The state offices are  Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New  Mexico, Oregon, Utah, Wyoming, and Eastern States. According to BLM officials, the primary purpose  of idle-well reviews is to ensure that these wells do not become  orphaned—that is, they lack a bond sufficient to cover reclamation costs  and there are no responsible or liable parties to perform reclamation. BLM Holds Nearly 4,000 Bonds, Valued at $162 Million, but Amounts Are Based on Regulatory Minimums and Not on Full Reclamation Costs

As of December 2008, oil and gas operators had provided 3,879 surety and  personal bonds, valued at approximately $162 million, to ensure  compliance with all lease terms and conditions for 88,357 wells, according  to our analysis of BLM data. Specifically, the bond minimum of $10,000 for individual bonds was last  set in 1960, and the bond minimums for statewide bonds—$25,000—and  for nationwide bonds—$150,000—were last set in 1951. BLM Spent Nearly $4 Million to Reclaim 295 Orphaned Wells since Fiscal Year 1988 and Has Identified Another 144 Orphaned Wells to Be Reclaimed

According to BLM data, the agency spent about $3.8 million to reclaim 295  orphaned wells in 10 states from fiscal years 1988 through 2009. The amount spent per reclamation project varied from a  high of $582,829 for a single well in Wyoming in fiscal year 2008, to a low  of $300 for three wells in Wyoming in fiscal year 1994. BLM has identified an additional 144 orphaned wells on BLM and other  federal land that need to be reclaimed in seven states. Although BLM  reclamation estimates were not available for all of these wells, officials in  BLM field offices have completed reclamation cost estimates for 102 of the  144 wells, for a total estimated cost of $1,683,490. States Have Different Approaches for Determining Bonding Amounts and Generally Require Bond Amounts Equal to or Higher Than Those of BLM

The 12 western states have bonding requirements for oil and gas  operations that differ in their approach from BLM’s onshore oil and gas  bonding requirements. Federal Regulations for Other Resources Generally Require Bond Amounts That Cover Reclamation Costs or the Minimum Bond Amounts Have Been More Recently Set

Regulations governing the extraction of other resources owned by the  federal government generally require (1) bond amounts that consider the  cost of reclamation, which reduces the government’s potential liability for  reclamation costs; or (2) use minimum amounts that were established  more recently than the amounts for BLM oil and gas bonds. Agency Comments and Our Evaluation

GAO provided Interior with a draft of this report for its review and  comment. Interior provided technical comments, which we incorporated  as appropriate. GAO staff who made major contributions to this report are  listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This appendix details the methods we used to examine three aspects of  the Department of the Interior’s (Interior) Bureau of Land Management  (BLM) bonding requirements for BLM oil and gas leases and reclamation  of oil and gas wells. Specifically, we were asked to (1) determine the types,  value, and coverage of bonds held by BLM for oil and gas operations; (2)  determine the amount that BLM has paid to reclaim orphaned wells over  the past 20 years, and the number of orphaned wells BLM has identified  but has not yet reclaimed; and (3) compare BLM’s bonding requirements  for oil and gas operations with the bonding requirements the 12 western  states use for oil and gas operations on state and private lands and other  Interior agencies’ bonding requirements for other resources. Individual lease  bond. Individual lease  bond. Statewide bond (to  cover all leases of  the same mineral). cover all leases of  the same mineral).
Why GAO Did This Study

The Federal Land Policy and Management Act of 1976 directs the Department of the Interior (Interior) to manage lands for multiple uses while also taking any action to prevent "unnecessary or undue degradation" of the land. To do this, Interior's Bureau of Land Management (BLM), among other things, requires oil and gas operators to reclaim the land they disturb and post a bond to help ensure they do so. Despite these requirements, not all operators perform reclamation. If the bond is not sufficient to cover well plugging and surface reclamation and there are no responsible or liable parties, the well is considered "orphaned," and BLM uses federal dollars to fund reclamation. The 12 western states where most oil and gas production occurs and other Interior agencies also require bonds to ensure reclamation. GAO was asked to (1) determine the number, value, and coverage of bonds held by BLM for oil and gas operations; (2) determine the amount that BLM has paid to reclaim orphaned wells over the past 20 years and the number of orphaned wells BLM has identified but has not yet reclaimed; and (3) compare BLM's bonding requirements for oil and gas operations with those the 12 western states use for oil and gas operations on state and private lands and other Interior agencies' bonding requirements for other resources. Among other things, GAO analyzed BLM data on wells and BLM-held bonds, and interviewed BLM officials.

What GAO Found

According to GAO's analysis of BLM data, as of December 2008, oil and gas operators had provided 3,879 bonds, valued at $162 million, to ensure compliance with lease terms and conditions for 88,357 wells. BLM regulations establish minimum bond amounts: $10,000 for an individual lease, $25,000 to cover all leases of a single operator in a state, and $150,000 to cover all leases of a single operator nationwide. The bond amount for individual leases was set in 1960, while the statewide and nationwide bond amounts were set in 1951. For fiscal years 1988 through 2009, BLM spent about $3.8 million to reclaim 295 orphaned wells in 10 states and has identified an additional 144 orphaned wells in 7 states that need to be reclaimed, according to BLM. The amount spent per reclamation project varied greatly, from a high of $582,829 for a single well in Wyoming in fiscal year 2008 to a low of $300 for 3 wells in Wyoming in fiscal year 1994. BLM reclamation cost estimates were not available for all of the wells it has yet to reclaim, but BLM field office officials have completed reclamation cost estimates of approximately $1.7 million for 102 of the 144 orphaned wells. The 12 western states (Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) and other Interior agencies and offices have bonding approaches that differ from BLM's oil and gas bonding requirements. The states generally require higher bond amounts than the minimum amounts established by BLM regulations for individual and statewide oil and gas leases. Regulations governing the extraction or use of other federally owned resources generally require bond amounts based on the cost of reclamation or use minimum amounts that were established more recently than the bond amounts for oil and gas. GAO provided a draft of this report to the Department of Interior for review and comment. The Department provided technical comments, which were incorporated as appropriate.