The U.S. Bureau of Land Management (BLM) has not consistently implemented its policies for managing potential liabilities related to managing idle wells, or wells that have not produced for at least seven years, and orphan wells, or wells that generally have no responsible or liable parties, on federal lands and reviewing bond adequacy for these wells, according to a report last month from the U.S. Government Accountability Office (GAO).
BLM's idle and orphan well policy is intended to ensure that non-producing wells are either plugged or returned to production, and that bonds are reviewed when certain events occur or periodically and increased when needed. "This policy directs BLM field offices to develop an inventory of such wells and rank and prioritize them for reclamation based on potential environmental harm, among other things," the report noted.
However, for the fiscal years 2005 to 2009, GAO found that 13 of the 33 field office survey respondents reported that they either did not conduct any review or did not know the number of reviews conducted of idle and orphan wells. GAO found that 11 of the 33 field office survey respondents reported that they had not conducted any reviews in one or more fiscal years during the five-year period GAO examined.
GAO also found that two BLM state offices and 22 field offices have not created action plans for reviewing bond adequacy and idle and orphan wells, as BLM policies call for. "Most field office officials told GAO that a lack of resources and higher priorities were the primary reasons for not conducting these reviews," GAO said.
Additionally, BLM state offices also did not consistently interpret BLM policy on when to increase bond amounts." For example, officials in three state offices told GAO that they generally require evidence of operator noncompliance before raising a bond amount, while another state office increased bond amounts for most operators because it viewed them as a potential risk to the government."
BLM faces two challenges in managing potential liability. Its bonding system impairs BLM's ability to manage potential liability; specifically, the minimum bond amounts, not updated in more than 50 years, may not be sufficient to encourage all operators to comply with reclamation requirements. BLM officials stated that criteria in the policy for deciding when to increase a bond is vague, creating ambiguity about whether a request for an increase should b submitted and whether it will be approved.
Limitations with the data system BLM uses to track oil and gas information on public land restrict the agency's ability to evaluate potential liability and monitor agency performance. The BLM field offices GAO surveyed reported a total of about 2,300 idle wells that had been inactive for seven years or more as of fiscal year 2009. However, other Interior data indicates that the number of idle wells on federal land is nearly double the amount reported by the BLM field offices.
GAEO recommends that BLM develop a comprehensive strategy to increase minimum bonds over time and improve its data system to better evaluate potential liability and agency performance. BLM has agreed with GAO's recommendations and has already taken steps to improve the completeness and accuracy of its oil and gas data.
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