Oil and Gas Development: Actions Needed to Improve Oversight of the Inspection and Enforcement Program

BLM has primary responsibility for managing oil and gas development on federal and Indian lands. To help ensure operator compliance with laws and regulations, BLM administers the Inspection and Enforcement program. Under the program, BLM inspects operators' drilling, production, and plugging activities and can issue various enforcement actions, such as monetary assessments, for violations. GAO was asked to examine key aspects of the Inspection and Enforcement program.

This report (1) describes the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce among agency field offices for the most recent 5 years for which such data were available (fiscal years 2012 through 2016) and (2) examines the extent to which BLM conducted internal control reviews in accordance with its July 2012 oversight policy for fiscal years 2013 through 2018, the most recent period for which such data were available. GAO examined BLM policies, data, and documents; interviewed BLM headquarters, state and field office officials; visited six BLM field offices selected based on their level of resource development activity; and toured oil and gas drilling, production, and plugging sites at three of these six field offices.

Based on GAO's analysis of Bureau of Land Management (BLM) data, the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce showed an imbalance among BLM's 33 field offices in fiscal years 2012 through 2016. GAO analyzed BLM data on the overall percentage of the workload and workforce distributed at each field office (i.e., activity level) and grouped similar activity level field offices together into highest, medium and lowest activity categories. GAO found that the program distributed the majority of its workload to 6 highest activity offices and distributed the majority of the workforce to 21 medium activity offices (see fig.). Based on GAO's review of BLM documentation and interviews with agency officials, BLM took both short- and long-term actions in fiscal years 2012 through 2016 to address this imbalance, such as temporarily re-assigning inspectors from some medium activity offices to some of the highest activity offices.

BLM has not completed all required internal control reviews of its field offices. BLM's July 2012 oversight policy instructs its state offices to periodically conduct internal control reviews of field offices, which are to, among other things, identify staffing needs. BLM state offices completed internal control reviews at 6 of 33 field offices from 2013 through 2017, and 5 more are scheduled from 2018 through 2020. Officials from BLM state offices told GAO that some human capital and workload challenges hindered their ability to complete reviews, including long-term vacancies in some state offices positions. However, a senior BLM official said that headquarters did not consistently track and monitor the extent to which state offices completed field office internal control reviews, and headquarters officials said they were not aware that so few reviews had been completed. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to expected results and analyzing significant differences. Identifying the reasons it did not complete internal control reviews, developing and implementing a plan to address those challenges, and monitoring state offices' progress toward completing required reviews will better position BLM to ensure that its state offices are completing all required internal control reviews as called for by its July 2012 oversight policy.

GAO is making three recommendations to BLM, including taking actions to increase monitoring of state offices' progress toward completing internal control reviews. BLM concurred with all three recommendations.

Production of oil and gas on federal and Indian lands is an important part  of the nation’s energy portfolio and generates billions of dollars annually  for the federal government, tribes, and individual Indian mineral owners.  In fiscal year 2016, the Department of the Interior reported collecting  more than $2 billion associated with onshore oil and gas development on  federal and Indian lands, including royalty payments from operators for  resources extracted. Interior’s Bureau of Land Management (BLM) has  primary responsibility for managing and overseeing oil and gas  development on federal lands. BLM also plays a key role in managing oil  and gas development on Indian lands. Specifically, BLM’s Inspection and  Enforcement program ensures production accountability (i.e., operators  accurately measure and report production volume—these volumes are a  key input into royalty payment calculations), environmental protection,  and public safety.

Inspecting oil and gas development and production is a complicated  process that requires BLM’s petroleum engineer technician (PET)  inspectors to conduct a variety of technically challenging inspections in  geographically remote areas to interact with hundreds of different  operators in the oil and gas market. At 33 BLM field offices with ongoing  oil and gas development activities, the Inspection and Enforcement  program employs a workforce of PET inspectors who carry out a  workload that includes a range of inspections that cover a well’s life cycle,  from drilling and production to plugging. PET inspectors play a vital role in  helping to ensure operators employ sound and prudent industrial  practices at more than 140,000 oil and gas wells on federal and Indian  lands. In addition, changes and innovations within the oil and gas industry  can impact the bureau’s PET inspector workforce and its inspection  workload. In this context, BLM oversight is essential to help ensure the  bureau’s field offices have effective internal controls, which help BLM  achieve its mission and respond to changing risks.

Past work by us, Interior’s Office of Inspector General, and others has  highlighted the importance of BLM’s oversight of oil and gas development  on federal and Indian lands and identified a number of weaknesses. BLM  has taken some actions to address these weaknesses. For example:  In March 2010, we found BLM was unable to consistently meet its  goals for completing production inspections. We recommended that  BLM consider an alternative inspection strategy to ensure it inspects  all wells within a reasonable time frame, given available resources.  BLM concurred with our recommendation. In response to our  recommendation, in 2011, BLM developed its risk-based production  inspection strategy, which classifies wells as either high-priority or  low-priority for inspections based on multiple factors.

In December 2010, the Interior Inspector General identified  weaknesses with the quality of inspections conducted by Inspection  and Enforcement program personnel and made a number of  recommendations. In July 2012, BLM issued a program oversight  policy that, among other things, requires state offices to conduct  periodic internal control reviews of the Inspection and Enforcement  program at BLM field offices with ongoing oil and gas activities.

Since 2011, we have designated Interior’s management of federal oil  and gas resources as a high-risk area vulnerable to fraud, waste,  abuse, and mismanagement. In our February 2017 high-risk series  update, we reported that Interior has taken some actions to address  production verification and human capital challenges by, for example,  using special, higher salary rates to hire and retain key oil and gas  staff such as BLM inspectors. However, the agency’s management of  federal oil and gas resources remains an area vulnerable to fraud,  waste, abuse, and mismanagement.

In our 2017 high-risk series update, we added a new high-risk area on  improving management of federal programs that serve tribes and their  members. We reported that, among other things, Interior’s Bureau of  Indian Affairs mismanages Indian energy resources held in trust and  thereby limits opportunities for tribes and their members to use those  resources to create economic benefits and improve the well-being of  their communities.

You asked us to examine BLM’s oil and gas Inspection and Enforcement  program. This report (1) describes the distribution of oil and gas  Inspection and Enforcement program workload and workforce among  BLM’s field offices for the past 5 years and (2) examines the extent to  which BLM conducted internal control reviews in accordance with its July  2012 oversight policy.

To describe the distribution of oil and gas inspection and enforcement  workload and workforce among BLM’s 33 field offices with ongoing oil  and gas activities, we focused on the workload completed by PET  inspectors, as well as workforce data on PET inspectors. PET inspectors’  workload includes inspections of drilling, production, and well plugging  operations, commonly referred to as “downhole” inspections according to  the BLM Inspection and Enforcement Program Manager. We focused on  these areas because (1) BLM planning documents consistently state that  downhole inspections on high-priority drilling, high-priority well plugging,  and high-priority production wells are the program’s top three work  activities, and (2) the program allocates the majority of its total inspection  work months to completing downhole inspections. We selected the past  5 years (fiscal years 2012 through 2016) for which such workload and  workforce data were available during our review.

However, due to data reliability issues associated with priority rankings  (high or low) during fiscal years 2012 through 2016 for drilling, production,  and plugging inspections as well as issues with the number of completed  inspections—the most direct measure of workload—we determined that  these inspection data were not sufficiently reliable for our purposes.  Instead, we identified seven alternate workload measures for drilling,  production, and plugging inspections, which BLM officials said would  provide a representation of the size and scope of its inspection workload.  In addition, we identified two workforce measures for a total of nine  measures that covered fiscal years 2012 through 2016. The workload  measures are:  the number of wells drilled on federal and Indian lands;  the number of production cases on federal and Indian lands (a case is  either a lease or an agreement, can have from 1 to more than 1,000  wells, and is the unit of analysis for BLM’s production inspection  workload);  the number of high-priority production cases on federal and Indian  lands;  the number of low-priority production cases on federal and Indian  lands;  the number of planned work months for plugging inspections on  federal and Indian lands;  the number of enforcement actions issued for all inspections on  federal and Indian lands; and  the number of major and continued noncompliance enforcement  actions—major incidents of noncompliance, monetary assessments,  civil penalties, and operation shutdown—issued for all inspections on  federal and Indian lands. These types of actions generally identify (1)  immediate, substantial, and adverse effects to public health and  safety, the environment, production accountability, or royalty income;  or (2) an operator’s failure to correct an identified problem or violation  by the abatement date. For example, BLM can issue monetary  assessments up to $5,000 to operators who drill on federal and Indian  lands without approval.

With respect to workforce, the measures are:  the number of PET inspectors “on board” at each field office at the  start of each fiscal year, and  the number of PET inspection work months in each fiscal year.

For each of the workforce and workload measures, we calculated the  percentage of the nationwide total (i.e., federal plus Indian) for each field  office during fiscal years 2012 through 2016. Our calculations, in general,  demonstrated a pattern that showed natural break points in the data for  field office activity level. Based on these natural break points, we  developed and applied decision rules. Based on these rules, we  categorized each field office, based on specific workload and workforce  measures, as “high activity” if it represented 4 percent or more of the  nationwide total, “medium activity” if a field office represented from 3.9  percent to 1 percent of the nationwide total, and “low activity” if a field  office represented 1 percent or less of the nationwide total. BLM agreed  with this approach for categorizing the 33 field offices based on their  workload and workforce activity levels, and said it was representative of  the workload and workforce. For example, we categorized the Rawlins,  Wyoming, field office as medium activity for the number of wells drilled  because the office was responsible for 1.8 percent of all wells drilled on  federal and Indian lands from fiscal years 2012 through 2016. However,  we categorized the Rawlins field office as high activity based on the  number of planned work months for plugging inspections because the  office represented 5.7 percent of planned work months for plugging  inspections on federal and Indian lands in fiscal years 2012 through 2016.

We then compared the distribution of field offices across the workload  and workforce measures to identify the offices that most consistently fell  into the high-activity, medium-activity, or low-activity category. Once  again, our analysis demonstrated a pattern that showed natural break  points for the data, which allowed us to develop certain decision rules.  Based on these rules, we categorized a field office as an overall highest  activity office if it was rated high activity in at least six of the nine workload  and workforce measures and an overall lowest activity office if it was  rated low activity in at least six of the nine measures. Overall medium- activity offices were those that did not fall into the overall high and overall  low categories. For example, we categorized the Rawlins field office as  an overall medium-activity office because it was rated as high activity for  three measures and medium activity for six measures. BLM agreed with  this approach for grouping the field offices into three categories based on  activity.

We obtained our workload and workforce data primarily from the annual  inspection work plan BLM develops at the start of each fiscal year. The  annual work plan provided data for production cases, planned work  months for plugging inspections, number of onboard PET inspectors, and  number of PET inspection work months. In addition, we obtained records- level data from the bureau’s corporate oil and gas database for the wells  drilled and enforcement actions data. We assessed the reliability of the  work plan and records-level data by reviewing related documentation,  interviewing knowledgeable agency officials, and conducting electronic  and manual testing of the data to identify missing data or obvious errors.  We found that the data related to our seven workload and two workforce  measures were reliable for the purposes of our review.

To determine the extent to which BLM conducted internal control reviews  of the Inspection and Enforcement program from fiscal years 2013  through 2018 in accordance with its July 2012 oversight policy, we  reviewed the oversight policy and compared its requirements to (1) the  field office internal control reviews completed by state office officials and  (2) federal standards for internal control, specifically the control activities  standard that requires management to design control activities to achieve  objectives and respond to risks. We selected this time period as it was  the most recent period for which data were available.

For both objectives and to obtain possible reasons or explanations for the  data, we reviewed key BLM policy and guidance documents, including the  Inspection and Enforcement Handbook and the annually issued  Inspection and Enforcement Strategy and Goals. We interviewed BLM  headquarters officials, BLM officials at 7 state offices, and PET inspectors  at 13 BLM field offices. We selected this nongeneralizable sample to  provide a range of resource development, such as the primary type of  resource developed (i.e., oil or gas or both), the presence of Indian lands,  and geographic variation. We also conducted site visits to six BLM field  offices in New Mexico, Wyoming, and North Dakota; we selected these  field offices as they have historical or current high levels of resource  development activity. During those site visits, we accompanied PET  inspectors on drilling, production, and plugging inspections.

We conducted this performance audit from December 2016 to February  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

This section provides information on BLM’s mission and organizational  structure, the process for overseeing the development of federal and  Indian oil and gas resources, and key aspects of the Inspection and  Enforcement program.

BLM Mission and Organizational Structure

BLM’s mission is to maintain the health, diversity, and productivity of  public lands for present and future generations. As part of this mission,  BLM manages federal lands for multiple uses, including recreation;  grazing; timber; minerals; watershed; wildlife and fish; natural scenic,  scientific, and historical preservation; and the sustained yield of  renewable resources. BLM manages these responsibilities through its  headquarters office in Washington, D.C.; state offices; district offices; and  field offices. Each level’s general responsibilities include the following:

BLM’s headquarters office develops guidance and regulations.

State and field offices manage and implement the bureau’s programs.  In addition to implementing programs, BLM state offices oversee field  office operations. Field offices lead BLM’s oversight of oil and gas  development. They are located primarily in the Mountain West, where  much of oil and gas development on federal and Indian lands takes  place.

Within field offices, BLM supervisory and staff PET inspectors and  tribal PET inspectors (who are contracted by BLM to inspect some  wells on Indian lands in accordance with BLM policies and  procedures) have primary responsibility for implementing the  Inspection and Enforcement Program with assistance from state office  program coordinators, according to the Inspection and Enforcement  Program Manager. Among other things, state office program  coordinators help field offices plan and prioritize their inspection  workloads in accordance with BLM policy and comply with BLM  guidance and federal regulations when conducting and documenting  inspections, according to BLM officials.

Process for Development of Oil and Gas Resources on Federal and Indian Lands Including Key Aspects of the Inspection and Enforcement Program

Development of oil and gas resources on federal and Indian lands is a  multi-stage process. First, Interior holds auctions through which entities  may secure the right to federal and Indian leases that allow them to drill  for oil and gas after meeting certain conditions. Once an operator plans to  drill a well on leased land, it must first secure a permit from Interior. After  drilling a well, an operator installs production equipment, such as pump  jacks, storage tanks, and metering equipment. This production phase  continues until the well becomes inactive, and the operator may decide to  plug the well, usually because the well is either depleted or no longer  economically viable. After plugging the well, the operator is required to  remove all production equipment and reshape and revegetate the land  around the well.

To ensure compliance with applicable laws, regulations, and other  requirements, BLM’s Inspection and Enforcement program verifies that  the operator complies with all requirements at a well or lease site during  the drilling, production, and plugging phases. Three BLM onshore  orders, issued pursuant to regulation, specify requirements that operators  are to follow on federal and Indian leases. Inspectors use these orders  to verify compliance during inspections. Onshore Oil and Gas Order  Number 3 specified requirements for the minimum standards for site  security by ensuring that oil and gas produced from federal and Indian  leases are properly handled to prevent theft and loss and enable accurate  measurement. Onshore Oil and Gas Order Number 4 specified  requirements for measurement of oil produced under the terms of federal  and Indian leases or received by federal and Indian lessees as shares of  oil produced on state or private lands. Onshore Oil and Gas Order  Number 5 specified requirements for measurement of gas produced  under the terms of federal and Indian leases or received by federal and  Indian lessees as shares of gas produced on state or private lands.

Figure 1 shows key inspection activities that occur during the drilling,  production, and plugging stages of a well’s life cycle.

Our Analysis of BLM Data Shows the Distribution of BLM’s Inspection and Enforcement Program’s Workload and Workforce Was out of Balance in Fiscal Years 2012 through 2016

In fiscal years 2012 through 2016, the distribution of the oil and gas  Inspection and Enforcement program’s workload and the workforce  among the 33 BLM field offices with ongoing oil and gas development  activities showed an imbalance, based on our analysis of BLM data. BLM  took both short- and long-term actions in fiscal years 2012 through 2016  to address this imbalance, such as temporarily re-assigning inspectors  from some medium activity offices to some of the highest activity offices.  Based on our review of BLM documentation and interviews with agency  officials, two key factors affected the distribution of the program’s  workload: (1) energy market changes (e.g., price fluctuations) and (2)  BLM actions to plan and prioritize inspection workload (e.g., changing risk  classification for production inspections and decreasing the number of  work months for plugging inspections).

The Distribution of the BLM Inspection and Enforcement Program’s Workload and Workforce Was Out of Balance Based on Our Analysis of BLM’s Data

From fiscal years 2012 through 2016, the distribution of the workload and  workforce of BLM’s oil and gas Inspection and Enforcement Program was  out of balance across the 33 BLM field offices with ongoing oil and gas  development activities, based on our analysis of BLM data. The majority  of the workload, about 58 percent, was located at the 6 highest-activity  field offices, which had 44 percent of the workforce. In contrast, the  majority of the workforce, 56 percent, was located in the remaining 27  medium and lowest activity offices, which had about 42 percent of the  workload. Figure 2 shows the distribution of workload and workforce  across the 33 field offices. In addition, figure 3 shows a map of our  categorization of BLM’s 33 field offices by their workload and workforce  activity level.

From fiscal years 2012 through 2016, based on our review of BLM  documentation and interviews with agency officials, BLM took both short  and long-term actions to address this imbalance, such as temporarily re- assigning inspectors from some medium activity field offices to some  highest activity offices. A specific example of how BLM addressed this  workload and workforce imbalance on a short term basis for this period  concerns two of the highest activity offices (Hobbs and Dickinson). These  offices had fewer PET inspectors on board and fewer PET inspection  work months than three medium-activity offices (Pinedale, Rawlins, and  Vernal). To address this imbalance, BLM sent short-term “strike teams” of  PET inspectors to Hobbs and Dickinson on multiple occasions to help  complete inspections. For example, officials from the Hobbs field office  told us that in fiscal years 2012 and 2013, PET inspectors from the  Farmington field office helped complete drilling and plugging inspections  at Hobbs. In addition, officials from the Dickinson field office said that  during fiscal years 2012, 2013, and 2014, more than 20 PET inspectors  from five different states helped them inspect drilling, production, and  plugging operations.

BLM officials said there were pros and cons to the strike team approach.  They said strike teams generally allow a field office to complete high- priority inspections and can provide additional training to inspectors at  that office. However, agency officials said that, at times, the inspection  documentation from strike team PET inspectors may not fully align with  the policies and practices of the office they are assisting, which can  create uncertainty about what inspection activities were completed and  what the inspection found. We previously reported that strike teams  increase costs and are not a sustainable solution.

To address the workload and workforce imbalance on a long term basis,  BLM allocated additional funding in fiscal years 2015 and 2016 to hire  PET inspectors. The Inspection and Enforcement program manager said  that these hires were targeted to address workforce needs at certain field  offices. According to agency documentation, BLM allocated additional  funding to hire about 20 inspectors in fiscal year 2015 and 40 inspectors  in fiscal year 2016. Approximately 75 percent of these inspector positions  were in three state offices: Montana (which includes the Dickinson, North  Dakota field office), New Mexico (which includes the Tulsa, Oklahoma  field office), and Wyoming. All six of BLM’s highest activity field offices are  located in these three states.

With this additional funding in fiscal years 2015 and 2016, multiple  officials from BLM field offices reported that they were generally able to  hire inspectors and, as a result, the number of onboard inspectors  increased. For example, the number of onboard PET inspectors in the  Dickinson field office increased from 8 in fiscal year 2015 to 17 in fiscal  year 2017. In the Buffalo field office, the number of onboard PET  inspectors increased from 16 in fiscal year 2015 to 23 in fiscal year 2017.  These officials generally cited two key reasons for being able to hire  inspectors. First, BLM increased the compensation for PET inspectors  through the use of special salary rates, incentive payments, and student  loan repayments. We have previously reported that BLM faces challenges  hiring PET inspectors because BLM competes with industry for  employees, and industry offers higher salaries. Second, and as  described below, industry reduced development activity (i.e., wells drilled)  in fiscal years 2015 and 2016 as commodity prices decreased. Multiple  BLM field office officials also told us that it is easier to hire PET inspectors  when oil and gas prices are low because industry is not hiring and  applicants look to BLM for job security.

Two Key Factors Affected the Distribution of the Oil and Gas Inspection and Enforcement Program’s Workload

Two key factors—based on our review of BLM documentation and  interviews with agency officials—affected the distribution of the program’s  workload: (1) energy market changes (e.g., price fluctuations and  increased development of shale plays) and (2) BLM actions to plan and  prioritize inspection workload (e.g., changing risk classification for  production inspections and decreasing the number of work months for  plugging inspections). As we describe below, these factors affected  several aspects of the program’s workload (i.e., wells drilled, production  inspection cases, planned plugging work months, and enforcement  actions).

Consistently Lower Gas Prices, Volatile Oil Prices, and Increased Development of Shale Plays Led to a Decrease in Wells Drilled, but Not Uniformly Across BLM Field Offices

The number of wells drilled on federal and Indian lands from fiscal years  2012 through 2016 declined, according to BLM data. The decline was  primarily the result of consistently lower gas prices and oil prices that  dropped significantly in fiscal years 2015 and 2016 combined with  technological advancements that increased the development of resources  located in shale and other tight rock formations—which are generally not  found on federal and Indian lands. Multiple BLM officials told us that  commodity prices are a key factor that impacts the number of wells drilled  on federal and Indian lands. These officials told us that, in general, when  commodity prices are higher, industry will drill more wells, whereas when  prices are lower, fewer wells are drilled. In addition, we previously  reported that the highs and lows in prices and the number of oil and gas  wells drilled largely overlapped, strongly suggesting that development  activities reacted quickly and proportionally to changes in the prices of oil  and gas. Table 1 shows the number of wells drilled on federal and  Indian lands and average monthly prices for natural gas and crude oil for  the period. While there may have been some year-to-year variability  between the number of wells drilled and commodity prices (see the fiscal  year 2013 to 2015 prices for natural gas in table 1), operators drilled  fewer wells in fiscal years 2015 and 2016, which were years of both  consistently low gas prices and significant decreases in oil prices.

With regard to natural gas prices, a Purdue University study from March  2017 found that (1) the period of consistently lower natural gas prices  (i.e., the Henry Hub average monthly price per million British thermal unit  was generally from $2 to $4) began around 2009, which corresponds with  increased development of natural gas from shale resources, and (2) the  price increase in fiscal year 2014 was related to an extreme winter cold  spell. With regard to oil prices, a World Bank report from January 2018  identified multiple factors contributing to the significant price decease that  occurred in fiscal years 2015 and 2016. These factors included  increased oil production from U.S. shale plays—sedimentary rock  formations containing significant amounts of oil and natural gas— contributing to oversupply as well as lower production costs that allowed  shale oil wells to be profitable at lower prices.

From 2009 to 2016, there was also an increase in the development of oil  and gas plays located in shale and other tight rock formations, brought  about by advances in production technologies such as horizontal drilling  and hydraulic fracturing. According to Energy Information Administration  data, shale plays represented more than 90 percent of the growth in oil  and gas development from 2011 to 2016. As stated above, most shale  plays are not located on federal and Indian lands. However, the few  BLM field offices located in shale plays where operators focus on oil  development saw a smaller decrease in the number of wells drilled  compared to field offices located outside of shale plays. For example, the  Dickinson field office—located in the Bakken shale play—experienced a  15 percent decrease in the number of wells drilled from about 400 in fiscal  year 2012 to about 330 in fiscal year 2016. Similarly, the Hobbs field  office—located in the Permian shale play—experienced a 27 percent  decrease from about 160 in fiscal year 2012 to about 120 in fiscal year  2016. According to BLM data, almost all producing wells in the Dickinson  and Hobbs field offices are oil wells. In contrast, two field offices located  outside of shale plays experienced a more significant decrease. The  number of wells drilled in the Bakersfield field office (located in California)  declined 90 percent from 285 wells drilled in fiscal year 2012 to 30 wells  drilled in fiscal year 2016. According to BLM data, almost all of the  Bakersfield field office’s producing wells are oil wells. The number of wells  drilled in the Vernal, field office (located in Utah) declined 95 percent from  725 wells drilled in fiscal year 2012 to 35 wells drilled in fiscal year 2016.  According to BLM data, about 40 percent of the Vernal field office’s  producing wells are oil wells, and the remaining 60 percent are natural  gas wells.

BLM Changes to Risk Classification Led to Fluctuations in the Number of High Priority Production Inspection Cases

On multiple occasions from fiscal year 2012 through fiscal year 2016,  based on our review of agency documentation, BLM changed its  methodology to identify and classify risk, which led to fluctuations in the  number of high-priority production inspection cases in a given fiscal  year. In our review, we focused on high priority production cases  because, according to agency documents, inspecting such cases is one  of the program’s top three work priorities. Based on our review of agency  documentation, BLM’s risk-based strategy went through several iterations  from fiscal years 2011 through 2016, and agency officials said that it was  difficult to identify the specific reasons for year-to-year changes in the  number of their high-priority production cases. This strategy used multiple  weighted factors to develop a composite risk score to identify high- and  low-priority cases. In fiscal year 2011, BLM based the composite risk  score on seven weighted factors: four factors based on BLM data, and  three factors based on data from Interior’s Office of Natural Resources  Revenue (ONRR). However, BLM officials stated that they had  challenges importing ONRR data in a format compatible with the bureau’s  information technology system and have since stopped using the data.  From fiscal year 2013 through fiscal year 2016, BLM based the composite  risk score on the following four BLM-identified risk factors: (1) average  monthly production, (2) number of missing oil and gas operations reports,  (3) number of incidents of noncompliance, and (4) number of years since  last inspection. With regard to composite risk scores, in fiscal year 2011,  BLM determined that a composite risk score of 4 would be considered  high risk, meaning that cases with a score of 4 or more required an  inspection. For fiscal year 2013, BLM increased the composite risk score needed to be considered high risk and required an inspection with a score  of 5, a change intended to reduce the number of required inspections  because agency documentation stated that the workload in the preceding  years was too high for some field offices. For fiscal years 2014, 2015 and  2016, BLM lowered the composite risk score to 4 again.

BLM averaged about 2,150 high priority production cases in fiscal years  2012 through 2016, and in each of those fiscal years, the number ranged  from about 1,700 to about 2,500. In addition, over 60 percent of such  cases were located in the 6 highest-activity field offices we identified.  Since such cases are concentrated in six field offices, seemingly minor  fluctuations in the overall number of high priority production cases can  have greater impacts to an individual field office’s workload. For example,  in fiscal year 2013, BLM identified about 2,500 high priority production  cases. The Farmington field office in that year had about 170 such cases  (or about 7 percent of the total) and estimated that PET inspectors  needed about 12 work months to complete these inspections. In fiscal  year 2015, BLM identified about 1,700 high priority production cases. The  Farmington field office had about 90 such cases (or about 5 percent of  the total) and estimated that PET inspectors needed about 6 work months  to complete these inspections. In general, BLM officials told us that a  single PET inspector is assigned about 6 inspection work months in a  fiscal year once other demands on an inspector’s time (i.e., sick leave,  vacation, training, and the completion of other assigned non-inspection  duties such as administering various safety programs) are considered.  Therefore, in fiscal year 2013 the Farmington field office would have had  to dedicate 2 PET inspectors (or about 10 percent of its total PET  workforce) to complete only high priority production inspections, and in  fiscal year 2015 the field office would have needed 1 PET inspector (or  about 5 percent of its total PET workforce) to complete such inspections.

Since BLM’s risk-based strategy has gone through multiple iterations  since fiscal year 2012, several BLM officials said that it was difficult to  identify the specific reasons for year-to-year changes in the number of  their high-priority production cases. Officials, however, said that their  ability to complete more high-priority production inspections increases  during times of reduced industry drilling activity. Specifically, if industry is  drilling fewer new wells, BLM can apply additional resources toward  inspecting currently producing wells because PET inspectors who would  normally conduct drilling inspections can now be deployed to high-priority  production inspections. For example, as described above, the number of  wells drilled decreased during the time frame covered in our review, with  the Vernal and Bakersfield field offices experiencing substantial  decreases in the number of wells drilled from fiscal year 2012 to fiscal  year 2016. Officials in both offices told us that when drilling activity was  low, BLM redirected resources originally planned for drilling inspections to  complete high-priority production inspections.

BLM Reduced the Total Number of Estimated Well Plugging Inspection Work Months as Commodity Prices Stayed Low or Decreased

According to agency data, BLM reduced the estimated number of  plugging inspection work months from about 200 in fiscal year 2012 to  about 155 in fiscal year 2016, or about 23 percent. Multiple agency  officials told us that due to low or falling commodity prices operators  plugged fewer wells from fiscal year 2012 through fiscal year 2016. As  discussed above, natural gas prices were consistently low during fiscal  years 2012 through 2016, while oil prices decreased significantly in fiscal  years 2015 and 2016. According to multiple BLM officials, operators  generally plug fewer wells during times of low or falling commodity prices  because operators prefer to (1) maintain the income generated from even  marginally producing wells or (2) limit the expenditures required to plug  wells. In May 2018, we reported that low oil and gas prices placed  financial stress on operators, increasing bankruptcies and the risk that  operators would not permanently plug wells, and that BLM’s actual costs  and potential liabilities for reclaiming oil and gas wells likely increased for  fiscal years 2010 through 2017. In addition, we reported that BLM faced  challenges identifying and managing shut-in wells. For example, BLM  does not have time limits for how long operators can have a well in shut- in status, which may limit the agency’s ability to ensure that operators  permanently plug such wells before they become orphaned.

However, since BLM estimates the number of plugging inspection work  months at the start of each fiscal year, there can be instances where  actual industry activity is different than estimated. For example, BLM  officials at four field offices told us that during the time frame of our  review, operators in their region plugged more wells than estimated.  According to agency officials, these operators plugged more wells than  BLM estimated because the operators were either looking to reduce their  financial liability—sometimes in anticipation of selling assets—or looking  for work to keep crews busy. In these instances, agency officials told us  that, in general, BLM re-allocated inspection work months from low- priority production inspections to these plugging inspections. According to  agency officials and documentation, plugging inspections are a higher  priority than production inspections for multiple reasons. First, a plugging  inspection is time sensitive because it is the final stage in a well’s  lifecycle. In contrast, a production inspection is an ongoing operation that  can be conducted at almost any time. Second, properly plugging a well is  essential for long-term environmental protection. For example, wells that  are not properly plugged can leak methane and contaminate surface and  groundwater. As such, multiple BLM officials told us that plugging  inspections are their field office’s highest priority work task and they will  re-allocate resources, if necessary, to complete such inspections.

Higher Oil Prices in Some Years and Generally Lower Gas Prices Led to an Imbalance in the Program’s Enforcement Workload at Three Field Offices

Based on our analysis of BLM data, two key market changes created an  imbalance of the program’s enforcement workload: (1) increased drilling  activity at two field offices located in shale formations during times of  higher oil prices, and (2) bankruptcies of coalbed methane operators in  one field office as gas prices decreased. Combined, the Buffalo,  Carlsbad, and Dickinson field offices issued about 45 percent of all  enforcement actions, 75 percent of all monetary assessments, and about  85 percent of all civil penalties (see table 2). For purposes of this review,  we focused on the number and amount of monetary assessments and  civil penalties because, according to agency officials and BLM  documentation, these two enforcement actions are the key tools used by  BLM to address instances of serious or continued operator  noncompliance.

Almost all of the monetary assessments that the Carlsbad and Dickinson  field offices issued were for drilling violations—either drilling without  approval or failure to install a blowout preventer or other well control  equipment—and occurred in fiscal years 2012 through 2014, based on  our review of BLM enforcement data. Federal regulations generally  provide for higher monetary assessment amounts for drilling violations  compared to other types of violations. Specifically, drilling violations are  subject to assessments of $500 per day (up to $5,000), whereas a  violation for failure to comply with a previously issued written notice for a  minor violation is $250. As such, even though the Carlsbad and Dickinson  field offices issued 24 percent of the number of monetary assessments,  they issued about 60 percent (about $710,000) of the total amount  assessed by all BLM field offices from fiscal years 2012 through 2016. In  contrast, even though the Buffalo field office issued more than half of the  monetary assessments, these actions accounted for 18 percent (about  $220,000) of the total amount assessed because almost all of these  assessments were minor violations for failure to comply (see table 3).

From fiscal years 2012 through 2016, the Carlsbad and Dickinson field  offices were responsible for about 30 percent of all wells drilled on federal  and Indian lands, according to BLM data. These offices are located,  respectively, in the Permian and Bakken shale plays, where almost all  wells are oil wells. During fiscal years 2012 through 2014, for each of  these field offices, operators drilled about 435 wells each year, and the  price of oil ranged from $87 to $107 per barrel. In contrast, during fiscal  years 2015 and 2016, operators drilled about 275 wells each year while  the price of oil ranged from $45 to $86 per barrel. According to agency  officials, during fiscal years 2012 through 2014 operators attempted to  drill wells as quickly as possible in the Carlsbad and Dickinson field  offices to increase production during a time of higher oil prices.

BLM field office officials told us that when oil prices are higher, some  operators have less financial incentive to follow federal requirements. In  the Dickinson field office, for example, almost all monetary assessments  were related to drilling without approval. Officials from that field office told  us that, in general, these violations were related to operators who applied  to BLM for a drilling permit, but the bureau did not approve the permit  before the operator started drilling. In these instances, operators decided  that the benefit of increased production at higher prices outweighed the  cost of a monetary assessment, according to agency officials. BLM  officials told us that for both types of drilling violations—drilling without  approval and failure to install well control equipment—BLM issues  monetary assessments immediately upon discovery due to the potential  serious harmful impacts to resource development and environmental  health and suspends drilling operations until the operator corrects the  violation and pays the assessment. The officials said operators almost  always pay these assessments in a timely manner because they wanted  to complete drilling operations and start production.

In contrast to the monetary assessments issued during times of high oil  prices, the Buffalo field office issued hundreds of civil penalties totaling  millions of dollars during times of lower natural gas prices as some  coalbed methane operators declared bankruptcy and did not complete  required reclamation activities. Specifically, the Buffalo field office  issued over 75 percent of the number of civil penalties and almost the  entire amount penalized during fiscal years 2012 through 2016 (see table  4).

As we reported in May 2018, low natural gas prices placed financial  stress on operators of thousands of coalbed methane wells (natural gas  extracted from coal beds). In that May 2018 report, we also found that  coalbed methane was economical to produce when natural gas prices were higher, and thousands of coalbed methane wells were drilled on  federal lands. However, coalbed methane production has declined  because the production of shale gas has kept natural gas prices low.  Officials from the Buffalo field office told us that (1) low natural gas prices  contributed to an increasing number of bankruptcies among coalbed  methane operators, and (2) in general, these bankrupt operators stopped  production activities, shut-in the wells instead of permanently plugging  them, and stopped communicating with BLM.

For these cases, Buffalo field office documentation outlines a 20-step  process to identify a responsible party—that is, the operator or the  person(s) to whom BLM issued the lease (the lessee)—to either  permanently plug these wells or bring them back into production. Officials  said that they repeated this 20-step process for each operator or lessee,  as needed. Since one lease can have multiple lessees, the repetition of  this process resulted in a very large number of enforcement actions,  according to Buffalo field office officials. Under this process, BLM initially  issued thousands of written notices requiring the responsible party to  either “plug or produce.” When the responsible party did not take the  specified corrective action outlined in the written notices, the field office  then issued hundreds of monetary assessments for failure to comply with  the written notice and again instructed the operators to “plug or produce.”  When the responsible party failed to comply with the monetary  assessments, Buffalo issued hundreds of civil penalties.

Buffalo field office officials told us that they do not know whether the  government has collected any of the issued penalties because the  responsible parties did not pay the penalties to BLM in a timely manner.  As such, BLM turned these outstanding penalties over to the Treasury  Department for collection, a process that can take up to 2 years,  according to agency documentation. Since market conditions have  remained unfavorable for coalbed methane production, BLM has taken  actions to permanently plug some wells. For example, according to  agency officials and documents, the agency has (1) worked with some  non-bankrupt lessees, including at least one major oil and gas  corporation, to plug wells, (2) re-directed funding from other BLM  programs to pay to plug wells and (3) contributed funding to the state of  Wyoming’s well plugging program. We recently reported on BLM’s actual  costs and potential liabilities for reclaiming oil and gas wells and have  ongoing work reviewing BLM’s bonding requirements, which is the  primary mechanism to ensure that operators complete required  reclamation activities.

BLM Has Not Completed All Required Internal Control Reviews of Its Field Offices and Does Not Employ a Risk-Informed Oversight Strategy

BLM state offices did not complete internal control reviews at 27 of 33  field offices—including 5 of the 6 highest activity offices we identified.  According to the July 2012 oversight policy, state offices are to  periodically conduct internal control reviews of their field offices to, among  other things, (1) review whether inspections and enforcement actions are  accurate, complete, and conducted in accordance with policy, (2) review  staffing and training needs, and (3) identify areas where program  guidance can be improved. The July 2012 oversight policy also says that  BLM state offices are responsible for overall programmatic oversight of  field office operations. For those field offices with Inspection and  Enforcement program functions, this means that state offices are  responsible for ensuring that the field offices are able to meet the goals  stated in the program’s handbook, which include production accountability  (i.e., the accurate measuring and reporting of production volumes),  environmental safety, and public safety. BLM state offices completed  internal control reviews at 6 of the 33 field offices from 2013 through 2017  and scheduled reviews for 5 others from 2018 through 2020, as shown in  table 5.

Officials from BLM state offices who completed internal control reviews  said the benefits of these reviews included obtaining data to justify  additional training or resources and providing a formal opportunity to  examine key program management practices and correct identified  deficiencies. For example, in September 2017, the Colorado state office  completed an internal control review of a field office. Prior to this review,  officials from that state office told us that they thought the field office  might be understaffed based on a variety of factors, including longer than  expected inspection times. BLM data showed that in fiscal year 2016 this  field office estimated about 60 hours to complete a production inspection,  while the other 5 Colorado field offices’ average estimate was about 14  hours. The September 2017 Colorado state review identified unofficial  management policies at this field office that resulted in the underutilization  of PET inspectors and inflated inspection times, creating a perception of  understaffing. For example, one of the field office’s unofficial policies  required that PET inspectors drive at least 1,000 miles a month in order to  keep their government vehicle, which resulted in some inspectors taking  longer routes and driving to locations beyond those required for the job.  This policy contributed to artificially inflating inspection times. According  to the Colorado state review, the accurate tracking of inspection times is  vital for workload planning and staffing purposes. In response to these  findings, the field office manager terminated the unofficial policy, and  officials from the Colorado state office said they will check on the  implementation of their recommendations by reviewing the inspection  data. Officials from that state office are also no longer considering hiring  additional PET inspectors. To ensure that the field office sustains these  corrective actions, Colorado state officials told us that they perform  periodic reviews of production inspection records and continue to hold  progress report meetings with the field office’s management team.

Although BLM state offices completed internal control reviews at 6 of 33  field offices, the state offices did not complete reviews at 27 field offices,  including 5 of the 6 highest-activity field offices we identified. Officials  from BLM state offices identified some key human capital and workload  reasons that hindered their ability to complete reviews, including:  long-term vacancies in multiple state offices’ inspection and  enforcement coordinator positions, which BLM filled on a temporary  basis with other agency employees;  competing priorities from upper management (e.g., preparing for lease  sales); and hiring and training new PET inspectors.

For example, according to one state office inspection and enforcement  coordinator, the coordinator position was filled on a temporary basis by  four different BLM employees from about November 2013 to November  2015 as the agency tried to find a permanent hire. This official said that  as a result of the personnel changes, the state office did not conduct field  office internal control reviews as initially scheduled. In addition, another  state office inspection and enforcement coordinator said that she spends  a lot of her time providing instruction and on-the-job training to newly  hired PET inspectors in multiple field offices that do not have a  supervisory PET inspector, which limits her ability to perform field office  internal control reviews.

We also identified two shortcomings with BLM’s control activities that may  have limited the agency’s ability to compete internal control reviews as  required by the July 2012 oversight policy. First, BLM headquarters did  not design appropriate types of control activities to help management  fulfill its responsibilities. Specifically, the Inspection and Enforcement  program manager said that BLM headquarters did not consistently track  and monitor the extent to which state offices completed field office  internal control reviews. This official said that headquarters tends to rely  on state offices to track and monitor such reviews and that headquarters  focused on higher priority work tasks, such as developing and  implementing new regulations that were issued in January 2017. Within  the first 3 years following the issuance of the July 2012 policy, the agency  completed one internal control review each during fiscal years 2013 and  2015, although at least 12 reviews were to be completed. BLM  headquarters officials we spoke with were not aware that so few reviews  had been completed in fiscal years 2013 and 2015.

Federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, such  as by comparing actual performance to planned or expected results and  analyzing significant differences. Because it did not consistently monitor  and track state office performance, BLM headquarters (1) did not know  that state offices were not conducting field office internal control reviews  in accordance with the July 2012 oversight policy and (2) could not  analyze the reasons why actual performance did not meet expected  results. Identifying the reasons it did not complete internal control reviews  (e.g., human capital and workforce challenges), developing and  implementing a plan to address those challenges, and monitoring state  offices’ progress toward completing required reviews will better position  BLM to ensure that its state offices complete all required internal control  reviews as called for by its July 2012 oversight policy.

Second, the July 2012 oversight policy identifies specific areas (e.g., the  accuracy and completeness of inspections and staffing and training  needs) that the reviews should assess, but according to a BLM  headquarters official, the agency did not provide state offices with  implementation guidance or procedures. This official said that BLM did  not provide guidance or procedures so that state offices would have  flexibility in how they conducted such reviews. However, multiple BLM  state officials told us that such guidance or procedures would provide a  helpful framework for conducting these reviews. One state office  inspection and enforcement coordinator told us that since she had no  prior training or experience designing and implementing internal control  reviews, guidance or procedures would be especially beneficial.

Because they did not have documented implementation guidance or  procedures to follow, the two state offices that completed internal control  reviews developed their own procedures, which varied in design,  methodology, and resources based our review of the six completed  internal control reviews as well as interviews with BLM state officials.  Specifically:

One state office (1) developed its own review procedures based, in  part, on existing program documentation, (2) assigned a single  individual to conduct reviews because the state did not have the  resources available to provide additional staff support, and (3)  reviewed inspection and enforcement data contained in BLM’s  corporate oil and gas database as well as hard copy files, and  interviewed field office PET inspectors.

Another state office (1) developed its review procedures based on  those employed during a 2011 review of the entire Inspection and  Enforcement program at the suggestion of the Deputy State  Director; (2) assigned review teams consisting of multiple BLM  officials with different areas of expertise; and (3) reviewed database  and hard copy records, interviewed both field office PET inspectors  and field office management, and observed field office PET inspectors  as they conducted inspection activities.

Federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, such  as by clearly documenting internal control responsibilities in management  directives, administrative policies, or operating manuals. BLM has a  documented policy, but this policy does not clearly specify what  procedures state office officials are to follow to conduct internal control  reviews. Without developing and documenting procedures for  implementing internal control reviews under the July 2012 oversight policy, BLM does not have assurance that state offices will review all  specific areas identified in the July 2012 oversight policy in a consistent  manner.

In addition, although BLM did not have documented procedures for  conducting periodic internal control reviews, the July 2012 oversight  policy specified a schedule for conducting such reviews (see fig. 4). The  schedule states the following:

For state offices with four or fewer oil and gas field offices, the state  office is to complete an internal control review of each field office at  least once every 3 years. The state offices in this category are Alaska,  California, Eastern States, Montana, Nevada, and Utah.

For state offices with five or more oil and gas field offices, the state  office is to complete an internal control review of each field office at  least once every 6 years. The state offices in this category are  Colorado, New Mexico, and Wyoming.

According to the Inspection and Enforcement program manager, this  schedule was based on discussions with state office inspection and  enforcement coordinators to balance officials’ availability to conduct  internal control reviews and other responsibilities. The program manager  said that BLM did not identify or consider risk when developing the  schedule because the agency’s primary focus was to balance the new  requirement to conduct field office internal control reviews with the state  office coordinators’ existing workload. However, the review schedule in  the July 2012 oversight policy generally requires more frequent internal  control reviews of low-activity offices and less frequent reviews of high  activity offices. In particular, five of the six highest activity field offices we  identified in our review are in states in which there are more than five field  offices. According to the policy, these highest activity offices would  therefore receive an internal control review at least once every 6 years. In  contrast, five of the six lowest activity field offices are in states in which  the policy requires that reviews be conducted at least once every 3 years.  Such a review schedule may not ensure that BLM has properly  established and implemented internal control reviews at the highest  activity field offices—whose workforce must complete a majority of the  program’s workload—which may inherently pose a greater risk to the  program’s goals of production accountability, environmental protection,  and personnel safety. For example, if the six highest activity field offices  have an inadequate number of PET inspectors, then there is an increased  risk to BLM’s production accountability goal. Specifically, if these offices  do not have the human resources needed to fully inspect high-priority  production cases, BLM has less assurance that operators are properly  measuring and reporting production volumes, which increases the risks to  the accurate collection of royalty payments. Furthermore, those field  offices that experienced greater levels of drilling workload may present a  higher risk to BLM’s environmental protection goal. Specifically, if the six  highest activity offices do not conduct accurate and complete drilling  inspections, BLM has less assurance that operators are properly  conducting drilling operations, which increases the risks of environmental  problems, such as contamination of fresh water aquifers.

Federal internal control standards call for entities to identify, analyze, and  respond to risks related to achieving the defined objectives, such as by  estimating the significance of identified risks to assess their effect on  achieving defined objectives. Management estimates the significance of  a risk by considering the magnitude of impact, which refers to the likely  magnitude of deficiency that could result from the risk and is affected by  factors such as the size of a risk’s impact. Without employing a risk- informed approach to scheduling and conducting internal control reviews  that takes into account the risks to the Inspection and Enforcement  program, such as those inherent in field offices’ workload and workforce,  BLM will not have reasonable assurance that it has adequate controls in  place to address the effect of the field offices that pose the greatest risk to  the program. BLM officials said that assessing risk, including field offices’  workload activity levels, could provide a useful metric to inform how BLM  conducts and prioritizes field office internal control reviews.

On federal and Indian lands, BLM’s Inspection and Enforcement program  is intended to ensure that operators developing oil and gas resources do  so in a manner that protects public safety, environmental health, and  royalty income. This is a complex undertaking that occurs within the oil  and gas market and requires BLM’s PET inspectors to conduct technically  challenging drilling, production, and plugging inspections. In this context,  BLM’s July 2012 oversight policy calls for its state offices to conduct  periodic internal control reviews of field offices. While BLM state offices  completed internal control reviews at 6 field offices, they did not complete  reviews at 27 field offices, including 5 of the 6 highest activity field offices  we identified. In addition, because it did not consistently monitor and track  state office performance, BLM headquarters (1) did not know that state  offices were not conducting field office internal control reviews in  accordance with the July 2012 oversight policy and (2) could not analyze  the reasons why actual performance did not meet expected results.  Identifying the reasons it did not complete internal control reviews (e.g.,  human capital and workload), developing and implementing a plan to  address those challenges, and monitoring state offices’ progress toward  completing required reviews will better position BLM to ensure that its  state offices are completing all required internal control reviews as called  for by its July 2012 oversight policy.

Additionally, although BLM’s July 2012 oversight policy does identify the  specific areas that internal control reviews should assess, BLM did not  provide state offices with implementation guidance or procedures.  Because they did not have documented implementation guidance or  procedures to follow, the two state offices that completed internal control  reviews developed their own procedures, which varied in design,  methodology, and resources. Without developing and documenting  procedures for implementing internal control reviews under the July 2012  oversight policy, BLM does not have assurance that state offices will  review all specific areas identified in the July 2012 oversight policy in a  consistent manner.

Furthermore, and inconsistent with federal internal control standards,  BLM’s July 2012 oversight policy established a review schedule without  identifying or considering risk. Without employing a risk-informed  approach to scheduling and conducting internal control reviews that takes  into account the risks to the Inspection and Enforcement program, such  as those inherent in field offices’ workload and workforce, BLM will not  have reasonable assurance that it has adequate controls in place to  address the effect of the field offices that pose the greatest risk to the  program.

We are making the following three recommendations to BLM:  The Director of BLM should identify the reasons internal control reviews  were not completed (e.g., human capital and workforce), develop and  implement a plan to address those reasons, and monitor state offices’  progress toward completing required reviews. (Recommendation 1)

The Director of BLM should develop and document procedures for  implementing internal control reviews under the July 2012 oversight  policy. (Recommendation 2)

The Director of BLM should implement a risk-informed approach to  scheduling and conducting internal control reviews that takes into account  the risks to BLM’s mission, such as those inherent in field offices’  workload and workforce. (Recommendation 3)

We provided a draft of this product to the Department of Interior for  comment. In its comments, reproduced in appendix I, Interior concurred  with our three recommendations and outlined planned actions to  implement them. For example, BLM plans to issue updated guidance and  procedures for conducting internal control reviews to help ensure that  such reviews are completed in a timely manner using a consistent risk- based approach.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or ruscof@gaog.ov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II.

Appendix I: Comments from the Department of the Interior

In addition to the contact named above, Christine Kehr (Assistant  Director), Patrick Bernard (Analyst-in-Charge), Tara Congdon, William  Gerard, Cindy Gilbert, Jessica Lewis, Dan Royer, Kiki Theodoropoulos,  Karen Villafana, and Jack Wang made key contributions to this report.

Private companies operate over 140,000 oil and gas wells on federal and Indian lands. The Bureau of Land Management's (BLM) inspection program ensures that these operators are complying with laws and regulations that protect public safety and the environment. Inspectors also ensure that operators are making accurate royalty payments to the federal government.

We reviewed BLM's inspection program and found that the agency wasn't effectively allocating its workforce. BLM's 6 busiest field offices handled 58% of the inspection workload between FYs 2012-2016—but had only 44% of the inspection staff. We recommended that BLM address this issue.