oversight

Oil and Gas Management: Interior's Reorganization Complete, but Challenges Remain in Implementing New Requirements

Published by the Government Accountability Office on 2012-07-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Requesters




July 2012
             OIL AND GAS
             MANAGEMENT

             Interior’s
             Reorganization
             Complete, but
             Challenges Remain in
             Implementing New
             Requirements




GAO-12-423
                                              July 2012

                                              OIL AND GAS MANAGEMENT
                                              Interior’s Reorganization Complete, but Challenges
                                              Remain in Implementing New Requirements
Highlights of GAO-12-423, a report to
congressional requesters




Why GAO Did This Study                        What GAO Found
On April 20, 2010, the Deepwater              On October 1, 2011, the Department of the Interior (Interior) officially established
Horizon drilling rig exploded in the Gulf     two new bureaus, separating offshore resource management oversight activities,
of Mexico resulting in 11 deaths,             such as reviewing oil and gas exploration and development plans, from safety
serious injuries, and the largest marine      and environmental oversight activities, such as reviewing drilling permits and
oil spill in U.S. history. Interior, which    inspecting drilling rigs. Because the responsibilities of these bureaus are closely
oversees offshore oil and gas                 interconnected and will depend on effective coordination, Interior developed
activities, initiated a number of reforms     memoranda and standard operating procedures to define roles and
following the incident to improve its         responsibilities and facilitate and formalize coordination.
oversight. This report assesses (1)
Interior’s reorganization of its oversight    New safety and environmental requirements and policy changes designed to
of offshore oil and gas activities; (2)       mitigate the risk of a well blowout or spill initially required Interior to devote
how key policy changes Interior has           additional resources and time to reviewing certain oil and gas exploration and
implemented since this incident have          development plans and drilling permits for oil and gas activities in the Gulf of
affected Interior’s environmental             Mexico. Specifically, these policy changes affected Interior’s (1) environmental
analyses, plan reviews, and drilling          analyses, (2) reviews of oil and gas exploration and development plans, and (3)
permit reviews; (3) the extent to which       reviews of oil and gas drilling permits.
Interior’s inspections of drilling rigs and
production platforms in the Gulf identify     Interior’s inspections of offshore Gulf of Mexico oil and gas drilling rigs and
violations or result in civil penalty         production platforms from January 1, 2000, through September 30, 2011,
assessments; (4) when stakeholders            routinely identified violations. However, Interior’s database is missing data on
provided input to Interior on proposed        when violations were identified as well as violation correction dates for about half
oil and gas activities, and the extent        of the violations issued. As a result, Interior does not know on a real-time basis
which they believe Interior considered        whether or when all violations were identified and corrected, potentially allowing
their concerns; and (5) key challenges,       unsafe conditions to continue for extended periods. During this same period,
if any, Interior faces in overseeing          Interior issued approximately $18 million in civil penalty assessments. Recently,
offshore oil and gas activities in the        Interior began implementing a number of policy changes to improve both its
Gulf. GAO analyzed data and                   inspection and civil penalty programs. However, Interior has not assessed how
documents and interviewed officials
                                              these changes would affect its ability to conduct monthly drilling rig inspections.
from Interior and the Department of
Commerce’s National Oceanic and               Federal government stakeholders told GAO that they generally provided most of
Atmospheric Administration, Gulf of           their input on Interior’s oil and gas development program early in the planning
Mexico states, environmental groups,          process and typically did not review or comment on oil and gas exploration and
and industry.                                 development plans or drilling permits. Federal and state stakeholders stated that
                                              Interior was generally responsive to their input on proposed offshore oil and gas
What GAO Recommends
                                              activities in the Gulf of Mexico from 2002 through January 2012, but
GAO recommends, among other                   nongovernmental stakeholders—including industry and conservation groups—
things, that Interior improve the             stated that Interior was, at times, less responsive.
effectiveness of its inspections through
timely input of violation correction data,    Interior continues to face challenges following its reorganization that may affect
its capacity for categorizing oil and gas     its ability to oversee oil and gas activities in the Gulf of Mexico. Specifically,
activities according to risk, and its         Interior’s capacity to identify and evaluate risk remains limited, raising questions
strategic planning for information            about the effectiveness with which it allocates its oversight resources. Interior
technology and workforce efforts. In          also continues to experience difficulties in implementing effective information
commenting on a draft of this report,         technology systems, such as those that aid exploration and development plan
Interior generally agreed with GAO’s          reviews. It also continues to face workforce planning challenges, including hiring,
findings and recommendations.                 retaining, and training staff. Moreover, Interior does not have current strategic
                                              plans to guide its information technology or workforce planning efforts.
View GAO-12-423. For more information,
contact Frank Rusco at (202) 512-3841 or
ruscof@gao.gov.

                                                                                       United States Government Accountability Office
Contents


Letter                                                                                    1
               Background                                                                7
               Interior Has Generally Met Its Key Reorganization Time Frames            22
               Key Policy Changes for Oil and Gas NEPA Analyses, Plans, and
                  Permits Intended to Enhance Oversight Initially Increased
                  Review Times and Resource Requirements                                29
               Inspections Routinely Identified Violations, and Policy Changes
                  Are Under Way to Improve Inspection and Civil Penalty
                  Programs                                                              53
               Stakeholders Generally Provided Most Substantive Input on Oil
                  and Gas Activities Early in Interior’s Lease Sale Planning
                  Process and Reported That Interior’s Response Was Mixed               72
               Following Interior’s Reorganization, Key Challenges Remain               83
               Conclusions                                                             101
               Recommendations for Executive Action                                    105
               Agency Comments and Our Evaluation                                      107

Appendix I     Scope and Methodology                                                   109



Appendix II    Interior’s Organizational Structures for the Bureau of Ocean
               Energy Management and the Bureau of Safety and Environmental
               Enforcement                                                             113



Appendix III   Federal and State Stakeholder Input to Interior’s Proposed
               Gulf of Mexico Oil and Gas Activities for 2002 through 2012             115



Appendix IV    Comments from the Department of the Interior                            126



Appendix V     GAO Contact and Staff Acknowledgments                                   136




               Page i                                      GAO-12-423 Oil and Gas Management
Tables
          Table 1: Review Time Frames and Number of Amendments for
                   Approved Deepwater Exploration and Development Plans
                   from Initial Submission to Final Approval                         40
          Table 2: Review Time Frames and Number of Amendments for
                   Approved Shallow Water Exploration and Development
                   Plans from Initial Submission to Final Approval                   41
          Table 3: Review Time Frames and Average Number of Returns per
                   Submission for All Types of Approved Deepwater Drilling
                   Permits                                                           49
          Table 4: Review Time Frames and Average Number of Returns per
                   Submission for All Types of Approved Shallow Water
                   Drilling Permits                                                  51
          Table 5: Civil Penalties Associated with All Drilling Rig Violations,
                   January 1, 2000, through September 30, 2011                       67
          Table 6: Civil Penalties Associated with Production Platform
                   Violations, January 1, 2000, through September 30, 2011           67
          Table 7: NOAA’s Input to Interior’s Gulf of Mexico Outer
                   Continental Shelf (OCS) Lease Sale Environmental Impact
                   Statement (EIS) National Environmental Policy Act
                   (NEPA) documents, 2002—2012                                      115
          Table 8: FWS’s Input to Interior’s Gulf of Mexico OCS Lease Sale
                   EIS NEPA documents, 2002-2012                                    120
          Table 9: State’s Input to Interior’s Gulf of Mexico OCS Lease Sale
                   EIS NEPA documents, 2002-2012                                    124


Figures
          Figure 1: OCS Oil Production (in Thousands of Barrels),
                   1990 through 2010                                                   3
          Figure 2: OCS Natural Gas Production (in Millions of Cubic Feet),
                   1990 through 2010                                                   4
          Figure 3: BOEM and BSEE Regional Offices and BSEE District
                   Offices in the Gulf of Mexico (2012)                                9
          Figure 4: Timeline of Key Events Since the Deepwater Horizon
                   Incident                                                          19
          Figure 5: Interior’s Key Offshore Oil and Gas Program
                   Responsibilities before and after Reorganization                  24
          Figure 6: Interior’s NEPA Determination for Approved Plans from
                   January 1, 2000, through April 19, 2010                           30




          Page ii                                       GAO-12-423 Oil and Gas Management
Figure 7: Approved Plans Amended after Final NEPA
         Determination Was Made, January 1, 2000, through
         April 19, 2010 33
Figure 8: Drilling Rig Inspections, Violations, and Inspections per
         30 Days, January 1, 2000, through September 30, 2011            55
Figure 9: Production Platform Inspections, Violations, and Annual
         Inspections per Production Platform, January 1, 2000,
         through September 30, 2011                                      57
Figure 10: Drilling Rig Enforcement Actions, January 1, 2000,
         through September 30, 2011                                      58
Figure 11: Production Platform Enforcement Actions, January 1,
         2000, through September 30, 2011                                59
Figure 12: Announced and Unannounced Inspections and Associated
         Violations, January 1, 2000, through September 30, 2011         61
Figure 13: Missing Violation Correction Data by Severity of
         Violation, January 1, 2000, through September 30, 2011          63
Figure 14: Violations Flagged for Civil Penalty Consideration and
         District Manager Review, January 1, 2000, through
         September 30, 2011                                              69
Figure 15: Violations Considered for a Civil Penalty Assessment
         and Whether a Civil Penalty Was Assessed, January 1,
         2000, through September 30, 2011                                70
Figure 16: Duration of Civil Penalty Cases, January 1, 2000, through
         September 30, 2011                                              71
Figure 17: Bureau of Ocean Energy Management Organizational
         Structure                                                      113
Figure 18: Bureau of Safety and Environmental Enforcement
         Organizational Structure                                       114




Page iii                                    GAO-12-423 Oil and Gas Management
Abbreviations
API                     American Petroleum Institute
BOEM                    Bureau of Ocean Energy Management
BOEMRE                  Bureau of Ocean Energy, Management, Regulation
                        and Enforcement
BSEE                    Bureau of Safety and Environmental Enforcement
EA                      environmental assessment
EIS                     environmental impact statement
FWS                     Fish and Wildlife Service
GIS                     geographic information system
IT                      information technology
MOU                     memorandum of understanding
MMS                     Minerals Management Service
NEPA                    National Environmental Policy Act of 1969, as
                        amended
NOAA                    National Oceanic and Atmospheric Administration
OCS                     outer continental shelf
OCS Lands Act           Outer Continental Shelf Lands Act
TIMS                    Technical Information Management System


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Page iv                                               GAO-12-423 Oil and Gas Management
United States Government Accountability Office
Washington, DC 20548




                                   July 30, 2012

                                   The Honorable Sheldon Whitehouse
                                   Chairman
                                   Subcommittee on Oversight
                                   Committee on Environment
                                     and Public Works
                                   United States Senate

                                   The Honorable Nick J. Rahall, II
                                   House of Representatives

                                   On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf
                                   of Mexico, resulting in 11 deaths, serious injuries, and the largest marine
                                   oil spill in the history of the United States. Located over 40 miles off the
                                   coast of Louisiana and at a depth of nearly 5,000 feet in the Gulf of
                                   Mexico, the subsea well spilled oil for 87 days before responders were
                                   able to cap the well and contain the flow of oil. According to government
                                   estimates, by that time, over 4.9 million barrels of oil had spilled into the
                                   Gulf of Mexico. In addition to the tragic loss of life, the explosion, fire, and
                                   catastrophic oil spill damaged the environment and resulted in a loss of
                                   livelihoods and harm to local economies, with estimated compensation
                                   costs totaling in the billions of dollars. Following this incident, the
                                   Department of the Interior (Interior)—which is responsible for overseeing
                                   oil and gas activities on federal lands and waters—initiated a number of
                                   policy reforms to strengthen its oversight of offshore oil and gas
                                   production on the outer continental shelf (OCS),1 including in the Gulf of
                                   Mexico. While these reforms were being developed and implemented,
                                   Interior imposed a moratorium on certain offshore drilling operations that
                                   mainly affected deepwater oil and gas projects.2

                                   Under the Outer Continental Shelf Lands Act (OCS Lands Act) of 1953,
                                   as amended,3 Interior is responsible for leasing federal lands on the OCS


                                   1
                                    The OCS refers to the submerged lands outside the territorial jurisdiction of all 50 states,
                                   but within U.S. jurisdiction and control. The portion of the North American continental edge
                                   that is federally designated as the OCS generally extends seaward 3 geographical miles
                                   off the coastline to at least 200 nautical miles.
                                   2
                                    Interior considers deepwater projects to be in water depths of 500 feet or greater.
                                   3
                                    43 U.S.C. §§ 1331-1356.




                                   Page 1                                                 GAO-12-423 Oil and Gas Management
to meet the nation’s energy needs and generate revenue for the federal
government in a manner that protects the environment. Through its three
OCS regional offices—in Alaska, the Gulf of Mexico, and the Pacific OCS
regions, Interior manages more than 1.7 billion acres of the OCS, which,
according to its estimates, may contain as much as 88.6 billion barrels of
oil and 398.4 trillion cubic feet of natural gas.4 Over the past 5 years,
Interior has collected about $13 billion per year in royalties and other
payments from companies utilizing public resources, including those
producing oil and gas from offshore and onshore federal leases. This
represents one of the largest nontax sources of federal government
funds. While total domestic production of oil and gas had been on a slow
decline and flat, respectively, for many years, recent innovations allowing
new production from shale formations onshore, and increases in oil and
gas production in deepwater areas of the Gulf of Mexico, have led to a
reversal of that trend. Figures 1 and 2 illustrate trends in shallow water
and deepwater Gulf of Mexico oil and gas production from 1990 through
2010—the last year complete data were available. While oil produced
from shallow waters has been in decline since 1996, deepwater oil
production has been increasing and was at an all-time high in 2010 (see
fig. 1). In 2010, according to Interior, oil produced from offshore federal
leases—which is almost at a 20-year high—accounted for approximately
29 percent of domestic production.




4
 Bureau of Ocean Energy Management. Assessment of Undiscovered Technically
Recoverable Oil and Gas Resources of the National Outer Continental Shelf, 2011.




Page 2                                             GAO-12-423 Oil and Gas Management
Figure 1: OCS Oil Production (in Thousands of Barrels), 1990 through 2010




Unlike oil, total production of natural gas in the Gulf of Mexico has been in
decline since around 2002. Specifically, shallow water gas production has
been in decline since 1996, while deepwater gas increased through 2003
and then started to slightly decline (see fig. 2). This was generally
mirrored by decreasing production onshore until recent years. The recent
turnaround and growth in domestic gas production has been led by the
development of gas in shale formations, which are largely on nonfederal
lands. In 2010, according to Interior, natural gas produced from offshore
federal leases accounted for approximately 10 percent of total production
on federal leases and approximately 8 percent of total domestic
production.




Page 3                                          GAO-12-423 Oil and Gas Management
Figure 2: OCS Natural Gas Production (in Millions of Cubic Feet), 1990 through 2010




Interior’s responsibilities for managing offshore oil and gas production
activities include administering leases and reviewing and approving
exploration and development plans as well as applications for drilling
permits from operators—companies that develop the federal leases—and
inspecting offshore drilling rigs and production platforms to ensure
compliance with safety and environmental requirements. The Deepwater
Horizon incident raised questions about Interior’s oversight of offshore oil
and gas activities in the Gulf of Mexico and led to a number of reviews—
including those by the National Commission on the BP Deepwater
Horizon Oil Spill and Offshore Drilling and Interior’s Outer Continental
Shelf Safety Oversight Board.5 These reviews generated more than 200
recommendations to improve Interior’s oversight. In May 2010, Interior



5
 The board was created by secretarial order to review and oversee Interior OCS
operations to support reasoned and fact-based recommendations for potential
improvement.




Page 4                                              GAO-12-423 Oil and Gas Management
announced plans to significantly reorganize the bureau that managed oil
and gas activities on the OCS and collected royalties. In February 2011,
GAO added Interior’s oversight of oil and gas resources to its list of
programs at high risk of waste, fraud, abuse, and mismanagement or in
need of broad reform, citing concerns about Interior’s ability to undertake
this reorganization while continuing to carry out its ongoing oversight
responsibilities, weaknesses in its human capital management, and
shortcomings in its revenue collection policies.6

You asked us to review Interior’s oversight of offshore oil and gas
activities in the Gulf of Mexico. Specifically, this report examines (1)
Interior’s reorganization of its oversight of offshore oil and gas activities in
the Gulf of Mexico since the Deepwater Horizon incident; (2) how key
policy changes Interior has implemented since this incident have affected
Interior’s National Environmental Policy Act (NEPA) analyses, plans
reviews, and drilling permit reviews; (3) the extent to which Interior’s
inspections of Gulf of Mexico drilling rigs and production platforms
identified violations or resulted in civil penalty assessments, and how key
policy changes since this incident have affected Interior’s inspection and
civil penalties program; (4) when stakeholders have provided input to
Interior about proposed offshore oil and gas activities, and the extent to
which stakeholders believe Interior considered such input from
approximately 2002 through January 2012; and (5) key challenges, if any,
affecting Interior’s oversight of offshore oil and gas activities in the Gulf of
Mexico following its reorganization.

To conduct this work, we reviewed relevant laws and regulations and
Interior documents, guidance, and data. We also interviewed officials in
Interior’s headquarters and Gulf of Mexico regional offices as well as
officials from other federal agencies and state governments and
representatives from industry and conservation groups. To identify
actions Interior has taken as part of its reorganization efforts, we reviewed
agency documentation and guidance and interviewed knowledgeable
agency officials. Because the reorganization was not fully complete until
October 1, 2011, we did not evaluate the effectiveness of the
reorganization on Interior’s ability to conduct oversight of oil and gas
activities in the Gulf of Mexico. To examine Interior’s processes and
policy changes and their effects, we reviewed agency documents relevant



6
GAO, High Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).




Page 5                                          GAO-12-423 Oil and Gas Management
to Interior’s work with the National Environmental Policy Act of 1969, as
amended (NEPA),7 exploration and development plans, and drilling
permits. Because many of these policy changes are still under way and
have not been in force long enough to evaluate, we did not evaluate the
effectiveness of the policy changes to reduce the risk associated with
offshore oil and gas activities in this report. We analyzed Interior data on
its NEPA reviews and plan approvals from January 1, 2000, through
September 30, 2011, and drilling permit approvals from January 1, 2005,
through September 30, 2011, and interviewed knowledgeable Interior
officials. To determine the extent to which Interior’s inspections resulted in
violations and civil penalty assessments, we analyzed Interior’s inspection
data from January 1, 2000, through September 30, 2011. We assessed
the reliability of these data by (1) reviewing documentation about the data
and the system that produced them, (2) interviewing agency officials
knowledgeable about the data, and (3) verifying our results with agency
officials. Based on this assessment, we found these data sufficiently
reliable for our purposes. To determine the extent to which Interior
considered and addressed stakeholder concerns, we reviewed relevant
laws and interviewed stakeholders, including officials from the
Department of Commerce’s National Oceanic and Atmospheric
Administration (NOAA); Interior’s Fish and Wildlife Service (FWS); the five
Gulf of Mexico states (Alabama, Florida, Louisiana, Mississippi, and
Texas); and representatives from selected nongovernmental
organizations, including conservation and industry groups.8 To identify
challenges Interior faces, we reviewed relevant law and agency
documentation and guidance and interviewed knowledgeable agency
officials. While Interior is also responsible for overseeing offshore oil and
gas activities in all federal waters of the United States, the vast majority of
such activities currently take place in the Gulf of Mexico and, therefore,
we focused our review on activities in the Gulf of Mexico. Additional
details on our scope and methodology can be found in appendix I.




7
 Pub. L. No. 91-190, 83 Stat. 852 (1970), codified as amended at 42 U.S.C. §§ 4321-4347
(2011). Under NEPA, federal agencies must assess the effects of major federal actions—
those they propose to carry out or to permit—that significantly affect the environment.
8
 Conservation organizations were selected based on the following criteria: (1) they were
involved in environmental issues specific to the Gulf of Mexico, (2) they were referred to
us by a representative from a conservation group that we initially interviewed, and (3) time
and resource constraints.




Page 6                                                 GAO-12-423 Oil and Gas Management
                           We conducted this performance audit from September 2010 to July 2012
                           in accordance with generally accepted government auditing standards.
                           Those standards require that we plan and perform the audit to obtain
                           sufficient, appropriate evidence to provide a reasonable basis for our
                           findings and conclusions based on our audit objectives. We believe that
                           the evidence obtained provides a reasonable basis for our findings and
                           conclusions based on our audit objectives.


                           This section provides a history of Interior’s oversight of oil and gas
Background                 resources, a summary of the oil and gas development process in the Gulf
                           of Mexico, and a brief timeline of key events since the Deepwater Horizon
                           incident.


History of Interior’s      Interior was created by Congress in 1849, and part of Interior’s mission is
Oversight of Oil and Gas   to oversee the nation’s publicly owned natural resources, including parks,
Resources                  wildlife habitat, and oil and natural gas resources on millions of acres
                           onshore and offshore in OCS waters. With regard to oil and gas
                           resources in particular, Interior leases federal lands and submerged lands
                           on the OCS to oil and gas companies, issues permits for oil and gas
                           drilling to operators, and conducts inspections of such drilling and
                           production operations. In 1982, by secretarial order, the Secretary of the
                           Interior created the Minerals Management Service (MMS), consolidating
                           all of Interior’s OCS minerals responsibilities into a single agency. This
                           secretarial order gave MMS the authority to assess the nature, extent,
                           recoverability, and value of leasable minerals on the OCS. To manage
                           OCS energy resources, the Offshore Energy and Minerals Management
                           program within MMS carried out resource evaluations and classifications,
                           environmental studies and reviews, lease sales and management, and
                           inspection and enforcement activities. Until June 2010, this program
                           oversaw a number of scientific and technical research efforts and funded
                           scientific studies that contributed to understanding the potential effects of
                           OCS operations on human, marine, and coastal environments. MMS’s
                           Minerals Revenue Management program conducted oversight of royalty
                           payments paid by companies on the production of oil and gas from
                           federal leases.

                           We and others, including Interior’s Office of Inspector General, have
                           reported on a history of problems with Interior’s management of oil and




                           Page 7                                        GAO-12-423 Oil and Gas Management
gas resources.9,10 In 2010, shortly after the Deepwater Horizon incident,
Interior announced that it would reorganize its offshore oversight and
revenue collection functions. Specifically, Interior renamed MMS the
Bureau of Ocean Energy, Management, Regulation and Enforcement
(BOEMRE) as an interim step before eventually restructuring it into three
separate bureaus—the Bureau of Ocean Energy Management (BOEM),
responsible for leasing and resource management; the Bureau of Safety
and Environmental Enforcement (BSEE), responsible for issuing oil and
natural gas drilling permits and conducting inspections; and the Office of
Natural Resources Revenue, responsible for revenue collection.11 Within
the Gulf of Mexico region, BOEM and BSEE each have a regional office
in New Orleans, and BSEE has five additional district offices located in
southern Louisiana and Texas that report to the BSEE regional office (see
fig. 3). For leasing purposes, the Gulf of Mexico is composed of three
geographic planning areas—eastern, central, and western.




9
 GAO, Oil and Gas Management: Interior’s Oil and Gas Production Verification Efforts Do
Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes,
GAO-10-313 (Washington, D.C.: Mar. 15, 2010).
10
  DOI OIG, Minerals Management Service: Royalty-in-Kind Program’s Oil Verification
Process, C-IN-MMS-0007-2008 (Washington, D.C.: May 2010).
11
 This report focuses on BOEM and BSEE; it does not examine the Office of Natural
Resources Revenue.




Page 8                                              GAO-12-423 Oil and Gas Management
                          Figure 3: BOEM and BSEE Regional Offices and BSEE District Offices in the Gulf of
                          Mexico (2012)




Oil and Gas Development   In planning and managing offshore oil and gas development to meet its
in the Gulf of Mexico     requirements under federal law, Interior follows a complex process
                          combining resource development with assessments of potential
                          environmental and cultural effects. Throughout this process, Interior must
                          meet the federal requirements articulated in the OCS Lands Act while
                          also complying with NEPA and other laws that require the consideration
                          of the potential effects of offshore oil and gas development on
                          environmental and cultural resources. Under NEPA, all federal agencies
                          are to evaluate the likely environmental effects of actions they propose to
                          carry out or permit. NEPA has two principal purposes: (1) to ensure that
                          an agency carefully considers detailed information concerning significant
                          environmental effects and (2) to ensure that this information will be made
                          available to the public. Under NEPA, before initiating any oil and gas
                          planning, leasing, exploration, or development activities, Interior must
                          evaluate likely environmental effects of those activities. Generally, the
                          scope of those activities requires Interior to use either an environmental
                          assessment (EA)––a concise analysis developed if the environmental
                          effect of the proposed action is unknown or has the potential to be
                          significant––or, if the action is likely to affect the environment significantly,
                          a more detailed environmental impact statement (EIS). EIS regulations
                          include multiple opportunities for public comment—including commenting


                          Page 9                                          GAO-12-423 Oil and Gas Management
on the draft EIS—and require plans for mitigating adverse effects. EA and
EIS documents are intended to help decision makers understand the
environmental consequences associated with proposed activities, such as
those associated with oil and gas exploration and development. In
implementing NEPA, federal agencies may rely on a “tiering” process—a
process generally sanctioned in the governing regulations for NEPA, in
which prior NEPA reviews, such as EIS or EA documents, are
incorporated into subsequent, site-specific analyses. Tiering is used to
avoid duplication of analysis as a proposed activity moves through the
NEPA process from a broad assessment to a site-specific analysis.
Interior may also, in accordance with NEPA, categorically exclude
activities previously found not to have a significant effect on the
environment from further NEPA review.

Interior’s process for the development of federal oil and gas resources in
the Gulf of Mexico consists of the following stages: (1) preparing a
nationwide 5-year oil and gas leasing program, (2) planning for and
holding specific lease sales, (3) approving an operator’s exploration plan,
(4) approving an operator’s development plan,12 (5) approving an
operator’s drilling permit, and (6) inspecting offshore oil and gas
activities.13,14

Stage 1: Preparing a nationwide 5-year oil and gas leasing program.
Every 5 years, Interior identifies the areas of the OCS it will offer for
leasing and establishes a schedule for individual lease offerings. To
develop a 5-year program under the OCS Lands Act, Interior is to
consider several principles––including future national energy needs and
location-specific factors, such as environmental sensitivity and marine
productivity––and balance the potential for oil and gas discovery and
adverse environmental effects. Interior also is to conduct leasing activities
to ensure a fair market value to the federal government. In addition,
Interior is to seek comments from various state and public stakeholders,


12
 In the western Gulf of Mexico, the technical term for a development plan is a
Development and Operations Coordination Document.
13
  This process is usually considered to have four stages; however, for the purposes of this
report, we are examining the process in six stages to separately discuss the issuance of
drilling permits and inspections.
14
  Interior also permits geological and geophysical exploration outside the bounds of this
process. These activities may introduce sounds into the ocean and have the potential to
disrupt marine mammal behavior.




Page 10                                               GAO-12-423 Oil and Gas Management
and prepare and release an EIS evaluating the likely effects of the 5-year
program.

Stage 2: Planning and holding specific lease sales. After final approval of
the nationwide 5-year program, Interior may hold lease sales under the
OCS Lands Act for the lease parcels offered at auction. Laws protecting
environmental resources—such as marine mammals, coastal birds, and
wetlands—figure prominently at this stage. Under NEPA, before holding a
lease sale, Interior is to evaluate the likely environmental effects of the
proposed lease sale and describe various alternatives for oil and gas
development and their potential environmental effects. In the Gulf of
Mexico, Interior divides the region into three distinct planning areas—
western, central, and eastern. For the western and central planning
areas, Interior generally prepares a 5-year multilease sale EIS, which
describes all lease sales scheduled for those planning areas of the Gulf of
Mexico during that period and their potential environmental effects.
Typically, Interior conducts one lease sale in the western and central
planning areas each year. This EIS serves as the NEPA document for the
first individual sales in those planning areas. Interior then typically
conducts an EA or a supplemental EIS for the subsequent sales covered
by the 5-year multilease sale EIS. For leases in the eastern planning
area, most of which is currently under a leasing moratorium until 2022,15
Interior generally prepares a separate EIS for any proposed activities that
could affect resources in that area.

Because oil and gas development could affect species protected by the
Endangered Species Act, Interior must also consult with the FWS and
NOAA during this stage to assess the potential effects of oil and gas
activities, including seismic exploration, on threatened and endangered
species. Formal consultation between Interior and FWS and/or NOAA
results in the issuance of a biological opinion on whether Interior’s
proposed actions are likely to jeopardize threatened or endangered
species or adversely modify any designated critical habitat. As it relates to
oil and gas development, the Endangered Species Act authorizes FWS
and NOAA to allow incidental takings when approved through an



15
  A portion of the Central Gulf of Mexico Planning Area and most of the Eastern Gulf of
Mexico Planning Area are under restriction until 2022 as part of the Gulf of Mexico Energy
Security Act of 2006. The restricted areas include the portion of the eastern planning area
within 125 miles of Florida, the Gulf of Mexico east of the Military Mission Line (86o 41’
west longitude), and the central planning area located within 100 miles of Florida.




Page 11                                               GAO-12-423 Oil and Gas Management
incidental take statement. The statement includes the amount or extent of
anticipated take, reasonable and prudent measures to minimize the
effects of incidental take, and the terms and conditions that must be
observed.16 Interior may use the “best available science” to assist in its
determination during the consultation process. If Interior determines that
the proposed federal action is not likely to adversely affect any
endangered or threatened species, consultation may be concluded
informally with concurrence from FWS and NOAA without preparation of a
biological opinion. Oil and gas development could also affect species
protected by the Marine Mammal Protection Act; therefore, Interior also
coordinates with NOAA during this stage to mitigate potentially negative
effects of oil and gas activities on marine mammals and obtain
authorizations if mammals are likely to be taken. For offshore oil and gas
development, oil and gas operators––or Interior, on behalf of operators––
can apply to NOAA for an Incidental Take Authorization, which authorizes
the incidental but not intentional taking of small numbers of marine
mammals, provided the taking would have a negligible effect on marine
mammals and no unmitigable adverse effect on subsistence use of
marine mammals. Interior also is to consult with NOAA to ensure
compliance with the Magnuson-Stevens Fishery Conservation and
Management Act on actions that could adversely affect essential fish
habitat, which is generally defined as areas necessary to fish for
spawning, breeding, feeding, or growth to maturity. Additionally, Interior
and NOAA completed a Programmatic Essential Fish Habitat
Consultation in 1999, which is to be generally reviewed during
development of Interior’s Gulf of Mexico multilease sale EIS documents
or when specific modifications are required.

During this stage, Interior is to coordinate with the five coastal Gulf of
Mexico states through the Coastal Zone Management Act,17 which helps
states develop coastal management programs to manage and balance
competing uses of the coastal zone. The act and implementing
regulations require agency actions that are reasonably foreseeable to
affect any land or water use, or natural resource of the coastal zone, to be
consistent with enforceable policies of the five states’ coastal
management program. Accordingly, Interior is to provide the five states


16
  Take is defined under the Endangered Species Act as “to harass, harm, pursue, hunt,
shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”
17
  The five coastal states are Alabama, Florida, Louisiana, Mississippi, and Texas.




Page 12                                                 GAO-12-423 Oil and Gas Management
with information for review during a designated period on lease sales and
exploration and development plans to conduct a consistency
determination—a review to determine if the proposed activities are
consistent with the states’ coastal management policies. If a coastal state
determines that a proposed action by Interior is not consistent with the
state’s approved coastal zone management plan, it can pursue one of a
number of administrative remedies.

At the end of this stage, Interior is to offer leases for competitive bidding,
and all eligible companies are invited to submit written sealed bids for the
rights to explore, develop, and produce oil and gas resources on these
leases. The lease sale itself is a public auction, with leases sold to the
highest qualified bidder. Interior may reject bids if it believes they are too
low based on its analysis of the resource potential of a given lease.

Stage 3: Approving an operator’s exploration plan. Before allowing an
operator to explore for oil and gas in its leased area, Interior requires the
operator to submit an exploration plan. The exploration plan is to describe
all exploration activities planned by the operator, including the location of
wells and timing of activities. The plan is to include an analysis of a “worst
case” discharge from a potential spill and information on how the operator
would respond to such a discharge.18 After Interior receives an operator’s
exploration plan, it has 15 working days to review it for completeness. Once
Interior determines a plan is deemed submitted, it has 30 calendar days to
approve, disapprove, or require changes to the plan. When Interior
requests changes or more information, the operator is to submit an
amendment to the original plan, which begins new 15- and 30-day review
periods. Interior is to review and approve the operator’s exploration plan in
accordance with the OCS Lands Act and prepare a NEPA analysis—
typically tiered from the lease sale NEPA analysis completed in stage 2. In
the Gulf of Mexico, Interior generally performs a NEPA categorical
exclusion review to determine whether the planned activity can be
excluded from further environmental analysis or if further environmental


18
  The worst case discharge analysis is the daily rate of an uncontrolled flow from all
producible reservoirs into the open wellbore—the hole drilled from the seafloor down to
the reservoir of oil or gas. The package of reservoirs exposed to an open wellbore with the
greatest discharge potential is considered to be the worst case discharge scenario.
Shallower producible reservoirs isolated by casing––a metal pipe that is inserted inside
the wellbore to prevent high pressure fluids outside the formation from entering the well
and to prevent drilling mud inside the well from fracturing fragile sections of the wellbore––
and cement are not considered.




Page 13                                                 GAO-12-423 Oil and Gas Management
analysis is required. If, after conducting an initial environmental review,
Interior determines that the planned activity does not involve “extraordinary
circumstances”—which include potential effects to environmentally
sensitive areas or resources, and public controversy over the
environmental effects of the agency’s proposed action—it may
categorically exclude the plan from further environmental analysis.19
However, if it determines that extraordinary circumstances are present,
Interior is to prepare an EA or EIS, which may cause Interior to require
modifications to the operator’s exploration plan. Since August 2010, Interior
has required EAs for deepwater exploration and development plans.20
Interior is also to review each exploration plan to ensure that the plan is
consistent with the affected states’ coastal zone management plan.

Stage 4: Approving an operator’s development and production plan. After
the operator has determined that oil or gas can be found in the leased
area and decides to begin development and production of a lease, the
operator is to submit a development plan to Interior that describes the
wells the operator plans to drill, where these wells will be located, the
types of structures to be used, and how oil and natural gas will be
transferred to shore. Interior has 25 working days to deem the plan
submitted or notify the operator of problems that prevent it from being
deemed submitted. Once Interior determines the plan is deemed
submitted, it has 120 calendar days to approve, disapprove, or require
changes to the plan. When Interior requests changes or more information,
the operator is to submit an amendment to the original plan, which begins
a new 25-working day and 120-calendar day review period. Under the
OCS Lands Act, Interior is to review each development and production
plan to assess potential environmental effects and ensure that the plan is
consistent with the affected states’ coastal zone management plan.
Similar to Interior’s review of exploration plans in the Gulf of Mexico
region, Interior is to prepare a NEPA categorical exclusion review to
determine whether the planned activity may be categorically excluded
from further NEPA review. Since August 2010, Interior has required EAs


19
  Under NEPA, if an agency determines that activities of a proposed project fall within a
category of activities the agency has already determined have no significant
environmental effect—called a categorical exclusion—then the agency generally does not
need to prepare an EA or an EIS.
20
  Interior specifically requires preparation of an EA for exploration plans involving subsea
blowout preventers or drilling from floating facilities, which are generally associated with
deepwater operations.




Page 14                                                GAO-12-423 Oil and Gas Management
for deepwater exploration and development plans. On the basis of this
final NEPA analysis, operators are to secure Interior’s approval of their
development plans before proceeding past the exploration stage.

Stage 5: Approving an operator’s drilling permit. Once Interior approves
an operator’s plan, the operator is required to obtain drilling permits from
Interior for wells specified in either the exploration or development plan.
The operator submits an application for a drilling permit to the appropriate
Interior district office, where a district engineer initially is to review it for
completeness and compliance with regulation. The drilling permit may be
for a new well, which is the first time an operator drills a wellbore––the
hole drilled from the seafloor down to the reservoir of oil or gas—at a
location; a bypass, which is when an operator drills around an obstruction
in the current wellbore; or a sidetrack, which is when an operator uses the
current wellbore to drill into a new oil or gas reservoir.21 The operator’s
application may also include a request for a departure—or a waiver from
complying with a particular regulation. Interior’s district engineer is to
review the technical elements of the application and verify that they
conform to all applicable federal regulations.22 This review includes
verifying that the blowout preventer—a piece of equipment designed to
prevent the uncontrolled flow of oil and gas from a well—is appropriate for
the well design. Additionally, the engineer is to review plans for the well’s
technical specifications, including the casing and cementing
specifications, among other items. At this point, the district engineer may
approve the permit. In some instances, however, the district engineer
may return the permit to the operator for incompleteness or correction
and resubmission. Unlike exploration and development plans, Interior has
no statutory time frames for making a final decision on a drilling permit.
Only after Interior approves a permit can drilling begin.23 Once drilling is


21
  Each of these types of drilling permits can be revised, and each revision also requires
an application and Interior approval.
22
  In addition to regulations developed by Interior, Interior incorporates standards into its
regulations that have been generally agreed upon by industry and regulators and
published by the American Petroleum Institute (API). Since the passage of the National
Technology Transfer and Advancement Act in 1996, federal agencies have been required
to adopt private-sector standards, such as API’s, wherever practical, in lieu of creating
their own proprietary, nonconsensus standards.
23
  During drilling operations, operators submit a well activity report to district engineers on
a weekly basis that includes a description of the drilling activities. The operator can also
report whether one of twelve significant events occurred, such as drilling rig equipment
failures.




Page 15                                                 GAO-12-423 Oil and Gas Management
completed, if the operator determines that oil and gas can be
economically produced from the well, the operator submits an application
to the appropriate Interior regional office to begin production.

Stage 6: Inspecting offshore oil and gas activities. Interior inspectors from
the five district offices are to conduct inspections in the Gulf of Mexico to
ensure that operators are in compliance with all regulatory
requirements.24 Weather permitting, inspectors fly via helicopter to an
offshore drilling rig or production platform to conduct inspections and
generally return at the end of the day. The primary objective of an initial
inspection is to ensure proper installation and functionality of operational
components along with the associated safety and pollution prevention
equipment on drilling rigs and production platforms. After drilling
operations begin, Interior conducts additional inspections. Under the OCS
Lands Act, Interior is required to inspect offshore facilities, including
production platforms and drilling rigs, on an annual basis, but Interior
officials told us that they have an informal goal of conducting inspections
on drilling rigs once per month. The act also authorizes Interior to provide
for both annual scheduled—or announced—inspections and periodic
unscheduled—or unannounced—inspections of all OCS oil and gas
operations, including those in the Gulf of Mexico. During inspections,
Interior inspectors are to adhere to specific guidelines established by
regulation and Interior-approved plans and permits. The inspectors
perform the inspections, in part through using a checklist called the
Potential Incident of Noncompliance list, which is a compilation of yes or
no questions derived from regulated safety and environmental
requirements. If an inspector identifies out of compliance activities at an
offshore facility, a nonfinancial violation is issued, which may be (1) a
warning, (2) an order to shut down a particular component of the facility,
or (3) an order to shut down an entire drilling rig or production platform.
Operators generally have 14 days to correct the violation and notify
Interior that the violation was corrected. Interior’s policy is to place


24
  In 2004, Interior and the Coast Guard signed a memorandum of understanding (MOU)
to delineate inspection responsibilities between the agencies. Under the MOU, Interior is
responsible for, among other things, managing the nation’s oil, natural gas, and other
mineral resources on the OCS in a safe and environmentally sound manner. The MOU
assigns the Coast Guard the responsibility for ensuring (1) the safety of life and property
on offshore energy facilities and vessels engaged in OCS activities; (2) workplace safety
and health, including enforcement of requirements related to personnel, workplace
activities, and conditions and equipment on the OCS; and (3) security of offshore energy
facilities.




Page 16                                                GAO-12-423 Oil and Gas Management
                        operators with a history of poor performance on its monthly operator
                        compliance list and inspect those operators more frequently until it
                        determines that the operator’s performance has improved.

                        Interior also administers a civil penalties program with the goal of
                        ensuring safe and environmentally sound operations on the OCS.25 If an
                        inspector identifies a violation such as one that could cause injury, death,
                        environmental damage, or threaten human life or the environment,
                        Interior is to review the violation for a civil penalty assessment review.
                        However, before a civil penalty case is officially opened, both the district’s
                        supervisory inspector and district manager are to review the violation. A
                        civil penalty case is officially opened only after the district manager
                        agrees with the inspector and forwards the violation to an Interior civil
                        penalty reviewing officer in the relevant regional office. Once a case is
                        opened, the civil penalty reviewing officer may develop the case by
                        collecting additional information about the violation. If the reviewing officer
                        determines that a violation met Interior’s criteria—which includes whether
                        the violation caused injury, death, or environmental damage or posed a
                        threat to human life or the environment—Interior may issue the operator a
                        financial penalty. However, the reviewing officer may also determine that
                        a civil penalty is not warranted, in which case Interior would close the civil
                        penalty case. In addition to assessing a financial penalty, Interior may
                        also suspend any operation on the OCS, including in the Gulf of Mexico
                        region, if an operator fails to comply with a provision of any applicable
                        law, regulation, or order or provision of a lease or permit.26


Recent Policy Changes   Interior has enacted numerous policy changes intended to improve
Intended to Improve     Interior’s oversight of offshore oil and gas activities on the OCS, including
Offshore Oil and Gas    in the Gulf of Mexico since the Deepwater Horizon incident. As part of its
                        oversight responsibilities, Interior issues guidance documents called
Activities              Notices to Lessees and Operators that clarify, supplement, or provide
                        more detail about certain requirements. In response to the Deepwater
                        Horizon incident, Interior issued three of these notices, which, among
                        other things, notified operators that Interior would be evaluating whether
                        they had submitted adequate well containment information with their oil



                        25
                         30 C.F.R. Part 250, Subpart N.
                        26
                         30 C.F.R. § 250.173(a).




                        Page 17                                        GAO-12-423 Oil and Gas Management
spill response plans.27 Specifically, in one notice, Interior informed
operators that it would evaluate whether they could demonstrate that they
had access to and could deploy well containment resources to adequately
and promptly respond to a blowout—the uncontrolled release of oil or gas
from a well on the ocean floor or other loss of well control (see fig. 4).




27
  Containment refers to measures taken—after a major oil spill event such as a blowout—
to prevent more oil and gas from reaching the environment. Oil spill response plans must
include an operator’s proposed methods for ensuring that oil spill containment and
recovery equipment and response personnel are mobilized and deployed in the event of a
spill.




Page 18                                             GAO-12-423 Oil and Gas Management
Figure 4: Timeline of Key Events Since the Deepwater Horizon Incident




Page 19                                         GAO-12-423 Oil and Gas Management
Immediately after the Deepwater Horizon incident, the President ordered
the Secretary of the Interior to complete a 30-day study of its offshore oil
and gas policies and procedures, resulting in a May 27, 2010, report that
included 22 recommendations for improving the safety of offshore oil and
gas operations.28 On May 30, 2010, Interior made effective a Notice to
Lessees and Operators that enacted a 6-month moratorium on the drilling
of deepwater wells on the OCS, including the Gulf of Mexico, in light of
significant risks associated with drilling in deepwater without
implementation of recommendations from the report on safety equipment,
practices, and procedures.29 On June 8, 2010, Interior made effective a
Notice to Lessees and Operators that included seven new safety
requirements for drilling permits as recommended in the report.30 These
new requirements include certification by an operator’s Chief Executive
Officer that operations were in compliance with Interior’s regulations, and
third party certifications of the blowout preventer,31 among other items.
These new safety requirements were later incorporated into an interim
final drilling safety rule, along with additional requirements to enhance the
safety of drilling operations in October 2010.32

On June 18, 2010, Interior made effective a Notice to Lessees and
Operators addressing revised information requirements for exploration
and development plans.33 The policy, among other things, reversed part
of a 2008 Notice to Lessees and Operators that limited the information



28
 Department of the Interior. Increased Safety Measures for Energy Development on the
Outer Continental Shelf. May 27, 2010.
29
 NTL No. 2010-N04. National Notice to Lessees and Operators (NTL) of Federal Oil and
Gas Leases in the Outer Continental Shelf (OCS): To Implement the Directive to Impose a
Moratorium on All Drilling of Deepwater Wells. Effective May 30, 2010.
30
  NTL No. 2010-N05. National Notice to Lessees and Operators of Federal Oil and Gas
Leases, Outer Continental Shelf (OCS): Increased Safety measures for Energy
Development on the OCS. Effective June 8, 2010.
31
  A blowout preventer is a mechanical device intended to control and close off a well if
there is an uncontrolled flow of oil and gas.
32
  30 C.F.R. Part 250. Oil and Gas Sulphur Operations in the Outer Continental Shelf-
Increased Safety Measures for Energy Development on the Outer Continental Shelf.
33
  NTL No. 2010-N06. National Notice to Lessees and Operators of Federal Oil and Gas
Leases, Outer Continental Shelf (OCS): Information Requirements for Exploration Plans,
Development and Production Plans, and Development Operations Coordination
Documents on the OCS. Effective June 18, 2010.




Page 20                                               GAO-12-423 Oil and Gas Management
operators were required to submit regarding blowout scenarios and worst-
case discharge scenarios.34,35 The new policy required that operators
submit more detailed information about their worst case discharge
scenarios and blowout scenarios in exploration, development, and oil spill
response plans. The new policy explained that all operators, regardless of
location or state coordination, must submit more detailed information.
Along with the June 18, 2010, Notice to Lessees and Operators, Interior
released, and updated three times, a list of frequently asked questions as
a means to provide operators with additional guidance on how to comply
with the new policies.36

In June 2010, several companies filed a lawsuit related to the deepwater
drilling moratorium against the Secretary of the Interior. On June 22,
2010, a U.S. District Court overturned Interior’s initial drilling
suspension.37 Interior then announced a second drilling moratorium on
July 12, 2010, noting the following three key factors as the basis for the
decision: (1) it provided Interior, industry, and others time to develop
strategies and methods for the containment of uncontrolled wells in
deepwater; (2) it was necessary to ensure that an appropriate and
sufficient response was available in the event of another major oil spill;
and (3) it allowed for the collection and analysis of evidence regarding the
potential causes of the Deepwater Horizon incident. On August 16, 2010,
Interior issued a memorandum which directed all deepwater drilling plans
to be analyzed with EAs instead of relying on categorical exclusion
reviews. On October 1, 2010, Interior issued a report on the suspension
of certain offshore permitting and drilling activities.38 Additionally, many of
the revised policies outlined in the notices were incorporated into new



34
  A blowout scenario includes information on the estimated oil and gas flow rate, total
volume, and maximum duration of a blowout.
35
  NTL No. 2008-G04. Notice to Lessees and Operators of Federal Oil, Gas, and Sulphur
Leases in the Outer Continental Shelf, Gulf of Mexico OCS Region: Information
Requirements for Exploration Plans and Development Operations Coordination
Documents. Effective May 1, 2008. Expiration March 31, 2013.
36
  NTL No. 2010-N06. Frequently Asked Questions. Effective June 18, 2010 with updates
on July 15, July 21, and August 10, 2010.
37
 Honbeck Offshore Servs., L.L.C. v. Salazar, 696 F. Supp. 2d. 627 (E.D. La. 2010).
38
  Department of the Interior. Decision Memorandum. Report Regarding the Current
Suspension of Certain Offshore Permitting and Drilling Activities on the Outer Continental
Shelf. Issued on October 1, 2010.




Page 21                                               GAO-12-423 Oil and Gas Management
                         regulations via Interior’s emergency rule process. The Secretary of the
                         Interior ended the drilling moratorium on October 12, 2010, but directed
                         that, before any drilling permits were issued, operators had to certify
                         compliance with all existing rules and requirements, including those
                         recently implemented, and demonstrate the availability of adequate
                         blowout containment resources. On October 14, 2010, Interior published
                         an interim final drilling safety rule that incorporated new safety
                         requirements, some of which were previously issued in a Notice to
                         Lessees and Operators, along with additional requirements to enhance
                         the safety of drilling operations.39 On November 8, 2010, Interior made
                         effective another Notice to Lessees and Operators requiring operators
                         conducting activities using subsea blowout preventers or surface blowout
                         preventers on floating facilities to provide Interior with adequate
                         information demonstrating that they have access to and can deploy
                         containment resources to promptly respond to a blowout or other loss of
                         well control.40 On December 13, 2010, Interior released a document to
                         provide operators further guidance regarding environmental and safety
                         requirements to be used in preparing their plans and permits.


                         On October 1, 2011, Interior generally met its key reorganization time
Interior Has Generally   frame by officially reorganizing its oversight of offshore oil and gas
Met Its Key              activities in the Gulf of Mexico with the establishment of two new bureaus.
                         To aid the development of these new bureaus, the Secretary of the
Reorganization Time      Interior directed Interior staff to develop an implementation plan to provide
Frames                   further details on the planned reorganization, including target dates.
                         Because the oversight responsibilities of these two new bureaus have
                         many interdependencies, and their success will depend on effective
                         coordination, Interior has drafted memorandums and standard operating
                         procedures to define their roles and responsibilities and facilitate and
                         formalize their coordination.




                         39
                           Oil and Gas and Sulfur Operations in the Outer Continental Shelf—Increased Safety
                         Measures for Energy Development on the Outer Continental Shelf, 75 Fed. Reg. 63346
                         (2010).
                         40
                          NTL No. 2010-N10. National Notice to Lessees and Operators (NTL) of Federal Oil and
                         Gas Leases, Outer Continental Shelf: Statement of Compliance with Applicable
                         Regulations and Evaluation of Information Demonstrating Adequate Spill Response and
                         Well Containment. Effective November 8, 2010.




                         Page 22                                            GAO-12-423 Oil and Gas Management
Interior Established Two   On October 1, 2011, Interior met its goal to establish two new
Independent Bureaus,       independent bureaus to oversee offshore oil and gas activities on the
Separating Resource        OCS, including in the Gulf of Mexico, effectively separating Interior’s
                           mission to manage resources from its mission to provide oversight of
Management from Safety     safety and environmental enforcement. On May 19, 2010, following the
and Environmental          Deepwater Horizon incident, the Secretary of the Interior signed a
Oversight and              secretarial order to reorganize the roles and responsibilities performed by
Enforcement                MMS into new management structures. Interior subsequently contracted
                           with a consultant and formed an agency taskforce to develop key
                           milestones for the reorganization.41 According to the secretarial order, the
                           goals of the reorganization were to improve the management, oversight,
                           and accountability of activities on the OCS; ensure a fair return to the
                           taxpayer from royalty and revenue collection and disbursement activities;
                           and provide independent safety and environmental oversight and
                           enforcement of offshore activities. In the reorganization, Interior renamed
                           MMS to BOEMRE as an interim step before transferring MMS’s oil and
                           gas revenue collection functions to the newly created Office of Natural
                           Resources Revenue and separating BOEMRE into two bureaus—BOEM
                           and BSEE.42 To divide BOEMRE’s responsibilities, Interior issued new
                           regulations in October 2011 reorganizing existing regulations under the
                           new bureaus, thereby formally separating Interior’s regulations that
                           govern leasing and approval of development from those addressing lease
                           operations, safety, and enforcement.43 Specifically, under the
                           reorganization, BOEM is to oversee resource management activities,
                           including preparing the 5-year OCS oil and gas leasing program;
                           reviewing oil and gas exploration and development plans and
                           environmental studies; and conducting NEPA analyses. BSEE is to
                           oversee operations and environmental compliance, including reviewing
                           drilling permits, inspecting offshore drilling rigs and production platforms,
                           assessing civil penalties, and developing regulations and standards for
                           offshore drilling. Additionally, BSEE is to manage the National Offshore



                           41
                             Department of the Interior, Establishment of the Bureau of Ocean Energy Management,
                           the Bureau of Safety and Environmental Enforcement, and the Office of Natural
                           Resources Revenue, Order No. 3299 (May 19, 2010).
                           42
                             Department of Interior, Change of the Name of the Minerals Management Service to the
                           Bureau of Ocean Energy Management, Regulation, and Enforcement, Order No. 3302
                           (June 18, 2010).
                           43
                            Reorganization of Title 30: Bureaus of Safety and Environmental Enforcement and
                           Ocean Energy Management (Direct final rule). 76 Fed. Reg. 64432 (2011).




                           Page 23                                            GAO-12-423 Oil and Gas Management
                                         Training and Learning Center—established in June 2011—to train its
                                         inspectors and engineers. (See fig. 5 for a high level illustration of the
                                         reorganization and app. II for the full organizational charts for both BOEM
                                         and BSEE.)

Figure 5: Interior’s Key Offshore Oil and Gas Program Responsibilities before and after Reorganization




                                         Interior and others identified a number of reasons for dividing the roles
                                         and responsibilities previously performed by MMS. BOEMRE’s director
                                         noted that MMS had three competing missions—revenue collection,
                                         energy development, and safety and environmental enforcement. The
                                         National Commission on the BP Deepwater Horizon Oil Spill and Offshore
                                         Drilling concluded that MMS had primarily focused on revenue collection
                                         and energy development, adversely affecting its ability to set and enforce
                                         appropriate safety and environmental oversight rules. After the



                                         Page 24                                           GAO-12-423 Oil and Gas Management
                            Deepwater Horizon incident, the President directed Interior to provide a
                            postaccident safety report within 30 days. While developing this report,
                            Interior’s senior management, including the Secretary, discussed dividing
                            MMS’s duties. A senior Interior official stated that, even before the
                            Deepwater Horizon incident, Interior’s leadership was considering
                            alternative management structures to MMS, noting that separating
                            resource management from the safety and environmental enforcement
                            functions had been a best practice used by some European nations such
                            as Norway, which established the Petroleum Safety Authority in January
                            2004 to hold regulatory responsibility for safety, emergency
                            preparedness, and the working environment in the petroleum activities.
                            Previously, these responsibilities were held under the Norwegian
                            Petroleum Directorate, which among other responsibilities oversees
                            resource management.

                            Some Interior officials stated that they expect Interior’s overall
                            management of oil and gas resources to improve due to the
                            reorganization. A senior Interior official overseeing the reorganization
                            stated that establishing three separate bureaus, each with its own
                            director, will help ensure equal advocacy for all three missions. For
                            example, the official stated that by establishing BSEE, the director of
                            BSEE will be responsible for safety and environmental enforcement,
                            independent from the resource management development and revenue
                            collection missions. In addition, an official in the Gulf of Mexico regional
                            office stated that by reducing the scope of each bureau’s mission,44 the
                            responsibilities of the regional managers will also be reduced so that they
                            may delegate less, focus more on the areas they oversee, and take a
                            more hands-on approach to management.


Interior’s Implementation   To aid the establishment of the new bureaus, the secretarial order
Plan Guided the             directed that an implementation plan with a schedule for the planned
Reorganization              reorganization be developed within 30 days.45 In July 2010, Interior
                            issued its implementation plan with target dates, including October 1,
                            2011, as the target date to complete the reorganization. The



                            44
                              Because many of our interviews were conducted with Interior officials before BSEE and
                            BOEM were established, we generally do not distinguish the bureau of the official but refer
                            to them as Interior officials.
                            45
                             Sec. Order No. 3299.




                            Page 25                                               GAO-12-423 Oil and Gas Management
implementation plan also provided target dates for completing tasks to
facilitate the reorganization, including reports of best practices and
organizational effectiveness and a detailed organizational structure for
BOEM and BSEE. A senior Interior official stated that, although the
implementation plan identified target dates for the reorganization, details
of the reorganization were not developed until later in the process.

According to a senior Interior official, the primary decisions about the
reorganization were made by BOEMRE’s director, with input from senior
advisors, including both political appointees and career Interior
management staff. To help inform these decisions and complete tasks,
Interior hired a consultant at a cost of approximately $7 million, as of
November 2011,46 and created an agency taskforce––a team of over 65
Interior staff with multiple subteams focused on identifying
interdependencies between BOEM and BSEE.47 Interior officials stated
that the expertise and advice provided by the consultant was critical to
completing the reorganization on time while simultaneously keeping the
agency’s regulatory processes operating, and positioning both new
bureaus to operate effectively at start up. Throughout this process,
according to a senior Interior official, the consultant worked closely with
the taskforce. The consultant was responsible for developing a series of
reports specified in the July 2010 implementation plan and contract as
well as providing guidance to BOEMRE management on how to conduct
analyses that supported key reorganizational decisions. According to a
senior Interior official, the consultant provided reports from September
2010 through February of 2011 that helped inform the reorganization.
These reports included assessments of (1) BOEMRE’s organizational
structure based, in part, on over 200 interviews, according to the
consultant, (2) relevant regulatory best practices from Canada’s and
Norway’s offshore oil and gas regulators, as well as the U.S. Department
of Agriculture’s and Nuclear Regulatory Commission’s inspection


46
  The contract included a base period as well as several options that were exercised by
Interior to provide consulting services throughout the reorganization process. In addition to
the approximately $7 million identified earlier, the contract includes an additional option to
purchase approximately $1 million in consulting services.
47
  This taskforce is consistent with our July 2003 report in which we discuss key practices
and implementation steps for successful organizational transformations, including the use
of dedicated implementation teams as well as the involvement of employees to obtain
their ideas and gain ownership for the transformation.GAO, Results Oriented Cultures:
Implementation Steps to Assist Mergers and Organizational Transformations,
GAO-03-669 (Washington, D.C.: July 2, 2003).




Page 26                                                 GAO-12-423 Oil and Gas Management
                             programs, (3) organizational options for dividing BOEMRE’s
                             responsibilities into BOEM and BSEE, and (4) an implementation plan
                             detailing the necessary steps to complete the reorganization within
                             specified time frames, among other assessments. Following the issuance
                             of the consultant’s February 2011 report, the consultant continued to
                             assist the reorganization.

                             The taskforce’s primary goal was to help ensure that BOEM and BSEE
                             were fully functional as of October 1, 2011, in accordance with the target
                             date outlined in the implementation plan. Among other activities, the
                             taskforce helped determine BOEM’s and BSEE’s future organizational
                             structures, identified interdependencies between BOEM and BSEE, and
                             developed standard operating procedures to help manage functions
                             across the two bureaus. Specifically, while working with the consultant,
                             the taskforce identified 49 interdependencies between BOEM and BSEE,
                             such as between BOEM’s leasing responsibilities and BSEE’s district
                             office engineers’ responsibilities. Of those 49 interdependencies, the
                             taskforce identified 16 that required policy solutions, including, for
                             example, ensuring that drilling permit information is available to BSEE’s
                             district engineers, as well as BOEM staff responsible for reviewing and
                             approving exploration and development plans. The taskforce developed
                             potential policy solutions for many of these interdependencies and
                             provided them to Interior senior managers, including BOEMRE’s director.

                             Interior took other steps to support the separation of BOEMRE into BOEM
                             and BSEE, including dividing the two bureaus’ financial records, although
                             BSEE manages administrative resources––such as IT resources––for
                             both bureaus to achieve cost savings. Interior also officially reassigned
                             employees and launched separate websites for each bureau.


Interior Has Developed an    According to Interior officials, BOEM and BSEE will maintain a close
MOU for BOEM and BSEE        working relationship, particularly during the early stages of their formation,
to Facilitate Coordination   due to the interdependencies in their oversight responsibilities. Prior to
                             the division of BOEMRE, a senior Interior official in the Gulf of Mexico
                             Regional office stated that the split would not “put up a wall” between the
                             two bureaus, noting that both bureaus will continue to occupy the same
                             New Orleans, Louisiana, building and that staff would be able to “walk
                             down the hall” to discuss and resolve issues with colleagues in both
                             bureaus. Interior officials further stated that the initial reorganization will
                             not significantly change the bureau’s work processes.




                             Page 27                                        GAO-12-423 Oil and Gas Management
To help define BOEM’s and BSEE’s roles and responsibilities and
facilitate and formalize their collaboration, Interior developed an
overarching inter-bureau MOU; a six program set of area-specific
memoranda of agreements; and numerous standard operating
procedures. The MOU establishes a high-level working relationship
between BOEM and BSEE and, according to the document, is intended to
help minimize duplication of effort, promote consistency in procedures
and regulations, and resolve disputes between the two bureaus. To help
accomplish these goals, the MOU outlines a number of
postreorganization roles and responsibilities. For example, it calls for the
deputy directors of BOEM and BSEE to meet at least quarterly to discuss
means to better ensure collaboration across the bureaus. The MOU also
outlines the use of the six memoranda of agreements to establish
principles for collaboration on program areas across BOEM and BSEE
including: (1) plans and permits; (2) the environment and NEPA; (3)
geologic data assignments; (4) the marine minerals program; (5)
assignments, bonding, and pipelines; and (6) royalty relief requests. Each
memorandum of agreement outlines roles and responsibilities for BOEM
and BSEE and references a number of standard operating procedures
that document interdependencies between the bureaus. Each standard
operating procedure identifies specific objectives, responsibilities, and
agency interdependencies for specific work actions. In documenting
agency interdependencies, each standard operating procedure provides
details on the actions to be taken by BSEE and BOEM for individual
program activities. An Interior official said that, over time, the standard
operating procedures will be refined and that it will be important to clearly
document changes to them in order to minimize the risk of staff relying on
institutional knowledge, especially as experienced staff retire or find work
elsewhere.




Page 28                                      GAO-12-423 Oil and Gas Management
                             Key policy changes Interior has implemented since the Deepwater
Key Policy Changes           Horizon incident, which were designed to mitigate the risk of a well
for Oil and Gas NEPA         blowout or spill, initially required Interior to devote additional resources
                             and time to reviewing oil and gas exploration and development plans and
Analyses, Plans, and         drilling permits for oil and gas activities on the OCS, including in the Gulf
Permits Intended to          of Mexico. Specifically, these policy changes affected Interior’s (1) NEPA
Enhance Oversight            analyses for oil and gas exploration and development plans, including its
                             use of categorical exclusions; (2) reviews of oil and gas exploration and
Initially Increased          development plans; and (3) reviews of oil and gas drilling permits.
Review Times and
Resource
Requirements

Interior Relied Heavily on   Interior approved almost all exploration plans (97 percent) and
Categorical Exclusions,      development plans (98 percent) for oil and gas activities in the Gulf of
but Use Is Now Limited       Mexico from January 1, 2000, through April 19, 2010, using a categorical
                             exclusion. That is, because Interior had previously determined that a
Pending an Internal          planned activity was not likely to significantly affect the environment, it
Review                       categorically excluded the activity from a more detailed, site-specific
                             NEPA analysis.

                             Of the 3,249 exploration plans Interior approved from January 1, 2000,
                             through April 19, 2010, approximately 14 percent were approved via a
                             categorical exclusion with no additional analysis; 83 percent were
                             approved via categorical exclusion with some additional analysis; and 3
                             percent were approved via a more detailed, site-specific EA.48 Interior
                             officials told us they prepared EA documents for exploration plans for
                             several reasons, including plans for (1) development in the eastern Gulf
                             of Mexico, (2) using new and unusual technology, or (3) development
                             adjacent to the federally protected Flower Garden Banks National Marine
                             Sanctuary. The overall results for development plans were similar. Of the
                             2,935 approved development plans submitted, approximately 16 percent
                             were approved via a categorical exclusion with no additional analysis, 82
                             percent were approved via a categorical exclusion with some additional




                             48
                              Approximately 2 percent of approved exploration plans were missing a NEPA code and
                             were not included in our analysis.




                             Page 29                                           GAO-12-423 Oil and Gas Management
                                         analysis, and 2 percent were approved via a more detailed, site-specific
                                         EA49 (see fig. 6).

Figure 6: Interior’s NEPA Determination for Approved Plans from January 1, 2000, through April 19, 2010




Categorical Exclusion Reviews            Interior’s categorical exclusion reviews were hindered by (1) the poor
Were Hindered by Poor                    quality of data in Interior’s geographic information system (GIS), (2) limited
Geographic Information                   controls for ensuring NEPA analyses for approved plans were based on
System Data Quality, a Lack of           complete and accurate information, and (3) limited clear criteria for
Controls, and Limited Criteria           identifying certain types of activities that may preclude the use of
                                         categorical exclusions. According to Interior’s policy prior to the Deepwater
                                         Horizon incident, all exploration and development plans underwent a NEPA
                                         analysis, called a categorical exclusion review to determine whether the
                                         operator proposed activities could be categorically excluded from further
                                         analysis or if the plan required an EA or EIS. The categorical exclusion
                                         review—though less detailed and thorough than an EA or EIS—consisted
                                         of a series of environmental evaluations and site-specific, environmental
                                         resource reviews. These site-specific reviews, which are based largely on


                                         49
                                           Approximately 2 percent of approved development plans were missing a NEPA code
                                         and were not included in our analysis.




                                         Page 30                                          GAO-12-423 Oil and Gas Management
information in Interior’s GIS, include assessments of the effects of oil and
gas activities on air and water quality, archeological sites, and biologically
sensitive areas, among others.

However, according to Interior officials, Interior has been unable to
maintain complete and accurate data in its GIS system due to limited
resources. Interior officials stated that they have developed alternative
processes to compensate for the current GIS limitations; however, these
processes are time and resource intensive and prone to error. Because
Interior relies on GIS data to conduct its categorical exclusion reviews to
determine whether additional environmental analyses are necessary, and
these data may be incomplete and inaccurate, by using them there is a
risk of not accurately assessing a plan’s potential environmental effects or
identifying plans that might warrant a more detailed environmental
analysis. Interior officials told us that they have begun to devote
resources to improving Interior’s GIS data and that the GIS is being
upgraded and is scheduled to be deployed in May 2012.

We also found that Interior’s current plan review process could cause it to
approve a plan where the NEPA analysis, including categorical exclusion
reviews, was based on incomplete or inaccurate information. According to
Interior’s policy, exploration and development plans undergo a NEPA
analysis through a categorical exclusion review in order to determine
whether the activity can be categorically excluded or if the plan requires
additional review through an EA or EIS.50 Interior’s NEPA staff conduct
these reviews. However, during the exploration and development plan
review process, Interior officials explained that they may request that
operators provide additional information or correct previously submitted
information through a plan amendment. Sometimes, according to Interior
officials, these amendments may contain information necessary for
completing the NEPA analysis. In such cases, Interior officials told us that
staff reviewing the plan are to coordinate with NEPA staff to ensure that
any information included in subsequent amendments would not need to
be considered as part of a NEPA analysis. However, Interior staff stated
that this coordination does not always occur and that this coordination is
not documented in Interior’s Technical Information Management System
(TIMS) IT system, meaning that Interior cannot be confident that its NEPA



50
  Since the Deepwater Horizon incident, Interior no longer used the categorical exclusion
review process for deepwater exploration and development plans.




Page 31                                              GAO-12-423 Oil and Gas Management
analyses were based on the most current relevant information in the
exploration and development plans. For example, in one instance, the
NEPA analysis was completed before Interior had received an operator’s
plan amendment, which included the operator’s final worst case scenario
discharge estimate, information that, according to Interior officials, would
typically be considered during Interior’s NEPA analysis. Interior officials
acknowledged that the controls in place are insufficient to prevent the
approval of plans with NEPA analyses that were based on inaccurate or
incomplete information. Without complete and accurate information to
analyze the potential effects of a proposed project as required by NEPA,
Interior risks making an erroneous assessment of the environmental risks
associated with such a project.

Our analysis of Interior’s data on approved exploration and development
plans that had amendments from January 1, 2000, through April 19,
2010, found that, for about 15 percent of the 1,466 plans it approved,
Interior completed its NEPA analysis, including categorical exclusion
reviews, before all of the plan’s final amendments had been submitted
(see fig. 7).




Page 32                                      GAO-12-423 Oil and Gas Management
Figure 7: Approved Plans Amended after Final NEPA Determination Was Made,
January 1, 2000, through April 19, 2010




In addition, we found that Interior does not have clear criteria for certain
types of activities that preclude the use of categorical exclusions. Interior
policy states that if a categorical exclusion review concludes that a
proposed activity could result in an “extraordinary circumstance,” such as
having highly uncertain or potentially significant environmental effects,
Interior cannot approve the plan through a categorical exclusion and must
prepare, at a minimum, an EA.51 Extraordinary circumstances include


51
  Interior policy allowed approval of exploratory and development plans in the Western
and Central Gulf of Mexico—since 1981 and 1985, respectively—via categorical
exclusions, except when staff determined that an extraordinary circumstance existed. The
initial policy of categorically excluding exploration and development plans in the Western
Gulf of Mexico, according to Interior officials, was carried over from the U.S. Geological
Survey, which had regulatory authority over the Gulf of Mexico prior to the creation of
MMS in 1982. Interior officials reported that the policy for approving plans via categorical
exclusions was based on the findings of numerous previously completed EA documents
that resulted in a finding of no significant effect.




Page 33                                                GAO-12-423 Oil and Gas Management
actions such as approving a development plan (1) in areas of high
seismic risk or seismicity, relatively untested waters, or remote areas; (2)
within the boundary of a proposed or established marine sanctuary, or
within or near the boundary of a proposed or established wildlife refuge or
areas of high biological sensitivity; (3) in areas of hazardous natural
bottom conditions; or (4) utilizing new or unusual technology. Additionally,
Interior’s departmental manual specifies a number of “exceptions” to
individual actions within categorical exclusions—such as activities with
highly controversial or very uncertain environmental effects or activities
that could potentially adversely affect endangered species—and requires
that Interior prepare an EA or EIS for such actions. Interior officials told us
that, while certain extraordinary circumstances and exceptions, such as
those related to endangered species, are more clearly determined and
would trigger an EA or EIS, others have less precise criteria, and
according to Interior policy, the responsible official determines whether
they are significant. For example, Interior officials told us that Interior
does not have documented clear criteria on what constitutes a
controversial environmental effect as it relates to an exploration or
development plan; instead, Interior has relied on the expertise of its staff
to identify such cases. Additionally, these officials stated that Interior does
not have clear criteria on what constitutes new or unusual technology.
Interior officials told us that there was an effort to develop guidance on
this issue, but that such guidance was never completed. Without
documented clear criteria for when staff may categorically exclude a plan
from a more detailed, NEPA analysis, Interior risks making inconsistent
determinations as to what constitutes an extraordinary circumstance and
making insufficient assessments of the potential effects of a proposed
plan. According to Interior officials, Interior issued a NEPA handbook in
September 2011 in response to a recommendation from our March 2010
report, in which we recommended that Interior develop and set a deadline
for issuing a comprehensive NEPA handbook providing guidance on how
to implement NEPA and periodically update and revise this guidance as
needed.52 Interior officials stated that, while additional guidance on
extraordinary circumstances was included in the handbook, there are
broad regional differences, and that the regional offices—including the
Gulf of Mexico Regional office—are continuing to develop internal



52
  GAO, Offshore Oil and Gas Development: Additional Guidance Would Help Strengthen
the Minerals Management Service’s Assessment of Environmental Impacts in the North
Aleutian Basin, GAO-10-276 (Washington, D.C.: Mar. 8, 2010).




Page 34                                          GAO-12-423 Oil and Gas Management
                               guidance that is more appropriately tailored to their specific geographical
                               jurisdiction.

Since the Deepwater Horizon    After the Deepwater Horizon incident, Interior limited its use of categorical
Incident, Use of Categorical   exclusions to approve deepwater oil and gas activities in the Gulf of
Exclusions for Deepwater       Mexico while it reviewed its NEPA policy and implemented a new
Plans Is Limited Pending       requirement for preparing EA documents for exploration and development
Outcome of Internal Review     plans proposing deepwater projects. On August 16, 2010, the Council on
                               Environmental Quality released a report on Interior’s implementation of
                               NEPA in its review and approval of exploration and development
                               plans.53,54 Among the report’s findings was that Interior should (1) review
                               its use of categorical exclusions for oil and gas exploration and
                               development on the OCS in light of the increasing levels of complexity
                               and risk and the potential environmental effects associated with
                               deepwater drilling and (2) consider revising its policy for using categorical
                               exclusions. The same day that the report was released, Interior
                               announced that it was revising its categorical exclusion policy and, while
                               certain shallow water drilling activities could still be approved using
                               categorical exclusions, deepwater drilling activities could not, pending the
                               outcome of an Interior review. On October 8, 2010, Interior published a
                               notice in the Federal Register announcing its intent to conduct a broad
                               review of its categorical exclusions for OCS decisions to ensure that it is
                               in full compliance with NEPA and the regulations implementing NEPA.55
                               Interior officials initially said that the report was to be completed in 2011
                               but that due to delays, it will not be finalized until mid-2012.

                               According to Interior officials, the new requirement to prepare EA
                               documents for exploration and development plans for deepwater projects,
                               instead of relying on categorical exclusions, has required additional time
                               and resources for Interior’s review but provides greater assurance that


                               53
                                 The Council on Environmental Quality coordinates federal environmental efforts and
                               works closely with agencies and other White House offices in the development of
                               environmental policies and initiatives. It was established within the Executive Office of the
                               President by Congress as part of NEPA, and additional responsibilities were provided by
                               the Environmental Quality Improvement Act of 1970.
                               54
                                 Council on Environmental Quality, Report Regarding the Minerals Management
                               Service’s National Environmental Policy Act Policies, Practices, and Procedures as They
                               Relate to Outer Continental Shelf Oil and Gas Exploration and Development (Aug. 16,
                               2010).
                               55
                                 75 Fed. Reg. 62418 (2010).




                               Page 35                                                GAO-12-423 Oil and Gas Management
                              environmental risks are considered. The officials stated that transitioning
                              from categorical exclusions to site-specific EA documents for deepwater
                              plans was initially challenging. For example, for exploration plans, staff
                              had to produce a much more detailed and lengthy environmental analysis
                              than previously required within the same 30-day review time frame.
                              Interior officials reported that much of the initial difficulty in completing EA
                              documents was getting the necessary information from the operator to
                              complete the necessary analysis. Officials said that, going forward, they
                              hope to streamline the EA process by developing a template that Interior
                              staff can use to capture information to complete EA documents for
                              exploration and development plans proposing projects in deepwater.
                              Interior officials also reported that improving Interior’s ability to prepare
                              EA documents is contingent, in part, on acquiring additional staff.


Added Safety and              As previously discussed in this report, after the Deepwater Horizon
Environmental                 incident, Interior enacted a number of policy changes to improve the
Requirements for              safety of offshore oil and gas activities. In particular, Interior issued a
                              Notice to Lessees and Operators, effective on June 18, 2010, that revised
Exploration and               information requirements for exploration and development plans.56 This
Development Plans Appear      guidance, in part, reversed a 2008 Notice to Lessees and Operators that
to Have Initially Increased   limited the blowout scenario and worst case discharge information
Exploration Plan Review       required to accompany such plans.57 The new guidance required that
Times, and Interior’s TIMS    operators submit more detailed information about their worst case
IT System Hindered the        discharge and blowout scenarios, along with information about how they
Review Process                would respond to a blowout. On August 16, 2010, Interior also issued a
                              memorandum directing that all deepwater drilling plans be analyzed in
                              EAs instead of through categorical exclusion reviews. These changes,
                              according to Interior officials, would logically result in longer processing
                              times for plans. However, according to Interior officials, Interior
                              considered these changes necessary to ensure that operators provided
                              sufficient environmental safeguards and projects received an appropriate
                              level of NEPA review. Interior issued another Notice to Lessees and
                              Operators effective about 5 months later on November 8, 2010, to inform



                              56
                                NTL No. 2010-N06. Information Requirements for Exploration Plans, Development and
                              Production Plans, and Development Operations Coordination Documents on the OCS.
                              Effective on June 18, 2010.
                              57
                               NTL No. 2008-G04. Information Requirements for Exploration Plans and Development
                              Operations Coordination Documents. Effective on May 1, 2008.




                              Page 36                                           GAO-12-423 Oil and Gas Management
                                operators that the agency would evaluate whether the operator’s current
                                oil spill response plan—typically examined during a review of an
                                exploration or development plan—described the types and quantities of
                                surface and subsea containment equipment that the operator could
                                access in the event of a spill or threat of a spill and the deployment time.58
                                Specifically, operators were encouraged to provide information in their oil
                                spill response plans on well containment equipment such as capping
                                stacks, dispersant systems, remotely operated underwater vehicles, and
                                oil collection vessels, among other things, that would be necessary to
                                respond to a subsea well blowout.

                                Our analysis of Interior’s data from January 1, 2000, through September
                                30, 2011, suggest that after the Deepwater Horizon incident when new
                                information requirements for exploration and development plans were
                                implemented, plan review times and the number of amendments per plan
                                initially generally increased. However, more recent data suggest that
                                review times and amendments per plan have decreased somewhat,
                                although not to levels prior to the incident. In addition, we found that
                                Interior’s TIMS IT system, which tracks amendments to plans, also
                                hindered Interior’s review.

Data Suggest Review Times       Our analysis of Interior’s data on review and approval of exploration and
and Frequency of Amendments     development plans suggests that, following the Deepwater Horizon
Initially Generally Increased   incident and Interior’s new safety and environmental requirements for
after New Safety and            plans, both review times and amendments per plan initially generally
Environmental Requirements      increased for approved plans when compared to before the incident.
for Approved Exploration and    However, our analysis also suggests that, in some cases, review times
Development Plans Were          and numbers of amendments per approved plan have recently
Enacted                         decreased, although not to levels prior to the Deepwater Horizon incident.
                                Specifically, our analysis of Interior’s data from January 1, 2000, through
                                September 30, 2011, found that after Interior added new requirements,
                                the median review times initially increased for approved deepwater
                                exploration and development plans and shallow water exploration plans
                                but decreased for approved shallow water development plans.
                                Amendments for both exploration and development plans irrespective of
                                water depth initially increased. Interior officials stated that, over time, both
                                review times and amendments may decrease as Interior staff and


                                58
                                 NTL No. 2010-N10. Statement of Compliance with Applicable Regulations and
                                Evaluation of Information Demonstrating Adequate Spill Response and Well Containment
                                Resources. Effective on November 8, 2010.




                                Page 37                                           GAO-12-423 Oil and Gas Management
operators become more familiar with the new policy requirements. While
our analysis of Interior’s data suggest decreases in review times and
numbers of amendments per plan, until several more years of post-
Deepwater Horizon incident data are available, we can only present
preliminary results of the effects of the new plan requirements on plan
reviews.

We examined Interior’s review of approved deepwater and shallow water
exploration and development plans from initial submission to final
approval for three time frames: (1) routine exploration and development
plan reviews from January 1, 2000, through April 19, 2010; (2) a transition
period when Interior staff and operators were adjusting to new policies––
October 12, 2010, through May 31, 2011, for deepwater plans and June
8, 2010, through May 31, 2011, for shallow water plans; and (3) more
recent reviews from June 1, 2011, through September 30, 2011.59
Dividing the post-Deepwater Horizon incident period into two time frames
allowed us to determine whether there had been a change in plan
processing since the early post-Deepwater Horizon incident time frame
and accompanying slowdown in reviews. Specifically, in dividing the post-
Deepwater Horizon period into two time frames, we did not consider the
outcome for any plan submitted in the first of these periods but approved
in the second. Our methodology did not allow us to use data for plans that
were submitted in either period but not approved prior to September 30,
2011. Therefore, we examined median processing times only for those
plans that were both submitted and approved during a single one of these
time frames and, as a result, some of our analysis was based on a small
number of plans. Due to this limitation, our analysis should be viewed as
provisional, awaiting the passage of time and the availability of additional
data to allow for a more detailed examination of post-Deepwater Horizon
incident plan processing times. It should also be noted that review times
for exploration plans and development plans include both the time when
plans are being reviewed at Interior and the time when plans are being
revised by the applicant (in cases where an applicant’s submission does
not comply with regulatory requirements).

Deepwater exploration plans. Our analysis of Interior’s data on
deepwater exploration plans from January 1, 2000, through April 19,


59
  Our analysis did not examine review time frames for plans submitted from April 20,
2010, through June 7, 2010, for shallow water plans, and October 11, 2010, for deepwater
plans, due to the effect of policy changes and the deepwater drilling moratorium.




Page 38                                             GAO-12-423 Oil and Gas Management
2010, found that there were 1,374 plans submitted and approved within
this time frame. These plans had a median review time of 38 days, and
an average of 0.63 amendments per plan. For the policy transition period,
from October 12, 2010, through May 31, 2011, our analysis found that
there were 15 plans submitted and approved within this time frame.
These plans had a median review time of 57 days and an average of 2.47
amendments per plan. For the last time frame, from June 1, 2011,
through September 30, 2011, our analysis found that there were 5 plans
that were submitted and approved within this time frame. These plans
had median review time of 47 days and an average of 0.6 amendments
per plan (see table 1).

Deepwater development plans. Our analysis of Interior’s data on
deepwater development plans from January 1, 2000, through April 19,
2010, found that there were 448 plans submitted and approved within this
time frame. These plans had a median review time of 57 days and an
average of 0.79 amendments per plan. For the policy transition period,
from October 12, 2010, through May 31, 2011, our analysis found that
that there were 16 plans submitted and approved within this time frame.
These plans had a median review time of about 59.5 days and an
average of 1.63 amendments per plan. For the last time frame, from June
1, 2011, through September 30, 2011, our analysis found that there were
7 plans submitted and approved within this time frame. These plans had a
median review time of 56 days and an average of 0.86 amendments per
plan (see table 1).




Page 39                                    GAO-12-423 Oil and Gas Management
Table 1: Review Time Frames and Number of Amendments for Approved Deepwater Exploration and Development Plans from
Initial Submission to Final Approval

                                                        Exploration                                               Development
                                                                                   June 1, 2011,                                 June 1, 2011,
                                       January 1,   October 12,                        through        January 1,   October 12,       through
                                    2000, through 2010, through                      September     2000, through 2010, through     September
                                    April 19, 2010 May 31, 2011                        30, 2011    April 19, 2010 May 31, 2011       30, 2011
Total number of submittals with            1,374                         15                   5             448             16                 7
both initial plan submission date
and plan approved date
Median days from initial plan                   38                       57                  47              57           59.5             56
submission to the plan approved
date
Average number of amendments                 0.63                     2.47                   0.6           0.79           1.63           0.86
per approved plan
                                          Source: GAO analysis of Interior data.




                                          Shallow water exploration plans. Our analysis of Interior’s data on
                                          shallow water exploration plans from January 1, 2000, through April 19,
                                          2010, found that there were 1,982 plans submitted and approved within
                                          this time frame. These plans had a median review time of 39 days and an
                                          average of 0.54 amendments per plan. For the policy transition period,
                                          from June 8, 2010, through May 31, 2011, our analysis found that 14
                                          were submitted and approved within this time frame. These plans had a
                                          median review time of 68 days and an average of 1.71 amendments per
                                          plan. For the last time frame, from June 1, 2011, through September 30,
                                          2011, our analysis found that there were 3 plans submitted and approved
                                          within this time frame. These plans had a median review time of 51 days
                                          and an average of 0 amendments per plan.

                                          Shallow water development plans. Our analysis of Interior’s data on
                                          shallow water development plans from January 1, 2000, through April 19,
                                          2010, found that 2,579 plans were submitted and approved within this
                                          time frame. These plans had a median review time of 43 days and an
                                          average of 0.47 amendments. For the policy transition period, from June
                                          8, 2010, through May 31, 2011, our analysis found that that there were 39
                                          plans submitted and approved within the time frame. These plans had a
                                          median review time of 39 days and an average of 1.79 amendments per
                                          plan. For the last time frame, from June 1, 2011, through September 30,
                                          2011, our analysis found that there were 41 plans submitted and
                                          approved within the time frame. These plans had a median review time of
                                          20 days and an average of 0.7 amendments per plan (see table 2).



                                          Page 40                                                          GAO-12-423 Oil and Gas Management
Table 2: Review Time Frames and Number of Amendments for Approved Shallow Water Exploration and Development Plans
from Initial Submission to Final Approval

                                                        Exploration                                      Development
                                                                      June 1, 2011,                         June 8,    June 1, 2011,
                                       January 1,       June 8, 2010,     through           January 1,        2010,        through
                                    2000, through       through May     September        2000, through through May       September
                                    April 19, 2010          31, 2011      30, 2011       April 19, 2010    31, 2011        30, 2011
Total number of submittals with              1982                         14         3           2579            39              41
both initial plan submission date
and plan approved date
Median days from initial plan                    39                       68        51             43            39              20
submission to the plan approved
date
Average number of amendments                  0.54                     1.71          0            0.47          1.79             0.7
per approved plan
                                           Source: GAO analysis of Interior data.



                                           According to Interior officials, the new information requirements for
                                           exploration and development plans were confusing for both operators and
                                           Interior reviewers of those plans. As a result, operators amended plans
                                           more frequently, and the amendments added complexity to Interior’s
                                           review process, increasing the time before Interior’s final approval
                                           decision. Interior officials stated that amendments were often the result of
                                           errors or gaps in the information operators provided to Interior. Interior
                                           staff stated that, since the additional requirements went into effect,
                                           communication has increased between Interior and operators during the
                                           review process. For example, an Interior official told us that the policy
                                           change that led to the greatest increase in plan review times was the
                                           August 16, 2010, policy to complete EA documents for deepwater
                                           exploration or development plans instead of relying on categorical
                                           exclusions. As result of this new policy, Interior required additional
                                           information from operators in order to complete the EA documents.
                                           According to staff, this resulted in additional plan amendments, as
                                           operators were not initially submitting the necessary information, and led
                                           to overall increased review times. Additionally, Interior officials stated that
                                           the new policy requiring worst case discharge analyses was confusing for
                                           both operators and Interior and that the information and analyses
                                           operators initially provided were incorrect or incomplete and had to be
                                           amended. After approximately 6 months, however, Interior officials
                                           reported that they improved their ability to review the information and
                                           verify the calculations that operators provided and that operators gained a
                                           better understanding of how to complete the worst case discharge
                                           analysis in accordance with the new policy. Overall, Interior officials



                                           Page 41                                                GAO-12-423 Oil and Gas Management
                            stated they expected that, as both staff and operators familiarize
                            themselves with the new plan requirements, plan review times would
                            decrease along with the number of plan amendments. After reviewing a
                            draft of this report, Interior conducted its own analyses of plan review
                            times using a different methodology and a longer time frame to show
                            more recent trends. Similar to GAO’s analysis, Interior found that review
                            times have declined since the policy changes went into effect and the
                            deepwater drilling moratorium was lifted. See appendix IV for additional
                            details.

Interior’s TIMS IT System   Interior officials reported that their review of exploration and development
Hindered Review of Plans    plans was further hindered by the limitations in its TIMS IT system
                            including (1) no edit checks that would prevent operators from submitting
                            incomplete and inaccurate plans, (2) no field to identify whether
                            amendments to plans were made at the request of Interior or the
                            operator, and (3) shortcomings in Interior’s TIMS IT system for tracking
                            plan amendments.

                            Interior has had a long-standing problem ensuring that operators submit
                            complete and accurate plans, according to Interior officials, and
                            developed a plan to address this limitation in 2003. According to Interior
                            officials, Interior planned to develop an IT module called ePlans with data
                            input controls––called edit checks––to limit operators’ ability to submit
                            incomplete or inaccurate plans and reduce the resources Interior invests
                            in these reviews. However, ePlans was never completed due to
                            cancellation by Interior in December 2010. As of September 2011, Interior
                            officials reported they had worked with a consultant to develop a
                            requirements document for procuring the ePlans module.

                            In addition, Interior officials stated that the TIMS IT system does not have
                            a field for collecting information on whether amendments were submitted
                            at the request of Interior to correct a deficiency or if the operator elected
                            to revise its plan for technical reasons. As a result, when we attempted to
                            analyze Interior’s data to determine why plans were amended so
                            frequently, we were unable to do so. Interior officials acknowledged that
                            information on the reasons plans were amended would assist them to
                            identify common deficiencies in plans that could be communicated to
                            operators before they submit plans, potentially minimizing the number of
                            incomplete or inaccurate plans. Despite the lack of an automated system
                            to collect this data, Interior officials stated that they have identified
                            common deficiencies in submitted plans and worked to communicate this
                            information to operators on Interior’s website and through plan
                            workshops. Interior staff currently use a manual checklist for


                            Page 42                                       GAO-12-423 Oil and Gas Management
                              completeness, which Interior has shared with industry and the public
                              through these workshops and on its website. According to Interior
                              officials, this checklist will be incorporated into ePlans as Interior
                              continues to develop the automated business rules and refine
                              requirements for the system. Interior officials also stated that
                              development of the ePlans system will depend on available funding
                              through the budget process. However, without an automated system to
                              identify deficiencies, Interior managers cannot readily determine if there
                              are common deficiencies in operators’ plans.

                              In addition, the limitations of Interior’s TIMS IT system, which tracks plan
                              amendments, makes it difficult for staff to identify the most current version
                              of a plan. According to Interior officials, review staff were, at times, unsure
                              which version was the most current, a problem that was exacerbated by
                              new information requirements that generally increased the average
                              number of amendments per plan. To address this issue, in June 2011,
                              Interior officials began requesting that operators submit a composite
                              plan––a complete, accurate, and final plan that includes all information
                              from the initial plan and subsequent amendments. This composite plan
                              would be submitted as the final amendment to the initial plan. While not a
                              formal policy requirement, Interior officials stated that management
                              communicated this new approach to Interior staff via e-mail, and staff, in
                              turn, communicated it to operators by e-mail or telephone. Interior officials
                              stated that once both Interior and operators become familiar with the new
                              requirements for plans, the challenges staff currently face with
                              amendments should decrease.


New Safety and                In addition to the new information requirements for exploration and
Environmental                 development plans, Interior has added additional safety and
Requirements for Drilling     environmental requirements for drilling permits designed to improve
                              Interior’s oversight of oil and gas drilling operations. Our analysis of
Permits Initially Increased   Interior’s new well and revised new well drilling permit review and
Review Times                  approval data from January 1, 2005, through September 30, 2011, found
                              that, after the new safety requirements went into effect, review times
                              increased, as did the number of times that Interior returned a permit to an
                              operator.

Interior Added Safety and     As previously discussed, Interior has issued a number of policy changes
Environmental Requirements    to enhance the safety of drilling operations on the OCS, including in the
for Drilling Permits          Gulf of Mexico. In particular, a June 8, 2010, Notice to Lessees and
                              Operators outlined new requirements for obtaining drilling permits, as
                              recommended by the Secretary of the Interior’s May 2010 Safety


                              Page 43                                        GAO-12-423 Oil and Gas Management
Measures Report. These new requirements include certification by the
operator’s Chief Executive Officer that operations were in compliance with
Interior’s regulations and third-party certifications of well design and the
blowout preventer, among other things. On October 14, 2010, Interior
incorporated some of these new safety requirements into an interim
drilling safety rule, along with additional requirements intended to
enhance the safety of drilling operations.60 In issuing the interim drilling
safety rule, Interior reported that “even without the full results of pending
investigations, the obvious failures of well intervention and blowout
containment systems demonstrate that previous regulatory assumptions
concerning their reliability are inaccurate” and that the interim drilling
safety rule “imposes requirements to give greater certainty that casing
and cement design and fluid displacement are adequate for wellbore
integrity, and to enhance the reliability of well control equipment.” All
together, Interior revised its drilling requirements related to well control,
blowout preventers, well casing and cementing, secondary intervention,
unplanned disconnects between drilling rigs and the blowout preventer,
recordkeeping, well completion, and well plugging. Interior officials
identified the following new safety requirements as the most significant:

Deepwater safety system requirement. Interior officials said that the
new requirements for blowout preventers include testing specific
components of the blowout preventer’s emergency control systems.
These systems are required for blowout preventers deployed on
dynamically positioned drilling rigs61 and, according to Interior officials, the
new function testing requirements should provide greater assurance that
emergency control systems will work in the event of, for example, an
emergency disconnect between the rig and equipment located several
thousand feet below on the seafloor.

Third-party verifications of blowout preventer components. Interior
added a requirement for a third-party licensed entity to verify that the blind
shear rams—the part of a blowout preventer that cuts the drill pipe and
seals the well—have the capability to shear the drill pipe, by including



60
  Oil and Gas Sulfur Operations in the Outer Continental Shelf—Increased Safety
Measures for Energy Development on the Outer Continental Shelf, 75 Fed. Reg. 63346
(2010), (amending 30 C.F.R. part 250).
61
  A dynamically positioned drilling rig is a drilling rig that is maintained in position over an
offshore well location via thrusters, rather than mooring anchors.




Page 44                                                   GAO-12-423 Oil and Gas Management
shear test results and conducting calculations showing that the blowout
preventer can shear the pipe under any condition.

Blowout preventer systems review. Interior now requires operators to
submit additional schematics related to blowout preventers. According to
Interior officials, Interior engineers now review each blowout preventer’s
schematics, including for anomalies. Interior officials told us that this
increases the confidence that Interior understands how that particular
blowout preventer works. According to Interior officials, should another
incident similar to the Deepwater Horizon occur, it is critical that both
Interior and the drilling rig contractor have the most up-to-date schematics
of the blowout preventer. Officials explained that, during maintenance of
blowout preventers, components, including hydraulic hoses, may be
disconnected and reconnected. Without accurate schematics, neither
Interior nor the operator would be able to identify whether the equipment
was altered in a manner that could jeopardize its functioning. According to
Interior officials, the Deepwater Horizon incident and the blowout
preventer used for the well being drilled illustrate the importance of
understanding how a blowout preventer works and the need for both
Interior and the operator to have correct, up-to-date schematics. During
the well blowout, the operator attempted repeatedly to activate one
component of the blowout preventer to regain control of the well.
However, because a hydraulic hose was installed incorrectly, the operator
was unknowingly activating another component of the blowout preventer
that was not designed to regain control and shut in the well.

Third-party certification of well casing design. Interior officials said
this policy requires a certified engineer to review the well casing and
certify that the design provides adequate well casing integrity. Interior
officials pointed out, however, that a limitation of this policy requirement is
that it does not require that a licensed petroleum engineer conduct the
third-party review, only that the reviewer should be a professional
engineer with a degree in any engineering position.

New standards for cement. Prior to the Deepwater Horizon incident,
Interior officials stated that Interior’s engineers reviewed a well permit’s
cement plan primarily to ensure that it included adequate volumes of
cement to construct a safe and secure wellbore. Interior engineers did
not, however, routinely consider the risks associated with the cementing
plan. Interior’s new requirement incorporates best practices for certain




Page 45                                        GAO-12-423 Oil and Gas Management
                                    technical cementing,62 which Interior officials said will provide greater
                                    assurance that the operator is examining any risks involved in its
                                    cementing plan.

                                    Negative pressure test. Interior added new requirements specifying
                                    when an operator must conduct a negative pressure test—a test to verify
                                    the well is not capable of flow in the casing hole section being tested—
                                    and provide criteria for how it would successfully pass the test. Prior to
                                    the Deepwater Horizon incident and the recent interim final drilling safety
                                    rule, Interior officials told us that Interior did not have specific
                                    requirements for negative pressure tests. According to Interior officials, a
                                    negative pressure test lowers the pressure inside the wellbore to ensure
                                    that the casing and cement can withstand the pressure differential,
                                    separating the wellbore from the oil and gas reservoir. A blowout
                                    preventer is present during the test so that, if something goes wrong, it
                                    can be activated and prevent the release of oil or gas. According to an
                                    Interior official, failure to correctly interpret the negative pressure reading
                                    was likely a contributing factor to the well blowout in the Deepwater
                                    Horizon incident.

Data Suggest Drilling Permit        Our analysis of Interior’s data suggests that, as with the new
Review Times and Permit             requirements for exploration and development plans, Interior’s drilling
Returns Initially Increased after   permit review times and permit returns generally increased after the
New Safety and Environmental        Deepwater Horizon incident and Interior’s new safety and environmental
Requirements Were Enacted           requirements for drilling permits intended to improve safety went into
                                    effect. However, our analysis also suggests that review times and
                                    numbers of returns per permit have decreased somewhat in the most
                                    recent time frame, although not to levels prior to the Deepwater Horizon
                                    incident. Specifically, our analysis of Interior’s data from January 1, 2005,
                                    through September 30, 2011, found that after Interior added new
                                    requirements, the median review times initially increased for deepwater
                                    and shallow water new well and revised new well drilling permits. Returns
                                    per permit for both new well and revised new well permits, irrespective of
                                    water depth, also increased. Interior officials stated that, over time, both
                                    review times and returns per permit may decrease as Interior staff and



                                    62
                                      Since the passage of the National Technology Transfer and Advancement Act in 1996,
                                    federal agencies have been required to adopt private-sector standards, which would
                                    include standards published by the American Petroleum Institute (API), wherever
                                    practical, in lieu of creating their own proprietary, nonconsensus standards. These best
                                    practices are based on API 65 part 2.




                                    Page 46                                              GAO-12-423 Oil and Gas Management
operators become more familiar with the new policy requirements. And
while our analysis of Interior’s data suggests decreases in review times
and numbers of returns per permit, until several more years of post-
Deepwater Horizon incident data available, we can only present
preliminary results of the effects of the new permit requirements on permit
reviews.

Similar to our analysis of Interior’s reviews of exploration and
development plans, we examined three distinct time frames for Interior’s
drilling permit reviews: (1) routine drilling permit review operations from
January 1, 2005, through April 19, 2010;63 (2) a transition period when
Interior staff and operators were adjusting to new policies––October 12,
2010, through May 31, 2011, for deepwater drilling permits and June 8,
2010, through May 31, 2011, for shallow water drilling permits; and (3)
recent drilling permit reviews from June 1, 2011, through September 30,
2011.64 Dividing the post-Deepwater Horizon incident period into two time
frames allowed us to determine whether there had been a change in
permit processing since the early post-Deepwater Horizon incident time
frame and accompanying slowdown in reviews. Specifically, in dividing
the post-Deepwater Horizon period into two time frames, we did not
consider the outcome for any permits submitted in the first of these time
frames but approved in the second. Our methodology did not allow us to
use data for permits that were submitted in either time frame but not
approved prior to September 30, 2011. Therefore, we examined median
processing times only for those permits that were both submitted and
approved during a single one of these time frames and, as a result, some
of our analysis was based on a small number of permits. Due to this
limitation, our analysis should be viewed as provisional, awaiting the
passage of time and the availability of additional data to allow a more
detailed examination of post-Deepwater Horizon incident permit
processing times. In addition to our analysis of new well and revised new
well permits, we also examined permits for sidetracks, revised sidetracks,
bypasses, and revised bypasses.




63
  Analysis of drilling permits prior to 2005 was not possible due to Interior officials’
concerns about the reliability of the data.
64
  Our analysis did not examine review time frames for permits submitted from April 20,
2010, through June 7, 2010, for shallow water plans, and October 11, 2010, for deepwater
plans, due to the effect of policy changes and the deepwater drilling moratorium.




Page 47                                                  GAO-12-423 Oil and Gas Management
Deepwater drilling permits. Our analysis of Interior’s data on deepwater
new well drilling permits from January 1, 2005, through April 19, 2010,
found that 414 permits were submitted and approved within this time
frame. These permits had a median review time of 20 days, and Interior
returned the permits to the operator an average of about 1.57 times per
permit. For the policy transition period, from October 12, 2010, through
May 31, 2011, we found that 2 permits were submitted and approved
within the time frame. These permits had a median review time of 68
days, and Interior returned the permits an average of 3.5 times per
permit. For the most recent time frame—from June 1, 2011, through
September 30, 2011—we found that 8 permits were submitted and
approved within the time frame. These permits had a median review time
of 32 days, and Interior returned the permits an average of 3 times per
permit. See table 3 for information on all types of permits, including
revised new wells, sidetracks, revised sidetracks, and bypasses.




Page 48                                    GAO-12-423 Oil and Gas Management
Table 3: Review Time Frames and Average Number of Returns per Submission for All Types of Approved Deepwater Drilling
Permits

                                         New well                                               Revised new well
                                                            June 1, 2011,                                            June 1, 2011,
                          January 1,      October 12,           through      January 1, 2005,        October 12,         through
                       2005, through    2010, through      September 30,    through April 19,      2010, through    September 30,
                       April 19, 2010    May 31, 2011               2011                2010        May 31, 2011             2011
Number of                        414                  2                8                 687                  32               46
submittals
approved
Median days                       20                 68               32                   1                 3.5               0.5
from initial
submittal until
final approval
Average number                  1.57                 3.5               3                0.54                1.56              0.39
of returned
drilling permits
per approved
submittal


                                         Sidetrack                                              Revised sidetrack
                                                            June 1, 2011,                                            June 1, 2011,
                          January 1,      October 12,           through      January 1, 2005,         October 12,        through
                       2005, through    2010, through      September 30,    through April 19,       2010, through   September 30,
                       April 19, 2010    May 31, 2011               2011                2010         May 31, 2011            2011
Number of                        259                   5               5                 177                  13               13
submittals
approved
Median days from                   4                  23               5                   1                    0               1
initial submittal
until final
approval
Average number                  0.85                 3.6               1                0.32                 0.77            0.39
of returned drilling
permits per
approved
submittal




                                           Page 49                                               GAO-12-423 Oil and Gas Management
                                         Bypass                                                              Revised bypass
                                                                June 1, 2011,                                                    June 1, 2011,
                          January 1,      October 12,               through               January 1, 2005,       October 12,         through
                       2005, through    2010, through          September 30,                through April      2010, through    September 30,
                       April 19, 2010    May 31, 2011                   2011                     19, 2010       May 31, 2011             2011
Number of                        149                      7                          8                124                  8               10
submittals
approved
Median days from                   1                      1                         1.5                 1                 0.5              1.5
initial submittal
until final
approval
Average number                  0.55                 2.29                       0.75                 0.39                0.88              0.7
of returned drilling
permits per
approved
submittal
                                           Source: GAO analysis of Interior data.



                                           Shallow water drilling permits. Our analysis of Interior’s drilling permit
                                           data from January 1, 2005, through April 19, 2010, for shallow water new
                                           well drilling permits found that 1,105 permits were submitted and
                                           approved within the time frame. These permits had a median review time
                                           of 11 days, and Interior returned the permits to the operator an average of
                                           1.25 times per permit. For the policy transition period, from June 8, 2010,
                                           through May 31, 2011, we found that 43 permits were submitted and
                                           approved within the time frame. These permits had a median review time
                                           of 28 days, and Interior returned the permits an average of 2.37 times per
                                           permit. For the most recent time frame—from June 1, 2011, through
                                           September 30, 2011—we found that 18 permits were submitted and
                                           approved within the time frame. These permits had a median review time
                                           of 13.5 days, and Interior returned the permits an average of 2.11 times
                                           per permit. See table 4 for information on all types of permits, including
                                           revised new wells, sidetracks, revised sidetracks, and bypasses.




                                           Page 50                                                           GAO-12-423 Oil and Gas Management
Table 4: Review Time Frames and Average Number of Returns per Submission for All Types of Approved Shallow Water
Drilling Permits

                                        New well                                           Revised new well
                                                           June 1, 2011,                                        June 1, 2011,
                          January 1,    June 8, 2010,          through        January 1,    June 8, 2010,           through
                       2005, through through May 31,      September 30,    2005, through through May 31,       September 30,
                       April 19, 2010           2011               2011    April 19, 2010           2011                2011
Number of                      1,105                 43              18            1,246                92                27
submittals
approved
Median days                      11                  28             13.5               1                 2                 1
from initial
submittal until
final approval
Average number                  1.25             2.37              2.11             0.31              0.82               0.89
of returned
drilling permits
per approved
submittal


                                         Sidetrack                                         Revised sidetrack
                                                           June 1, 2011,                                        June 1, 2011,
                          January 1,    June 8, 2010,          through        January 1,    June 8, 2010,           through
                       2005, through through May 31,      September 30,    2005, through through May 31,       September 30,
                       April 19, 2010           2011               2011    April 19, 2010           2011                2011
Number of                       648                  75              21             492                  94               31
submittals
approved
Median days from                   4                 22              16                1                  1                1
initial submittal
until final
approval
Average number                  0.72               2.16            1.86             0.34               0.71             0.68
of returned drilling
permits per
approved
submittal




                                           Page 51                                         GAO-12-423 Oil and Gas Management
                                         Bypass                                                          Revised bypass
                                                                June 1, 2011,                                                June 1, 2011,
                          January 1,    June 8, 2010,               through                 January 1,    June 8, 2010,          through
                       2005, through through May 31,           September 30,             2005, through through May 31,      September 30,
                       April 19, 2010           2011                    2011             April 19, 2010           2011               2011
Number of                       377                     22                          10            233                 13               10
submittals
approved
Median days from                  1                       1                          1              1                  1                2
initial submittal
until final
approval
Average number                  0.38                 1.14                       0.80              0.26               0.38              0.7
of returned drilling
permits per
approved
submittal
                                           Source: GAO analysis of Interior data.



                                           According to Interior officials, there has been a learning process for both
                                           Interior and operators as the new drilling safety requirements went into
                                           effect. At least one of the new requirements related to blowout
                                           preventers—reviewing the schematics—was initially difficult for Interior’s
                                           engineers because, according to those officials, they did not have the
                                           expertise to review schematics. According to Interior officials, reviewing
                                           schematics involves printing the schematic, hanging it on a wall, and
                                           tracing every line on the blowout preventer to ensure that the blowout
                                           preventer is correctly configured. Interior staff reported that, after the first
                                           several blowout preventer schematic reviews, staff became more
                                           experienced. During their review of the schematics, Interior engineers
                                           found errors and notified the operators. In some instances, operators took
                                           up to 6 months to submit a corrected blowout preventer schematic to
                                           Interior. Interior officials reported that, prior to the Deepwater Horizon
                                           incident, there were 33 deepwater drilling rigs each with a subsea blowout
                                           preventer—typically the most complex blowout preventers that Interior
                                           reviews—deployed in the Gulf of Mexico. According to Interior officials,
                                           after Interior staff complete initial reviews of the remaining subsea
                                           blowout preventers, subsequent reviews should be more efficient
                                           because, if no changes are made to them, the operator may submit a
                                           statement certifying that no changes were made since Interior’s last
                                           review. Interior officials added that Interior does not require a third-party
                                           certification of blowout preventer schematics as it does, for example, for
                                           the casing design.




                                           Page 52                                                       GAO-12-423 Oil and Gas Management
                            Interior also reported mixed feedback from operators concerning the new
                            drilling safety requirements. Interior officials told us that some operators
                            stated that the requirements go beyond what is necessary to ensure the
                            safety of offshore drilling, while others stated that the requirements are
                            long overdue or expressed a desire to understand and comply with the
                            new requirements. Despite the mixed feedback from operators, Interior
                            officials expressed confidence that the new requirements would lead to
                            greater safety for offshore drilling. Going forward, agency officials stated
                            that drilling permit reviews should become more efficient as both Interior
                            and operators become more familiar with the new requirements. After
                            reviewing a draft of this report, Interior conducted its own analyses of
                            permit review times using a different methodology and a longer time
                            frame to show more recent trends. Similar to GAO’s analysis, Interior
                            found that review times have declined since the policy changes went into
                            effect and the deepwater drilling moratorium was lifted. See appendix IV
                            for additional details.


                            Interior’s inspections of Gulf of Mexico offshore oil and gas drilling rigs
Inspections Routinely       and production platforms routinely identified violations from January 1,
Identified Violations,      2000, through September 30, 2011, but the inspection program faced
                            several key challenges. Since the Deepwater Horizon incident, Interior
and Policy Changes          has made policy changes to its inspection program to improve program
Are Under Way to            oversight. Interior issued approximately $18 million in civil penalty
Improve Inspection          assessments during this period, and district managers generally agreed
                            with inspection staff recommendations to formally open civil penalty
and Civil Penalty           cases. Since the incident, Interior also made policy changes to improve
Programs                    its civil penalty program.


Interior’s Inspection       Our analysis of Interior’s inspection data from January 1, 2000, through
Program Routinely           September 30, 2011,65 found that approximately 8 percent of drilling rig
Identified Violations but   inspections and 28 percent of production platform inspections identified
                            violations. However, three key challenges hindered Interior’s inspection
Was Hindered by Three
                            program: (1) Interior did not generally meet its informal goal for
Key Challenges              conducting monthly drilling rig inspections, (2) Interior did not have a
                            formal policy for conducting announced versus unannounced inspections



                            65
                              Because the Deepwater Horizon incident was a unique event, inspection data presented
                            for 2010 may not be representative of normal Interior operations.




                            Page 53                                            GAO-12-423 Oil and Gas Management
until fiscal year 2012, and (3) Interior was missing about half of the data
on whether violations it identified were corrected.

Drilling rig inspection rates and violations. Our analysis of Interior’s
data on drilling rig inspection rates—the number of days a drilling rig was
on site divided by the number of inspections per month—indicates that
Interior met its informal drilling rig inspection goal in 1 of 11 years for the
period from January 1, 2000, through 2010,66 but it appeared likely to
meet its goal for 2011. The OCS Lands Act requires Interior to conduct
annual inspections for all offshore structures, and Interior, according to
Interior officials, developed an informal goal of inspecting active drilling
rigs monthly, which was never formalized in documented policy. During
the period of our analysis, the overall number of drilling rig inspections
generally declined from 2,208 in 2000 to 771 in 2009—the last calendar
year for which complete data were available prior to the Deepwater
Horizon incident; the decline was largely the result of reduced drilling
activity in the Gulf of Mexico, according to Interior officials. During this
same time period, the average drilling rig inspection rate varied from a
high of 1.15 per month in 2000 to a low of 0.61 per month in 2008 (see
fig. 8). According to Interior officials, Interior may be even less likely to
consistently meet this informal goal in future years for several reasons.
First, as oil and gas drilling activities move further offshore to develop
deepwater projects, travel times for inspections will increase, thereby
increasing the average time per inspection. Second, new safety
requirements Interior issued require operators to notify Interior at least 72
hours before blowout preventer testing to facilitate having Interior
inspection staff present to witness at least one of the tests. These new
requirements have required inspectors to remain on drilling rigs for
several days, thereby lengthening the time for each drilling rig inspection.
Additionally, inspection frequency can be greatly affected by weather,
especially in the winter months. Fog, high winds, and severe storms can
prevent inspectors from conducting inspections for many days.
Nonetheless, Interior continues to rely on its informal goal for inspecting
drilling rigs and has not assessed how new policy requirements and travel
times to deepwater drilling rigs would affect its ability to conduct these
monthly drilling rig inspections.



66
   Our analysis determined the drilling rig inspection rate by dividing the number of active
rig days on location by the number of inspections per 30 days. This analysis does not
indicate whether each drilling rig was inspected once every 30 days.




Page 54                                                 GAO-12-423 Oil and Gas Management
                                         Our analysis of drilling rig inspections found that the percentage of
                                         violations associated with drilling rig inspections remained within a small
                                         range during the period of our analysis. Specifically, from 2000 through
                                         2010, the percentage of inspections associated with violations ranged
                                         from 5 percent to 10 percent. However, data for the first 9 months of 2011
                                         indicate that over 19 percent of drilling rig inspections were associated
                                         with violations, the highest percentage we found (see fig. 8).

Figure 8: Drilling Rig Inspections, Violations, and Inspections per 30 Days, January 1, 2000, through September 30, 2011




                                         Note: Because the Deepwater Horizon incident was a unique event, data presented for 2010 may not
                                         be representative of normal Interior operations.


                                         When examining all categories of violations associated with drilling rigs
                                         during this period, we found that the 10 most frequent violations fell into
                                         three of Interior’s violation categories: (1) general operations, (2) drilling
                                         operations, and (3) pollution events. Specifically, 5 of the 10 most




                                         Page 55                                                  GAO-12-423 Oil and Gas Management
frequent violations were related to general operations,67 3 were related to
drilling operations, and 2 were related to pollution events.68 Overall, the
most frequent violation was in general operations––for example, the
inspector observed that the operator was not performing operations in a
“workmanlike manner,” among other criteria. In this case, a violation could
be issued if, for example, an inspector saw tools or other equipment lying
on the ground that could pose a safety hazard for other workers on the
rig. Other frequent violations for drilling operations were related to
technical deficiencies in testing blowout preventers.

Production platform inspection rates and violations. Our analysis of
Interior’s data on production platform inspection rates—the number of
production platforms divided by the number of inspections per year—
indicates that Interior generally exceeded its goal of annually inspecting
production platforms for the 11 years from January 1, 2000, through
2010,69 but it was uncertain whether it would meet its goal for 2011. When
examining Interior’s oil and gas production platform inspection data, we
found that Interior generally exceeded its goal of annually inspecting
production platforms. During the period of our analysis, the number of
production platform inspections generally declined from 4,249 in 2000 to
3,390 in 2010. When accounting for the number of production platforms in
the Gulf of Mexico during this period, Interior’s average inspection rate
ranged from a low of 1.03 per year in 2007 to a high of 1.29 per year in
2009. On average, approximately 28 percent of production platform
inspections were associated with violations, ranging from a low of
approximately 20 percent in 2008 to a high of 34 percent in 2010—a rate
higher than that for drilling rig inspections (see fig. 9).




67
  General operation violations include violations related to accident reporting and record
keeping.
68
  Pollution event violations include violations related to pollution prevention and oil spill
reports.
69
  Our analysis determined the production platform inspection rate by dividing the number
of production platforms by the number of inspections per year. This analysis does not
indicate whether each production platform was inspected once per year.




Page 56                                                  GAO-12-423 Oil and Gas Management
Figure 9: Production Platform Inspections, Violations, and Annual Inspections per Production Platform, January 1, 2000,
through September 30, 2011




                                         Note: Because the Deepwater Horizon incident was a unique event, data presented for 2010 may not
                                         be representative of normal Interior operations.


                                         When examining all categories of violations associated with production
                                         platforms during this period, similar to drilling rigs, we found that the 10
                                         most frequent violations fell into 3 categories: (1) production operations,
                                         (2) general operations, and (3) pollution events. Specifically, 5 of the 10
                                         most frequent violations were related to production operations, 4 were
                                         related to general operations, and 1 was related to a pollution event.
                                         Similar to drilling rig inspections, the most frequently issued violations
                                         were related either to inspectors observing unsafe work practices or
                                         unsafe conditions.

                                         Enforcement actions. We found that the severity of Interior’s
                                         enforcement actions in response to about half of all drilling rig and
                                         production platform violations issued from January 1, 2000, through
                                         September 30, 2011, were warnings, and the other half resulted in orders
                                         to either shut down the component in violation––such as a piece of
                                         equipment––or, if sufficiently serious, shut down the entire drilling rig or



                                         Page 57                                                  GAO-12-423 Oil and Gas Management
production platform. Specifically, our analysis of drilling rig enforcement
actions from January 1, 2000, through September 30, 2011, found that,
on average, approximately 60 percent of the violations were warnings, 20
percent were component or well shut down orders, and 20 percent were
drilling rig shutdown orders (see fig. 10).

Figure 10: Drilling Rig Enforcement Actions, January 1, 2000, through September
30, 2011




Note: Because the Deepwater Horizon incident was a unique event, data presented for 2010 may not
be representative of normal Interior operations.


Our analysis of production platform enforcement actions from January 1,
2000, through September 30, 2011, showed that, on average,
approximately 50 percent of the violations were warnings, 46 percent
were component or well shutdown requests, and about 4 percent were
production platform shutdown requests (see fig. 11).




Page 58                                                  GAO-12-423 Oil and Gas Management
Figure 11: Production Platform Enforcement Actions, January 1, 2000, through
September 30, 2011




Note: Because the Deepwater Horizon incident was a unique event, data presented for 2010 may not
be representative of normal Interior operations.


Interior officials explained that the financial cost incurred by the operator
associated with shutting down a production platform or drilling rig can be
significant. However, officials explained that the operator may be able to
correct the violation while the inspector is present, meaning that the
component or the production platform or drilling rig is not shut down. For
example, an operator may forget to open a safety valve after an
equipment test, which could result in a violation, as well as a mandatory
shut down of the production platform or drilling rig. However, since the
operator can immediately fix the problem, the facility would not be shut
down, but would still receive a violation.




Page 59                                                  GAO-12-423 Oil and Gas Management
Announced versus unannounced inspections. Interior has authority to
conduct both announced and unannounced inspections, but did not have
a documented policy to differentiate between them until fiscal year 2012.
For both drilling rigs and production platforms, we found that
unannounced inspections were associated with a greater number of
violations than were announced inspections from January 1, 2000,
through September 30, 2011. For example, we found that about 8 percent
of announced drilling rig inspections were associated with violations
compared to about 10 percent of unannounced inspections associated
with violations. Similarly, we found that 28 percent of announced
production platform inspections were associated with violations, whereas
approximately 45 percent of unannounced inspections were associated
with violations. The percentage of unannounced inspections of drilling rigs
per year varied from a low of zero percent in 2002 and 2003 to a high of
about 11 percent in 2009, and for production platforms, from a low of
approximately 1 percent in 2008 and 2009 to a high of about 11 percent
in 2000 (see fig. 12).




Page 60                                     GAO-12-423 Oil and Gas Management
Figure 12: Announced and Unannounced Inspections and Associated Violations, January 1, 2000, through September 30, 2011




                                        Note: Because the Deepwater Horizon incident was a unique event, data presented for 2010 may not
                                        be representative of normal Interior operations.




                                        Page 61                                                  GAO-12-423 Oil and Gas Management
Interior officials told us that conducting unannounced inspections can be
logistically challenging for several reasons. For example, without advance
notice to the drilling rig or production platform, Interior may have difficulty
landing a helicopter because the landing pad on the rig or platform may
be occupied by another helicopter, or operators may be actively using a
crane to move equipment, which prevents a safe landing. Additionally,
without advance scheduling, the operator may not have all of the
personnel available that the inspectors need to meet with to conduct the
inspection. Moreover, according to Interior officials, the resources
necessary to conduct annual announced inspections required under the
OCS Lands Act does not allow Interior inspectors much time to conduct
unannounced inspections. Interior officials stated that as more inspection
staff are hired and trained, they expect to conduct greater numbers of
unannounced inspections. Recently, Interior issued guidance to each of
its district offices informing them of the number of unannounced
inspections—including inspections of drilling rigs—required to be
conducted in fiscal year 2012.70 Specifically, each of the five district
offices in the Gulf of Mexico is required to conduct unannounced
inspections of 15 percent of all manned platforms or drilling rigs within
their district.

Violation correction dates. We also found that Interior did not record in
its TIMS IT system whether about half of the violations issued from
January 1, 2000, through September 30, 2011, were ever corrected,
raising questions about the safety of offshore oil and gas operations.
According to Interior’s policy, operators generally have 14 days to
respond to an issued violation. The operator is required to mail Interior a
copy of the violation along with steps taken by the operator to correct the
violation or request an extension for correcting the violation. According to
Interior officials, paper copies of this information should be retained in
Interior’s files and subsequently keyed into Interior’s electronic database.
However, when examining Interior’s data, we found that from January 1,
2000, through September 30, 2011, violation correction dates were
missing from Interior’s TIMS IT system for a significant number of
violations of varying levels of enforcement action. For example, for the
period examined, approximately 58 percent of warning violations were
missing a correction date, as were 42 percent of component shutdown


70
  According to Interior’s policy, the definition of an unannounced inspection is one that is
performed without prior notification; that is, the operator shall be notified only 20 minutes
before landing on the facility.




Page 62                                                 GAO-12-423 Oil and Gas Management
                                         violations and 44 percent of drilling rig or production platform shutdown
                                         violations. According to the standards for internal control in the federal
                                         government, agencies are to promptly record transactions and events to
                                         maintain their relevance to management in controlling operations and
                                         making decisions.71 Interior officials stated that they were uncertain why
                                         violation correction data was not consistently being entered into the TIMS
                                         IT system. Moreover, one official told us that, in some cases, violation
                                         data is entered into the TIMS IT system only after the violation is
                                         corrected. Because Interior is not recording data in an accurate and
                                         consistent manner, Interior management does not know on a real-time
                                         basis whether or when violations were identified or corrected, potentially
                                         allowing unsafe activities to continue (see fig. 13).

Figure 13: Missing Violation Correction Data by Severity of Violation, January 1, 2000, through September 30, 2011




                                         71
                                           GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
                                         (Washington, D.C.: November 1999).




                                         Page 63                                           GAO-12-423 Oil and Gas Management
Policy Changes Intended   Interior officials stated that numerous efforts and policy changes are
to Improve Inspection     under way to improve Interior’s inspection program in the aftermath of the
Program Are Under Way     Deepwater Horizon incident, including (1) hiring additional inspectors, (2)
                          considering specialization of inspection staff, (3) shifting from one-person
                          to two-person inspection teams, (4) requiring additional documentation of
                          inspections, and (5) requiring that inspectors witness blowout preventer
                          tests. Interior has not, however, expanded a 2009 voluntary pilot program
                          whereby inspection staff could electronically access and review operators’
                          records while onshore, allowing additional time to physically inspect
                          operations when offshore on a production platform or drilling rig.

                          Hiring inspectors. Interior determined that its inspection staff was too
                          small and not sufficient to carry out its new oversight responsibilities.
                          Since the Deepwater Horizon incident, Interior officials told us that, as of
                          March 2012, they hired 43 new Gulf of Mexico region inspectors while
                          losing 24, resulting in a net increase of 19 inspectors. Additionally, in April
                          2011, Interior reported it was creating a new training program for its
                          inspection staff. According to the new national training director, it may be
                          up to 2 years before new inspection staff are fully trained under the new
                          training program, meaning that while the number of inspectors has
                          increased, Interior’s inspection capacity has not necessarily increased
                          commensurately. However, Interior has not assessed how the numbers of
                          inspectors hired would affect its ability to conduct monthly drilling rig
                          inspections.

                          Specialization of inspectors. As of December 2011, Interior’s inspection
                          staff did not specialize in specific offshore activities, such as oil and gas
                          measurement, drilling, or well abandonment. However, Interior officials
                          reported that, given the complexity of the operations occurring, they are
                          initiating an inspection program whereby inspection staff specialize in
                          technical aspects of offshore oil and gas activities, such as drilling, with
                          the goal of conducting more effective and robust oversight. According to
                          several Interior officials, a more specialized inspection workforce would
                          result in more effective oversight. However, this effort is closely linked
                          with its newly established formal training program and the ability to hire
                          additional inspectors.

                          Inspection teams. In June 2011, Interior announced that it planned to
                          begin using multiple person teams to conduct inspections. Several Interior
                          officials stated that this approach should result in better oversight, but in
                          the short term, overall inspection numbers may temporarily decline
                          because moving from a one-person inspection team to two-person



                          Page 64                                        GAO-12-423 Oil and Gas Management
inspection teams will decrease the number of inspections in which each
inspector can participate in.

Documentation of inspections. Prior to the Deepwater Horizon incident,
Interior inspection staff did not always document what they examined
during inspections. According to several Interior officials, Interior
historically required inspectors to use a checklist to document their
inspections, but as inspection staff became more experienced over the
past 10 years, Interior stopped requiring such documentation. Since the
Deepwater Horizon incident, Interior officials told us that Interior has
again begun to require that inspectors document that all aspects of an
inspection were completed. Additionally, beginning in July 2011, Interior
began training inspectors for a pilot program using laptops, as opposed to
paper records, to document drilling inspections while offshore on a drilling
rig. According to an Interior official, the pilot program is an electronic-
based documentation system that provides inspectors with all of the data
they need to perform an inspection, including the inspection form in
electronic format.

Witnessing blowout preventer tests. As a result of the new safety
requirements, inspection staff are to witness blowout preventer tests to
better ensure that blowout preventers will work when needed. According
to Interior officials, these new inspections can take a long time because of
the difficulty coordinating the timing of a blowout preventer test with an
operator. As a result, inspectors may remain on a drilling rig for several
days waiting for the operator to complete the test, which prevents the
inspector from completing inspections on other drilling rigs or production
platforms.

Pilot program for electronic inspections of records. In 2008, Interior
implemented a pilot program called eInspection––a program that allows
operators to upload certain records related to oil and gas measurement to
an electronic database and enable inspectors to review the records
electronically from onshore, for example, on days when weather prevents
them from flying to drilling rigs or production platforms offshore. According
to an Interior official, while this program is still ongoing, it has not had
much participation from industry. To date, Interior has not implemented
similar programs for other types of inspections, such as drilling. Gulf of
Mexico region officials stated that improvements to eInspection could
significantly improve the use of agency and operator resources and
reduce costs. Specifically, they cited benefits such as (1) maintaining
productivity during bad weather; (2) limiting the number of expensive
helicopter flights; (3) improving inspection efficiencies through the division


Page 65                                       GAO-12-423 Oil and Gas Management
                               of inspection duties; and (4) allowing Interior to retain experienced staff
                               that can no longer meet the physical requirements for conducting offshore
                               inspections, such as periodic helicopter crash simulation training. Some
                               Interior officials cautioned that, despite the potential benefits of this
                               program, its expansion to other types of inspections would likely require
                               new regulations and could pose challenges for smaller operators that
                               might not currently store their records electronically.


Violations Resulted in         Our analysis of Interior data showed that from January 1, 2000, through
$18 Million in Civil Penalty   September 30, 2011, Interior issued approximately $18 million in civil
                               penalty assessments for violations associated with drilling rigs and
Assessments                    production platforms.72 During this period, inspectors referred violations
                               for consideration to formally open a civil penalty case, and Interior district
                               managers agreed with over 50 percent of inspectors’ referrals. Once a
                               civil penalty case was officially opened, most led to an assessment, which
                               took an average of 213 days to bring the case to resolution.

                               Violations associated with civil penalty assessments. We reviewed
                               Interior’s data on civil penalty assessments for violations associated with
                               drilling rigs and production platforms from January 1, 2000, through
                               September 30, 2011, and found that Interior issued about $18 million in
                               civil penalty assessments for such violations. Of this $18 million, about $2
                               million was assessed for drilling rig violations and $16 million for
                               production platform violations. Tables 5 and 6 show the number of total
                               violations, those violations that were assessed with civil penalties, and the
                               dollar amounts of those assessments for drilling rigs and production
                               platforms, respectively.




                               72
                                All civil penalty assessments are presented in nominal dollars.




                               Page 66                                              GAO-12-423 Oil and Gas Management
Table 5: Civil Penalties Associated with All Drilling Rig Violations, January 1, 2000, through September 30, 2011
                                                    Drilling rig violation not               Drilling rig violation
                                                             associated with                      associated with      Total amount of civil
Year                   Drilling rig violations                   civil penalty                        civil penalty     penalties assessed
2000                                      259                                         251                  8 (3 %)                $116,000
2001                                      305                                         301                  4 (1 %)                $102,000
2002                                      134                                         127                  7 (5 %)                $190,000
2003                                      166                                         165                  1 (1 %)                  $25,000
2004                                      119                                         114                  5 (4 %)                  $60,000
2005                                      153                                         148                  5 (3 %)                $268,000
2006                                      244                                         203               41 (17 %)                 $673,500
2007                                      154                                         148                  6 (4 %)                $242,000
2008                                       72                                          68                  4 (6 %)                  $40,000
2009                                      114                                         105                  9 (8 %)                $210,000
2010                                      113                                         109                  4 (4 %)                $115,000
       a
2011                                      211                                         206                  5 (2 %)
Total                                   2,044                                       1,945                 99 (5 %)               $2,041,500
                                           Source: GAO analysis of Interior data.
                                           a
                                            Data for 2011 are through September 30, 2011.



Table 6: Civil Penalties Associated with Production Platform Violations, January 1, 2000, through September 30, 2011
                                                        Production platform                  Production platform
                        Production platform         violation not associated                 violation associated      Total amount of civil
Year                             violations                 with civil penalty                  with civil penalty      penalties assessed
2000                                   3,988                                         3,863               125 (3 %)               $2,569,000
2001                                   3,864                                         3,700               164 (4 %)               $1,520,450
2002                                   3,423                                         3,349                74 (2 %)               $1,612,450
2003                                   2,997                                         2,975                22 (1 %)                $707,250
2004                                   3,093                                         3,036                57 (2 %)                $802,500
2005                                   2,389                                         2,339                50 (2 %)                $961,500
2006                                   2,392                                         2,293                99 (4 %)               $2,154,500
2007                                   2,291                                         2,247                44 (2 %)               $2,167,750
2008                                   1,597                                         1,561                36 (2 %)                $529,000
2009                                   2,130                                         2,096                34 (2 %)               $1,963,000
2010                                   2,821                                         2,776                45 (2 %)               $1,346,250
       a
2011                                   1,689                                         1,646                43 (3 %)                  $95,000
Total                                 32,674                                        31,881               793 (2 %)              $16,428,650
                                           Source: GAO analysis of Interior data.
                                           a
                                            Data for 2011 are through September 30, 2011.




                                           Page 67                                                         GAO-12-423 Oil and Gas Management
Interior may assess civil penalties at a daily rate, and such penalties can
accrue over time. For example, Interior may impose a single $40,000 civil
penalty assessment for a serious violation or a $5,000 per-day civil
penalty assessment for a less serious violation, resulting in a $40,000 fine
if the operator took 8 days to correct the violation. According to Interior
officials, data on civil penalty assessments—by day and by violation—
would be useful in examining civil penalty trends over time. However,
Interior’s TIMS IT system does not contain the data in a way that would
allow program managers to identify trends in the civil penalty program.
Because Interior management cannot readily distinguish whether civil
penalties were more frequently associated with significant violations that
were immediately corrected, as opposed to less serious violations that
were not immediately corrected, its ability to examine civil penalty trends
over time is limited.

Violation referrals for civil penalty case consideration. In examining
Interior’s civil penalty data from January 1, 2000, through September 30,
2011, we found that Interior’s district managers agreed with inspection
staffs’ recommendations to develop a violation for civil penalty review
about 56 percent of the time. According to Interior officials, when
inspection staff refer a violation for consideration for civil penalties, both
the district supervisory inspector and district manager review the violation
to verify that it meets the specified criteria for officially opening a civil
penalty case. Ultimately, the district manager determines whether to
officially develop a civil penalty case and forward the information to the
civil penalty case reviewing officer. Our analysis of Interior’s civil penalty
data found that inspection staff referred 1,439 violations for consideration
for civil penalties and that district managers agreed with inspectors for
802 of these violations, or about 56 percent of the violations (see fig. 14).




Page 68                                       GAO-12-423 Oil and Gas Management
Figure 14: Violations Flagged for Civil Penalty Consideration and District Manager Review, January 1, 2000, through
September 30, 2011




                                         Violations leading to civil penalty assessments. Our analysis found
                                         that once a district manager determined that a violation warranted
                                         consideration for a civil penalty assessment, Interior assessed a civil
                                         penalty in approximately 89 percent of these violations from January 1,
                                         2000, through September 30, 2011. Specifically, we found that of the
                                         1,232 violations considered for a civil penalty assessment, Interior
                                         assessed a civil penalty for 1,099 violations, or about 89 percent of the
                                         time (see fig. 15). Interior officials reported that during the time when a
                                         civil penalty reviewing officer develops the case, the reviewing officer may
                                         decide not to assess a civil penalty based on the available evidence.




                                         Page 69                                           GAO-12-423 Oil and Gas Management
Figure 15: Violations Considered for a Civil Penalty Assessment and Whether a Civil Penalty Was Assessed, January 1, 2000,
through September 30, 2011




                                        Duration of civil penalty cases. For the period reviewed, once a civil
                                        penalty case was officially opened, Interior spent an average of 213 days
                                        to bring the case to resolution. The days to complete a civil penalty review
                                        varied from a high of 323 days in 2003 to a low of 119 days in 2011, with
                                        a slight overall decline over time. Interior officials told us that the length of
                                        time to complete a review is a concern for them, and that they are
                                        planning to examine how to shorten the duration of civil penalty cases
                                        going forward (see fig. 16).




                                        Page 70                                          GAO-12-423 Oil and Gas Management
Figure 16: Duration of Civil Penalty Cases, January 1, 2000, through September 30, 2011




Policy Changes Intended                  Interior’s civil penalty program manager told us that Interior has initiated
to Improve Civil Penalty                 several efforts to reform the civil penalty program since the Deepwater
Program Are Under Way                    Horizon incident, including addressing human capital issues and
                                         responding to recommendations from the September 2010 report of
                                         Interior’s Outer Continental Shelf Safety Oversight Board.73

                                         Human capital. Interior officials reported that, in July 2011, the entire
                                         Gulf of Mexico civil penalty program comprised three staff: (1) an
                                         experienced civil penalty program manager who has since left the
                                         agency; (2) a full-time reviewing officer; and (3) a former Interior official



                                         73
                                           Interior, Outer Continental Shelf Safety Oversight Board Report to Secretary of the
                                         Interior Ken Salazar (Sept. 1, 2010).




                                         Page 71                                               GAO-12-423 Oil and Gas Management
                        who retired but was rehired on a temporary basis. More recently, in March
                        2012, Interior hired a new civil penalty program manager and one
                        additional full-time reviewing officer. As Interior increases the number of
                        inspection staff, Interior officials said they anticipate that the number of
                        violations referred for civil penalty review will also increase. According to
                        Interior officials, Interior is attempting to hire additional civil penalty
                        reviewing officers to help manage the workload.

                        Responding to recommendations. Interior is working to address four
                        recommendations from the Safety Oversight Board report according to
                        Interior officials. First, Interior is reevaluating the full range of its
                        enforcement actions, including fines, violations, and its ability to suspend
                        an operator’s lease. Second, Interior is considering whether certain
                        violations should be automatically associated with a fine, rather than
                        relying upon the civil penalty process to determine whether to fine an
                        operator. Third, Interior is working to reduce the time frames for the entire
                        civil penalty process, from referral to collection of a fine, and is developing
                        a civil penalty tracking database, so that management can provide more
                        effective oversight of the process. Fourth, Interior is examining its civil
                        penalty rate structure to determine whether current fine amounts should
                        be adjusted; however, Interior officials stated that any changes to the
                        current civil penalty rate structure would require new legislation or a
                        rulemaking.


                        Stakeholders typically provided their most substantive input on Interior’s
Stakeholders            proposed Gulf of Mexico oil and gas activities early in the lease sale
Generally Provided      planning process and varied in the extent to which they believed Interior
                        considered their concerns. Federal stakeholders said they provided most
Most Substantive        input while Interior was developing its Gulf of Mexico multilease sale EIS
Input on Oil and Gas    and that Interior was generally responsive to their concerns. State
Activities Early in     stakeholders indicated that their level of input varied and also said that
                        Interior was generally responsive to their concerns. Nongovernmental
Interior’s Lease Sale   industry stakeholder groups stated that Interior has not always been
Planning Process and    responsive to their concerns and that seemingly inconsistent plan and
                        permit review time frames have made it difficult for companies to plan
Reported That           operations, among other concerns. Nongovernmental conservation
Interior’s Response     stakeholders said that Interior was not always responsive to their
                        concerns. (See app. III for more information on federal and state
Was Mixed               governmental stakeholders.) Some federal and state stakeholders also
                        told us that opportunities to provide input have recently become more
                        limited because, in 2010, Interior did not renew the charter for a long-
                        standing stakeholder advisory committee.


                        Page 72                                        GAO-12-423 Oil and Gas Management
Federal Stakeholders         The federal stakeholders we contacted—officials from NOAA and FWS––
Provided Input to Interior   said that they generally submitted their most substantive input early in the
Early in the Lease Sale      lease sale planning process when Interior was developing its Gulf of
                             Mexico multilease sale EIS.74 NOAA and FWS officials told us that
Planning Process and
                             historically, they did not review or comment on postlease oil and gas
Believed Interior Was        activities, including reviewing exploration and development plans and
Generally Responsive to      drilling permits. Various officials at both agencies told us that Interior was
Their Concerns               generally responsive to their concerns (see app. III for detailed
                             information on stakeholder input).

NOAA                         According to NOAA officials, until the Deepwater Horizon incident, NOAA
                             provided its most substantive input early in the lease sale planning
                             process, when Interior was developing its Gulf of Mexico multilease sale
                             EIS. Specifically, NEPA regulations direct federal agencies to prepare
                             NEPA analyses, such as EIS documents, concurrently and integrated
                             with other environmental impact analyses to the fullest extent practicable.
                             As such, NOAA’s implementation of its responsibilities under the
                             Endangered Species Act, Magnuson-Stevens Fishery Conservation and
                             Management Act, and Marine Mammal Protection Act, generally
                             overlapped with Interior’s Gulf of Mexico multilease sale EIS process.
                             NOAA officials explained that, by informally providing input to Interior as it
                             developed its Gulf of Mexico multilease sale EIS,75 NOAA could ensure
                             that the information necessary to complete its consultations under the
                             Endangered Species Act and the Magnuson-Stevens Fishery
                             Conservation and Management Act were included, as well as any
                             required mitigation measures. As long as these mitigation measures were
                             enforced by Interior, and as long as no new information became available
                             that would require Interior to update the Gulf of Mexico multilease sale
                             EIS, NOAA officials stated that no additional consultations were
                             necessary. As a result, NOAA generally did not request or receive
                             exploration and development plans or drilling permits. (See app. III for
                             more information on NOAA’s input into Interior’s proposed Gulf of Mexico
                             oil and gas activities from 2002 through January, 2012.)



                             74
                               FWS is part of Interior. Therefore, for the purposes of this report, when we state that
                             FWS provided input to Interior, we are stating that FWS provided input to the part of
                             Interior responsible for overseeing offshore oil and gas activities.
                             75
                               In this context, informal means that NOAA did not provide its most substantive input
                             through formally commenting on draft Gulf of Mexico lease sale EISs, rather NOAA staff
                             communicated with Interior staff on an ongoing basis via telephone calls and e-mails to
                             provide input into Interior’s Gulf of Mexico lease sale EISs.




                             Page 73                                                GAO-12-423 Oil and Gas Management
NOAA officials told us that Interior has generally been responsive to their
input regarding oil and gas development in the Gulf of Mexico, although
they have disagreed over how to assess the effects of seismic
technologies––frequently used by operators to explore the Gulf of Mexico
for oil and gas––on marine mammals. Overall, NOAA officials reported
that their primary concerns about oil and gas development in the Gulf of
Mexico are the potential effects on marine mammals and fish, including
damage to coral reefs, marine debris, vessel strikes of marine life, the risk
of an oil spill, and the effects of seismic activities on marine life. Of these
issues, assessing the effects from seismic activities on marine mammals
has been one of the more challenging issues. Typically, when operators
explore for oil and gas in the Gulf of Mexico, they use various seismic
technologies that emit powerful sound waves into the water and seafloor
to facilitate identifying potential oil and gas resources. According to NOAA
officials, the use of these technologies can negatively affect marine
mammals, predominantly through behavioral disturbance, but also
potentially through hearing impairment or physical injury. NOAA and
Interior have been working toward addressing these issues and ensuring
environmental compliance for about 10 years.

Since the Deepwater Horizon incident, NOAA officials told us that they
have reviewed oil spill analyses included in past Gulf of Mexico multilease
sale EIS documents. NOAA officials stated that they believe that Interior
made a good faith effort to provide accurate scientific data and risk
analysis; however, in retrospect, NOAA officials also said that they
believe Interior could improve these analyses. For example, NOAA
officials told us that it would be difficult to determine the full effect of an oil
spill, such as the direction of oil flow and how the oil would affect unique
marine life, without better baseline research.76 At the same time, NOAA
officials acknowledged Interior faces financial and technical challenges in
obtaining higher quality data.

In addition, on May 19, 2011, Interior and NOAA signed an MOU intended
to ensure greater communication and collaboration on oil and gas



76
   NOAA officials reported that baseline research, as well as short/long-term monitoring
and ocean observing, are important to the oil and gas permitting process in the Gulf of
Mexico. At the October 2011 Deepwater Horizon Oil Spill Principal Investigator
Conference researchers emphasized that there is a lack of baseline information related to
living marine resources in the Gulf of Mexico, and that the collection of information is very
important to understanding ecosystem processes and oil spill response.




Page 74                                                GAO-12-423 Oil and Gas Management
      development in the Gulf of Mexico. Specifically, the MOU established a
      formal agreement regarding the agencies’ coordination and collaboration
      to ensure that decision making related to the development of oil and gas
      on the OCS is based on relevant scientific information and both agencies’
      expertise and respective responsibilities and authorities. The MOU
      specifies that NOAA and Interior will cooperate and coordinate by: (1)
      defining specific processes to ensure effective and timely communication
      of agency priorities and upcoming activities; (2) identifying and
      undertaking critical environmental studies and analyses; (3) collaborating
      on scientific, environmental, and technical issues related to offshore
      renewable energy technologies; and (4) increasing coordination and
      collaboration on public announcements related to OCS activities,
      including with respect to research and scientific priorities. For example,
      the MOU created more formal procedures for NOAA’s involvement with
      Interior’s OCS energy-related programs and environmental analyses and
      established quarterly meetings for Interior and NOAA senior leadership to
      discuss topics relevant to OCS resource development. Under the MOU,
      NOAA will have a clear role in commenting on both management and
      science issues and ensuring that both areas receive appropriate
      attention. When we spoke with a NOAA official about this MOU in July
      2011, the official reported that meeting the requirements of the MOU
      would require additional resources and that NOAA had not yet
      determined how the specific details of the MOU would be implemented.

FWS   According to FWS officials, FWS also provided its most substantive input
      early in the lease sale planning process, when Interior was developing its
      Gulf of Mexico multilease sale EIS. Similar to NOAA, FWS did not
      typically receive or comment on postlease activities, such as individual
      exploration and development plans and drilling permits.77 Again, because
      NEPA regulations direct federal agencies to prepare EIS documents
      concurrently and integrated with other environmental impact analyses to
      the fullest extent practicable, FWS’s implementation of its Endangered
      Species Act responsibilities generally overlap with Interior’s Gulf of
      Mexico multilease sale EIS process. FWS officials explained that by
      informally providing input to Interior as it develops its Gulf of Mexico
      multilease sale EIS documents, FWS can ensure that the information


      77
        According to FWS officials, Interior does request that FWS review each individual lease
      sale EA covered by the 5-year consultation as they are prepared. The purpose of this
      review is for Interior to verify that the proposed action has not changed and to ensure that
      there is no new endangered species information that would need to be addressed.




      Page 75                                                GAO-12-423 Oil and Gas Management
necessary to complete its consultations under the Endangered Species
Act are included, as well as any measures Interior has included to
minimize the potential for adverse effects. As long as these measures are
enforced by Interior, and no new information becomes available that
would require Interior to update the EIS, FWS officials stated that no
additional consultations are necessary. As a result, FWS generally did not
request or receive exploration and development plans or drilling permits.
(See app. III for more information on FWS’s input into Interior’s proposed
Gulf of Mexico oil and gas activities for 2002 through 2012.)78

FWS officials reported that Interior has generally been responsive to their
concerns regarding proposed oil and gas activities in the Gulf of Mexico
since 2002 relating to (1) emergency contingency plans, (2) oil spill risk
analyses, and (3) the effects of oil spills on coastal areas.

   Emergency contingency plans. FWS officials reported that, during a
    2001 consultation related to proposed oil and gas activities from 2003
    through 2007, it recommended that Interior continues to require
    operators to prepare adequate hazardous spill contingency plans for
    all activities. Further, FWS recommended that such plans include
    strategic placement of appropriate spill cleanup equipment, personnel
    training in nonintrusive cleanup technique, and demonstration of
    response commitment, capabilities, and implementation. Interior,
    according to FWS officials, has since required all operators to have
    such a plan.

   Oil spill risk analyses. FWS officials told us that they asked to be
    involved early in the process to model oil spill risk in support of the
    Gulf of Mexico multilease sale EIS documents. FWS officials stated
    that, in their 2001 review of the oil spill models that Interior used in its
    final Gulf of Mexico 2003 to 2007 multilease sale EIS, they raised
    concerns about assumptions and methodologies that Interior used in
    preparing the models. FWS requested additional information, which
    Interior provided, ultimately alleviating many of FWS’s concerns.




78
  FWS’s responsibilities in the OCS under the Endangered Species Act consist primarily
of cooperating and assisting other Federal agencies (in this case Interior) to meet their
requirements under the act. This is accomplished when another agency presents an
action for FWS’s review and comment. Depending on the effects to listed species, the end
result would be a concurrence letter or biological opinion written by FWS to Interior.




Page 76                                              GAO-12-423 Oil and Gas Management
                                  Effects of coastal spills. FWS officials said that they raised concerns
                                   about the effect of coastal spills from pipelines and near shore activity
                                   associated with the OCS leasing program. According to FWS officials,
                                   oil spills can occur along the coastline when pipelines are ruptured,
                                   such as in the event a shrimp trawler punctures a pipeline on the
                                   seafloor. To respond to this concern, FWS officials told us that Interior
                                   must now address the potential effects on the coastal habitats of
                                   endangered species from pipelines and other near shore activities
                                   associated with the Gulf of Mexico leasing program

                              Since the Deepwater Horizon incident, FWS officials told us that their
                              concerns about oil and gas development in the Gulf of Mexico have
                              evolved. For example, FWS officials said that they believed that
                              deepwater drilling was much more likely to adversely affect species that
                              fall under NOAA’s jurisdiction, such as fish and marine mammals.
                              However, the presence of tar balls on beaches along the Gulf Coast after
                              the Deepwater Horizon incident, which could negatively affect resources
                              under FWS’s jurisdiction, has led FWS to consider taking more
                              precautions when reviewing Interior’s Gulf of Mexico multilease sale EIS
                              documents that include proposed deepwater oil and gas development.
                              FWS officials reported telling Interior that they would like more detailed
                              information and validated scientific modeling in Interior’s NEPA
                              documents, particularly concerning oil spill risk analysis and cumulative
                              effects of oil and gas activities. Despite the shifts in concerns, FWS told
                              us that they planned no major policy or programmatic changes.


States’ Input to Interior     Stakeholders from the five Gulf of Mexico coastal states—Alabama,
Varied, and State Officials   Florida, Louisiana, Mississippi, and Texas—varied in how they provided
Indicated That Interior       input to Interior.79 Of the five states, two provided comments on Interior’s
                              Gulf of Mexico multilease sale EIS documents, according to state officials,
Was Generally Responsive
                              and several of the states commented on specific lease sale EIS
to Their Concerns             documents. Officials from all five states reported conducting consistency
                              reviews in accordance with the Coastal Zone Management Act, and one
                              state—twice in the 1990s—found that a proposed oil and gas project in
                              the Gulf of Mexico was inconsistent with its Coastal Zone Management



                              79
                                The stakeholders who provided this input were state officials who participated in
                              conducting consistency reviews under the Coastal Zone Management Act, and therefore
                              do not represent the full scope of interaction between Interior and state government
                              officials.




                              Page 77                                            GAO-12-423 Oil and Gas Management
Plan. Officials from all five Gulf of Mexico coastal states told us that
Interior has generally been responsive to input they provided about its
proposed oil and gas development activities in the Gulf of Mexico, but this
responsiveness has varied over time; officials from several states said
that they still have concerns associated with oil and gas development in
the Gulf of Mexico, including wetland loss, oil spills, and potential effects
on both state coastal tourism and deep-sea species and habitats. (See
app. III for more information on states’ input into Interior’s proposed Gulf
of Mexico oil and gas activities for 2002 through 2012.)

   Alabama. Officials from the Alabama Department of Environmental
    Management stated they were satisfied with Interior’s ability to
    address their comments even in instances in which they disagreed.
    Officials explained that both the tourism and fisheries industries are
    present along the Alabama coast and that they take into consideration
    any potential effects that oil and gas drilling activities might have on
    these industries when reviewing Interior’s oil and gas NEPA
    documents. For example, a primary concern to these officials, which
    was communicated to Interior in 2007, was that they did not want
    visible structures—such as drilling rigs or production platforms—along
    the state’s coastline.

   Florida. Officials from the Florida Department of Environmental
    Protection characterized Interior as being responsive to their input.
    Officials explained that their primary concern with oil and gas activities
    in the Gulf of Mexico was the possibility that an oil spill—whether from
    a pipeline rupture or well blowout similar to the Deepwater Horizon
    incident—could affect the state’s coastal tourism industry. Of the
    coastal states we reviewed, Florida is unique in that its coastal waters
    are in Interior’s Eastern Planning Area of the Gulf of Mexico, which
    has had a moratorium on new oil and gas leasing since 1988.
    However, in 2000, Interior proposed a lease sale that could include
    areas in the Eastern Planning Area of the Gulf of Mexico. Florida
    officials, including the Governor, requested that the lease sale be
    canceled due to long-standing concerns about possible effects on
    tourism. According to Florida officials, Interior ultimately reduced the
    size of the area being leased by eliminating areas closest to Florida’s
    coastline.

   Louisiana. Officials from Louisiana’s Department of Natural
    Resources’ Office of Coastal Management stated that, while
    historically, they did not find Interior to be responsive to their input,
    Interior has been more responsive over the past 2 years.
    Furthermore, these officials stated that relationships with Interior staff,


Page 78                                        GAO-12-423 Oil and Gas Management
    as well as the NEPA and other related documents that they produced,
    have greatly improved since the Deepwater Horizon incident. Officials
    explained that they are very supportive of OCS leasing and offshore
    oil and gas development in the Gulf of Mexico but that they still have
    specific concerns. Officials explained that Louisiana supports the
    expansion of exploration and development of Gulf energy resources,
    and all of the nation’s natural resources, and believes this is critical to
    the nation’s economic and energy security. However, concerns about
    how some aspects of OCS leasing are conducted and royalties
    distributed led Louisiana’s Department of Natural Resources to file
    two lawsuits against Interior in 1991 and again in 2006. The 2006
    lawsuit—settled in Louisiana’s favor—was filed as a result of
    Louisiana’s long-standing concerns about the techniques used by
    Interior in its NEPA analyses. State officials told us that Interior had
    improved, but a report issued by the state in September 2009
    identified eight remaining concerns. Specifically, the state was
    concerned about the adequacy of Interior’s analysis of the indirect,
    secondary, or cumulative effects of lease sales, and that Interior has
    not verified its predictions of potential environmental and
    socioeconomic analyses included in its NEPA documents. Louisiana
    state officials contend that these secondary and cumulative effects
    cannot be directly attributed to one specific act or event, yet clearly
    there are secondary and cumulative effects of the development that
    result from federal lease sales. Louisiana state officials told us that the
    lease sale stage is the point at which all such potential effects should
    be addressed because the lease sale is the gateway to any
    subsequent exploration and development activity within the affected
    area.

   Mississippi. Officials from the Mississippi Department of Marine
    Resources stated that they were satisfied with Interior’s response to
    their concerns and that they have not had problems cooperating with
    Interior. Similar to Alabama, officials told us the state’s primary
    concern prior to Hurricane Katrina in 2005 was the drilling of oil and
    gas wells within 15 miles of the Gulf Island National Seashore’s
    shoreline.

   Texas. Officials from the Texas General Land Office stated that,
    overall, they have had a good working relationship with Interior and
    that collaboration has been effective. Officials stated that they are
    primarily concerned about protecting Texas’s coastal areas and, in
    particular, its wetlands, beaches, and oyster reefs. Officials stated that
    Interior’s plans for oil and gas activities have seldom caused concern
    about possible effects to these areas.


Page 79                                        GAO-12-423 Oil and Gas Management
                           Since the Deepwater Horizon incident, officials from all five states told us
                           that no major changes in policies for reviewing Interior’s Gulf of Mexico
                           multilease sale EIS and other lease sale EIS documents or conducting
                           consistency reviews have occurred.


Nongovernment              The nongovernment stakeholders we contacted—representatives from oil
Stakeholders Said They     and gas industry associations and conservation groups—expressed
Had Few Opportunities to   frustration with the level of input they can provide to Interior and told us
                           that Interior has not always been responsive to their concerns.
Provide Input and That
Interior Was Not Always
Responsive to Their
Concerns

Oil and Gas Industry       Representatives from oil and gas industry associations told us that they
                           were satisfied with the process for providing comments on Interior’s Gulf
                           of Mexico lease sales, but that since the Deepwater Horizon incident,
                           there has been much uncertainty regarding Interior’s review and
                           approvals of plans and permits. One representative from an oil and gas
                           association stated that member companies had specified four key issues
                           of concern. First, companies reported inconsistent time frames for
                           reviews of plans and permits, making it difficult for companies to plan
                           operations. Second, companies raised concerns that Interior’s staffing
                           was insufficient to review the plans and permits in a timely manner and
                           that Interior staff were uncertain how to comply with new requirements for
                           plans and permits. Third, companies stated that recently issued guidance
                           on new requirements were sometimes contradictory, complicating an
                           operator’s efforts to comply with Interior’s new policies. Fourth,
                           companies raised concerns that Interior’s reliance on notices to lessees
                           and operators amounted to de facto rulemaking outside of the standard
                           regulatory process, which generally results in less opportunity for public
                           comment. Another oil and gas association representative told us that
                           Interior’s new policies have been difficult to interpret and that Interior has
                           had to return both exploration and development plans and drilling permit
                           applications to operators for corrections, increasing Interior’s review times
                           and delaying approvals. Interior has taken several steps to address this
                           uncertainty, including holding workshops on new policies and making
                           checklists available to provide greater assurance that all required
                           information is submitted with the drilling permit.




                           Page 80                                       GAO-12-423 Oil and Gas Management
Conservation Groups   Representatives of conservation groups we contacted expressed
                      frustration with identifying and accessing operators’ exploration and
                      development plans and drilling permits in advance of Interior approvals.
                      Specifically, a conservation group representative told us that the group
                      believed Interior did not routinely make exploration or development plans
                      or drilling permits available to the public for comment prior to approval,
                      and only placed them on its website after being approved. Another
                      representative stated that her conservation group had difficulty locating
                      and commenting on drilling permits and believed that drilling permit
                      information is made available on Interior’s website only after drilling
                      approval. Additionally, representatives from conservation groups told us
                      that Interior’s website—the principal mechanism to obtain information on
                      proposed oil and gas activities—was difficult to navigate. For example,
                      one representative told us that the website lacked a user friendly
                      mechanism to identify and locate exploration and development plans,
                      stating that it was necessary to know the plan number in order to search
                      for the plan. As a result, conservation group representatives generally
                      expressed dissatisfaction with the amount of information—including
                      exploration and development plans and drilling permits—Interior makes
                      available to the public for oil and gas activities in the Gulf of Mexico.

                      Representatives from several conservation groups reported that Interior
                      was generally not responsive to concerns they raised about oil and gas
                      activities in the Gulf of Mexico. These representatives reported a range of
                      ongoing concerns, including their view that Interior’s management of the
                      Gulf of Mexico has been biased toward development of oil and gas and
                      that there has been a lack of thorough scientific analyses in leasing
                      decisions. Specifically, conservation group representatives said they
                      believed that Interior had relied too heavily on the use of categorical
                      exclusions in approving oil and gas activities as opposed to conducting
                      more thorough, site-specific scientific analyses. A representative from one
                      group stated that either NOAA or another independent scientific agency
                      should have the authority to deny a project when it poses a significant
                      threat to the Gulf of Mexico.

                      Conservation group representatives also raised concerns that the
                      technology for deepwater drilling may have outpaced oil spill containment
                      and cleanup technologies and the government’s capacity to either prevent
                      or address spills when they occur. Compounding that concern was a
                      belief that Interior was too reliant on industries’ own assessment of the
                      new containment technologies. Additional concerns these representatives
                      raised included effects to marine mammals from seismic technologies,
                      vessel collisions with marine mammals, and oil spills and other


                      Page 81                                     GAO-12-423 Oil and Gas Management
                             discharges. Because Interior had not addressed their concerns
                             sufficiently, a number of lawsuits have been filed against the Secretary of
                             the Interior for reasons including Interior’s use of categorical exclusions
                             for approving oil and gas activities and continued permitting of seismic
                             activities.


Interior Did Not Renew the   In 2010, opportunities for stakeholders to provide input to Interior about
Charter for a Key            offshore leasing activities became more limited because Interior did not
Stakeholder Advisory         renew the charter for a key stakeholder advisory committee—the OCS
                             Policy Committee—that had existed since 1975 and consisted of
Committee in 2010            stakeholders representing federal and state agencies, conservation
                             groups, and industry associations, among others. Under the implementing
                             regulations for the OCS Lands Act, Interior is required to periodically
                             consult with key stakeholders, including state and local governments, oil
                             and gas lessees (operators), and other individuals engaged in OCS
                             activities. Interior’s regulations have historically called for consultation
                             between the Secretary of the Interior and OCS stakeholders to take
                             place, in part, through the OCS Policy Committee.80 The committee’s
                             charter called for the committee to review and comment on all aspects of
                             leasing, exploration, development, and protection of OCS resources and
                             states that the committee provides a forum to convey the views
                             representative of coastal states, local governments, offshore industries,
                             environmental communities, other offshore users, and the public. In
                             addition, federal standards for internal control state that federal managers
                             should ensure that there are adequate means of communicating with, and
                             obtaining information that may significantly affect the ability of an agency
                             to achieve its goals from external stakeholders.81

                             In 2010, however, Interior did not renew the committee’s charter. Several
                             stakeholders who were former committee participants told us that the
                             committee was an effective mechanism for providing input directly to the
                             Secretary of the Interior and said that they would have liked to have been
                             consulted about actions Interior took after the Deepwater Horizon
                             incident. A senior Interior official said that the committee’s charter was
                             allowed to lapse because Interior was actively deciding how best to meet
                             the committee’s goals, given the increasing complexity of the energy


                             80
                              30 C.F.R. §256.19.
                             81
                              GAO/AIMD-00-21.3.1.




                             Page 82                                      GAO-12-423 Oil and Gas Management
                       industry. The official further explained that the committee’s value to
                       Interior has varied over time and that the committee was most successful
                       when it was charged with a specific task, such as examining issues
                       related to the leasing moratorium in the Eastern Planning Area of the Gulf
                       of Mexico. The official stated that reestablishing the committee is an open
                       item for Interior and may be discussed in the future following the
                       reorganization. In the meantime, the official said that industry and
                       environmental groups have other means of providing input to Interior such
                       as meeting directly with Interior officials. Additionally, while Interior no
                       longer has an advisory committee that provides input on leasing on the
                       OCS, the Interior official stated that Interior established a new advisory
                       committee—the Ocean Energy Safety Advisory Committee—to provide
                       input on offshore energy safety. Specifically, this committee is a
                       collaborative initiative among government, industry, academia, and
                       nongovernmental organizations to advise on matters and actions relating
                       to offshore energy safety, including, but not limited to, drilling and
                       workplace safety, well intervention and containment, and oil spill
                       response. Interior officials also stated that they have heard the concerns
                       of stakeholders through frequent workshops, meetings, and public
                       comment periods. They note that Interior’s leadership and staff have
                       spent numerous hours devoted to outreach efforts. Interior officials also
                       stated that a Federal Advisory Committee Act (FACA) committee may not
                       always be the most effective manner to receive stakeholder input, and
                       with other outreach measures in place, officials said they do not believe
                       the absence of this committee reflects an internal control compliance
                       issue. Interior has stated that it has an open door policy for all
                       stakeholders, conducting numerous public outreach meetings;
                       stakeholder meetings; public comment periods; meetings with industry,
                       state and local officials, and nongovernment organizations; and
                       workshops and conferences.


                       Since its reorganization, Interior faces six key challenges in its oversight
Following Interior’s   of offshore oil and gas activities in the Gulf of Mexico. These challenges
Reorganization, Key    include Interior’s ability to: (1) prospectively categorize drilling operations
                       according to risk; (2) implement effective IT systems; (3) hire, retain, and
Challenges Remain      train qualified staff; (4) respond to recommendations from external
                       reviews; (5) develop and implement timely and effective regulations; and
                       (6) adapt to constrained resources.




                       Page 83                                        GAO-12-423 Oil and Gas Management
Interior Has Taken Steps    Since the Deepwater Horizon incident, Interior has taken steps to identify
to Identify and Evaluate    and evaluate drilling risks, but its capacity to do so remains limited.
Drilling Risks, but Its     Federal standards for internal control state that agency management
                            should identify relevant risks from internal and external sources and
Capacity to Do So Remains   analyze their potential effects.82 Such an analysis generally includes
Limited                     estimating the risk’s significance, assessing the likelihood of its
                            occurrence, and deciding how to manage the risk and what actions
                            should be taken. Interior officials stated that they have the technical
                            capacity to prospectively categorize proposed drilling operations
                            according to risk but they have not done so, though they acknowledged
                            such an effort could improve Interior’s oversight of offshore oil and gas
                            activities. Prospectively categorizing risk helps ensure that oversight
                            resources are effectively allocated.

                            Interior officials told us they can devote additional resources to certain
                            drilling operations that they believe may be challenging. For example,
                            Interior officials told us that district engineers are aware that drilling
                            certain wells is likely to pose greater risks, such as drilling exploratory
                            wells and wells at depths greater than 15,000 feet, and may require a
                            more rigorous review. More recently, since the Deepwater Horizon
                            incident, Interior officials told us that Interior, in a joint effort with industry,
                            developed a well containment screening tool to assess well design, the
                            geology surrounding the well site, reservoir pressures, and wellbore fluid
                            gradient requirements. According to these officials, the screening tool is
                            primarily intended to assess whether a well may be contained following a
                            subsea well blowout, but that they also use the screening tool to evaluate
                            overall well design based on risk.

                            Interior officials told us that once drilling is under way, district engineers
                            receive from operators weekly well activity reports, which they review to
                            ensure compliance with the specifications contained in the drilling permit.
                            Each weekly well activity report also includes a checklist of 12 “significant
                            events,” including such items as rig failure, well kick occurrence, and
                            stuck drilling pipe.83 Interior officials told us that systematically analyzing


                            82
                              GAO/AIMD-00-21.3.1.
                            83
                              A well kick is an entry of water, gas, oil, or other formation fluid into the wellbore during
                            drilling. It occurs when the pressure exerted by the column of drilling fluid is not great
                            enough to overcome the pressure exerted by the fluids in the formation drilled. If prompt
                            action is not taken to control the kick, or kill the well, a blowout may occur. A stuck pipe is
                            when a drill pipe has inadvertently become immovable in the wellbore.




                            Page 84                                                  GAO-12-423 Oil and Gas Management
these reports could provide information on drilling risk. For example,
based on the information in these reports, Interior may be able to improve
its data on what geographic areas, specific drilling rigs, or operators are
associated with higher risks for drilling operations, which could allow them
to better prospectively categorize drilling risks. However, Interior officials
told us they have not had the resources to systematically analyze data
reported in the weekly well activity reports. In addition, Interior has not
specifically defined all “significant events.” As a result, even if Interior had
the resources to analyze its weekly well activity reports, it may find that
the information they contain on the 12 significant events is inconsistent
because the agency does not have clear definitions for some of these
significant events.

Interior officials also told us that district engineers who have concerns
about a particular well may request additional inspections of certain
drilling operations, although when such requests are made, Interior does
not track them in its TIMS IT system. Additionally, Interior has a
documented policy to more frequently inspect operators that have poor
performance records. Specifically, Interior generates a monthly operator
compliance report that includes operators and specific facilities that
require special on-site inspections or attention based on their compliance
history. Interior’s district offices can include an operator on this report
based on several criteria, including violations that resulted in a serious
injury or fatality and violations forwarded for civil penalty reviews. Once
an operator or facility is included in this report, Interior’s policy is to
inspect its operations at least once every 4 months, using a combination
of announced and unannounced inspections, among other actions.
Interior removes the operator or facility from the report when it determines
that the operator’s performance and compliance history improves.
However, an Interior official told us that Interior did not begin to
systematically track which operators were included on the compliance
report and their associated inspection in its TIMS IT system until 2011.
Accordingly, we were unable to verify the extent to which operators were
included on the monthly operator compliance report and whether those
operators were inspected according to Interior’s policy. Overall, Interior
remains unable to demonstrate how it deploys its inspection resources in
such a manner that takes into account a prospective categorization of
drilling according to risk, whether the risk is technical—such as drilling
into high pressure, high temperature reservoirs—or associated with
operators or facilities with a history of poor compliance.

Some entities have expressed concern that Interior does not have a
policy to categorize proposed drilling operations based on risk. In January


Page 85                                        GAO-12-423 Oil and Gas Management
2011, the report of the National Commission on the BP Deepwater
Horizon Oil Spill and Offshore Drilling recommended that Interior, with the
help of the National Academy of Engineering, cultivate and maintain
expertise on offshore drilling safety by identifying criteria and establishing
a methodology for assessing high-risk wells in collaboration with the U.S.
Geological Survey, the Department of Energy, NOAA, and academia, and
developing the capability to perform sophisticated risk assessments.84
Interior officials told us that, while they have taken some actions related to
the recommendation, they have not specifically followed through with the
recommendation, and an official from the National Academy of
Engineering told us that it was unaware of any ongoing discussions
between Interior and the National Academy of Engineering on this issue.

Interior officials stated that a potential project that industry may sponsor
would, among other things, quantitatively assign a risk score to proposed
wells based on factors such as well location, well design, and other
technical considerations. Interior officials stated that they would like to
participate in this project, although they recognize Interior would have to
contribute to the project financially. If successful, the project could result
in a tool that Interior could require operators to use as part of its permit
review process. Interior officials explained that there is a precedent for
this type of collaboration; after Hurricanes Katrina and Rita, they worked
with industry to develop an analytical tool to identify the risk of structures
breaking free from their mooring. Operators may now include the results
of this tool with their drilling permit applications. However, without a more
systematic and prospective approach to identifying and categorizing
drilling risk, Interior may not effectively devote its limited oversight
resources—including engineering reviews of drilling permits, monitoring
weekly well activity reports, and inspecting drilling operations—in a
manner that most effectively mitigates risk.




84
 National Commission, Deep Water: The Gulf Oil Disaster and the Future of Offshore
Drilling, Report to the President (January 2011).




Page 86                                            GAO-12-423 Oil and Gas Management
Interior Continues to Face   As we reported in September 2007,85 Interior has faced challenges
Challenges Implementing      implementing effective IT systems, which has affected its ability to meet
Effective IT Systems         program and mission goals in overseeing oil and gas development in the
                             OCS. We found that these challenges persist. In particular, we found two
                             challenges with Interior’s current IT systems.

                             First, Interior initiated a major IT project in 2003 called OCS Connect that
                             did not meet user needs or planned delivery dates. At that time, Interior
                             reported that its offshore leasing program relied heavily on paper-based
                             processes and that technology improvements would allow it to streamline
                             its business processes.86 OCS Connect was designed to replace some of
                             Interior’s existing IT systems—including its TIMS IT system––and
                             improve and expand stakeholders’ access to information, decrease
                             Interior’s processing time for reviews of plans and drilling permits, and
                             increase the quality and quantity of the analyses of offshore resources,
                             among other things. Additionally, a key goal of OCS Connect was that it
                             would allow Interior to track the life cycle of a specific oil and gas
                             development from initial leasing, through planning, permitting, and
                             compliance. OCS Connect was initially designed to include 14
                             processes––called business process clusters––that Interior had identified
                             as potential candidates for reengineering, such as managing drilling plan
                             submittals and permit requests. A senior Interior official said that Interior
                             hired a contractor to gather system requirements from agency staff and
                             develop OCS Connect. The contractor developed the first of the 14
                             clusters, but it was poorly received by Interior staff and did not meet their
                             needs. Subsequent problems, including Hurricane Katrina in 2005, led to
                             delays in developing the remaining clusters. In July 2008, we reported
                             that the Office of Management and Budget identified OCS Connect as a
                             high-risk project that was poorly planned.87 On December 31, 2010, after
                             obligating approximately $67 million toward the development of OCS
                             Connect, according to an Interior official estimate, and following several


                             85
                               GAO, Information Technology: Further Improvements Needed to Identify and Oversee
                             Poorly Planned and Performing Projects, GAO-07-1211T (Washington, D.C.: Sept. 20,
                             2007).
                             86
                               Outer Continental Shelf (OCS) Connect Initiative (Request for Comments concerning
                             Offshore Minerals Management Program’s e-Government Initiative).” 68 Fed. Reg. 46656
                             (2003).
                             87
                               GAO, Information Technology: OMB and Agencies Need to Improve Planning,
                             Management, and Oversight of Projects Totaling Billions of Dollars, GAO-08-1051T
                             (Washington, D.C.: July 31, 2008).




                             Page 87                                            GAO-12-423 Oil and Gas Management
changes to its scope, Interior officially terminated the project, citing the
ongoing reorganization of BOEM and BSEE. Interior officials and agency
documentation reported that 1 of the 14 clusters was complete,
development had begun on some others, and some software and
hardware had been upgraded. A senior Interior official said that Interior
learned a number of lessons from this experience, many of which were
formally documented. One of the key lessons learned was that the
contractor limited the amount of feedback end users could provide
throughout the development process, which contributed to the problems
with the project. As a result, Interior’s offshore leasing program continues
without the technology improvements that would allow it to streamline its
business processes. Because Interior has yet to fully replace or upgrade
the IT systems used for overseeing offshore oil and gas developments, it
continues to have problems with its GIS used to facilitate NEPA analyses
and the TIMS IT system used to track operators’ exploration and
development plans and records with more accurate and efficient systems.
As noted previously, officials in the Gulf of Mexico regional office told us
that GIS is hindered by the poor quality of data in the system.
Furthermore, Interior’s TIMS IT system lacks edit checks to limit
operators’ ability to submit incomplete or inaccurate plans, making
Interior’s review of exploration and development plans challenging. In
addition, the method by which amendments are currently tracked in the
TIMS IT system can complicate and lengthen Interior’s review process.
As of September 2011, Interior staff were working with the consultant that
facilitated the reorganization to create a requirements document for
ePlans, which is designed to address the shortcomings in the TIMS IT
system. However, some Interior officials expressed concern that Interior’s
experience going forward with ePlans could be similar to its experience
with OCS Connect.88

Second, BOEM and BSEE do not have a current comprehensive IT
strategic plan. Interior’s most recent IT strategic plan is dated 2005 to
2007 and was developed for MMS. Senior Interior officials said that they
have not updated the IT strategic plan because they were focused on the
reorganization and were addressing only those IT issues related to the
reorganization, such as the division of IT support resources. The officials
said that they anticipated developing a plan within the next few months,


88
  In addition, as previously discussed in this report, Interior also has not fully implemented
a 2009 pilot program that would allow inspection staff to electronically access and review
operators’ records while onshore.




Page 88                                                 GAO-12-423 Oil and Gas Management
                            but were currently in the very early stages of the process. In January
                            2004, we identified well-defined IT strategic planning as an important
                            component of effective management because it helps ensure that an
                            agency’s IT goals are aligned with its strategic goals and that IT is being
                            used to maximize improvement in mission performance.89 Additionally, in
                            2009, we reported that IT strategic plans should serve as the agency’s IT
                            vision or road map and help align its information resources with its
                            business strategies and investment decisions.90 Further, an IT strategic
                            plan comprising results-orientated goals, strategies, milestones, and
                            performance measures is important to enable an agency to consider the
                            resources, including human capital, infrastructure, and funding, that are
                            needed to implement, manage, support, and pay for IT projects. For
                            example, a strategic plan that identifies what an agency intends to
                            accomplish during a given period helps ensure that the necessary
                            infrastructure is put in place for new or improved IT capabilities. In
                            addition, a strategic plan that identifies interdependencies within and
                            across individual IT systems modernization projects helps ensure that the
                            interdependencies are understood and managed, so that projects—and
                            thus system solutions—are effectively integrated. Without an effective IT
                            strategic plan, Interior will find it more difficult to address the challenges it
                            faces in implementing effective IT systems, potentially limiting its abilities
                            to meet programmatic and system modernization goals.


Interior Continues to       We have previously reported that Interior has faced persistent challenges
Report Challenges in        in hiring and retaining qualified staff in key oil and gas engineering and
Hiring, Retaining, and      inspection positions. In particular, in March 2010, we reported that Interior
                            lacked staff with critical skills because of difficulties in hiring, training, and
Training Staff as Well As   retaining staff.91 In February 2011, when we added Interior’s management
Succession Planning         of oil and gas resources to our list of areas at high risk for waste, fraud,
                            abuse, and mismanagement or in need of broad reform,92 we cited human
                            capital challenges as a key concern. We found during this review that


                            89
                              GAO, Information Technology Management: Governmentwide Strategic Planning,
                            Performance Measurement, and Investment Management Can Be Further Improved,
                            GAO-04-49 (Washington, D.C.: Jan. 12, 2004).
                            90
                             GAO, Information Technology: FDA Needs to Establish Key Plans and Processes for
                            Guiding Systems Modernization Efforts, GAO-09-523 (Washington, D.C.: June 2, 2009).
                            91
                             GAO-10-313.
                            92
                             GAO-11-278.




                            Page 89                                           GAO-12-423 Oil and Gas Management
                             human capital problems persist as Interior undergoes its reorganization,
                             which increases the need for key positions such as engineers and
                             inspectors. In addition, Interior has not developed a comprehensive
                             strategic workforce plan that outlines specific strategies to address gaps
                             in critical skills and competencies that need attention and processes to
                             address human capital challenges, including determining the critical skills
                             and competencies that will be needed to achieve current and future
                             programmatic results, and help guide future human capital management.

Challenges in Hiring Staff   A senior Interior official told us that hiring qualified engineers and
                             inspectors poses the greatest human capital challenge. In particular, the
                             official told us that hiring qualified engineers is difficult because the
                             federal salary schedule sets starting salaries for entry-level engineers at
                             Interior at about $30,000 to $40,000 less per year than an entry-level
                             position in the private sector—a difference of about 50 percent. The
                             $30,000 to $40,000 gap between the federal and private sector salaries
                             persists throughout engineers’ careers, although as an Interior engineer’s
                             salary rises over time, it decreases as a percentage of total salary.
                             Locality pay differentials within the federal salary schedule also mean that
                             workers in Louisiana are paid less than those in Houston, TX; therefore,
                             Interior’s Gulf of Mexico offices are competing with both government and
                             private-sector employers located in Houston that can pay higher salaries.
                             Interior regional office officials also noted that the current federal pay
                             freeze, which eliminates cost-of-living adjustments for federal employees,
                             may further deter inspectors from seeking or continuing employment with
                             Interior. Regional office officials also stated that because the private
                             sector offers higher starting salaries than the federal government, top
                             candidates are typically hired by the petroleum industry, with Interior
                             attracting less skilled candidates. To address pay challenges, in
                             December of 2011, Congress provided a special 25 percent base pay
                             increase for geologists, geophysicists, and petroleum engineers in the
                             Gulf of Mexico region.93 Further, in February 2012, Interior announced
                             expanded student loan repayment for engineers and certain technical
                             staff. In addition to pay, Interior officials stated that the small number of
                             petroleum engineering programs in the United States, as well as
                             constraints on hiring non-U.S. citizens for federal positions, means that
                             the pool of qualified candidates is limited. To attract applicants, a senior
                             Interior official said that recruiting has begun to focus on midlevel career



                             93
                              Pub. L. No. 112-74, div. E, title I, § 121(c), 125 Stat. 1012 (2011).




                             Page 90                                                GAO-12-423 Oil and Gas Management
                                engineers in the private sector who may be interested in working for
                                Interior because the agency offers a more standard work week and
                                family-friendly work environment than the private sector, including
                                working most days onshore versus months away from home and
                                overseas. For inspectors, a senior Interior official stated that, similar to
                                engineers, the primary challenge is recruiting highly qualified candidates.
                                This official also stated that, unlike the situation for engineers, the pay
                                difference between Interior inspectors and comparable positions in the
                                private sector is not as great, but stricter federal hiring standards
                                disqualify many potential applicants. For example, conflicts of interest
                                could disqualify candidates from federal jobs but may not limit their
                                prospects in the private sector.

Challenges in Retaining Staff   A senior Interior official stated that retaining qualified engineers was less
                                of an issue than recruitment. Interior engineers tend to spend less time
                                offshore on drilling rigs and production platforms than those in the private
                                sector, meaning that they have more time with their families. Government
                                work is also typically less cyclical than that in the private sector, providing
                                more job security. The senior Interior official stated that the better work-
                                life balance and relative job security meant that the engineers they are
                                able to recruit typically stay. Nonetheless, regional office officials
                                expressed some concern about retention and recent attrition. Specifically,
                                one regional office official noted that the Gulf of Mexico regional office
                                had recently lost four of its five experienced engineers.

                                Interior’s headquarters and Gulf of Mexico regional office officials also
                                noted that retention of inspectors has been a challenge in the aftermath of
                                the Deepwater Horizon incident. Many senior staff left the agency, and
                                new requirements that Interior implemented in response to the oil spill
                                have led to an increase in work demands without a commensurate
                                increase in compensation, which may increase attrition. Specifically,
                                several officials from the Gulf of Mexico regional office noted that new
                                requirements for witnessing blowout preventer tests significantly
                                increased the number of days inspectors must spend offshore. As with
                                engineers, regional office officials said that one of the key advantages
                                that Interior offers over positions in the private sector is that its inspectors
                                can generally be home each night; therefore increased time offshore
                                might cause inspectors to migrate to better-paying jobs in the private
                                sector. In June 2011, a senior Interior official stated that Interior received
                                a strong response from its inspector job announcements in the Gulf of
                                Mexico and hired 30 new inspectors; however, attrition limited the net
                                gain to 15 inspectors. As of March 2012, Interior was able to hire an



                                Page 91                                        GAO-12-423 Oil and Gas Management
                               additional 13 inspectors while losing 9, resulting in a total net gain of 19
                               inspectors since the Deepwater Horizon incident.

                               Retirements were cited as a significant issue by Interior officials, as many
                               senior staff are now eligible or will soon be eligible for retirement.
                               According to data provided by Interior, as of January 2012, approximately
                               45 percent of BOEM and 42 percent of BSEE staff will be eligible for
                               retirement over the next 5 years. Regional office officials were particularly
                               concerned about the loss of senior staff following the reorganization,
                               noting that until they can refine and document many new processes, they
                               depend on the expertise of their senior staff to fulfill their missions.
                               Interior’s human capital planning documents, as well as officials in both
                               headquarters and the Gulf of Mexico regional office, noted that long-term
                               succession planning was a major issue and that, in many cases, positions
                               were “one deep”––meaning that if experienced staff left the agency, there
                               would not be enough skilled staff to take their place.

Challenges in Training Staff   In June 2011, in response to concerns with developing newer staff,
                               Interior announced the opening of a new National Offshore Training and
                               Learning Center and the development of the agency’s first formal training
                               curriculum for inspectors and engineers. An official responsible for
                               overseeing inspectors and engineers stated that the development of the
                               training program may be one of the most important accomplishments to
                               come out of the reorganization. Interior officials told us that, historically,
                               Interior has not had a formal inspector training program; rather, it relied
                               on on-the-job training that included pairing senior inspectors with newly
                               hired inspectors and some classroom instruction. Senior and regional
                               office officials stated that this type of training produced inconsistent
                               results, as some senior inspectors proved to be less effective trainers
                               than others. Additionally, following the Deepwater Horizon incident,
                               Interior’s Office of Inspector General reported that, based on survey
                               results, only 39 percent of inspectors believed that they had received
                               sufficient training to perform their duties effectively. The training center’s
                               director stated that the center will eventually provide training for
                               inspectors, engineers, and environmental enforcement officers, although
                               the first priority is to establish a core curriculum to train inspection staff.
                               The director stated that the inspection staff training curriculum would
                               eventually consist of 25 modules covering a range of issues. As of
                               December 2011, 1 module had been developed and was being revised by
                               the new training director. Overall, the director stated that the inspection
                               training curriculum will include classroom training, testing, on-the-job
                               training, and potentially some form of certification. Additionally, as part of
                               the inspection training curriculum, the director plans to incorporate


                               Page 92                                        GAO-12-423 Oil and Gas Management
                               various simulators, thereby allowing inspectors to experience real-world
                               situations. For example, according to the director, Interior plans to use a
                               fully operational drilling platform simulator operated by Louisiana State
                               University, as well as a working production platform to allow inspectors to
                               train in a more realistic environment. In December 2011, the director
                               stated that training for engineers will eventually be developed but that
                               because engineers generally have well-developed technical skills, the
                               curriculum will focus on problem solving rather than obtaining and
                               developing specific technical skills. More recently, in March 2012, Interior
                               officials stated that it had initiated technical training for engineers. Interior
                               officials stated that they have adjusted the training program to provide
                               training for both engineers and inspectors in the first year of employment,
                               use a comprehensive training plan to address the needs of the current
                               and expanding workforce, and added an enhanced technical curriculum.
                               While we note Interior’s action to date, Interior has not yet finalized its
                               training modules, and no inspection staff have been certified. Until Interior
                               has successfully developed, finalized, and implemented a training
                               program for inspectors and engineers, Interior will find it more difficult to
                               provide adequate oversight of offshore oil and gas activities in the Gulf.

Absence of Comprehensive       Interior is taking steps to respond to its human capital challenges, but it
Strategic Workforce Planning   has not developed a comprehensive strategic workforce plan that outlines
                               specific strategies and processes to help address these challenges and
                               help guide future human capital management for BOEM and BSEE. In
                               January 2001, we determined that strategic human capital management
                               merited designation as a governmentwide high-risk area because the
                               government’s approach to managing its people—its human capital—was
                               the critical missing link in reforming and modernizing the federal
                               government’s management practices.94 In a December 2003 report, we
                               identified strategic human capital, or workforce, planning as the key to
                               addressing two critical organizational needs: (1) aligning an organization’s
                               human capital program with its current and emerging mission and
                               programmatic goals and (2) developing long-term strategies for acquiring,
                               developing, and retaining staff to achieve programmatic goals.95 In that
                               report, we identified five key principles that effective human capital
                               planning should address. For example, effective workforce planning


                               94
                                GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: January 2001).
                               95
                                GAO, Human Capital: Key Principles for Effective Strategic Workforce Planning,
                               GAO-04-39 (Washington, D.C.: Dec. 11, 2003).




                               Page 93                                            GAO-12-423 Oil and Gas Management
should determine the critical skills and competencies that will be needed
to achieve current and future programmatic results and develop strategies
to address gaps and human capital conditions in critical skills and
competencies that need attention, such as for succession planning and
addressing short-term human capital needs for critical skills. Prior to the
reorganization, Interior developed a strategic workforce plan for MMS for
2008 through 2013 and a similar workforce plan for MMS’s Gulf of Mexico
region in March of 2010, but it has not adapted these plans to the new
organizational structure. Following the Deepwater Horizon incident,
Interior took steps to improve its human capital planning in response to
recommendations from external reviews and as part of the reorganization.
For example, in response to a recommendation from Interior’s Office of
Inspector General, Interior developed a succession plan for its regional
offices. Most recently, in March 2012 Interior issued a departmentwide
strategic workforce management plan and indicated that it would
implement more detailed workforce planning. However, without a
strategic workforce plan for both BOEM and BSEE, Interior may find it
more challenging to address human capital challenges such as hiring,
retention, and training. Senior Interior officials said that they would
eventually develop a plan for BOEM and BSEE, but that they did not have
the time or the resources to do so because of the demands placed upon
them by the reorganization. To date, Interior has not specifically identified
when it plans to develop such a plan.

While improved workforce planning will assist Interior in meeting BOEM
and BSEE’s agency-wide goals, both agencies will still likely face
significant human capital challenges in coming years. For example, a
2011 study by Schlumberger Business Consulting,96 an oil and gas
services company, reported that the oil and gas industry is going through
a major transition referred to as the “big crew change,” as many workers
hired before significant recruitment cuts in the 1980s are now
approaching retirement. The report projected a significant net loss in
experienced petroleum technicians by 2015 due to retirements and
concluded that while recruitment should compensate for the total number
of employees lost, a significant experience gap will remain, threatening
the timely completion of projects.




96
  Schlumberger Business Consulting, 2011 SBC Oil & Gas HR Benchmark, March 8,
2012.




Page 94                                         GAO-12-423 Oil and Gas Management
Interior Has Not       Interior had not consistently tracked recommendations from external
Consistently Tracked   reviews examining Interior’s oversight of oil and gas activities issued after
Recommendations from   the Deepwater Horizon incident until March 2012, when it provided
                       documentation that it had begun developing a database to consistently
External Reviews       track recommendations. Under federal standards for internal control,97
                       agencies are to ensure that the findings of audits and other reviews are
                       promptly resolved under the monitoring standard. Specifically, agency
                       managers should (1) promptly evaluate findings from audits and other
                       reviews, including those showing deficiencies and recommendations
                       reported by auditors and others who evaluate agency operations; (2)
                       determine proper actions in response to findings and recommendations
                       from those audits and reviews; and (3) complete, within established time
                       frames, all actions that correct or otherwise resolve the matters brought to
                       management’s attention.98 Following the Deepwater Horizon incident,
                       various federal entities reported on factors that contributed to the
                       Deepwater Horizon incident and made a number of recommendations to
                       Interior to improve its oversight of oil and gas drilling operations and help
                       prevent such incidents. Federal government reviews on the Deepwater
                       Horizon incident include the following:

                             The postaccident safety report that the President directed Interior to
                              prepare within 30 days of the accident, issued on May 27, 2010;99

                             A review of Interior’s NEPA policies, practices, and procedures by the
                              President’s Council on Environmental Quality, issued on August 16,
                              2010;100




                       97
                           GAO/AIMD-00-21.3.1.
                       98
                         The resolution process begins when audit or other review results are reported to
                       management and is completed only after action has been taken that (1) corrects identified
                       deficiencies, (2) produces improvements, or (3) demonstrates the findings and
                       recommendations do not warrant management action.
                       99
                         U.S. Department of the Interior, Increased Safety Measures for Energy Development on
                       the Outer Continental Shelf (May 27, 2010).
                       100
                             Council on Environmental Quality. August 16, 2010.




                       Page 95                                                GAO-12-423 Oil and Gas Management
      A report by the OCS Safety Oversight Board––a group established by
       the Interior’s Secretary following the Deepwater Horizon incident––
       issued on September 1, 2010;101

      A report by Interior’s Office of Inspector General issued on December
       7, 2010;102

      A report by the National Commission on the BP Deepwater Horizon
       Oil Spill and Offshore Drilling issued on January 11, 2011;103

      A joint accident investigation report by Interior and the U.S. Coast
       Guard issued on September 14, 2011;104,105 and

      A report by the National Academy of Engineering on December 14,
       2011.106

We found that Interior is formally tracking recommendations from several
reports, including those issued by Interior’s Office of Inspector General
and the OCS Safety Oversight Board. According to Interior’s Office of
Inspector General, as of March 2012, Interior has implemented 29 of the
64 recommendations included in its December 2010 report.107




101
      U.S. Department of the Interior. September 1, 2010.
102
   U.S. Department of the Interior Office of Inspector General, A New Horizon: Looking to
the Future of the Bureau of Ocean Energy Management, Regulation, and Enforcement,
CR-EV-MMS-0015-2010 (Dec. 7, 2010).
103
   National Commission, Deep Water: The Gulf Oil Disaster and the Future of Offshore
Drilling, Report to the President (January 2011).
104
  The Bureau of Ocean Energy Management Regulation and Enforcement, Report
Regarding the Causes of the April 20, 2010, Macondo Well Blowout (Sept. 14, 2011).
105
    United States Coast Guard: Report of Investigation into the Circumstances Surrounding
the Explosion, Fire, Sinking and Loss of Eleven Crew Members Aboard the Mobile
Offshore Drilling Unit Deepwater Horizon. In the Gulf of Mexico, April 20-22, 2010. Volume
I of the report was released on April 20, 2011.
106
  National Academy of Engineering and National Research Council, Macondo Well-
Deepwater Horizon Blowout (Dec. 14, 2011).
107
    Oil and Gas and Sulfur Operations in the Outer Continental Shelf—Increased Safety
Measures for Energy Development on the Outer Continental Shelf, 75 Fed. Reg. 63346
(2010).




Page 96                                                GAO-12-423 Oil and Gas Management
However, Interior has not consistently employed a process for tracking
and responding to the findings and recommendations of other external
reviews. The national commission’s report on the BP Oil Spill108 made
recommendations covering 31 areas. In September 2011, we asked a
senior Interior official about the national commission’s recommendations
and the agency’s response. Interior was able to provide responses on
specific recommendations but was unable to provide documentation that
tracked the steps Interior had taken to address the national commission’s
recommendations. According to the official, the national commission’s
report was directed to the President; therefore, Interior was not required
or expected to officially document its response to the report’s
recommendations. Moreover, according to the official, Interior’s
reorganization, along with other policy changes enacted since the
Deepwater Horizon incident, has likely addressed the recommendations
in the national commission’s report. However, in March 2012, Interior
provided documentation tracking the national commission’s
recommendations and announced on March 14, 2012, that several
members of the national commission were forming a new organization—
the Oil Spill Commission Action— to monitor the progress of government
and industry to implement a series of critical safety
recommendations outlined in its January 2011 report. On April 17, 2012,
the Oil Spill Commission Action released a progress report stating that
while it was encouraged by the advances industry, Interior, and other
federal agencies had made in the 2 years since the Deepwater Horizon
incident to improve the safety of offshore drilling and the nation’s
readiness to respond to any spills that do occur, it noted that more needs
to be done, including by Congress, which has yet to enact any legislation
responding to the explosion and spill. Furthermore, Interior’s BSEE
indicated that it had recently developed a database to track
recommendations from all recently issued reports and planned to
systematically enter and track recommendations from all relevant reports.
Nonetheless, Interior has not consistently employed a formal process for
tracking and responding to the findings and recommendations of external
reviews and ensured they are promptly resolved. Without taking steps to
document that such findings and recommendations are resolved by
correcting identified deficiencies, producing improvements, or
demonstrating that the findings and recommendations do not warrant



108
   National Commission, Deep Water: The Gulf Oil Disaster and the Future of Offshore
Drilling, Report to the President (January 2011).




Page 97                                            GAO-12-423 Oil and Gas Management
                             management action, Interior cannot, for example, demonstrate to decision
                             makers and reviewers that it considered the national commission’s
                             recommendations for improving oversight and what actions, if any,
                             Interior has taken to implement them.


Interior Continues to Face   Interior officials stated that the rate of technology development in
Challenges Issuing           deepwater drilling has surpassed Interior’s ability to draft and publish
Effective and Timely         regulations and that, even prior to the Deepwater Horizon incident,
                             Interior was already taking a stopgap approach to provide regulatory
Regulations for Deepwater    oversight. Specifically, instead of updating regulations to address new
Drilling Activities          technologies and processes, Interior has to some extent, relied on
                             Notices to Lessees and Operators to communicate new policies and
                             regulatory approaches. Additionally in 2005, Interior began requiring
                             operators to submit a Deepwater Operations Plan for deepwater
                             projects.109 According to Interior officials, the Deepwater Operations Plan
                             is designed to address industry and Interior concerns by notifying an
                             operator in advance of significant investment whether Interior accepted
                             the operator’s plan. According to an Interior official, because Interior does
                             not have any regulations specific to deepwater environments, the
                             Deepwater Operations Plan functioned in lieu of regulations. However,
                             without up-to-date regulations on current technologies and practices, the
                             incidence of requests for departures from existing regulations is likely to
                             increase.

                             Interior officials stated that many activities on deepwater operations in the
                             Gulf of Mexico are not covered by existing regulations and that, therefore,
                             operators’ departure requests are common. Departure requests
                             potentially increase the risks associated with certain drilling operations
                             because district engineers are making decisions independently and often
                             without documented guidance, which can result in regulations being
                             inconsistently applied. For example, the OCS Safety Oversight Board’s
                             report found that operators will “shop around” district offices for approval
                             for departure requests. We attempted to analyze Interior’s data from



                             109
                                30 C.F.R. §§ 250.286–295; see also NTL No. 2011-N11 issued Nov. 21, 2011. Prior to
                             issuing new regulations, Interior began requiring certain information from operators
                             working in water depths greater than 1,000 feet through the establishment of handling
                             procedures for Deepwater Operation Plans in 1997. In October 2000, Interior issued NTL
                             No. 2000-N06, which provided guidance on Deepwater Operations Plan submission
                             requirements.




                             Page 98                                            GAO-12-423 Oil and Gas Management
Interior’s TIMS IT system on departure requests but found that the data
were incomplete and unreliable. Specifically, Interior officials reported that
they did not record departure request denials. When we analyzed
approved departure requests––which Interior guidance states district
engineers should record––Interior officials reported that engineers were
no longer recording that information consistently in the TIMS IT system.
However, officials stated that accurate data on departure requests,
approvals, and denials, would help Interior identify specific regulations
that should be considered for revision.

In response to the Deepwater Horizon incident, as noted previously,
Interior issued a number of new policies affecting offshore oil and gas
operations and is taking steps to improve its ability to develop and issue
final regulations; however, Interior continues to face challenges issuing
effective and timely regulations. An Interior official stated that, following
the Deepwater Horizon incident, there was a significant shift to focus on
ensuring that Interior has effective regulations. Additionally, according to
an Interior official, Interior’s senior management have taken a more active
role in discussions regarding regulations than have directors of the
predecessor agency, MMS. An Interior official stated that the new
requirements—including regulations—issued in the period following the
Deepwater Horizon incident are not typical of the agencies’ processes
and that they were issued much more quickly than typical regulations.
Interior documents acknowledge a historic weakness in the agency not
issuing timely and effective regulations.

Representatives of API, which publishes standards for oil and gas
activities frequently incorporated into Interior’s regulations, stated that
although API fully supported an effective regulatory regime, it was
concerned about the effectiveness of Interior’s rulemaking, especially
rulemaking in response to the Deepwater Horizon incident. API
representatives stated that the interim final drilling safety rule Interior
issued in October 2010 created burdens for operators and potentially
undermined the effectiveness of some existing regulations.110 Specifically,
API publishes standards generally agreed upon by industry and
regulators, and where applicable, Interior incorporated some of these
standards into its regulations. These standards typically state that an
operator “should” or “shall” follow some specified practice or procedure;



110
  75 Fed. Reg. 63346 (2010).




Page 99                                       GAO-12-423 Oil and Gas Management
however, an API representative stated that the interim final drilling safety
rule, which applies to many API standards referenced by Interior’s
regulations, requires that operators “must” follow the specified practice or
procedure. In some circumstances, according to an API representative,
this revision undermined the standards’ effectiveness, may increase risk,
and created substantial new requirements for operators. In a letter to the
Regulations and Standards Branch of BOEMRE on December 13, 2010,
trade and industry groups stated that revising a section on well control
and blowout preventer maintenance to include mandatory requirements
would increase the risk to worker safety due to increased blowout
preventer handling requirements.111

In addition to concerns raised specifically by API, industry representatives
also stated that, by relying so heavily on Notices to Lessees and
Operators, Interior is not following the formal rulemaking process, limiting
the public’s—including industry’s—opportunities for involvement and
undermining the transparency of the process. Despite concerns regarding
Interior’s rulemaking, API representatives noted that Interior has recently
become more involved in API’s standard-setting meetings since the
Deepwater Horizon incident. In particular, representatives stated that
Interior staff regularly attended meetings and provided formal comments
on new standards that API is developing for deepwater well design.112
Additionally, API officials stated that they worked with industry to provide
recommendations in May 2010 for Interior to consider in its review of its
regulatory scheme. Later, in September 2010, industry provided
recommendations to both Interior and the Coast Guard on well
intervention and oil spill response.

Interior has taken steps to reexamine and improve the processes used to
develop regulations since the Deepwater Horizon incident. For example,
Interior is working with industry to improve regulations specific to
deepwater drilling and hosted a conference in November 2011 to discuss
these efforts. In addition, Interior officials stated that they had recently
contracted with Argonne National Laboratory to review BSEE’s current


111
  API, the International Association of Drilling Contractors, the Independent Petroleum
Association of America, the National Ocean Industries Association, the Offshore
Operators Committee, the Offshore Equipment and Operating Procedures Joint Industry
Task Forces, and the US Oil and Gas Association submitted comments.
112
  API Recommended Practice 96, Deepwater Well Design and Construction, 1st Ed.
201X.




Page 100                                             GAO-12-423 Oil and Gas Management
                            regulations and make recommendations on how it can improve those
                            regulations.

                            While Interior has taken steps to issue new regulations and improve its
                            regulatory processes following the Deepwater Horizon incident, it will also
                            continue to face challenges in this area in coming years. In particular,
                            Interior staff noted that industry is drilling more wells into reservoirs
                            associated with high temperatures and pressures. These drilling
                            operations can be more challenging than other operations. For example,
                            in late March 2012, a high pressure and high temperature well in the
                            North Sea began leaking gas, causing the evacuation of the platform due
                            to the potential risk of an explosion and fire. In May 2012, the platform’s
                            operator announced that the leak had been stopped.


Interior Anticipates That   Interior officials told us that Interior had planned to increase its oversight
Resource Constraints        capacity—including hiring additional staff and improving support service—
Could Limit Efforts to      through a multiyear expansion plan, with full staffing anticipated in fiscal
                            year 2013. As of September 2011, Interior officials expressed concern
Increase Its Oversight      that current and potential future budgetary constraints may prevent
Capacity                    Interior from increasing its capacity as anticipated. In particular, Gulf of
                            Mexico regional office officials expressed concerns that they may not
                            receive the anticipated increases in resources for staffing and helicopter
                            operating costs, which would hinder their ability to review permits and
                            conduct inspections. Without the resources initially anticipated, officials
                            said that they will not be able to fully develop their programs as planned,
                            potentially hindering their ability to manage oil and gas activities in the
                            Gulf of Mexico. However, in March 2012, officials told us that the fiscal
                            year 2012 appropriations bill included an inspection fee of $62 million,
                            allowing BSEE to receive most of the resources needed to increase its
                            inspection and permitting capacity. Despite these new fees, Interior
                            officials expressed concern that attention to oversight of offshore oil and
                            gas drilling may diminish over time and that future budget appropriations
                            may be limited, hindering their ability to provide effective oversight.


                            The Department of the Interior is charged with the critical role of ensuring
Conclusions                 that the country’s oil and gas resources on the OCS in the Gulf of Mexico
                            are developed in a manner that is protective of both human health and
                            the environment. The April 20, 2010, Deepwater Horizon incident raised
                            serious questions about Interior’s management of oil and gas activities in
                            the Gulf of Mexico. Since the incident, Interior has fundamentally
                            reorganized its oversight of offshore oil and gas activities through the


                            Page 101                                      GAO-12-423 Oil and Gas Management
creation of BSEE and BOEM. Interior has also enacted numerous policy
changes intended to improve its oversight of offshore oil and gas
activities. Moreover, Interior has taken and continues to take steps to
reform its oversight. However, the ultimate effectiveness of Interior’s
reorganization and recent policy changes remains uncertain.

In particular, questions remain about one aspect of Interior’s
environmental NEPA analyses, which are required for exploration and
development plans and play a critical role in assessing the potential
effects of oil and gas development in the Gulf of Mexico. Interior
completed a number of NEPA analyses without the most current,
potentially relevant information—for example, in amendments to operator-
submitted plans. Also, Interior technical staff reviewing the plans do not
always coordinate with the agency’s NEPA staff to ensure that any
information included in subsequent amendments would not need to be
considered as part of a NEPA analysis and do not always document such
coordination. As a result, some of these NEPA analyses may have been
based on incomplete or inaccurate information. Interior officials
acknowledged that the controls in place are insufficient to prevent the
approval of plans with NEPA analyses based on inaccurate or incomplete
information. Without ensuring that NEPA analyses are conducted on
complete and accurate information to analyze the potential effects of a
proposed project as required by NEPA, Interior risks making an
erroneous assessment of the environmental risks associated with such a
project.

In addition, we are concerned with two limitations in Interior’s exploration
and development plan review process. First, because Interior’s TIMS IT
system does not include necessary data input controls, called edit
checks, for preventing operators from submitting inaccurate and
incomplete plans, Interior must devote resources to reviewing exploration
and development plans for accuracy and completeness and asking
operators to submit amendments to address inaccurate or incomplete
plans. Interior attempted to develop an IT module called ePlans—which
was to include edit checks—to help manage its review process for
exploration and development plans; however, ePlans was never
completed. Interior continues to evaluate ePlans and has worked on a
requirements document for it. Second, because Interior’s TIMS IT system
does not have a field to collect information on (1) whether plan
amendments were requested by Interior or initiated by the operator or (2)
the reasons for the amendments, Interior management does not have the
information it needs to conduct targeted outreach with operators on how



Page 102                                     GAO-12-423 Oil and Gas Management
to improve plan submissions, which could reduce the use of amendments
as well as the burden on operators and Interior staff.

We are also concerned about the effectiveness of two aspects of
Interior’s inspection program. First, Interior has not assessed how new
policy requirements, travel times to deepwater drilling rigs, and the
current number of inspectors affect its ability to conduct drilling
inspections; as a result, it cannot be certain that its informal monthly
inspection goal is appropriate for overseeing drilling activities in the Gulf
of Mexico. Furthermore, Interior’s inspections routinely identify violations,
but Interior’s TIMS IT system is missing some data, such as the date that
violations were found or corrected. As a result, Interior does not know on
a real-time basis whether or when all violations were identified and
corrected, potentially allowing unsafe conditions to continue for extended
periods.

Additionally, Interior officials acknowledged challenges in maintaining
timely regulations for drilling, especially as they relate to deepwater
drilling. However, Interior has not systematically recorded operators’
requests for departures from regulations in its TIMS IT system or whether
the requests were approved or denied. Without data on departure
requests, Interior is foregoing information that may help it to identify which
regulations operators consistently request departures from and that it
subsequently may use to identify when specific regulations should be
considered for revision.

Furthermore, while Interior has taken steps to identify and evaluate
drilling risks, its capacity to do so remains limited. Interior officials stated
that they have the expertise to do so and acknowledged that such an
effort could improve Interior’s oversight of offshore oil and gas activities.
Interior has taken some steps, for example, with its well containment
screening tool, that can be used to evaluate overall well design based on
risk. In this regard, even though operators are to report to Interior
significant event data in weekly well activity reports once they begin
drilling, Interior does not have clear definitions for some of these
significant events, raising uncertainty as to whether Interior is
systematically collecting and maintaining reliable data on risk factors
associated with drilling operations. Moreover, some entities have
expressed concern that Interior does not have a policy to categorize
proposed drilling operations based on risk. For example, the report of the
National Commission on the BP Deepwater Horizon Oil Spill and Offshore
Drilling recommended that Interior should identify criteria and a
methodology for assessing high-risk wells in collaboration with the U.S.


Page 103                                       GAO-12-423 Oil and Gas Management
Geological Survey, the Department of Energy, NOAA, and academia and
develop in-house competence to perform such sophisticated risk
assessments. As the government faces significant financial constraints,
without clear criteria and a methodology for assessing drilling operations
according to risk, Interior may not adjust and evaluate its oversight—
including inspections—in a cost-effective manner.

We and others have identified numerous opportunities for Interior to
improve its oversight. Since the Deepwater Horizon incident, a number of
government agencies, boards, and commissions have reported on the
factors contributing to the incident and recommended areas for
improvement. Interior has addressed and responded to the results of
audits, as well as to many of the recommendations from these reports.
However, Interior was unable to provide documentation that it was
consistently tracking and responding to the results of external reviews—
other than audits—to ensure that findings were promptly addressed and
actions were taken to respond to recommendations until March 2012,
when officials provided documentation that they had begun developing a
database to track such recommendations. Without such tracking, it is
uncertain whether Interior has fully considered and either concurred or
disagreed with the findings of these reports and what, if any, steps it has
taken to implement the recommendations it agrees with.

Questions also remain about Interior’s efforts to complete long-term
strategies for IT planning. Interior’s IT systems are critical for managing
its oil and gas oversight responsibilities. Recognizing this, Interior is
taking steps to improve its implementation of IT projects and has
identified IT system initiatives that could assist implementation of
Interior’s mission. However, it has not yet specified a time frame for when
it would complete a comprehensive IT strategic plan, which should
include results-oriented goals, strategies for achieving those goals,
milestones, performance measures, and an analysis of interdependences
among IT projects and activities, among other things. Without such a
plan, BOEM and BSEE will have difficulty applying the lessons from prior
failed improvement efforts and are at increased risk of falling short of
meeting their system modernization goals.

In recent years, we have identified various challenges facing Interior in
hiring, training, and retaining staff to oversee oil and gas activities.
According to Interior officials, Interior historically did not provide
standardized or rigorous training for its offshore inspection staff or
engineers. Interior has taken steps to address the training gap by
establishing a National Offshore Training and Learning Center, but


Page 104                                     GAO-12-423 Oil and Gas Management
                      Interior officials stated that they are only at the initial phases of designing
                      a curriculum. Additionally, Interior recently developed a succession plan
                      for its regional offices, though Interior officials expressed concern that
                      many critical positions are “one deep” and that, due to retirements, both
                      BOEM and BSEE risk losing significant expertise and institutional
                      knowledge. Finally, Interior continues to struggle to compete with industry
                      in hiring qualified staff. Interior has taken steps to improve its human
                      capital planning following Deepwater Horizon, but challenges remain. For
                      example, Interior has not developed a comprehensive strategic workforce
                      plan for both BOEM and BSEE that outlines specific strategies to address
                      gaps in critical skills and competencies that need attention and processes
                      to address human capital challenges, including determining the critical
                      skills and competencies that will be needed to achieve current and future
                      programmatic results. Since BOEM and BSEE started operations on
                      October 1, 2011, neither has developed a strategic workforce plan, which
                      could help guide each bureau’s efforts to address human capital
                      challenges and help guide future human capital management.

                      Finally, while Interior’s implementing regulations for the OCS Lands Act
                      require that the Secretary of the Interior provide for periodic consultation
                      with stakeholders on a regional and national basis, Interior did not renew
                      its OCS Policy Committee’s charter for 2011. This long-standing advisory
                      committee historically provided opportunities for stakeholders
                      representing industry, conservation groups, and state and local
                      governments to provide input to the Secretary on offshore leasing
                      activities. Without this committee, or some equivalent alternative,
                      opportunities for stakeholders to engage Interior on oil and gas leasing
                      activities and other oil and gas related issues in the Gulf of Mexico have
                      become more limited.


                      To improve Interior’s oversight of offshore oil and gas activities in the Gulf
Recommendations for   of Mexico, we are making the following 11 recommendations to the
Executive Action      Secretary of the Interior:

                         Institute controls to help ensure that Interior’s environmental NEPA
                          analyses are based on the most current, relevant information, such as
                          in amendments to operator-submitted exploration and development
                          plans that would need to be considered as part of such an analysis.

                         Continue to evaluate ePlans and develop edit checks to improve the
                          accuracy and completeness of operators’ exploration and
                          development plan submissions.


                      Page 105                                       GAO-12-423 Oil and Gas Management
   Track whether plan amendments were initiated at the request of
    Interior or the operator and, for amendments initiated at the request of
    Interior, the reasons for the amendments to provide Interior’s
    managers with information needed to conduct targeted outreach with
    operators on how to improve plan submissions and reduce the use of
    amendments.

   Enhance the effectiveness of Interior’s inspection program by

          assessing how new inspection policy requirements, travel times to
           drilling rigs, and numbers of inspectors affect Interior’s ability to
           conduct monthly drilling inspections and whether its monthly
           inspection goal is appropriate; and

          ensuring that both violations and correction dates are recorded in
           Interior’s TIMS IT system in a timely manner.

   Ensure that operators’ requests, approvals, and disapprovals for
    departure from regulations are recorded to provide Interior with
    information that would better allow it to identify when specific
    regulations should be considered for revision.

   Enhance Interior’s capacity for identifying and evaluating offshore oil
    and gas drilling operations according to risk, thereby allowing it to
    adjust and evaluate its oversight accordingly by (1) identifying and
    systematically collecting and maintaining reliable data on risk factors
    associated with drilling operations, (2) providing operators with clear
    definitions for significant events in the weekly well activity reports and
    developing a way to characterize and record these events
    systematically and reliably, and (3) using the risk factors and
    significant events data to develop a risk-based approach with clear
    criteria to prospectively evaluate and categorize drilling operations
    according to risk and retrospectively to evaluate the performance of
    oversight and risk mitigation activities in avoiding significant events.

   Complete and maintain its database for tracking recommendations, so
    that Interior consistently tracks and responds to the results of all
    audits and other external reviews to ensure that findings are promptly
    addressed and appropriate actions are taken to respond to
    recommendations and improve oversight.

   Direct BOEM and BSEE to set milestones and a completion date for
    developing a comprehensive IT strategic plan, including results-
    oriented goals, strategies, milestones, performance measures, and an


Page 106                                         GAO-12-423 Oil and Gas Management
                         analysis of interdependencies among projects and activities, and use
                         this plan to guide and coordinate their modernization goals.

                        Direct BOEM and BSEE to develop a strategic workforce plan that,
                         among other actions, determines the critical skills and competencies
                         that will be needed to achieve current and future programmatic results
                         and develop strategies to address gaps and human capital conditions
                         in critical skills and competencies that need attention.

                        Consider reinstating the OCS Policy Committee, on a regional and
                         national basis, or adopt an equivalent alternative to allow increased
                         opportunities for stakeholders to provide input as it relates to offshore
                         oil and gas leasing activities to ensure Interior fulfills its obligations
                         under the implementing regulations of the OCS Lands Act.


                     We provided a draft of this report to Interior for review and comment.
Agency Comments      Interior generally agreed with our findings and recommendations.
and Our Evaluation
                     Interior also provided its own analysis of exploration and development
                     plan and drilling permit review times which differed from our analysis in
                     two ways. First, our analysis included plans and permits submitted and
                     approved within each separate time frame, while Interior’s analysis
                     required only that the plan was submitted and approved, regardless of the
                     time frame. Second, our analysis of review times included data through
                     September 30, 2011, while Interior’s analysis included data through May
                     31, 2012, allowing time for Interior staff and operators to become more
                     familiar with the increased environmental and safety requirements and
                     new review process.

                     While we believe our analysis provides a more conservative and accurate
                     view of review times, Interior’s analysis is not incorrect for examining
                     trends in review times for plans and permits. Further, Interior’s analysis
                     provides a more current assessment of review times in the post
                     Deepwater Horizon incident period. Overall, Interior’s analyses found that
                     review times for plans and permits has decreased since the Deepwater
                     Horizon incident, which is consistent with the results of our work.

                     Interior and the Department of Commerce (NOAA) also provided
                     technical comments which we incorporated as appropriate. Appendix IV
                     contains Interior’s comment letter and enclosure containing its analysis of
                     plan and permit review times.




                     Page 107                                       GAO-12-423 Oil and Gas Management
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the Secretary of the
Interior, the Secretary of Commerce, the appropriate congressional
committees, and other interested parties. In addition, the report will be
available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please
contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix V.




Frank Rusco
Director, Natural Resources
  and Environment




Page 108                                    GAO-12-423 Oil and Gas Management
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             This report examines (1) Interior’s reorganization of its oversight of
             offshore oil and gas activities in the Gulf of Mexico since the Deepwater
             Horizon incident; (2) how key policy changes Interior has implemented
             since this incident have affected Interior’s National Environmental Policy
             Act (NEPA) analyses, plans reviews, and drilling permit reviews; (3) the
             extent to which Interior’s inspections of Gulf of Mexico drilling rigs and
             production platforms identified violations or resulted in civil penalty
             assessments, and how key policy changes since this incident have
             affected Interior’s inspection and civil penalties program; (4) when
             stakeholders have provided input to Interior about proposed offshore oil
             and gas activities, and the extent to which stakeholders believe Interior
             considered such input from approximately 2002 through January 2012;
             and (5) key challenges, if any, affecting Interior’s oversight of offshore oil
             and gas activities in the Gulf of Mexico following its reorganization.

             To identify the actions Interior has taken as part of its reorganization of
             Interior’s Minerals Management Service (MMS), we reviewed relevant
             regulations, Interior’s secretarial orders as well as applicable federal rules
             associated with the reorganization. We also interviewed knowledgeable
             officials at Interior’s headquarters office in Washington, D.C., and its Gulf
             of Mexico regional office in New Orleans, including staff overseeing the
             reorganization. We reviewed previous and current budget documentation
             detailing changes to the MMS; the Bureau of Ocean Energy
             Management, Regulation, and Enforcement (BOEMRE); the Bureau of
             Ocean Energy Management; and the Bureau of Safety and
             Environmental Enforcement. We also reviewed documentation and
             guidance developed by both Interior and an outside consultant hired by
             Interior to guide the reorganization, such as by establishing time frames
             and other milestones. We also reviewed documentation including
             memoranda of understanding, memoranda of agreements, and standard
             operating procedures used to define working relationships following the
             reorganization’s completion, as well as supporting documentation used to
             develop these documents. Additionally, we met with Interior officials at
             their headquarters’ offices in Herndon, Virginia, and Washington, D.C.,
             and at the Gulf of Mexico regional office in New Orleans, to discuss these
             documents. Due to the short amount of time that elapsed since the
             reorganization, we did not evaluate the effect of the reorganization on
             Interior’s ability to conduct oversight of oil and gas activities in the Gulf of
             Mexico.

             To examine key policy changes Interior has implemented since the
             Deepwater Horizon incident related to overseeing oil and gas
             development in the Gulf of Mexico, and how these changes have affected


             Page 109                                       GAO-12-423 Oil and Gas Management
Appendix I: Scope and Methodology




Interior’s operations, we reviewed agency documents relevant to Interior’s
work with NEPA exploration and development plans, and drilling permits.
We also interviewed officials from Interior’s Gulf of Mexico regional office
and New Orleans and Lafayette district offices. We analyzed Interior data
from its Technical Information Management (TIMS) information
technology (IT) system on NEPA reviews and exploration and
development plan approvals from January 1, 2000, through September
30, 2011. We analyzed Interior data from its TIMS IT system on drilling
permit approvals from January 1, 2005, through September 30, 2011. Our
review of drilling permits was limited to data beginning in 2005 due to
concerns about the reliability of data recorded prior to 2005. We assessed
the reliability of these data by (1) reviewing documentation about the data
and the system that produced them; (2) interviewing agency officials
knowledgeable about the data; and (3) verifying our results with agency
officials. Based on this assessment, we found these data sufficiently
reliable for our purposes. Because many policy changes are still under
way and have not been in place long enough to evaluate, our report does
not evaluate the effectiveness of the policy changes to reduce the risk
associated with offshore oil and gas activities.

To determine the extent to which Interior’s inspections resulted in
violations and penalties and how key policy changes since the Deepwater
Horizon incident have affected Interior’s inspection and civil penalties
program, we analyzed Interior’s inspection and civil penalty data from its
TIMS IT system from January 1, 2000, through September 30, 2011. We
assessed the reliability of these data by (1) reviewing documentation
about the data and the system that produced them; (2) interviewing
agency officials knowledgeable about the data; and (3) verifying our
results with agency officials. Based on this assessment, we found these
data sufficiently reliable for our purposes. We also reviewed agency
documents relevant to Interior’s inspection and civil penalty program and
interviewed officials from Interior’s headquarters office in Herndon, VA,
the Gulf of Mexico regional office, and the Houma district office. Because
many of these policy changes are still under way and have not been in
place long enough to evaluate, we did not evaluate the effectiveness of
the policy changes to reduce the risk associated with offshore oil and gas
activities in this report.

To determine when stakeholders provided input to Interior about
proposed offshore oil and gas activities and the extent to which they
believe Interior considered and addressed their input (the Fish and
Wildlife Service, the National Oceanic and Atmospheric Administration,
coastal states, industry and conservation groups) on oil and gas


Page 110                                     GAO-12-423 Oil and Gas Management
Appendix I: Scope and Methodology




development in the Gulf of Mexico from 2002 through January 2012, we
reviewed relevant federal statutes on Interior’s process for offshore oil
and gas development. Key statutes included the Outer Continental Shelf
Lands Act, National Environmental Policy Act, the Endangered Species
Act, the Marine Mammal Protection Act, the Magnuson-Stevens Fishery
Conservation and Management Act, and the Coastal Zone Management
Act. We identified key lease sale documents for the Gulf of Mexico from
2000 through January 2012, and limited our review to the 5-year Gulf of
Mexico Outer Continental Shelf (OCS) multilease sale environmental
impact statements (EIS) documents and individual lease sale EIS
documents that were not included within Interior’s 5-year plan. We
identified and interviewed both government and nongovernment
stakeholders that collaborated or submitted input to Interior concerning
offshore oil and gas activities during the period of our review. Government
stakeholders included officials from the Department of Commerce’s
National Oceanic and Atmospheric Administration (NOAA) and Interior’s
Fish and Wildlife Service (FWS) and state environmental agencies
responsible for conducting consistency reviews under the Coastal Zone
Management Act (CZMA) in Alabama, Florida, Louisiana, Mississippi, and
Texas. We collected correspondence documentation between
stakeholders and Interior and interviewed officials from NOAA and FWS
to determine whether and when they submitted input on oil and gas
NEPA documents. We also interviewed officials from the five Gulf of
Mexico coastal states (Alabama, Florida, Louisiana, Mississippi, and
Texas) to determine when and how they provided input to interior on
proposed offshore oil and gas activities. Nongovernment stakeholders
included representatives from conservation organizations and the
associations representing the offshore oil and gas industry. Conservation
organizations were selected based on the following criteria: (1) they were
involved in environmental issues specific to the Gulf of Mexico, (2) they
were referred to us by a representative from a conservation group that we
initially interviewed, and (3) time and resource constraints. We selected
three oil and gas industry trade groups based on their announcement to
form oil spill task forces and because each represents a minimum of 250
companies in the oil and gas industry. GAO spoke to representatives of
two of the three trade groups. Despite several attempts to speak to the
third, our correspondence was not returned. The findings from our
interviews cannot be generalized to groups we did not speak with.

To determine what challenges, if any, Interior faces in providing oversight
of offshore oil and gas activities in the Gulf of Mexico, we reviewed
relevant laws, regulations, and Interior guidance and documentation, and
interviewed knowledgeable officials in Interior’s headquarters and Gulf of


Page 111                                     GAO-12-423 Oil and Gas Management
Appendix I: Scope and Methodology




Mexico regional offices. We also reviewed our previous work on Interior
as well as federal external reviews that reported on factors contributing to
the Deepwater Horizon incident. To report on Interior’s ability to identify
and evaluate drilling risk, we obtained Interior data from its TIMS IT
system on significant events from January 1, 2004, through May 14,
2011, but determined that the data was not sufficiently reliable for our
purposes. We also reviewed documentation and interviewed Interior
officials responsible for overseeing drilling permit reviews and drilling rig
inspections. To further our understanding of IT challenges, we reviewed
Interior’s IT strategic plans, as well as budget and other documentation
describing Interior’s implementation of IT systems. We also spoke with
knowledgeable Interior officials responsible for overseeing IT systems as
well as officials with direct experience working with these systems. To
enhance our understanding of human capital issues, we reviewed
Interior’s human capital strategic plans developed for MMS, as well as
other human capital documentation and reviewed data provided to us by
Interior, and verified the reliability of the data for our purposes by
reviewing documentation and gathering information from people
knowledgeable of the system. We also met with Interior officials
responsible for overseeing human capital planning in the Gulf of Mexico
regional office. To report on Interior’s responses to federal government
stakeholders, we reviewed federal government stakeholder studies and
Interior’s responses and discussed this documentation with the
responsible interior official. To further our review of the development of
federal regulations, we reviewed Interior documentation on regulations
and met with knowledgeable Interior officials and representatives from the
American Petroleum Institute to obtain their views. To enhance our
understanding of the effect, if any, of resource constraints on Interior’s
oversight, we reviewed relevant budgetary documentation from Interior
and met with Interior officials in headquarters and the Gulf of Mexico to
discuss these issues.

We conducted this performance audit from September 2010 to July 2012
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit.




Page 112                                     GAO-12-423 Oil and Gas Management
Appendix II: Interior’s Organizational Structures
                                       Appendix II: Interior’s Organizational
                                       Structures for the Bureau of Ocean Energy
                                       Management and the Bureau of Safety and
for the Bureau of Ocean Energy Management and
                                       Environmental Enforcement


the Bureau of Safety and Environmental
Enforcement
                                       The Bureau of Ocean Energy Management’s and the Bureau of Safety
                                       and Environmental Enforcement’s detailed organizational structures are
                                       provided in figures 17 and 18.

Figure 17: Bureau of Ocean Energy Management Organizational Structure




                                       Page 113                                    GAO-12-423 Oil and Gas Management
                                        Appendix II: Interior’s Organizational
                                        Structures for the Bureau of Ocean Energy
                                        Management and the Bureau of Safety and
                                        Environmental Enforcement




Figure 18: Bureau of Safety and Environmental Enforcement Organizational Structure




                                        Page 114                                     GAO-12-423 Oil and Gas Management
Appendix III: Federal and State Stakeholder
                                            Appendix III: Federal and State Stakeholder
                                            Input to Interior’s Proposed Gulf of Mexico Oil
                                            and Gas Activities for 2002 through 2012


Input to Interior’s Proposed Gulf of Mexico
Oil and Gas Activities for 2002 through 2012
                                            Federal stakeholders—the National Oceanic and Atmospheric
                                            Administration (NOAA) and Fish and Wildlife Service (FWS)––and state
                                            government stakeholders provide input to Interior through a variety of
                                            legal authorities.


NOAA                                        According to NOAA officials, NOAA generally provided its most
                                            substantive input to Interior while Interior was developing its Gulf of
                                            Mexico multilease sale environmental impact statement (EIS). Table 7
                                            outlines NOAA’s input to Interior.

Table 7: NOAA’s Input to Interior’s Gulf of Mexico Outer Continental Shelf (OCS) Lease Sale Environmental Impact Statement
(EIS) National Environmental Policy Act (NEPA) documents, 2002—2012

                                                                                        Magnuson-Stevens
                           National Environmental                                       Fishery Conservation and      Marine Mammal
                           Policy Act             Endangered Species Act                Management Act                Protection Act
Gulf of Mexico Lease Sale EIS Documents Prior to the Deepwater Horizon Incident
Final Gulf of Mexico OCS Yes – informal                 Yes – biological opinion,       Yes – Letter documenting      No
2003-2007 Multilease Sale                               November 29, 2002               consultation April 29, 2002
EIS (November 2002)
Final Gulf of Mexico OCS Yes – informal                 Yes – biological opinion,       Yes – Letter documenting      No
Lease Sales 189 and 197                                 August 30, 2003                 consultation November 19,
Eastern Planning Area EIS                                                               2002
(May 2003)a
Final Gulf of Mexico OCS   Yes – informal               Yes – biological opinion,       Yes – Letter documenting      No
2007 – 2012 Multilease                                  June 29, 2007                   consultation December 21,
Sale EIS (April 2007)                                                                   2006
Final Gulf of Mexico OCS   Yes – informal               Yes – biological opinion,       Yes - Letter Documenting      No
Lease Sale 224 Eastern                                  June 15, 2001. Still in effect. Consultation July 19, 2007
Planning Area                                           Interior expanded lease
Supplemental EIS                                        area 181 after the biological
(October 2007)a                                         opinion was completed.
                                                        Interior requested NOAA
                                                        review of the amended
                                                        action. On October 9, 2007,
                                                        NOAA determined that the
                                                        expanded area would not
                                                        change the effects to listed
                                                        species already considered,
                                                        and would be covered under
                                                        the existing biological
                                                        opinion.
Final Gulf of Mexico OCS   No                           Yes – biological opinion,       Yes – Letter documenting      No
Supplemental 2009 – 2012                                June 29, 2007. Still in effect. consultation December 13,
Supplemental EIS                                                                        2006.
                   b
(September 2008)




                                            Page 115                                                GAO-12-423 Oil and Gas Management
                                          Appendix III: Federal and State Stakeholder
                                          Input to Interior’s Proposed Gulf of Mexico Oil
                                          and Gas Activities for 2002 through 2012




                                                                                                     Magnuson-Stevens
                           National Environmental                                                    Fishery Conservation and         Marine Mammal
                           Policy Act             Endangered Species Act                             Management Act                   Protection Act
Gulf of Mexico Lease Sale EIS Documents After the Deepwater Horizon Incident
Final Gulf of Mexico OCS Yes – formal, June 6,            Yes – Interior requested                   Yes – Letter Documenting   No
Lease Sale 218 Western   2011                             reinitiation of the                        Consultation June 6, 2011.
Planning Area                                             Endangered Species Act                     Post-Deepwater Horizon
Supplemental EIS (August                                  Consultation on July 30,                   incident, NOAA requested a
2011)c                                                    2010, and NOAA responded                   comprehensive review of
                                                          on September 24, 2010.                     existing EFH consultations
                                                          Reinitiations are not                      on September 24, 2010.
                                                          complete. The June 29,                     NOAA and Interior are
                                                          2007, biological opinion                   working on a new
                                                          remains in effect until the                consultation document for
                                                          reinitiated consultations are              the 2012-2017 multisale
                                                          complete.                                  EIS.
Final Gulf of Mexico OCS   Yes – formal, August 15,       Yes – Interior requested                   Yes – Letter Documenting      No
Lease Sale 216 and 222     2011                           reinitiation of Endangered                 Consultation August 15,
Central Planning Area                                     Species Act Consultation on                2011. Post-Deepwater
Supplemental EIS                                          July 30, 2010, and NOAA                    Horizon incident, NOAA
(January 2012)c                                           responded on September                     requested a comprehensive
                                                          24, 2010. Reinitiations are                review of existing essential
                                                          not complete. The June 29,                 fish habitat consultations on
                                                          2007 biological opinion                    September 24, 2010. NOAA
                                                          remains in effect until the                and Interior are working on
                                                          reinitiated consultations are              a new consultation
                                                          complete.                                  document for the 2012-2017
                                                                                                     multisale EIS
                                          Source: GAO’s analysis of Interior and NOAA documents and input from NOAA officials.
                                          a
                                          Interior does not include lease sales that could affect the eastern planning area in its programmatic
                                          Gulf of Mexico multilease sale EIS documents; rather, it prepares a separate lease sale EIS.
                                          b
                                           Interior had to supplement its programmatic Gulf of Mexico 2007-2012 multilease sale EIS because
                                          of the Gulf of Mexico Energy Security Act of 2006.
                                          c
                                          Interior created a separate lease sale EIS due to potential changes in the baseline conditions that
                                          may have occurred since the Deepwater Horizon incident.


                                          National Environmental Policy Act. NOAA officials stated that they do not
                                          always submit formal comments under NEPA on Interior’s Gulf of Mexico
                                          multilease sale EIS or individual lease sale EIS documents, but generally
                                          provide comments informally under other legal authorities, such as the
                                          ESA. Our analysis of Interior’s Gulf of Mexico lease sale environmental
                                          impact statement (EIS) documents from 2002 through January 2012
                                          found that NOAA did not formally comment on the five draft lease sale
                                          EIS documents completed prior to the Deepwater Horizon incident. NOAA
                                          officials explained that, in the past, they generally consulted informally
                                          with Interior as it developed its Gulf of Mexico multilease sale EIS
                                          documents and individual lease sale EIS documents so that NOAA could
                                          ensure that the information necessary to complete its consultations were



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included in Interior’s National Environmental Policy Act (NEPA)
documents. However, NOAA provided comments on the supplemental
EIS documents for both the Western and Central Planning areas—the
first lease sale NEPA documents completed since the Deepwater Horizon
incident—indicating a shift in its practice.1

NOAA officials also explained that, with regard to other Interior NEPA
documents, such as individual lease sale environmental assessments
(EA) or NEPA analyses associated with exploration and development
plans and drilling permits, as long as the environmental conditions had
not changed since the completion of the Gulf of Mexico multilease sale
EIS or individual lease sale EIS, and the exploration and development
plans or drilling permits were approved with the stated mitigation
requirements, NOAA typically has not requested or received these
documents and therefore generally has not commented on them.

Endangered Species Act. NOAA officials told us that they generally rely on
information included in Interior’s draft Gulf of Mexico multilease sale EIS
documents to prepare biological opinions required under Section 7 of the
Endangered Species Act (ESA).2 NOAA officials further explained that the
time frames covered by the biological opinions generally coincide with time
frames analyzed in the Gulf of Mexico multilease sale EIS documents. For
example, NOAA’s biological opinion dated November 29, 2002, covers all
proposed activities analyzed in Interior’s draft Gulf of Mexico OCS 2003-
2007 multilease sale EIS, which was finalized in November 2002. NOAA
officials told us that by providing input informally through the NEPA process
and formally through ESA Section 7 consultations, they have ensured that
Interior’s final Gulf of Mexico multilease sale EIS and other NEPA
documents included any necessary mitigation measures—such as Notices
to Lessees and Operators or lease stipulations—to protect threatened or
engendered species. Accordingly, all subsequent approvals of oil and gas
activities, including exploration and development plans and drilling permits,
would be tiered back to the final Gulf of Mexico multilease sale EIS.
Although NOAA officials told us they typically do not request or receive


1
 While the leases included in this lease sale were previously analyzed in the Final
Programmatic Gulf of Mexico OCS Supplemental EIS 2009-2012 Multilease Sale
(September 2008), the potential effects of the Deepwater Horizon incident caused Interior
to prepare an EIS, taking into consideration new information.
2
 Interior officials stated that they also provided Biological Assessments in addition to the
EIS for consideration in the Section 7 analysis.




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these documents from Interior and, therefore, do not typically comment on
them as it relates to their authority under the ESA, recent coordination
between NOAA and Interior has resulted in interim ESA consultation
procedures. According to NOAA officials, these procedures, finalized on
February 8, 2012, ensure that the existing mitigation measures in the
biological opinion are sufficient. As a result, NOAA officials told us that
Interior is now consulting with them on both exploration and development
plans, among other items. These interim procedures will remain in place
until they are replaced with new mitigation measures and procedures in a
new biological opinion under the ESA.

Our analysis of NOAA’s biological opinions for the lease sales we
reviewed found that, prior to the Deepwater Horizon incident, NOAA
completed four biological opinions, all of which found that the proposed
lease sales and their associated actions were not likely to jeopardize the
continued existence of any endangered or threatened species under
NOAA’s jurisdiction. These biological opinions included both mandatory
terms and conditions for Interior, in addition to discretionary
recommendations intended to minimize or avoid adverse effects of
proposed actions on listed species and critical habitat. Exceptions to this
process exist, for example, if certain new information becomes available
during the time period for which the biological opinion is in effect, such as
with the Deepwater Horizon incident, Interior is required to reinitiate ESA
Section 7 consultations. On July 30, 2010, Interior requested reinitiation
of Section 7 ESA consultation with NOAA as it prepared supplemental
NEPA documents for the remaining lease sales initially included in the
final programmatic Gulf of Mexico OCS 2007-2012 multilease sale EIS
(April 2007). In the interim, the existing July 29, 2007, biological opinion
will remain in effect.

Magnuson-Stevens Fishery Conservation and Management Act. NOAA
generally uses information included in Interior’s draft Gulf of Mexico
multilease sale EIS to facilitate its consultation requirements under the
Magnuson-Stevens Fishery Conservation and Management Act.
Specifically, NOAA works with Interior to ensure that the elements of
Essential Fish Habitat assessments required by regulation are included in
Interior’s Gulf of Mexico multilease sale EIS. Then, similar to NOAA’s
biological opinions, NOAA’s Essential Fish Habitat programmatic
consultations remain in effect for the time period of the Interior lease
program being analyzed in the final Gulf of Mexico multilease sale EIS.
For example, NOAA’s Essential Fish Habitat programmatic consultation
letter dated April 26, 2002, covers activities associated with Interior’s final
Gulf of Mexico OCS 2003-2007 multilease sale EIS, dated November


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2002. Also, similar to NOAA’s biological opinions, the consultation letter
may include recommendations to minimize and avoid the effects of oil
and gas development on Essential Fish Habitats. For example, NOAA
and Interior cooperatively developed a mitigation measure for the
protection of certain organisms that inhabit the seafloor of the Gulf of
Mexico.

Our analysis of NOAA’s Essential Fish Habitat consultations from
approximately 2002 through January 2012 found that, prior to the
Deepwater Horizon incident, NOAA completed five consultations, all of
which, according to NOAA officials, found that if the proposed Interior
mitigations, conservation recommendations, and standard lease
stipulations and regulations are followed, the effects on Essential Fish
Habitats resulting from activities proposed in the lease sale EIS
documents would be minimal. However, after the Deepwater Horizon
incident, NOAA requested a comprehensive review of existing essential
fish habitat consultations on September 24, 2010.3 NOAA and Interior are
working on a new consultation document for Interior’s next Gulf of Mexico
multilease sale EIS.

Marine Mammal Protection Act. Under the Marine Mammal Protection Act
(MMPA), Interior coordinates with NOAA to mitigate potentially negative
effects on marine mammals and obtain authorizations if mammals are
likely to be taken. NOAA officials stated that NOAA worked with Interior
through the ESA and NEPA processes to institute lease stipulations and
Notices to Lessees and Operators that provide protection for threatened
or endangered marine mammals. However, both NOAA and Interior
officials acknowledged that adverse effects to marine mammals (both
ESA-listed and nonlisted) from seismic surveys in the Gulf of Mexico
could occur and that an MMPA authorization would be appropriate and,
as a result, Interior first applied for an MMPA authorization in 2002.
NOAA and Interior have been working toward the issuance of MMPA
incidental take regulations to cover seismic surveys in the Gulf of Mexico.
Since 2002, however, changes in the anticipated activities, the need for



3
  NOAA officials stated that to the extent that Interior can examine the effects to essential
fish habitat and related critical habitat for ESA-listed species together (or at least keep the
potential effects in mind as they complete their NEPA documentation and related ESA
documentation), it will aid their overall analysis from the standpoint of ecosystem effects
and, potentially, regulatory compliance under the ESA and Magnusson-Stevens Fishery
Conservation and Management Act.




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                                         NEPA analyses, and resource limitations have slowed down the process
                                         and regulations have not yet been issued.

                                         In April 2011, Interior again revised its application for take authorizations
                                         based on industries’ updated seismic effort projections, which NOAA later
                                         published for comment. However, the EIS is not still complete, and NOAA
                                         has issued no take authorizations for marine mammals for seismic
                                         activities. In addition, a group of conservation organizations filed a
                                         number of formal notices of intent to sue the Secretary of the Interior and,
                                         in one case, the Secretary of Commerce, for failure to comply with MMPA
                                         and ESA when approving offshore oil and gas activities in the Gulf of
                                         Mexico. For example, in its February 9, 2011, notice, the group informed
                                         Interior and NOAA that it intended to challenge the 10 projects approved
                                         since October 15, 2010, for, among other things, failing to obtain take
                                         permits under the MMPA and ESA that are designed to protect
                                         endangered species and marine mammals, such as whales, from harmful
                                         offshore oil activities.


FWS                                      According to FWS officials, FWS also generally provided its most
                                         substantive input while Interior was developing its Gulf of Mexico
                                         multilease sale EIS documents. Table 8 outlines FWS’s input to Interior.

Table 8: FWS’s Input to Interior’s Gulf of Mexico OCS Lease Sale EIS NEPA documents, 2002-2012

                                       National Environmental
                                       Policy Act                            Endangered Species Act
Gulf of Mexico Lease Sale EIS Documents Prior to the Deepwater Horizon Incident
Final Gulf of Mexico OCS 2003-2007     Yes – informal                        Yes – biological opinion, January 13, 2003
Multilease Sale EIS (November 2002)
Final Gulf of Mexico OCS Lease Sales  Yes – formal, January 27, 2003         Yes – biological opinion, August, 2003
189 and 197 Eastern Planning Area EIS
(May 2003)a
Final Gulf of Mexico OCS 2007 – 2012   Yes – formal, January 5, 2007         Yes – concurrence to Interior’s biological assessment
Multilease Sale EIS (April 2007)                                             September 14, 2007
Final Gulf of Mexico OCS Lease Lease   Yes – Informal                        Yes – biological opinion, June 8, 2001
Sale 224 Eastern Planning Area
Supplemental EIS (October 2007)a
Final Gulf of Mexico OCS Supplemental Yes – formal, June 6, 2008             Yes – concurrence to Interior’s original biological
2009 – 2012 Supplemental EIS                                                 assessment September 14, 2007. Concur to draft
(September 2008) b                                                           Supplemental EIS (addition of Lease Sale 181 and
                                                                             updates) via e-mail dated July 30, 2008.




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                                      National Environmental
                                      Policy Act                                        Endangered Species Act
Gulf of Mexico Multilease Sale EIS Documents After the Deepwater Horizon Incident
Final Gulf of Mexico OCS Lease Sale   Yes – formal, June 6, 2011                        Yes – Interior requested reinitiation of ESA
218 Western Planning Area                                                               consultations on July 30, 2010, and FWS responded on
Supplemental EIS (August 2011)c                                                         September 27, 2010. Reinitiations are not complete.
                                                                                        The September 14, 2007 and July 30, 2008
                                                                                        concurrence to Interior’s biological assessments
                                                                                        remain in effect until the reinitiated consultations are
                                                                                        complete
Final Gulf of Mexico OCS Lease Sale   Yes – formal, August 10, 2011                     Yes – Interior requested reinitiation of ESA
216 and 222 Central Planning Area                                                       consultations on July 30, 2010, and FWS responded on
Supplemental EIS (January 2012)c                                                        September 27, 2010. Reinitiations are not complete.
                                                                                        The September 14, 2007 and July 30, 2008
                                                                                        concurrence to Interior’s biological assessments
                                                                                        remain in effect until the reinitiated consultations are
                                                                                        complete
                                        Source: GAO analysis of Interior and FWS documents and input from FWS officials.
                                        a
                                         Due to the drilling moratorium in the eastern planning area of the Gulf of Mexico, Interior does not
                                        include lease sales that could affect the eastern planning area in its programmatic Gulf of Mexico
                                        multilease sale EIS documents; rather, it prepares a separate lease sale EIS.
                                        b
                                         Interior had to supplement its programmatic Gulf of Mexico 2007-2012 multilease sale EIS because
                                        of the Gulf of Mexico Security Act of 2006.
                                        c
                                        Interior created a separate lease sale EIS due to potential changes in the baseline conditions that
                                        may have occurred since the Deepwater Horizon incident.


                                        National Environmental Policy Act. FWS officials told us that they are
                                        generally involved with Interior as it develops its Gulf of Mexico multilease
                                        sale EIS. Similar to NOAA, FWS officials told us they coordinate with
                                        Interior early in the process and are able to provide information on
                                        endangered species necessary to ensure that Interior meets its ESA
                                        requirements.

                                        Our analysis of Interior’s Gulf of Mexico lease sale EIS documents from
                                        2002 through January 2012 indicated that FWS provided formal
                                        comments to Interior on three of the five draft lease sale EIS documents
                                        prior to the Deepwater Horizon incident and on both draft lease EIS
                                        documents since the incident. FWS officials also explained that, again,
                                        like NOAA, because they provide their most substantive input during the
                                        lease sale planning process as Interior develops a Gulf of Mexico
                                        multilease sale EIS, they do not typically formally comment on postlease




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activities, including lease sale EA documents,4 exploration and
development plans, or individual drilling permits.

Endangered Species Act. FWS officials told us that, until 2007, FWS
typically relied on information included in the draft Gulf of Mexico
multilease sale EIS to complete the required ESA Section 7
consultations.5 Similar to NOAA, FWS officials explained that the time
frames covered by these consultations—which resulted in biological
opinions drafted by FWS—generally coincided with time frames analyzed
in Interior’s final Gulf of Mexico multilease sale EIS. For example, FWS’s
biological opinion dated January 13, 2003, covers the proposed activities
analyzed in Interior’s draft Gulf of Mexico OCS 2003-2007 multilease sale
EIS, which was finalized in November 2002. Our analysis of FWS’s ESA
consultations from 2002 through 2012 found that, prior to the Deepwater
Horizon incident; FWS completed three ESA Section 7 consultations, all
of which found that the proposed lease sales and their associated actions
were not likely to adversely affect any threatened or endangered species.
FWS prepared a biological opinion at the request of Interior that found
that the proposed lease sales were not likely to jeopardize the continued
existence of any endangered or threatened species.

Beginning in 2007, instead of formally consulting with Interior and preparing
a biological opinion for the final Gulf of Mexico OCS 2007-2012 multilease
sale EIS (April 2007), FWS requested that it informally consult with Interior
and that Interior prepare a biological assessment.6 FWS officials explained
that formal consultations resulting in biological opinions were resource
intensive but generally necessary to determine if the authorized incidental
take would jeopardize a threatened or endangered species. However, in
2007, based on the outcomes of the previously completed biological
opinions which all concluded that Interior’s proposed actions were not likely


4
 FWS officials told us that they sometimes informally consult with Interior on individual
lease sales.
5
 Interior officials stated that they also provided Biological Assessments in addition to the
EIS for consideration in the Section 7 analysis.
6
 Under Section 7, federal agencies must consult with FWS when any action the agency
carries out, funds, or authorizes––such as through a permit––may affect a listed
endangered or threatened species or critical habitat. This process usually begins as
informal consultation. When a federal agency determines that, through a biological
assessment or other review, its action is likely to adversely affect a listed species, the
agency submits a request to FWS for a formal consultation.




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                   to adversely affect listed species, FWS requested that Interior consider
                   completing the consultation informally, rather than formally. This informal
                   consultation required Interior to prepare a biological assessment for the
                   proposed activities, with which FWS concurred. FWS officials told us that
                   both its formal and informal consultations included conservation
                   recommendations for Interior intended to further minimize the potential for
                   adverse effects of proposed actions on listed species and critical habitat or
                   further a species recovery. FWS officials explained that, again, similar to
                   NOAA, by providing input informally through the NEPA process and the
                   ESA Section 7 consultations, it has ensured that Interior’s final Gulf of
                   Mexico multilease sale EIS and ESA consultation documents have
                   included the necessary conservation measures—such as Notices to
                   Lessees and Operators or lease stipulations—to protect threatened or
                   endangered species under its jurisdiction. Accordingly, all subsequent
                   authorization of oil and gas activities, including approvals of exploration and
                   development plans or drilling permits, would be tiered back to the relevant
                   Gulf of Mexico multilease sale EIS and ESA biological opinion or biological
                   assessment. As a result, as oil and gas development moves through
                   Interior’s postlease process––including the exploration and development
                   plan and drilling permit review and approvals––FWS officials told us that
                   they typically do not request or receive these documents from Interior and
                   therefore do not typically comment on them as it relates to their authority
                   under the ESA. Again, as with NOAA, the exception is if new information
                   becomes available during the time period for which the biological opinion is
                   in effect, such as with the Deepwater Horizon incident, in which case
                   Interior is required to reinitiate Section 7 ESA consultations. On July 30,
                   2010, Interior requested reinitiation of Section 7 ESA consultation with
                   FWS. Subsequent to the Deepwater Horizon incident, on July 30, 2010,
                   Interior requested reinitiation of Section 7 consultation with FWS. However,
                   FWS did not reinitiate consultation at this time because no assessments of
                   the current status of listed species as a result of the oil spill has been made
                   available to FWS to serve as a basis for assessing the effects of the
                   proposed actions. In the interim, Interior has determined that the existing
                   September 14, 2007, biological assessment remains in effect.


State Government   State government stakeholders provided input to Interior through
Stakeholders       commenting on Gulf of Mexico multilease sale EIS and other lease sale
                   EIS documents and consistency reviews conducted under the Coastal
                   Zone Management Act.

                   National Environmental Policy Act. Of the five state agencies from Gulf of
                   Mexico states that we reviewed, only the Mississippi Department of


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                                         Marine Resources did not comment on any of Interior’s Gulf of Mexico
                                         multilease sale EIS documents or individual lease sale EIS documents
                                         from approximately 2002 through January 2012. Of the remaining four
                                         state agencies that provided comments, Louisiana’s Department of
                                         Natural Resources was most consistent in commenting on Interior’s draft
                                         lease sale EIS documents, commenting on five of the six included in our
                                         analysis period (see table 9).

Table 9: State’s Input to Interior’s Gulf of Mexico OCS Lease Sale EIS NEPA documents, 2002-2012

                                             Alabama                         Florida                       Louisiana              Mississippi      Texas
                                        Department of                 Department of                    Department of            Department of     General
                                        Environmental                 Environmental                          Natural                  Marine        Land
                                         Management                       Protection                      Resources                Resources       Office
Gulf of Mexico Lease Sale EIS Documents Prior to the Deepwater Horizon Incident
Final Gulf of Mexico OCS 2003-2007                      Yes                               No                            Yes                No          No
Multilease Sale EIS (November 2002)
Final Gulf of Mexico OCS Lease                            No                            Yes                             Yes                No         Yes
Sales 189 and 197 Eastern Planning
                     a
Area EIS (May 2003)
Final Gulf of Mexico OCS 2007 –                         Yes                               No                            Yes                No          No
2012 Multilease Sale EIS (April 2007)
Final Gulf of Mexico OCS Lease                            No                              No                             No                No          No
Lease Sale 224 Eastern Planning
Area Supplemental EIS (October
      a
2007)
Final Gulf of Mexico OCS                                Yes                               No                             No                No          No
Supplemental 2009 – 2012
                                  b
Supplemental EIS (September 2008)
Gulf of Mexico Lease Sale EIS Documents After the Deepwater Horizon Incident
Final Gulf of Mexico OCS Lease Sale                       No                              No                             No                No          No
218 Western Planning Area
                               c
Supplemental EIS (August 2011)
Final Gulf of Mexico OCS Lease Sale                     Yes                               No                            Yes                No          No
216 and 222 Central Planning Area
Supplemental EIS (January 2012)c
                                         Source: GAO analysis of Interior and state documents and input from state officials.
                                         a
                                          Due to the drilling moratorium in the eastern planning area of the Gulf of Mexico, Interior does not
                                         include lease sales that could affect the eastern planning area in its programmatic Gulf of Mexico
                                         multilease sale EIS documents; rather, it prepares a separate lease sale EIS.
                                         b
                                          Interior had to supplement its programmatic Gulf of Mexico 2007-2012 multilease sale EIS because
                                         of the Gulf of Mexico Energy Security Act of 2006.
                                         c
                                         Interior created a separate lease sale EIS due to potential changes in the baseline conditions that
                                         may have occurred since the Deepwater Horizon incident.




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Coastal Zone Management Act. State agency officials responsible for
complying with CZMA from the five Gulf of Mexico states told us that no
oil and gas activities proposed by Interior since 2000 have been found to
be inconsistent with the states’ coastal zone management plan. In
accordance with CZMA, states are required to approve or deny
consistency certification under the CZMA for Interior’s oil and gas
proposed activities, including for Interior’s Gulf of Mexico multilease sale
EIS, individual lease sale EA documents, and exploration and
development plans. Unlike most other stakeholders, states receive and
have the opportunity to review and disapprove an operator’s exploration
and development plan if they find the proposed plan to be inconsistent
with the state’s coastal zone management plan. However, officials from
two of the five Gulf of Mexico states characterized their consistency
reviews as cursory. Officials from one of these state agencies said they
are checking the documents for form and not content, while an official
from another state agency explained that the states’ approvals were
mostly through default—that is, by not disapproving the project within the
specified time frame, the project was found to be consistent with the
state’s coastal zone management plan. An official from another state
agency said that while state officials conduct consistency reviews, they
provide their most substantive input to Interior during the NEPA process.
We attempted to obtain data from the states and report on their
consistency determinations but found that the data were not sufficiently
reliable for the purposes of our analysis.




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             Appendix IV: Comments from the Department
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Department of the Interior




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Appendix V: GAO Contact and Staff
                  Appendix V: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Frank Rusco, (202) 512-3841 or ruscof@gao.gov
GAO Contact
                  In addition to the contact named above, Christine Kehr, Assistant
Staff             Director; Nirmal Chaudhary; Glenn C. Fischer; Cindy Gilbert; David
Acknowledgments   Greyer; Michael Kendix; Alison O’Neill; Kiki Theodoropoulos; Barbara
                  Timmerman; and Nick Weeks made key contributions to this report.




(361227)
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