oil and Gas Royalties: A Comparison of the Share of Revenue Received
from Oil and Gas Production by the Federal Government and Other
Resource Owners, [hyperlink, http://www.gao.gov/products/GAO-07-676R],
(Washington, D.C.: May 1, 2007).
Oil and Gas Royalties: Royalty Relief Will Cost the Government
Billions of Dollars but Uncertainty Over Future Energy Prices and
Production Levels Make Precise Estimates Impossible at this Time,
[hyperlink, http://www.gao.gov/products/GAO-07-590R], (Washington,
D.C.: Apr. 12, 2007).
Royalties Collection: Ongoing Problems with Interior's Efforts to
Ensure A Fair Return for Taxpayers Require Attention, [hyperlink,
http://www.gao.gov/products/GAO-07-682T], (Washington, D.C.: Mar. 28,
2007).
Oil and Gas Royalties: Royalty Relief Will Likely Cost the Government
Billions, but the Final Costs Have Yet to Be Determined, [hyperlink,
http://www.gao.gov/products/GAO-07-369T], (Washington, D.C.: Jan. 18,
2007).
Strategic Petroleum Reserve: Available Oil Can Provide Significant
Benefits, but Many Factors Should Influence Future Decisions about
Fill, Use, and Expansion, [hyperlink,
http://www.gao.gov/products/GAO-06-872], (Washington, D.C.: Aug. 24,
2006).
Royalty Revenues: Total Revenues Have Not Increased at the Same Pace
as Rising Oil and Natural Gas Prices due to Decreasing Production
Sold, [hyperlink, http://www.gao.gov/products/GAO-06-786R],
(Washington, D.C.: June 21, 2006).
Oil and Gas Development: Increased Permitting Activity Has Lessened
BLM's Ability to Meet Its Environmental Protection Responsibilities,
[hyperlink, http://www.gao.gov/products/GAO-05-418], (Washington,
D.C.: June 17, 2005).
Mineral Revenues: Cost and Revenue Information Needed to Compare
Different Approaches for Collecting Federal Oil and Gas Royalties,
[hyperlink, http://www.gao.gov/products/GAO-04-448], (Washington,
D.C.: Apr. 16, 2004).
[End of section]
Footnotes:
[1] Secretarial Order 3302, issued June 18, 2010, renamed the Minerals
Management Service.
[2] We assessed the reliability of these data and found them to be
sufficiently reliable for our purposes.
[3] GAO, Oil and Gas Leasing: Interior Could Do More to Encourage
Diligent Development, [hyperlink,
http://www.gao.gov/products/GAO-09-74] (Washington, D.C.: Oct. 3,
2008).
[4] In addressing long-term energy challenges, Congress enacted the
Energy Policy Act of 2005, in part to expedite oil and gas development
within the United States. This law authorizes BLM, for certain oil and
gas activities, to approve projects without preparing new
environmental analyses that would normally be required by the National
Environmental Protection Act.
[5] GAO, Oil and Gas Development: Increased Permitting Activity Has
Lessened BLM's Ability to Meet Its Environmental Protection
Responsibilities, [hyperlink, http://www.gao.gov/products/GAO-05-418]
(Washington, D.C.: June 17, 2005).
[6] GAO, Mineral Revenues: Data Management Problems and Reliance on
Self-Reported Data for Compliance Efforts Put MMS Royalty Collections
at Risk, [hyperlink, http://www.gao.gov/products/GAO-08-893R]
(Washington, D.C.: Sept. 12, 2008).
[7] GAO, Oil and Gas Management: Interior's Oil and Gas Production
Verification Efforts Do Not Provide Reasonable Assurance of Accurate
Measurement of Production Volumes, [hyperlink,
http://www.gao.gov/products/GAO-10-313] (Washington, D.C.: Mar. 15,
2010).
[8] [hyperlink, http://www.gao.gov/products/GAO-10-313].
[9] Pub. L. No. 91-190, 83 Stat. 852 (1970).
[10] GAO, Energy Policy Act of 2005: Greater Clarity Needed to Address
Concerns with Categorical Exclusions for Oil and Gas Development under
Section 390 of the Act, [hyperlink,
http://www.gao.gov/products/GAO-09-872] (Washington D.C.: Sept. 16,
2009).
[11] On May 17, 2010, BLM issued an Instruction Memorandum that
provides amended instructions for using some of the section 390
categorical exclusions, requires review of the circumstances for use
of any of section 390 categorical exclusions, seeks to ensure all
actions approved through the use of a section 390 categorical
exclusion are in conformance with the approved land-use plan, and
provides some general guidelines for ensuring compliance with NEPA.
[12] [hyperlink, http://www.gao.gov/products/GAO-05-418].
[13] GAO, Offshore Oil and Gas Development: Additional Guidance Would
Help Strengthen the Minerals Management Service's Assessment of
Environmental Impacts in the North Aleutian Basin, [hyperlink,
http://www.gao.gov/products/GAO-10-276], (Washington, D.C.: Mar. 8,
2010).
[14] GAO, Oil and Gas Royalties: The Federal System for Collecting Oil
and Gas Revenues Needs Comprehensive Reassessment, [hyperlink,
http://www.gao.gov/products/GAO-08-691] (Washington, D.C.: Sept. 3,
2008).
[15] [hyperlink, http://www.gao.gov/products/GAO-09-74].
[16] Oil and Gas Royalties: Litigation over Royalty Relief Could Cost
the Federal Government Billions of Dollars, [hyperlink,
http://www.gao.gov/products/GAO-08-792R], (Washington, D.C.: June 5,
2008).
[17] [hyperlink, http://www.gao.gov/products/GAO-08-691].
[18] [hyperlink, http://www.gao.gov/products/GAO-09-74].
[19] [hyperlink, http://www.gao.gov/products/GAO-08-893R].
[20] GAO, Mineral Revenues: MMS Could Do More to Improve the Accuracy
of Key Data Used to Collect and Verify Oil and Gas Royalties,
[hyperlink, http://www.gao.gov/products/GAO-09-549] (Washington, D.C.:
July 15, 2009).
[21] [hyperlink, http://www.gao.gov/products/GAO-10-313].
[End of section]
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