The federal government reforms laws and regulations by enacting new legislation and proposing new rules to implement the legislation. Reforms can stem from government oversight organizations’ recommendations, including from both DOI’s Office of Inspector General and the Government Accountability Office. Below are reforms following the Deep Water Horizon oil spill, recent findings from government oversight organizations, and proposed rules.
Reforms following the Deepwater Horizon oil spill
In the aftermath of the Deep Water Horizon oil spill in the Gulf of Mexico in 2010, the federal government overhauled the oversight of DOI’s leasing, regulation, and collection of revenue for oil and gas extraction on the Outer Continental Shelf. DOI’s post Deepwater Horizon reorganization separated and established independent oversight for offshore leasing (i.e., BOEM), offshore safety and environmental enforcement (i.e., BSEE), and the collection and accountability of the revenue generated from natural resource development on federal and Indian lands through the creation of the Office of Natural Resources Revenue (i.e., ONRR).
When the Secretary of the Interior announced the creation of ONRR in May 2010 and the elimination of the former Minerals Management Service in June 2010, the goal was to fundamentally restructure the government’s mineral leasing, regulatory, and revenue collection agencies. The Secretary wanted to:
- Separate the three responsibilities of leasing, regulation, and revenue collection
- Provide each office and bureau with the independence and resources necessary to fulfill their missions
- Eliminate real and perceived conflicts associated with the previous organizations
While the federal government made regulatory reforms following the spill, Congress did not change any laws related to offshore fossil fuel management in response to the accident.
Office of Inspector General (OIG) reports
DOI’s OIG is responsible for the independent oversight and promotion of excellence, integrity, and accountability within the programs, operations, and management of DOI. OIG also identifies and prevents fraud, waste, and mismanagement within the agency. In recent years, OIG has published numerous reports related to DOI revenue from natural resource extraction, including:
- June 2016: Office of Natural Resources Revenue’s Financial Management Division. This report assesses the efficiency of ONRR’s processes to accurately and timely collect and distribute energy- and mineral-related revenue. It identifies, among various inefficient practices and procedures, potentially serious issues with ONRR’s oil price edits, negative estimates, and policies and procedures. It contains 17 recommendations to improve ONRR’s operations and increase efficiency.
- February 2016: Bureau of Indian Affairs’ Southern Ute Agency’s Management of the Southern Ute Indian Tribe’s Energy Resources. This report states the Bureau of Indian Affairs (BIA) Southern Ute Agency does not currently effectively fulfill its tribal energy-related obligations, including having an established energy branch or plan and record management issues. It offers 7 recommendations to improve management.
- October 2014: BIA Needs Sweeping Changes to Manage the Osage Nation’s Energy Resources (PDF). This report states that the Bureau of Indian Affairs (BIA) Osage Agency has a flawed oil and gas management program, including the policies and procedures that guide royalty payment activities, accounting, and leasing activities. The report provides 33 recommendations to improve the program.
- March 2014: Bureau of Land Management’s Mineral Materials Program (PDF). This report states that, among other challenges, the BLM Mineral Materials Program has little assurance that it obtains market value for mineral materials and provides 15 recommendations to enhance the program.
- September 2012: Oil and Gas Leasing in Indian Country: An Opportunity for Economic Development (PDF). This report concludes that Indian oil and gas leasing is not reaching its full economic potential, largely due to a lack of a dedicated and coordinated management focus at the federal level for the more than 17,000 leases on Indian lands.
- May 2010: Minerals Management Service: Royalty-In-Kind Program’s Oil Volume Verification Process (PDF). OIG found several areas where the Royalty-In-Kind Program could be improved to ensure proper accounting of royalties that are paid in oil and gas volumes to the federal government, rather than in dollars.
Government Accountability Office (GAO) reports
The GAO is an independent, nonpartisan agency that investigates how the federal government spends taxpayer funds, including those for natural resource management on federal and Indian lands. GAO publishes its reports on the GAO Summary Page. Some recent GAO findings related to natural resource extraction include:
- June 2016: Indian Energy Development: Interior Could Do More to Improve Its Process for Approving Revenue-Sharing Agreements. This report assesses Department of Interior’s recent guidance intended to streamline the review process and review approval times of oil and gas revenue-sharing agreements that include Indian resources.
- December 2013: Oil and Gas Resources: Actions Needed for Interior to Better Ensure a Fair Return (PDF). This report examines steps DOI has taken to ensure that the public receives a fair return on oil and gas resources extracted from federal lands, as well as recommends improvements to the fiscal system.
- September 2008: Oil and Gas Royalties: The Federal System for Collecting Oil and Gas Revenues Needs Comprehensive Reassessment (PDF). This report evaluates the government take from federal oil and gas resources and assesses DOI’s work in monitoring the performance and appropriateness of the current fiscal system.
- March 1989: The Mining Law of 1872 Needs Revision (PDF). This report critiques the foundational mining law on three major points: that the law’s annual work requirements need to be replaced, that the law forces the federal government to sell valuable land at nominal prices, and that the patent provision runs counter to other natural resource policies.
New and proposed rules
Per the Administrative Procedures Act, agencies propose rules to implement federal laws. The public has an opportunity to comment on all proposed rules before an agency finalizes any regulations. Recently, DOI bureaus and offices issued these rules after public comment:
- Bureau of Ocean Energy Management (BOEM) rule on leasing of oil and gas and sulfur in the Outer Continental Shelf (PDF)
- BOEM rule on the allocation and disbursement of royalties, rentals, and bonuses for offshore oil and gas (PDF)
- ONRR rule on consolidated federal oil and gas and federal and Indian coal valuation reform (PDF)
BLM also issued a proposed rule on wind and solar and competitive leasing (PDF) intended to go into effect after public comment.
For more details, search the Federal Registrar for DOI proposed rules.
The 2010 Dodd-Frank Act
In 2010, the U.S. enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF) (124 Stat. 1376) to improve transparency and accountability across the financial system. Section 1504 of the act requires extractive industries companies registered with the Securities and Exchange Commission (SEC) to separately disclose information about payments to governments around the world in an interactive data format.
Section 1504 mandates disclosure of “the type and total amount of (such) payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals,” including “taxes, royalties, fees (including license fees), production entitlements, bonuses, and other material benefits, that the Commission, consistent with the guidelines of the Extractive Industries Transparency Initiative (to the extent practicable), determines are part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals.”
SEC is rewriting the rule to implement this law. SEC has stated that the revised rule will be proposed by the end of 2015. Section 5.2e of the EITI Standard states: “Reporting at project level is required, provided that it is consistent with the United States Securities and Exchange Commission rules and the forthcoming (now implemented) European Union requirements.” According to SEC scheduling, it will issue final implementation rules by June 2016.