Report: Too much BLM time threatens billions of dollars in oil, gas revenue

Published: Saturday, July 5 2014 3:50 p.m. MDT

Updated: Saturday, July 5 2014 10:51 p.m. MDT

A drilling rig near Kennedy, Texas.

Eric Gay, Associated Press

Enlarge photo»

SALT LAKE CITY — U.S. onshore oil and gas revenues averaging $3 billion a year are at risk because the federal agency responsible for approving permits takes too long to process applications to drill, a new audit concludes.

The report released this week by the Office of Inspector General also notes that the Vernal field office of the Bureau of Land Management is one of three in the country handling well more than half the annual workload.

"Long review times create uncertainties in the (application) process for both industry and BLM. This adversely affects developing the nation’s domestic energy resources. Specifically, the federal government and Indian lands mineral owners risk losing royalties from delayed oil and gas production," the report notes.

Uintah County Commissioner Mike McKee said delays chase away industry, and thus dollars, from federal lands, which occupy 90 percent of Uintah County.

"I will take my hat off to the Vernal office because I believe they are doing a good job, as much as they can, but with that said, there has been a backlog for a number of years," McKee said.

He said he believes that backlog in Vernal is well over 1,000 applications to drill, constituting more than a third of the national backlog of 3,500 applications noted by the report.

Nationally, Utah follows Wyoming and New Mexico for the largest amount of drilling activity occurring on federal lands, with private and state-owned lands in North Dakota experiencing the largest overall increase, according to the audit.

How it works

Each year, the BLM gets about 5,000 applications to drill that include an assortment of documents relating to oil and gas extraction, such as drilling and operational plans. Those applications kickstart what the report describes as a complex process involving a multi-agency review of environmental, geologic and engineering issues.

Those applications are processed at 33 offices, mostly in the Western United States.

The review notes that oil and gas production is a major activity on federal and Indian lands, with annual royalty revenues averaging $3 billion since fiscal year 2011. It added that about 92,000 oil and gas wells currently exist on federal lands, and industry drills more than 3,000 new wells annually.

Processing the industry's applications to drill took the BLM an average of 228 days, or 7.5 months, in 2012, compared to states' claims of about 80 days, the report said. While conceding some delays are attributable to industry, the report said the BLM review process has many inefficiencies which accounts for the bulk of the problems.

Other findings in the audit were reported:

• The review process is open-ended and provides no "finish-by" answer for either the BLM or the energy industry planning.

• Most applications are processed without supervision that would ensure timely completion.

• Most applications are reviewed manually without the expediency or efficiency of an electronic format.

• Long processing times occur because, until recently, it has not been a high departmental priority.

"We determined that inefficiencies in processing (applications) primarily related to weaknesses in oversight and accountability, and staffing," the review said.

Seeking efficiencies

The inspector's report acknowledged staffing and resource challenges for the BLM but said the agency could make better use of the personnel it does have.

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