Gao.Gov/Products/GAO-11-34

gao.gov/products/GAO-11-34

FederalOilandGasLeases:OpportunitiesExisttoCaptureVentedandFlaredNaturalGas,WhichWouldIncreaseRoyaltyPaymentsandReduceGreenhouseGases

GAO-11-34October29,2010

HighlightsPage(PDF)FullReport(PDF,57pages)AccessibleTextRecommendations(HTML)

Summary

TheDepartmentoftheInterior(Interior)leasespubliclandsforoilandnaturalgasdevelopment,whichgeneratedabout$9billioninroyaltiesin2009.Somegasproducedontheseleasescannotbeeasilycapturedandisreleased(vented)directlytotheatmosphereorisburned(flared).ThisventedandflaredgasrepresentspotentiallostroyaltiesforInteriorandcontributestogreenhousegasemissions.GAOwasaskedto(1)examineavailableestimatesoftheventedandflarednaturalgasonfederalleases,(2)estimatethepotentialtocaptureadditionalgaswithavailabletechnologiesandassociatedpotentialincreasesinroyaltypaymentsanddecreasesingreenhousegasemissions,and(3)assessthefederalroleinreducingventingandflaring.Inaddressingtheseobjectives,GAOanalyzeddatafromInterior,theEnvironmentalProtectionAgency(EPA),andothersandinterviewedagencyandindustryofficials.

Estimatesofventedandflarednaturalgasforfederalleasesvaryconsiderably,andGAOfoundthatdatacollectedbyInteriortotrackventingandflaringonfederalleaseslikelyunderestimateventingandflaringbecausetheydonotaccountforallsourcesoflostgas.Foronshorefederalleases,operatorsreportedtoInteriorthatabout0.13percentofproducedgaswasventedorflared.EstimatesfromEPAandtheWesternRegionalAirPartnership(WRAP)showedvolumesashighas30timeshigher.Similarly,foroffshorefederalleases,operatorsreportedthat0.5percentofthenaturalgasproducedwasventedandflared,whiledatafromanInterioroffshoreairqualitystudyshowedthatvolumetobeabout1.4percent,andestimatesfromEPAshowedittobeabout2.3percent.GAOfoundthatthevolumesoperatorsreportedtoInteriordonotfullyaccountforsomeongoinglossessuchastheemissionsfromgasdehydrationequipmentorfromthousandsofvalves--keysourcesintheEPA,WRAP,andInterioroffshoreairqualitystudies.DatafromEPA,supportedbyinformationobtainedfromtechnologyvendorsandGAOanalysis,suggestthataround40percentofnaturalgasestimatedtobeventedandflaredononshorefederalleasescouldbeeconomicallycapturedwithcurrentlyavailablecontroltechnologies.AccordingtoGAOanalysis,suchreductionscouldincreasefederalroyaltypaymentsbyabout$23millionannuallyandreducegreenhousegasemissionsbyanamountequivalenttoabout16.5millionmetrictonsofCO2--theannualemissionsequivalentof3.1millioncars.Ventingandflaringreductionsarealsopossibleoffshore,butdatawerenotavailableforGAOtodevelopacompleteestimate.Aspartofitsoversightresponsibilities,Interiorischargedwithminimizingventedandflaredgasonfederalleases.Tominimizelostgas,Interiorhasissuedregulationsandguidancethatlimitventingandflaringduringroutineprocedures.However,Interior'soversighteffortstominimizetheselosseshaveseverallimitations,includingthatitsregulationsandguidancedonotaddresssomesignificantsourcesoflostgas,despiteavailablecontroltechnologiestopotentiallyreducethem.AlthoughEPAdoesnothavearoleinmanagingfederalleases,ithasvoluntarilycollaboratedwiththeoilandgasindustrythroughitsNaturalGasSTARprogram,whichencouragesoilandgasproducerstousegassavingtechnology,andthroughwhichoperatorsreportedventingreductionstotalingabout0.4percentofnaturalgasproductionin2008.Toreducelostgas,increaseroyalties,andreducegreenhousegasemissions,GAOrecommendsthatInteriorimproveitsventingandflaringdataandaddresslimitationsinitsregulationsandguidance.Interiorgenerallyconcurredwiththeserecommendations.

View the Transcript
00:01:28
Vented Gas Visible Through Infrared Camera
From the U.S. Government Accountability Office,
Title: Vented Gas Visible Through Infrared Camera
Description: The video shows vented gas as seen through an infrared camera, which appears to be smoke, billowing from the top of cylindrical metal oil storage tanks and from a pneumatic valve. The video also shows the tanks as seen through the naked eye where the gas is invisible. Video clips were courtesy of EPA and a private emission detection firm.
Associated Publication Number: GAO-11-34
Issue Date: 11/29/2010
No audio. Visual description: The video shows vented gas as seen through an infrared camera, which appears to be smoke, billowing from the top of cylindrical metal oil storage tanks and from a pneumatic valve. The video also shows the tanks as seen through the naked eye where the gas is invisible.

Recommendations

OurrecommendationsfromthisworkarelistedbelowwithaContactformoreinformation.Statuswillchangefrom"Inprocess"to"Open,""Closed-implemented,"or"Closed-notimplemented"basedonourfollowupwork.

Director:FranklinW.Rusco

Team:GovernmentAccountabilityOffice:NaturalResourcesandEnvironment

Phone:(202)512-4597

RecommendationsforExecutiveAction

Recommendation:ToensurethatInteriorhasacompletepictureofventingandflaringonfederalleasesandtakesstepstoreducethislostgaswhereeconomictodoso,andtoensurethatInterior'sdataarecompleteandaccurate,theSecretaryoftheInteriorshoulddirectBLMandBOEMREtotakeadditionalstepstoensurethateachagencyhasacompleteandaccuratepictureofventedandflaredgas,forbothonshoreandoffshoreleases,by(1)BLMdevelopingmorecompletedataonlostgasbytakingintoconsiderationadditionallargeonshoresourcesandwaystoestimatethemnotcurrentlyaddressedinregulations--sourcesthatEPA'snewlyproposedgreenhousegasreportingruleaddresses--and(2)BOEMREreconcilingdifferencesinreportedoffshoreventingandflaringvolumesinOilandGasOperationsReport(OGOR)andGulfwideOffshoreActivitiesDataSystem(GOADS)datasystemsandmakingadjustmentstoensuretheaccuracyofthesesystems.Page

AgencyAffected:DepartmentoftheInterior

Status:Inprocess