Oil and Gas Leasing: BLM Should Update Its Guidance and Review Its Fees
Fast Facts
The Bureau of Land Management seeks to facilitate safe and responsible oil and gas development on federal lands while providing a fair return for the American people.
There have been several changes to the Bureau's oil and gas leasing process since it was established in 1987, but guidance and related fees haven't kept pace with those changes. For example, lease application fees were intended to cover the costs of administering the process—but the Bureau hasn't fully reviewed its application fees and the costs they cover since 2005.
Our recommendations are to help the Bureau update its oil and gas leasing guidance and examine its fees and costs.
Oil wells near the Bakken Formation in North Dakota
Highlights
What GAO Found
The Department of the Interior's Bureau of Land Management (BLM), which leases federal lands for oil and gas development, has changed some of its leasing policies. For example, starting in fiscal year 2015, BLM was authorized to use online auctions, instead of in-person auctions, to award leases. In 2016, BLM launched an online system for submitting and processing nominations of lands for leasing. However, all of the agency's guidance documents for oil and gas leasing that GAO reviewed were out of date and did not fully reflect these changes, though agency policy requires guidance be updated promptly. Unless BLM reviews and revises its process for updating its guidance, the agency's outdated guidance may continue to lead to inefficiencies for industry and BLM state office staff that spend extra time interpreting outdated BLM guidance.
Parties, such as oil and gas companies, leased a small portion of lands nominated for onshore oil and gas leasing from 2009 through 2019, when about 87 million acres were nominated and about 14 million acres were leased (see figure).
Acreage Nominated, Offered for Lease, and Leased for Federal Onshore Oil and Gas Development, 2009 through 2019
BLM has not fully reviewed its application fees for oil and gas leases since 2005 despite changes to leasing that could affect program costs, such as the move from in-person to online auctions. BLM has conducted biennial reviews of its existing fees, but these reviews do not assess all of the costs the fees were intended to recover. Until BLM revises its approach to examine all relevant costs and adjusts fees accordingly, the agency may collect too much or too little in fees. In addition, BLM does not charge a fee to nominate lands for leasing and has not re-examined whether to charge such a fee since 2014. Without doing so, BLM risks continuing to expend resources to process nominations that do not result in leases. In addition, the agency may not strike the appropriate balance between encouraging nominations and controlling costs.
Why GAO Did This Study
BLM leases federal lands for oil and gas development through a process largely established with the Federal Onshore Oil and Gas Leasing Reform Act of 1987. Through this process, the public can suggest which federal lands should be made available for leasing by nominating them. BLM state offices review nominations, including to assess potential environmental impacts. BLM then offers leases at competitive auctions. While no fee is required to submit nominations, BLM charges an application fee for any leases that parties acquire.
GAO was asked to review oil and gas leasing on federal lands. This report examines: (1) changes to BLM's policies for oil and gas leasing since 1987, (2) outcomes for lands nominated for oil and gas leasing, and (3) the extent to which BLM reviews its oil and gas leasing fees in response to changing conditions.
GAO analyzed BLM policies and guidance as well as data on nominations, leasing, costs, and fees collected. GAO also interviewed BLM headquarters and state office officials as well as representatives of two stakeholder groups.
Recommendations
GAO is making four recommendations, including that BLM (1) review and adjust its approach for updating agency guidance; (2) revise its approach to biennial fee reviews to include all relevant costs, and adjust fees accordingly; and (3) re-examine whether to charge parties a fee for nominating lands for oil and gas development. Interior agreed with GAO's recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Bureau of Land Management | The Director of BLM should conduct a review to determine why the agency has had difficulty updating handbooks and its manual for oil and gas leasing as directed by BLM policy, and then adjust BLM's approach to updating them accordingly. (Recommendation 1) |
According to BLM officials, in March 2022, BLM reviewed the difficulty it has had in updating its oil and gas leasing handbooks and manuals. The agency found that difficulties were due to litigation, pending court action, or pending rulemaking on leasing regulations. However, agency officials did not indicate that BLM adjusted its approach to updating its handbooks and manual. Instead, BLM officials said the agency would start preparing to update its handbooks as part of its rulemaking process. BLM issued its proposed rule for comment in 2023, and anticipates finalizing the rule by April 2024.
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| Bureau of Land Management | The Director of BLM should develop guidance regarding the status codes for nominations contained in NFLSS. (Recommendation 2) |
BLM concurred with this recommendation. In March 2022, BLM posted guidance on its public NFLSS website regarding the status codes for nominations. In its guidance document, BLM provided specific definitions for the nomination status codes, as well as status definitions for other information in NFLSS such as competitive lease sales and protests. BLM's guidance document was also updated in August 2022 reflecting clarifications to BLM's nominations as a result of legislation.
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| Bureau of Land Management | The Director of BLM should revise the agency's approach to conducting biennial fee reviews to ensure that future biennial reviews examine all costs BLM intended to recover with its application fees and, where appropriate, adjust fees accordingly. (Recommendation 3) |
In a final rule issued April 2024, BLM revised the agency's approach to and fees for applications. Specifically, BLM reviewed its fees to account for changes in the leasing process since the fees were initially established, including by reviewing information from field offices of the processing time and associated costs of each type of application. Based on this analysis, BLM increased some of its application fees. For example, the competitive lease application fee had been $195 and was increased to $3,100 as a result of this review. Going forward, BLM intends to update its fees annually for inflation, and to conduct a more in-depth review for those fees where there has been a change in the application process. As a result of these changes, BLM's application fees will more appropriately reflect the total costs involved.
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| Bureau of Land Management | The Director of BLM should re-examine whether to charge a fee for nominating lands for oil and gas development. (Recommendation 4) |
As required by the Inflation Reduction Act of 2022, BLM began in August 2022 to charge a nonrefundable filing fee of $5 per acre or fraction thereof for all lands nominated for oil and gas development , meeting the intent of our recommendation.
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