Bureau of Land Management's Management of Private Acquired Leases

We reviewed the Bureau of Land Management’s (BLM) oversight of private acquired leases (PAQs) to determine whether BLM’s regulations and staffing structure were sufficient to manage current oil and gas production from PAQs. BLM administers oil and gas leases on Federal lands that include PAQs, which are private mineral leases on lands the Government has acquired. In our inspection we also wanted to determine if BLM has considered the anticipated growth in the Marcellus and Utica shale formations’ production and its impact on PAQs.  

 

We found that Federal agencies acquire PAQs as they pursue their missions, but without consulting BLM. BLM then assumes management responsibility, but with broad legislative authority over complex oil and gas leases that generate nominal Federal royalty revenues. BLM is also unable to keep up with the PAQs’ administrative workload, which BLM expects to increase with future resource development.

 

We also found that BLM has no strategy, or updated formal policies or procedures, for PAQ management. We learned of one policy and two instruction memorandums from the 1980s regarding PAQs that BLM no longer considers relevant and, therefore, are not followed. We also found that wells that are acquired may create management and environmental problems. The age of wells and their possible state of deterioration can result in fluid leakage and water and land contamination.

 

Finally, we found that royalty revenues could be underpaid. The Office of Natural Resources Revenue (ONRR) processes PAQ royalty payments from operators without verification. PAQ leases do not require production reporting; therefore, ONRR merely accepts royalty payments. Neither BLM nor ONRR has estimates on underpaid royalty amounts.

 

We offered six recommendations to help BLM improve oversight, mitigate risks, and prepare for additional PAQs and increased oil and gas production.