Oil And Gas Development: Increased Permitting Activity Has	 
Lessened BLM's Ability to Meet Its Environmental Protection	 
Responsibilities (17-JUN-05, GAO-05-418).			 
                                                                 
Rising U.S. energy consumption and concerns about dependency on  
foreign energy sources have prompted the administration to	 
aggressively pursue domestic oil and gas production, including	 
production on public lands, which in turn has generated concern  
that the impacts of this activity may compromise the use of	 
public land for other purposes. GAO determined (1) the extent to 
which the level of oil and gas development on public lands	 
managed by the Bureau of Land Management (BLM) has changed in	 
recent years, and how the change has affected BLM's ability to	 
mitigate impacts; (2) what policy changes related to oil and gas 
development BLM recently made and how these policies affected	 
BLM's environmental mitigation activities; and (3) what 	 
challenges BLM faces in managing its oil and gas program.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-418 					        
    ACCNO:   A26938						        
  TITLE:     Oil And Gas Development: Increased Permitting Activity   
Has Lessened BLM's Ability to Meet Its Environmental Protection  
Responsibilities						 
     DATE:   06/17/2005 
  SUBJECT:   Data collection					 
	     Environmental impact statements			 
	     Environmental monitoring				 
	     Environmental policies				 
	     Gas resources					 
	     Land management					 
	     National policies					 
	     Oil drilling					 
	     Oil resources					 
	     Policy evaluation					 
	     Public lands					 
	     Environmental protection				 
	     BLM National Energy Policy 			 
	     Implementation Plan				 
                                                                 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-05-418

United States Government Accountability Office

 GAO	Report to the Ranking Minority Member, Committee on Homeland Security and
                       Governmental Affairs, U.S. Senate

June 2005

OIL AND GAS DEVELOPMENT

      Increased Permitting Activity Has Lessened BLM's Ability to Meet Its
                   Environmental Protection Responsibilities

                                       a

GAO-05-418

[IMG]

June 2005

OIL AND GAS DEVELOPMENT

Increased Permitting Activity Has Lessened BLM's Ability to Meet Its
Environmental Protection Responsibilities

  What GAO Found

BLM's ability to meet its environmental mitigation responsibilities for
oil and gas development has been lessened by a dramatic increase in oil
and gas operations on federal lands over the past 6 years. Nationwide, the
total number of drilling permits approved by BLM more than tripled, from
1,803 in fiscal year 1999 to 6,399 in fiscal year 2004. BLM officials in
five out of eight field offices that GAO visited explained that as a
result of the increases in drilling permit workloads, staff had to devote
increased time to processing drilling permits, leaving less time for
mitigation activities, such as environmental inspections and idle-well
reviews.

BLM made policy revisions over the last 6 years that affected to varying
degrees its ability to assess and mitigate the environmental impacts of
oil and gas development. The combined effects of these policy changes-some
of which were aimed at facilitating and managing increased development,
while others were meant to enhance environmental mitigation-were mixed.
For example, four of the eight field offices reported that the most
significant impact of the policies to expedite and manage oil and gas
development was the increased emphasis that some of these policies placed
on processing permits, which in turn resulted in shifting staff
responsibilities away from mitigation activities. On the other hand,
policies to enhance mitigation generally had a positive impact, although
increases in the permitting workload have limited their effect. For
example, in six field offices, policies for revitalizing BLM's inspection
and enforcement program resulted in more inspection staff being hired,
although most offices remain understaffed.

BLM state and field office staff, and GAO, identified several challenges
to managing the agency's oil and gas program, including (1) managing
workloads while meeting all of its responsibilities, (2) using workforce
planning to effectively identify and communicate its workforce needs, and
(3) meeting its oil and gas program resource needs in light of budget
constraints. Workload pressure, already high due to increased permitting
activity, has been further exacerbated by increased appeals and litigation
of BLM decisions and actions, according to BLM staff. In reviewing BLM's
efforts to manage increasing workloads, GAO found that some data needed to
quantify specific workload activities are either not tracked or not
consistently tracked, and that BLM's current workforce planning process
does not effectively identify and communicate BLM's staff needs to
decision makers. As a result, the process does not provide consistent and
readily available information that BLM can use to support budget
justifications and make informed resource allocation decisions. BLM is
also presented with the challenge of meeting its oil and gas program
responsibilities in a period when staffing needs are growing faster than
available resources. While BLM has the authority to assess and collect
fees for processing oil and gas permits, it has not exercised this
authority. BLM has recently taken steps to develop a fee structure for
permits.

United States Government Accountability Office

Contents

  Letter 1

Results in Brief 5

Background 7

Dramatic Increases in Oil and Gas Permitting Activity Have

Lessened BLM's Ability to Ensure That Environmental Impacts

Are Mitigated 17 Recent BLM Policy Changes Have Had Mixed Impacts on
Environmental Mitigation Activities for Oil and Gas Development 27

BLM Faces Several Major Challenges in Implementing Its Oil and

Gas Program 35 Conclusions 45 Recommendations for Executive Action 46
Agency Comments and Our Evaluation 47

  Appendixes

Appendix I: Objectives, Scope, and Methodology 49

Appendix II: Resource Monitoring 55

Appendix III:	Comments from the Department of the Interior 61 GAO Comments
64

Appendix IV: GAO Contact and Staff Acknowledgments 65

Tables	Table 1: Table 2:

Table 3:

Table 4: Table 5:

Increases in Oil and Gas Drilling Permits Approved by
Eight BLM Field Offices in Fiscal Years 1999 and 2004 21
Number of Abandoned Wells That Still Needed Approved
Final Abandonment Notices for Eight BLM Field Offices,
as of February 17, 2005 26
Status of the Energy-Related Expedited Resource
Management Plans for Eight BLM Field Officesasof March
2005 30
Policy Changes to Improve and Streamline the Processing
of Drilling Permits 31
Nature of Resource Monitoring Plans That Address
Impacts from Oil and Gas Development across Broad
Geographic Areas 57

            Figures Figure 1: Oil Drilling Site with Access Road 10

Contents

Figure 2: Fragmentation of Wildlife Habitat by Multiple Oil and Gas

Sites 11 Figure 3: Typical Oil and Gas Site Subject to an Environmental

Inspection 14 Figure 4: BLM State and Field Offices Visited 19 Figure 5:
Number of Oil and Gas Drilling Permits Approved by BLM

for Fiscal Years 1999 through 2004 20 Figure 6: Cumulative Percentage
Change in Drilling Permits

Approved, BLM's Oil and Gas Program Budget, and Staff

Resources for the Oil and Gas Program for Fiscal Years

1999 through 2005 43

Abbreviations

AFMSS Automated Fluids Mineral Support System
AIRS Automated Inspection Record System
BLM Bureau of Land Management
EA environmental assessment
EIS environmental impact statement
EPA Environmental Protection Agency
EPCA Energy Policy and Conservation Act
FLPMA Federal Land Policy and Management Act
FTE full-time equivalent
IOAA Independent Offices Appropriations Act
NEPA National Environmental Policy Act
TA temporarily abandoned

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

June 17, 2005

The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Homeland Security and Governmental Affairs
United States Senate

Dear Senator Lieberman:

American families, communities, and businesses all depend on reliable and
affordable energy for their health, safety, and livelihood. Energy is
necessary for a myriad of things that affect peoples' daily lives,
including
transportation, communication, food production, medical services,
air-conditioning, and heating. As our nation's energy consumption
continues to rise and concerns about dependency on foreign energy
sources heighten, the administration has aggressively pursued options for
increasing domestic oil and gas production, including production on public
lands. This, in turn, has generated concern among some state and local
government officials, sportsmen, conservationists, and others that this
activity may compromise the use of public land for other purposes.

The Bureau of Land Management (BLM), an agency of the Department of
the Interior, is responsible for managing 261 million surface acres of
public
land, which is roughly one-eighth of the United States. BLM is also
responsible for issuing leases for oil and gas resources that are on or
under
federal lands as well as private lands for which the federal government
retains mineral rights-amounting to roughly 700 million acres.1 In fiscal
year 2004, oil and gas valued at roughly $14.5 billion was produced from
these leases and the government collected approximately $1.6 billion in
royalty payments, which are based on a percentage of the value of the oil
and gas produced.

The guiding legislation for BLM's management of public lands and mineral
estates is the Federal Land Policy and Management Act of 1976, as

1The Mineral Leasing Act of 1920 (Pub. L. No. 66-146 (1920)), as amended,
and the Mineral Leasing Act for Acquired Lands (Pub. L. No. 80-382
(1947)), as amended, provide the legislative authority for federal oil and
gas leasing. BLM's oil and gas leasing regulations are located at 43
C.F.R. pt. 3100. BLM cannot issue leases for National Forest System lands
over the objection of the Forest Service. 43 C.F.R. S: 3101.7-1(c).
Generally, for lands administered by other agencies, BLM must either
obtain the consent of (for acquired lands), or consult with (for public
domain lands), the agency responsible. 43 C.F.R. S: 3101.7-1 (a), (b).

amended (FLPMA).2 Congress declared in FLPMA that it was U.S. policy to
manage public lands for multiple use and sustained yield. 3 "Multiple use"
is defined, in part, as "the management of the public lands and their
various resource values so that they are utilized in the combination that
will best meet the present and future needs of the American people."4
"Sustained yield" is defined as the "achievement and maintenance in
perpetuity of a high-level annual or regular periodic output of the
various renewable resources of the public lands consistent with multiple
use."5 BLM carries out these requirements by continuously balancing a
variety of competing land uses, including cattle grazing, habitat
protection for threatened and endangered species, wilderness preservation,
recreational use, and oil and gas development.

BLM is also responsible for protecting the environment by mitigating the
impacts of oil and gas development occurring on lands managed by the
agency.6 This requires BLM to undertake a number of activities to ensure
that adverse impacts on the land as well as other resources-such as air,
water, vegetation, and wildlife-are properly avoided or mitigated. The
Federal Oil and Gas Royalty Management Act of 1982,7 as amended,
establishes the authority for BLM's program for inspecting oil and gas
sites to make sure operators are in compliance with all restrictions and
requirements outlined in their leases and drilling permits-including those
designed to protect the environment. The act requires the Secretary of the
Interior to develop guidelines setting forth the coverage and the
frequency of such inspections. Relatedly, various BLM regulations and
policies form the basis for monitoring the long-term impacts of oil and
gas production; tracking nonproducing wells, also referred to as "idle"
wells, to make sure that, among other things, they do not fall into
disrepair and become a liability to the federal government; and ensuring
that lands affected by oil and gas production are being properly
reclaimed. The protection of other

2Pub. L. No. 94-579 (1976), 90 Stat. 2743, codified at 43 U.S.C. S: 1701
et seq.

343 U.S.C. S: 1701(a)(7).

443 U.S.C. S: 1702(c).

543 U.S.C. S: 1702(h).

6When we refer to BLM's environmental protection responsibilities, we are
including BLM's responsibilities to protect the land as well as other
resources, such as air, water, vegetation, fish, and wildlife.

7Pub. L. No. 97-451(1983), 96 Stat. 2447, codified at 30 U.S.C. S: 1701 et
seq.

resources that may be affected by oil and gas activity is governed by
resource-specific laws, such as the Clean Air Act, the Clean Water Act,
and the Endangered Species Act.

In January 2001, the President established the National Energy Policy
Development Group for the purpose of developing a national energy policy.
In May 2001, this group issued the National Energy Policy Report, which
included recommendations for facilitating the production of oil and gas
resources on public lands. While Congress is still considering
comprehensive energy policy legislation in response to the National Energy
Policy Development Group, BLM has been administratively implementing some
of its recommendations. Specifically, BLM has focused its efforts on
streamlining its administration and management of the various stages of
oil and gas production through a number of policy and procedural changes
that seek to minimize delays in approving drilling permits and increase
production while also protecting the environment.

In this context, you asked us to determine (1) the extent to which the
level of oil and gas development on public lands managed by BLM has
changed over the past 6 years and how these changes have affected, if at
all, BLM's ability to assess and mitigate environmental impacts; (2) what
policy changes BLM has made in the past 6 years related to facilitating
and managing oil and gas development and how these changes have affected,
if at all, BLM's ability to assess and mitigate environmental impacts; and
(3) what challenges BLM faces in managing its oil and gas program.

To respond to these objectives, we obtained data from BLM on the number of
oil and gas drilling permits approved in the past 6 years and the number
of environmental inspections performed. We met with officials from BLM's
Fluid Minerals Group to discuss the agency's responsibilities for managing
its oil and gas program. We also met with the Director and Deputy Director
of BLM's National Energy Office to discuss the agency's efforts to
implement recommendations in the National Energy Policy specifically
affecting BLM's oil and gas program. In addition, we visited a
nonprobability sample of BLM field offices and used a structured interview
guide to assist in collecting information about how each field office
manages its oil and gas program, including staffing and workload issues.8

8Results from nonprobability samples cannot be used to make inferences
about a population, because in a nonprobability sample, some elements of
the population being studied have no chance or an unknown chance of being
selected as part of the sample.

We selected field offices that experienced some of the greatest increases
in oil and gas permitting activity for fiscal years 1999 through 2003 (at
the time of site selection, fiscal year 2004 data were not available).
Additional criteria for selection included offices that vary in their
ability to meet BLM's goals for inspecting oil and gas wells and offices
that either are or are not expediting the update of resource management
plans because the plans involve energy development issues. We focused on
these offices because of concern that the expedited time frames for
updating these plans could compromise the environmental analyses
associated with the plans. Using these criteria, we selected eight field
offices to visit: in Glenwood Springs, Colorado;9 Miles City, Montana;
Carlsbad and Farmington, New Mexico;10 Vernal, Utah; and Buffalo, Rawlins,
and Pinedale, Wyoming. Using a structured interview guide, we also
interviewed officials from each of the five BLM state offices-in Colorado,
Montana, New Mexico, Utah, and Wyoming-that have oversight authority for
these field offices.11 The officials we interviewed at these offices,
including state and field office managers, were responsible for the
day-to-day administration of BLM's oil and gas program. We also met with
officials from industry groups, environmental and citizen-based groups,
and state governments. We collected and analyzed documents related to
BLM's management of its oil and gas program, including instructional
memoranda, resource management plans, BLM's National Energy Policy
Implementation Plan, and relevant laws and regulations. A more detailed
description of our scope and methodology can be found in appendix I. We
conducted our work from February 2004 through April 2005 in accordance
with generally accepted government auditing standards.

9The Glenwood Springs, Colorado, field office shares oil and gas program
staff with the Grand Junction, Colorado, field office. The information we
collected represents the contributions of staff from both offices to
managing oil and gas activities that occur within the jurisdiction of the
Glenwood Springs, Colorado, field office.

10The Carlsbad, New Mexico, field office shares oil and gas program staff
with the Roswell, New Mexico, field office and the Hobbs, New Mexico,
field station. The information we collected represents the contributions
of staff from all of these offices in managing oil and gas activities that
occur within the jurisdiction of the Carlsbad, New Mexico, field office.

11The jurisdictions for the New Mexico and Montana state offices include
some neighboring states. The New Mexico state office also has jurisdiction
over Kansas, Oklahoma, and Texas. The Montana state office also has
jurisdiction over North Dakota and South Dakota. The data presented in
this report for the New Mexico and Montana state offices include data for
all of the states under their jurisdiction.

Results in Brief	A dramatic increase in oil and gas development on federal
lands over the past 6 years has lessened BLM's ability to meet its
environmental protection responsibilities. Nationwide, the total number of
oil and gas drilling permits approved by BLM more than tripled, from 1,803
to 6,399 for fiscal years 1999 through 2004.12 Much of the increased oil
and gas activity was concentrated in five intermountain states-Colorado,
Montana, New Mexico, Utah, and Wyoming. In fiscal year 2004, the offices
under the jurisdiction of these five BLM state offices collectively
approved 6,204 drilling permits, or more than 95 percent of the nationwide
total.13 For the eight BLM field offices we visited, the increase in the
number of drilling permits approved in fiscal year 2004 versus the number
approved in fiscal year 1999 ranged from 70 in the Miles City, Montana,
field office to 2,151 in the Buffalo, Wyoming, field office.14 Overall,
BLM officials in the majority of the field offices we visited said that
staff had to devote increasing amounts of time to processing drilling
permits, leaving less time to mitigate the environmental impacts of oil
and gas development. For example, the Buffalo, Wyoming, and Vernal, Utah,
field offices-the two field offices with the largest increases in
permitting activity-were each able to meet their annual environmental
inspection goals only once in the past 6 years. Furthermore, the Buffalo,
Wyoming, field office was able to achieve only 27 percent of its required
environmental inspection goals in fiscal year 2004. BLM staff in four of
the eight field offices we visited acknowledged similar difficulties in
trying to keep up with their environmental protection responsibilities.
Four of the eight field offices had a backlog of past due idle-well
reviews and seven of the eight field offices had a backlog of reclamation
inspections. BLM staff from each of the field offices that had experienced
difficulties in meeting their environmental protection responsibilities
attributed the problem, to varying degrees, to staff spending more time
processing drilling permits and less time performing environmental
mitigation activities.

During the past 6 years, BLM made several policy changes that have
impacted to varying degrees its ability to assess and mitigate the
environmental impacts of oil and gas development on public lands. While a

12Data as reported from BLM's Automated Fluid Minerals Support System.

13Data as reported from BLM's Automated Fluid Minerals Support System.

14Data as reported from BLM's Automated Fluid Minerals Support System and
corrected by BLM field office officials. For additional information,
please see appendix I.

number of these policies were aimed at facilitating and managing increased
development, others were intended to improve environmental mitigation
efforts. For example, the policy changes that helped facilitate and manage
oil and gas development included (1) reviewing restrictions on oil and gas
development to ensure that they are the least restrictive possible while
still protecting the environment; (2) expediting the update of certain
resource management plans, including those that involve energy development
issues; and (3) streamlining the process for permitting oil and gas
development. Similarly, recent policy changes intended to improve
mitigation activities included those (1) enhancing BLM's oil and gas
inspection capabilities, (2) improving management of idle wells, and (3)
encouraging the use of best management practices for oil and gas
development. However, the combined effects of both types of policy changes
on BLM's ability to assess and mitigate environmental impacts have been
mixed. For example, staff from four of the eight field offices told us
that policies that streamlined the permitting process also increased the
emphasis on processing permits, which in turn resulted in shifting staff
away from their environmental mitigation responsibilities. On the other
hand, the policies issued to revitalize inspection and enforcement
activities impacted BLM's mitigation activities positively because they
resulted in six of the eight field offices obtaining greater resources to
hire more inspection staff.

BLM state and field office staff and GAO identified several challenges
that BLM faces in managing its oil and gas program, including, but not
limited to, (1) managing workloads to meet all of its responsibilities,
(2) using workforce planning to effectively identify and communicate its
workforce needs, and (3) meeting its oil and gas program resource needs in
light of budget constraints. Workload pressure, which was already at a
high level due to the increases in permitting activity, has been further
exacerbated by increases in public challenges to BLM's decisions and
actions, according to BLM staff. Heavy workloads have led to high stress
levels and low morale among some staff. In reviewing BLM's efforts to
manage increasing workloads, we found that three field offices and four
state offices did not effectively identify and communicate their workforce
needs to either their respective BLM state office or BLM headquarters.
BLM's current workforce planning process does not identify all of BLM's
staffing needs, in large part because BLM headquarters directs state and
field offices to identify only those needs for which funding is available.
As a result, the current workforce planning process does not provide
consistent and readily available information that state and headquarters
decision makers can use to support budget justifications and make informed
resource allocation

decisions. Furthermore, some data needed to quantify workloads-including
idle-well reviews and reclamation-related workloads-are either not tracked
or not consistently tracked in a centralized database, making it difficult
to identify and prioritize staffing needs for these responsibilities.
Lastly, but perhaps most significantly, staffing needs are growing faster
than available resources. While many federal agencies are facing tight
budget constraints, BLM is in an unusual position because it has
authority, which it has not exercised, to generate additional revenues to
cover the costs of its program activities by assessing and collecting fees
for various services that it provides. In its budget justification for
fiscal year 2006, BLM proposed to impose fees for issuing oil and gas
permits and said it is drafting a rule establishing a fee structure.
According to the budget justification, the cost recovery fees would
generate a net increase of $7.6 million, which would allow BLM to maintain
its current staffing level and use a portion of its appropriated funds to
fund other program priorities such as ensuring proper inspection and
enforcement actions.

We are recommending that the Secretary of the Interior take steps to
ensure that BLM's staffing needs are accurately reflected in its workforce
plans and considered by key decision makers. We are also recommending that
the Secretary direct BLM to finalize and implement a fee structure to
cover the costs of processing oil and gas drilling permits. In responding
to a draft of this report, Interior generally agreed with our
recommendations. See appendix III for Interior's comment letter. Also, see
the "agency comments and our evaluation" section and appendix III for our
evaluation of these comments.

Background	In recent years, both rising energy prices and new technologies
have led to an increased emphasis on developing oil and gas resources on
public lands. First, higher prices have created greater economic
incentives to drill for oil and gas. According to the Energy Information
Administration, the average of daily New York Mercantile Exchange futures
prices for crude oil increased from $19.30 per barrel in 1999 to $41.47
per barrel in 2004.15

15The New York Mercantile Exchange futures contract is a widely used
benchmark for buying and selling crude oil. This contract is an agreement
through the New York Mercantile Exchange for a future purchase or sale of
1,000 barrels of sweet crude oil, similar in quality to West Texas
Intermediate oil. These prices represent the contract for delivery during
the next month.

Similarly, average wellhead prices for natural gas in the United States
have increased significantly in the past 6 years, increasing from an
average of $2.19 per thousand cubic feet in 1999 to an average of $5.49
per thousand cubic feet in 2004. Second, advances in technology have made
it more profitable to drill for oil and gas. For example, advances in
directional drilling and new techniques for putting wells into production
have made it possible to economically produce oil and gas from reservoirs
that were previously considered to be uneconomic.

Several other events in the past 6 years have also increased the emphasis
on developing oil and gas resources on public lands. First, the Energy Act
of 2000 directed the Secretary of the Interior, in consultation with the
Secretaries of Agriculture and Energy, to prepare a report that provides
an inventory of oil and natural gas resources beneath federal lands and to
identify the extent and nature of any restrictions or impediments to the
development of such resources.16 Second, the National Energy Policy
Report, issued on May 16, 2001, contained many recommendations that were
intended to diversify and increase energy supplies, encourage
conservation, and ensure energy distribution. For example, this report
included recommendations directing the Secretary of the Interior to
expedite the ongoing study of impediments to oil and gas development and
to examine restrictions on oil and gas leasing and modify these
restrictions where opportunities exist, as long as they were consistent
with the law, good environmental practice, and balanced use of resources.
The National Energy Policy Report also recommended that the President
issue an executive order to "rationalize permitting for energy production
in an environmentally sound manner by directing federal agencies to
expedite permits and other federal actions necessary for energy related
project approvals on a national basis." Accordingly, the President signed
Executive Order 13212 (Actions to Expedite Energy-Related Projects) on May
18, 2001, which incorporated these recommendations and established an
interagency task force to monitor and assist the agencies in their
efforts. Lastly, an oil and gas inventory, which is commonly referred to
as the

16Pub. L. No. 106-469 S: 604 (2000), 114 Stat. 2029, 2041-42, codified at
42 U.S.C. S: 6217.

Energy Policy and Conservation Act (EPCA) Report,17 was issued in January
2003. The EPCA Report included estimates of oil and gas resources and
reserves in five major geologic basins in the interior West and a
description of the extent and nature of any restrictions to the
development of these resources and reserves. These five basins contain
much of the onshore oil resources and the bulk of the onshore natural gas
under federal ownership in the contiguous United States.

In response to these events, BLM developed a National Energy Policy
Implementation Plan that outlined 54 specific tasks intended to facilitate
the implementation of the President's National Energy Policy. A subset of
these tasks dealt with BLM's management of its oil and gas program,
including mitigating the environmental impacts of oil and gas development.
This subset of tasks formed the basis for a series of BLM instructional
memoranda, which among other things, directed BLM field managers to (1)
use the results of the EPCA Report to review their restrictions on oil and
gas development to make sure they are still relevant and that they were
the least restrictive while protecting the environment, (2) improve and
streamline the processing of drilling permits for oil and gas wells, and
(3) expedite the update of certain resource management plans, including
those that are time sensitive because of energy development issues. This
subset of tasks also incorporated the agency's ongoing efforts to enhance
its oil and gas inspections and enforcement capabilities, improve its
management of idle wells, and encourage the use of best management
practices for oil and gas development.

Environmental Impacts of If not properly mitigated, the environmental
impacts of oil and gas

Oil and Gas Development	development could compromise BLM's responsibility
for protecting the environment. These environmental impacts range from
being site specific-for example, removing several acres of vegetation at
an individual well pad-to those that affect a much larger area, such as
fragmenting tens of thousands of acres of crucial winter range for mule
deer. (See figs. 1 and 2.) Air and water quality are also two resources
that

17Departments of the Interior, Agriculture and Energy, Scientific
Inventory of Onshore Federal Lands' Oil and Gas Resources and Reserves and
the Extent and Nature of Restrictions or Impediments to Their Development:
The Paradox/San Juan, Uinta/Piceance, Greater Green River and Powder River
Basins and the Montana Thrust Belt (January 2003). This report is a
portion of the inventory of onshore oil and gas resources underlying
federal lands required by section 604 of the Energy Act of 2000. The
inventory will be expanded in the future to include additional federal
lands and resources.

can be affected by oil and gas development. Air quality can be degraded by
increased dust from newly graded roads, and visibility can be affected in
the immediate area and downwind. Air quality can also be degraded by
increased nitrogen oxides from diesel engines and compressors used at
drilling sites. Surface water quality can be degraded by increased
sediment, salt, and other pollutants either from water draining off newly
graded surfaces and roads or from the accidental discharge of oil or water
produced during oil and gas production. Shallow aquifers can be polluted
if required protective measures are not in place, and coal bed methane gas
production can deplete shallow aquifers that serve as domestic water
sources. Visual resources can also be degraded by a high density of
drilling and production equipment that in extreme situations can change
the appearance of the landscape from a natural setting to an industrial
zone. In addition, the noises, smells, and lights from trucks, drilling
and construction equipment, and production facilities can disturb wildlife
and people living nearby.

                  Figure 1: Oil Drilling Site with Access Road

Source: GAO.

Figure 2: Fragmentation of Wildlife Habitat by Multiple Oil and Gas Sites

                                  Source: GAO.

BLM's Land Use Planning	The primary method BLM uses to balance resource
use and environmental protection is the development of land use plans
(called resource management plans) under FLPMA. During the planning
process, BLM determines, among other things, which parcels of land will be
available for oil and gas development. BLM then publishes a notice that
bids will be accepted for leases on these lands. Before approving an oil
and gas lease, BLM conducts a review to determine if any restrictions-or
stipulations-are necessary to mitigate the impacts from oil and gas
production. As provided by BLM regulations, if stipulations are necessary,
they are incorporated into the lease.18 Before an oil and gas company can
drill on leased lands, it must submit an application for a drilling permit
with BLM.19 BLM then evaluates the operator's proposal for drilling to
ensure that it conforms to the land use plan and applicable laws and
regulations. In

               1843 C.F.R. S: 3101.1-3. 1943 C.F.R. S: 3162.3-1.

approving a specific drilling permit, BLM inspects the proposed drilling
site and may add site-specific conditions of approval deemed necessary to
protect the environment. In addition, BLM must meet the requirements of
the National Environmental Policy Act of 1969 (NEPA). NEPA requires
federal agencies to prepare an environmental impact statement (EIS) for
major federal actions that may have a significant affect on the quality of
the human environment.20 When an agency is not sure whether an activity
will have significant impact on the environment, the agency prepares a
less detailed environmental assessment (EA).21 If an environmental
assessment determines that the activity will significantly affect the
environment, the agency then prepares an EIS. With regard to oil and gas
leasing and development, BLM implements NEPA during both the preparation
of the resource management plan and at the drilling permit application
stage.22

    BLM's Environmental Inspection and Monitoring Activities

Environmental Inspections

After BLM approves a drilling permit, the operator can drill the well and
commence production. To ensure compliance with all stipulations in the
lease and conditions of approval in the permit, as well as applicable laws
and regulations, BLM has an inspection and enforcement program that is
designed to verify that the operator remains in compliance with the
various restrictions at a well site. The authority for inspecting wells is
derived from the Federal Oil and Gas Royalty Management Act of 1982, as
amended. This act requires the Secretary of the Interior to develop
guidelines that specify the coverage and frequency of inspections.23
Although the driver of BLM's inspection program is to verify the volumes
of oil and gas produced to ensure the federal government is receiving the
required royalty payments, the inspection program has evolved over time to
include various environmental inspections, as well. BLM tracks data on oil
and gas wells and environmental inspections in its centralized database.

Environmental inspections are BLM's primary mechanism to ensure that
operators are complying with various environmental laws and lease
stipulations. BLM staff conduct environmental inspections in order to
protect the surface and subsurface environments. BLM's natural resource

2042 U.S.C. S: 4332(2)(C)(i). 2140 C.F.R. S:S:1501.3, 1508.9. 2243 C.F.R.
S:S: 1601.0-6, 3162.5-1(a). 23Pub. L. No. 97-451 S:S: 101, 108, codified
at 30 U.S.C. S:S: 1711, 1718.

specialists, who generally also have some responsibilities for processing
drilling permits, conduct environmental inspections by visiting an
individual well or group of wells to assess compliance with lease
stipulations and conditions of approval that are written into the drilling
permit.24 (See fig. 3.) BLM managers determine which wells are to be
inspected each year through a ranking process that places wells or groups
of wells into either high- or low-priority categories, with high-priority
wells requiring an annual inspection.25 Environmental inspection
priorities are based on several criteria, including the proximity to an
area of special environmental concern, whether noncompliance with lease
stipulations or conditions of approval could have a significant impact on
the environment, history of noncompliance, or sites that need BLM approval
for successful reclamation. If the natural resources staff determine that
a violation occurred or is occurring, they can take one of several
enforcement actions, including issuance of a verbal or written "incident
of noncompliance." The enforcement actions may carry fines, depending on
the severity of the infraction.

24Another mechanism BLM employs to ensure environmental compliance is
through environmental compliance inspections conducted by a petroleum
engineer technician. This type of inspection is completed as a component
of another type of inspection, such as production or drilling. If a
petroleum engineer technician determines a possible environmental
violation, the technician will then notify the natural resources staff
responsible for its resolution.

25In general, low-priority wells are supposed to be inspected every three
years.

Resource and Environmental Monitoring Activities

Figure 3: Typical Oil and Gas Site Subject to an Environmental Inspection

Source: GAO.

Another means for BLM to mitigate the impacts of oil and gas development
is through monitoring programs that are designed to measure the
effectiveness of mitigation measures over a period of time. According to
current BLM land use policy, each field office must develop a monitoring
schedule in their land use plans to periodically (annually is recommended)
revisit land use plan decisions and track progress toward their
implementation. The land use plan may also identify intervals and
standards for monitoring resources, such as air, water, soils, vegetation,
and fish and wildlife; this type of monitoring is referred to as resource
monitoring. Since 2003, when the Office of Management and Budget
identified, among other things, BLM's resource monitoring activities as an
area that needed improvement, BLM has been developing a National
Monitoring Strategy. This is a multiyear approach that will develop an
integrated data collection and assessment strategy to inform and guide
land management decisions, including protocols for periodically reporting
on resource conditions and the effectiveness of management actions at the
local, regional, and national levels.

With respect to oil and gas development, BLM recognizes two types of
monitoring as important: (1) land use plan monitoring and (2) resource
monitoring. Land use plan monitoring can alert the agency as to whether
the magnitude of the overall environmental impacts resulting from oil and
gas development are within the acceptable level projected in the resource
management plan. BLM's policy calls for tracking the number of oil and gas
wells drilled and then converting that number into a total amount of
surface acres disturbed. Resource monitoring can reveal how critical
resources, such as air quality, groundwater, surface water, and wildlife
are directly impacted from oil and gas development over time. Scientists
accomplish this by establishing a baseline condition for each resource,
determining the change in this baseline condition over time, and
attributing this change to a specific activity, such as oil and gas
development. Land managers can then determine the effectiveness of
stipulations and conditions of approval and decide whether these measures
need to be modified, strengthened, or eliminated. Resource monitoring
generally involves assessing cumulative impacts to resources over broad
geographic areas and can be incorporated into resource management plans or
environmental impact statements for large-scale oil and gas projects.

Monitoring Idle Wells	BLM also has monitoring responsibilities for idle
wells. Once the operator demonstrates to BLM that the well can no longer
produce oil or gas economically or has no other use, the well must be
plugged. However, the operator may delay plugging the well and instead
allow the well to remain idle for various reasons, including the
anticipation of higher oil and gas prices that may once again make the
well economic to operate or possibly using the well for secondary recovery
operations (for example, using the well to inject water into the oil
reservoir and push any remaining oil to operating wells).

BLM has policies that require it to periodically review the status of
these idle wells to ensure that legitimate reasons exist for allowing the
wells to remain idle. According to BLM, the primary purpose of idle-well
reviews are to ensure that an operator does not walk away from a
nonproducing well, thereby leaving the federal government with the
responsibility of plugging the well and reclaiming the site. According to
BLM, idle-well reviews also help mitigate impacts from oil and gas
developments by ensuring that well sites are reclaimed in a timely manner.

Idle wells consist of both temporarily abandoned and shut-in wells. BLM
defines temporarily abandoned wells as wells that are physically or
mechanically incapable of producing oil or gas of sufficient value to
exceed

direct operating costs but may have value for a future use. Operators must
receive BLM approval prior to placing a well in temporarily abandoned
status for more than 30 days. This approval, which lasts for up to 12
months, can be renewed annually at BLM's discretion. All temporarily
abandoned wells must have current approval after the initial 30 days.26
BLM policy defines shut-in wells as wells that are physically and
mechanically capable of producing oil or gas in paying quantities but have
not produced for 1 month. According to BLM, operators do not have to
obtain BLM approval to place wells in shut-in status. BLM field office
staff are directed to identify the number of idle wells and to review the
justification for their idle status.27 Although idle-well review policies
vary by field office, BLM policy suggests that field office staff initiate
the review when a well has not produced for 12 months. Staff then review
well files to determine if the information submitted by the operator
supports the idle status. If the justification is insufficient, BLM will
require the operator to submit a plan that allows for a number of actions,
including bringing the well back into production or plugging the well and
reclaiming the site.

When an operator determines, and BLM agrees, that a well has no further
economic value, the operator must follow an agreed-upon final reclamation
plan that includes removing all visual evidence of the well and pad,
recontouring the affected land, and revegetating the site with native
plant species. In general, the goal is to reclaim the well site so that it
matches the surrounding natural environment to the extent possible. BLM
would then inspect the site to monitor the success of the reclamation, a
process that typically takes several years. Once BLM determines that
reclamation efforts have been successful, BLM approves a Final Abandonment
Notice.

Inspecting and Monitoring Two types of reclamation may occur during the
life cycle of an oil and gas

Reclamation Efforts 	well. The first type is interim reclamation. Interim
reclamation is the practice of reclaiming unnecessary surface disturbance
after a well has been drilled. For example, operators may need a 10-acre
drill pad to safely drill a series of wells. However, once the wells are
drilled, operators may only need 4 acres to safely service the well over
its lifetime. In this case, interim reclamation would require the
reseeding and regrading of 6 acres of

2643 C.F.R. S: 3162.3-4(c).

27Justification to support continued idle status may include, for example,
the use of the well for injection to recover additional oil or gas or for
subsurface disposal of produced water. 43 C.F.R. S: 3162.3-4(a).

the initial pad that are no longer needed. While this practice is not a
general requirement in all permits issued by BLM, the agency may choose to
add it as a requirement in drilling permits for specific oil and gas
developments. The other type of reclamation occurs when the operator plugs
the well and initiates the final reclamation process, as described in the
previous section. This type of reclamation is a requirement and the terms
of the reclamation are included in the terms of the lease and the drilling
permit.

  Dramatic Increases in Oil and Gas Permitting Activity Have Lessened BLM's
  Ability to Ensure That Environmental Impacts Are Mitigated

Oil and gas development on BLM-managed lands has increased dramatically
over the past 6 years, resulting in staff spending more time processing
drilling permits and less time mitigating the environmental impacts of the
development.28 Nationwide, the total number of oil and gas drilling
permits approved by BLM more than tripled, from 1,803 to 6,399 for fiscal
years 1999 through 2004. Much of the increased oil and gas activity was
concentrated in five intermountain states-Colorado, Montana, New Mexico,
Utah, and Wyoming. In fiscal year 2004, the offices under the jurisdiction
of these five BLM state offices collectively approved 6,204 drilling
permits, more than 95 percent of the national total. BLM officials in most
of the field offices that we visited stated that the increased permitting
workload has led to less staff time being available for performing
environmental mitigation activities. These mitigation efforts include
conducting environmental inspections of oil and gas wells, implementing
monitoring programs, tracking idle wells and reviewing justifications for
why these wells are in idle status, and ensuring reclamation efforts are
successful.

28This report focuses on the impacts of increased oil and gas permitting
activity that occurred for fiscal years 1999 through 2004. While there is
evidence from prior studies that BLM did not meet its goals for certain
program activities before fiscal year 1999, we did not attempt to make
comparisons in this report between activity before fiscal year 1999 and
activity occurring for fiscal years 1999 through 2004. These reports
include Department of the Interior, Office of Inspector General, Audit
Report: Inspection and Enforcement Program and Selected Related
Activities, Bureau of Land Management, Report No. 196-I-1267 (Washington,
D.C., September 1996); Department of the Interior, Bureau of Land
Management, Potential Government Liability for Plugging Oil and Gas Wells
(Washington, D.C., November 1990); and Department of the Interior, Office
of Inspector General, Audit Report: Inspection and Enforcement Program and
Selected Related Activities, Bureau of Land Management, Report No. 90-18
(Washington, D.C., November 1989).

    BLM's Oil and Gas Permitting Activity Has More Than Tripled in the Past 6
    Years

Over the past 6 years, the total number of drilling permits approved by
BLM nationwide has more than tripled from 1,803 to 6,399. The permits
approved under the jurisdictions of five BLM states offices-Colorado,
Montana, New Mexico, Utah, and Wyoming-provided the bulk of the nationwide
increase in permitting activity and accounted for over 95 percent of all
the permits approved in fiscal year 2004. The eight BLM field offices we
visited in these five states accounted for 77 percent of the total permits
approved nationwide in fiscal year 2004. (See figs. 4 and 5.)

Figure 5: Number of Oil and Gas Drilling Permits Approved by BLM for
Fiscal Years

1999 through 2004

Number of permits

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0 1999 2000 2001 2002 2003 2004

Fiscal year

Total for BLM-wide
Total for eight BLM field offices visited
Source: BLM.

Note: These numbers are as of April 2004.

Specifically, the eight BLM field offices we visited approved 4,911
drilling permits in fiscal year 2004, an increase of 3,803 over the number
approved in fiscal year 1999. The increases among the eight BLM field
offices we visited ranged from 70 in the Miles City, Montana, field office
to 2,151 in the Buffalo, Wyoming, field office. (See table 1.)

Table 1: Increases in Oil and Gas Drilling Permits Approved by Eight BLM
Field Offices in Fiscal Years 1999 and 2004

Drilling permits Drilling permits approved in fiscal approved in fiscal
BLM field office year 1999 year 2004 Difference

                      Miles City, Montana     26               96 
                         Rawlins, Wyoming     74              212         138 
               Glenwood Springs, Colorado      8              179         171 
                     Carlsbad, New Mexico     242             436         194 
                        Pinedale, Wyoming     124             323         199 
                   Farmington, New Mexico     313             690         377 
                             Vernal, Utah     133             636         503 
                         Buffalo, Wyoming     188           2,339       2,151 
                                    Total    1,108          4,911       3,803 

Source: BLM.

Note: For additional information, see appendix I.

The increases in the number of drilling permits approved in the Buffalo,
Wyoming, and Miles City, Montana, field offices, according to BLM staff,
were due primarily to extensive coal-bed methane developments in the
Powder River Basin. In 2003, a congressional conference committee
considering the 2004 appropriations bill for the Department of the
Interior stated in its report that "[b]ased on the recently completed
environmental impact statement for the Powder River Basin and increased
staffing for the Buffalo and Miles City field offices, the managers expect
more than 3,000 drilling permits will be issued in 2004."29 The two
offices actually approved 2,435 permits in fiscal year 2004. Drilling for
natural gas was primarily responsible for the increases in permits
approved in the Rawlins and Pinedale, Wyoming, the Farmington, New Mexico,
and the Glenwood Springs, Colorado, field offices, while increases in the
Carlsbad, New Mexico, and Vernal, Utah, field offices were due to
increases in drilling for both oil and natural gas.

29H.R. Conf. Rep. No. 108-330, at 1314 (2003).

    Increased Oil and Gas Permitting Activity Has Decreased Staff Resources
    Available for Environmental Mitigation Activities

      Several BLM Field Offices with Large Increases in Permitting Activity Have
      Not Met Their Environmental Inspection Goals