Oil and Gas Development:
Increased Permitting Activity Has 
Lessened BLM’s Ability to Meet Its 
Environmental Protection Responsibilities

GAO-05-418 17jun2005

[Select sections included in this file. For full report go to www.gao.gov/cgi-bin/getrpt?GAO-05-418]

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.

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June 17, 2005 Letter
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 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 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

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 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

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 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 Oil and Gas Development

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

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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. § 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. § 3101.7-1 (a), (b).

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

343 U.S.C. § 1701(a)(7).

443 U.S.C. § 1702(c).

543 U.S.C. § 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. § 1701 et seq.

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.

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.

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.

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.

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

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.

source: www.gao.gov/cgi-bin/getrpt?GAO-05-418 24aug2005