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Watching over the lease suspensions
GAO recommends that BLM improves its oversight of leases where the temporary cessation of operations or production has been permitted
Alan Bailey Petroleum News
The U.S. Government Accountability Office has issued a report pointing out some deficiencies in the way that the Bureau of Land Management oversees oil and gas lease suspensions. The report makes recommendations for improvements.
The report says that at the end of fiscal year 2016 BLM was overseeing about 41,000 oil and gas leases on federal land, covering about 28.2 million acres in 32 states. And in that fiscal year the federal government collected $1.6 billion in oil and gas revenues from those leases, mainly in the form of royalties from oil and gas production.
But at that time about 2,750 of those leases were suspended, with suspension periods ranging from less than three years to more than 30 years. Because the loss of production from the suspended leases represents a loss of potential federal revenue, there is reason to be concerned that lease suspensions are adequately managed.
A variety of reasons A lease suspension, typically but not always requested by a lease operator, can be allowed by BLM for a variety of reasons, including environmental issues, permitting delays, logistical conflicts with other surface activities, weather related issues or economic conditions. And when a lease is suspended, the term of the lease and the lease rental payments are placed on hold, so that the leaseholder is not penalized as a consequence of the suspension.
Depending on the circumstances, a lease suspension can involve just the suspension of field operations, or it can involve the suspension of both operations and oil and gas production. BLM uses a multistep process to determine whether to allow a lease suspension, the GAO report says.
BLM typically delegates the review and approval of lease suspension requests to its field offices. And field offices are responsible for monitoring the status of suspensions, and for terminating suspensions that are no longer required.
Data quality Data concerning suspensions are stored in a national database that holds information relating to oil, gas and other mineral developments on federal lands. There are problems with the quality of the information in this database - over the past five years BLM has been trying to improve the data accuracy, the GAO report says.
One weakness of the database is that it does not contain a data field to specifically record the reason for a lease suspension. Thus, GAO investigators experienced considerable difficulty in trying to determine why many of the suspensions were in effect. It is possible to ferret out the reason for a suspension by reviewing lease files stored, mostly in hardcopy, in BLM state offices. However, the lack of ready access to this information inhibits BLM’s ability to monitor whether federal land is being inappropriately withheld from development, the GAO report says.
In addition, the database system does not provide any standardized reports suitable for oversight of the lease suspension situation.
Lack of monitoring procedures More generally, there is a lack of procedures for monitoring lease suspensions, a factor that undermines consistent and effective oversight. Some BLM offices commented that staffing shortages hindered this monitoring.
The upshot is inconsistent information on the status of suspensions: Three quarters of the official lease files in BLM state offices contained outdated information about suspensions, the GAO report says. In one example, a suspension issued in 1949 for economic reasons contained no issuance or monitoring information, the report says. In some cases, leases recorded in the BLM database as being suspended were no longer under suspension.
Four recommendations As a consequence of its investigation, GAO has made four recommendations. First, BLM needs to add a data field to its database to record the reason for a lease suspension. The agency also needs to develop official procedures for monitoring suspensions. Designated BLM officials need to conduct reviews of field office monitoring of suspensions and of the completeness of information recorded. And, when the BLM database is updated or replaced, the agency should ensure the development of mechanisms such as standard reports, to assist with the oversight of suspension monitoring by field offices.
BLM has agreed with the GAO recommendations.
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