Key Issues > Management of Federal Oil and Gas Resources - High Risk Issue
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Management of Federal Oil and Gas Resources - High Risk Issue

The U.S. oil and natural gas industry is a critical component of the nation's economy, providing energy for transportation, manufacturing, and residential use, while creating jobs and reducing imports. In addition, a portion of the nation's oil and natural gas is produced on federal lands and waters, generating billions in revenues, such as royalties.

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The Department of the Interior oversees oil and natural gas production on federal lands and waters—providing access to these resources while ensuring their safe and responsible development. Federal oil and gas resources provide an important source of energy for the United States; create jobs in the oil and gas industry; and generate billions of dollars annually in revenues that are shared between federal, state, and tribal governments. Interior reported collecting over $55 billion from fiscal years 2011 through 2016 from royalties and other payments. This makes oil and gas resources one of the federal government’s largest sources of nontax revenue. Moreover, the April 2010 explosion onboard the Deepwater Horizon and subsequent oil spill in the Gulf of Mexico highlighted the importance of Interior’s management of permitting and inspection processes to ensure operational and environmental safety.

Management of federal oil and gas resources is a High Risk area. Interior has taken some steps to strengthen how it manages federal oil and gas resources, but continues to face the following challenges:

  • Royalty Determination and Collection. Interior lacks reasonable assurance that it is collecting its share of revenue from oil and gas produced on federal lands and waters. While Interior has taken some steps to strengthen how it manages federal oil and gas leases, it has not taken steps to improve the verification of oil and gas produced from federal leases, and the reasonableness and completeness of royalty data.
  • Human Capital Challenges. Interior faces various challenges hiring, training, and retaining staff responsible for oil and gas. Since 2012, Interior has taken steps to address two underlying factors—lower salaries and a lengthy federal hiring process compared with the oil and gas industry—that have impeded its ability to hire and retain key oil and gas staff. However, Interior has not evaluated the effectiveness of its efforts. Interior and its bureaus have trained key oil and gas staff without fully evaluating the bureaus’ staff training needs or the training’s effectiveness and Interior has provided limited leadership facilitating the sharing of training resources among its bureaus.

Restructuring of Offshore Oil and Gas Oversight. Interior completed a restructuring of its oil and gas program in 2011, transferring offshore oversight responsibilities to two new bureaus—the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE). Yet more than 5 years after its creation, BSEE continues to use investigative policies and procedures that predate the Deepwater Horizon explosion. BSEE’s outdated policies and procedures do not require planning investigations, gathering and documenting evidence, and ensuring quality control, potentially undermining the effectiveness of investigations. Moreover, BSEE's ongoing restructuring of its environmental compliance program reverses steps taken to address post–Deepwater Horizon incident concerns, risking the bureau's ability to effectively oversee environmental compliance.

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  • portrait of Frank Rusco
    • Frank Rusco
    • Director, Natural Resources and Environment
    • RuscoF@GAO.GOV
    • 202-512-3841