BLM seeks to improve production, royalty accountability

Posted: May 6, 2013

Written by

Phil Taylor, Greenwire
Oil derrick

The Bureau of Land Management is proposing updates to decades-old regulations to more accurately measure oil and gas produced from public lands, an effort aimed at ensuring taxpayers get a fair return on publicly owned minerals.

The agency is collecting public feedback until May 17 on proposed revisions to Orders 3, 4 and 5, which it said are necessary to keep pace with changing technologies and industry practices.

"The BLM is in the early stages of updating these orders, and we are looking for practical feedback from stakeholders as the process moves forward," said BLM Principal Deputy Director Neil Kornze. "This is the beginning of a dialogue that we believe will enhance our efforts to bring these orders up to date."

A workshop was held last week at Interior Department headquarters to discuss the changes with industry, environmental groups and the public. BLM said it hopes to publish proposed orders in the Federal Register later this year.

The proposed revisions follow the Government Accountability Office's inclusion of Interior's oil and gas program on its 2013 high-risk list of federal programs vulnerable to fraud, waste, abuse or mismanagement. Interior's program, which originally joined the list in 2011, "does not have reasonable assurance that it is collecting its share of revenue from oil and gas produced on federal lands," GAO said.

Possible revisions to BLM's Order 3 would seek to prevent theft or loss of oil and gas produced from federal lands, including the designation of official points for royalty measurement, according to a summary of the proposal. Potential revisions to Orders 4 and 5 would add "new requirements for the equipment and procedures that ensure accurate and verifiable oil and gas measurement and royalty payments."

Other potential changes would address record-keeping requirements and expand the number and types of violations subject to immediate assessments, BLM said. Pipeline operators may also be subject to those record-keeping requirements, it said.

Oil and gas production from federal lands generates about $3 billion annually, roughly half of which is shared with the states in which drilling takes place. In general, companies self-report their production and royalty payments to Interior's Office of Natural Resource Revenue, but BLM conducts periodic production verification inspections.

Oil production on federal land rose 7 percent in 2012 over the previous year, the largest single-year production gain in at least the past eight years (Greenwire, March 5).

Growth was driven especially in New Mexico, where production increased 21 percent to 41 million barrels in 2012, and North Dakota, where it rose nearly 15 percent to 12 million barrels last year, according to agency data.

Natural gas production from federal lands was roughly level.

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