The US Bureau of Land Management’s incurred costs and potential liabilities for reclaiming oil and gas wells likely increased from fiscal 2010 through 2017, but it’s not certain by how much since the agency does not track the needed data, the Government Accountability Office said in a report that it released on June 5.
“Based on GAO’s analysis of data obtained from 13 of BLM’s 33 field offices that manage oil and gas programs, the average annual reclamation cost was $267,600, an increase compared to the $171,500 annual average across all BLM offices that GAO reported in 2010,” it said. GAO’s analysis of BLM data found that the number of known orphaned wells, which generally have no responsible or liable parties, for all field offices increased from 144 in 2010 to 219 as of 2017, it added.
But the agency’s database that contains information on oil and gas wells on federal and Indian lands does not collect information on costs incurred or on potential liabilities that might result from an increase in the number of orphaned wells, the report said.
“Under federal internal control standards, management should use quality information to achieve the entity’s objectives. Without systematically tracking such information, BLM does not have assurance that it has sufficient bonds or financial assurances to cover the costs of reclaiming orphaned wells,” it warned.
Deficiencies in BLM’s monitoring approach have partly kept the agency from fully assessing the extent to which state and field offices have implemented policies on reviewing wells and bond adequacy, the report said.
“GAO identified discrepancies between the well and bond adequacy review reports that BLM state offices submitted to headquarters and the national summary consolidating states’ information. Out of 10 state offices, three reported a different number of reviews completed in fiscal 2016 than what BLM reported in its fiscal year 2016 national summary,” it said.
Leading practices for monitoring the implementation of agency policies call for taking steps such as collecting and analyzing data on performance indicators, the report said. Without strengthening BLM’s approach to monitoring, its ability to assess field offices’ reviews of all inactive wells and determine the adequacy of all bonds is limited, it warned.
The report recommended that BLM’s director:
• Systematically and comprehensively track the actual costs the agency incurs when reclaiming orphaned wells and the information, including the number of orphaned wells and inactive wells over time, necessary to determine the agency’s potential liabilities.
• Develop and communicate specific instructions on what actions constitute a well review for annual reporting purposes.
• Take steps to improve Automated Fluid Minerals Support System data quality, for example, by conducting more edit checks and by having data stewards certify the quality of the data.
• Strengthen BLM’s approach to monitoring field offices’ implementation of the well review and bond adequacy review policies, such as by collecting and analyzing data on performance indicators and ensuring the quality of this information.
• Provide greater specificity in current policy or supplemental guidance to all BLM field offices on how to identify and manage all shut-in wells.
• Develop a resource management plan addressing resources needed to conduct well and bond adequacy reviews and to reclaim orphaned wells.
• In revising the bond adequacy review policy, ensure that the reviews of nationwide and statewide bonds reflect the overall risk presented by operators.
Contact Nick Snow at [email protected].