Third, federal regulations require operators to report monthly oil and gas  production to Interior on the OGOR. Interior’s Guidance to Operators on Reporting Requirements Has Limitations That May Hinder the Extent to Which It Can Account for Natural Gas Emissions

Interior’s limited guidance to operators on how to report natural gas  emissions on the OGOR may hinder the extent to which it can account for  such emissions. Third, Interior’s guidance does not specify  which activities are to be reported under OGOR categories for natural gas  emissions. Without specific instructions from BLM on how to develop estimates of  natural gas emissions, it may also be difficult for BLM’s production  accountability staff to determine which method operators are using to  estimate natural gas emissions and to verify their accuracy during  periodic records reviews. Although some BLM field office officials we spoke with told us  they felt that the OGOR volume estimates were fairly reliable, without  consistent accounting, Interior does not have the information it needs to  have reasonable assurance that it is minimizing waste on federal oil and  gas leases. As a result of this uncertainty with  the data, Interior may not have a clear accounting of natural gas  emissions, which could limit Interior’s ability to ensure that lessees pay  royalties in the proper amounts and minimize waste of natural gas. In its  proposed regulations, BLM has not provided additional guidance to  operators on which activities should be included under the natural gas  emissions reporting categories on the OGOR. BLM Has Not Consistently Followed Its Existing Guidance in Managing Operators’ Venting or Flaring Requests

BLM has approved operators’ requests to vent or flare gas royalty-free  without having the documentation its guidance requires. Field offices  have also applied BLM’s guidance differently, which has resulted in some  field offices requiring royalty payments on flared gas while other field  offices do not. Generally, venting or flaring on a short-term basis in  temporary or emergency circumstances is described in NTL-4A as  “authorized venting or flaring of gas.” Alternatively, venting or flaring  requests that are more long term in nature—described in NTL-4A as  “other venting or flaring” of gas—may be approved if operators submit  documentation that consists of (1) an evaluation report providing an  economic and a geologic justification to flare or (2) an action plan that  will eliminate venting or flaring of the gas within 1 year from the date of  application. We  estimate that nearly all of the requests that BLM approved royalty-free did  not include the documentation required for long-term venting or flaring. Selected Field Offices Have Applied BLM Guidance Differently to Venting or Flaring Requests

Officials in the six field offices we reviewed interpreted NTL-4A differently  with respect to charging royalties on approved venting or flaring, which  may have resulted in the operators seeking to vent or flare not receiving  consistent treatment across offices. As discussed above, Interior officials we spoke with told us that  BLM plans to finalize the proposed regulations by the end of calendar  year 2016, and they told us that finalizing the proposed regulations is an  Administration priority. Since Interior has historically focused on royalty-bearing oil and  gas production and has limited guidance on how to report natural gas  emissions, it cannot yet consistently account for these emissions on  federal leases. Appendix II: Objectives, Scope, and Methodology

This report examines (1) the extent to which the Department of the  Interior (Interior) can account for natural gas emissions from onshore  federal leases and (2) how selected Bureau of Land Management (BLM)  field offices have managed requests to vent or flare natural gas emissions  on onshore leases. Specifically, we  interviewed BLM officials in BLM headquarters; BLM’s National  Operations Center in Lakewood, Colorado; and six BLM field offices we  selected primarily based on (1) the volume of flared gas emitted in that  region, (2) the amount of lease use gas consumed in that region, and (3)  the volume of vented gas in that region in fiscal year 2014, the most  recent year for which complete data were available. To examine the  guidance BLM provides to operators regarding reporting flared volumes  on the OGOR, we reviewed BLM’s existing guidance on venting and  flaring—Notice to Lessees and Operators of Onshore Federal and Indian  Oil and Gas Leases (NTL-4A)—and interviewed officials from our  selected field offices on how such volumes are to be reported on the  OGOR. Fiscal year 2014 was the most recent year for which  BLM could provide complete data. To better understand the rationale behind BLM’s acceptance or rejection  of these requests, we selected a simple random sample of 100 of the  1,281 venting or flaring requests for further review.
Why GAO Did This Study

Interior's BLM oversees and accounts for onshore oil and gas production on federal lands. Interior generally collects royalties for this oil and gas, but its guidance, which was issued over 30 years ago, may exempt gas that is vented, flared, or used to operate equipment on the lease. Increased oil production in recent years has resulted in a rise in flared gas in certain regions where there is limited infrastructure to transport or process gas associated with oil production. BLM has proposed updating its venting and flaring regulations to clarify how such emissions are to be managed.
GAO was asked to review Interior's management of natural gas emissions onshore. This report examines (1) the extent to which Interior can account for these emissions and (2) how BLM field offices have managed requests to vent or flare. GAO analyzed Interior data, including a simple random sample of venting or flaring requests from fiscal year 2014, the most recent year for which data were available; reviewed Interior documents; and interviewed officials from a nongeneralizable sample of six BLM field offices selected based on increased natural gas emissions in recent years. GAO also interviewed operators with leases managed by two BLM field offices.

What GAO Found

The Department of the Interior's (Interior) guidance to oil and gas operators on its reporting requirements has limitations that may hinder the extent to which it can account for natural gas emissions on onshore federal lands (leases). Interior is required to ensure that oil and gas operations are conducted in a manner that minimizes waste. As part of its oversight activities, Interior requires operators to submit monthly Oil and Gas Operations Reports (OGOR). Interior uses these reports to track volumes of oil and gas produced on federal lands, including gas that may be exempt from royalties, such as gas released into the air (vented), burned (flared), or used to power equipment on the lease (lease use). Historically, Interior's focus has been on collecting data from royalty-bearing oil and gas production, and thus it has provided limited guidance on how operators are to report natural gas emissions. For example, Interior
does not provide specific instructions on how to estimate natural gas emissions, which results in operators using varying estimation methods that may be difficult to verify;
does not specify which natural gas emissions activities should be reported, resulting in operators not reporting some emissions (e.g., from storage tanks).
As a result of these limitations, Interior may not have a consistent accounting of natural gas emissions from onshore federal leases, and does not have the information it needs to reasonably ensure it is minimizing waste on these leases.
The Bureau of Land Management's (BLM) field offices have not consistently followed BLM's existing guidance in managing operators' venting or flaring requests. GAO found that BLM field offices have approved venting or flaring requests that did not include the documentation BLM's guidance requires. Specifically, in fiscal year 2014, GAO found that BLM received 1,281 venting or flaring requests from operators. GAO reviewed the documentation for a random sample of 100 of those requests and, based on this sample, estimates that 90 percent (+/-8) of the requests to BLM did not provide the documentation required by BLM guidance. GAO also estimates that BLM approved 70 percent (+/-9) of these venting or flaring requests and, for nearly half of the approvals, allowed operators to flare gas royalty-free. Further, GAO found that selected BLM field offices have applied BLM guidance differently to venting or flaring requests. For example, officials in two BLM field offices GAO reviewed said they used their authority under the existing guidance to charge royalties on flared gas, while a third field office was considering doing so. The other three field offices GAO reviewed have interpreted BLM guidance as allowing all venting or flaring requests in their regions to be approved royalty-free. BLM's proposed update to its regulations, if finalized, would clarify how BLM will manage future venting or flaring requests. Interior officials told GAO that they expect to finalize the proposed update to its regulations by the end of calendar year 2016 and that finalizing the regulations is an Administration priority.

What GAO Recommends

GAO is making four recommendations to Interior, including providing additional guidance on how operators are to report natural gas emissions. Interior generally concurred with these recommendations.