Department of the Interior: Major Management Challenges
Published: 2009-03-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of the Interior is responsible for managing much of the nation's vast natural resources. Its agencies implement an array of programs intended to protect these precious resources for future generations while also allowing certain uses of them, such as oil and gas development and recreation. In some cases, Interior is authorized to collect royalties and fees for these uses. Over the years, GAO has reported on challenges facing Interior as it implements its programs. In addition to basic program management issues, Interior faces difficult choices in balancing its many responsibilities, and in improving the condition of the nation's natural resources and the department's infrastructure, in light of the federal deficit and long-term fiscal challenges facing the nation. This testimony highlights some of the major management challenges facing Interior today. It is based on prior GAO reports.
section_title: What GAO Found
paragraphs: As GAO's previous work has shown, the Department of the Interior faces major management challenges in the following six areas: (1) Strengthening resource protection; (2) Strengthening the accountability of Indian and island community programs; (3) Improving federal land acquisition and management; (4) Reducing Interior's deferred maintenance backlog; (5) Ensuring the accurate collection of royalties; and (6) Enhancing other revenue collections and financial assurances. Interior has not yet developed a cohesive strategy to address wildland fire issues, as GAO recommended in 1999 and 2005. In addition, Interior faces challenges in managing oil and gas operations on federal lands, adapting to climate change, and resolving natural resource conflicts through collaborative management. Having a land base is important to Indian tribes. Concerns remain about delays in decisions about land that Interior will take into trust status. In addition, programs for seven island communities--four U.S. territories and three sovereign island nations--continue to have financial and program management deficiencies. As the steward of more than 500 million acres of federal land, land consolidation through sales and acquisitions and land management are important functions for the department. The Federal Land Transaction Facilitation Act has had limited success and Interior's U.S. Fish and Wildlife Service is unlikely to achieve its goals to protect certain migratory bird habitat and it is generally not managing a majority of its farmlands. While Interior has improved inventory and asset management systems, the dollar estimate of the deferred maintenance backlog has continued to grow. The 2008 estimate of between $13.2 billion and $19.4 billion is more than 60 percent higher than the 2003 estimate. The funds for Interior in the recently enacted stimulus package may reverse this trend. GAO and others have found many material weaknesses in their numerous evaluations of federal oil and gas management and revenue collection processes. These weaknesses place an unknown but significant proportion of royalties and other oil and gas revenues at risk and raise questions about whether Interior is collecting an appropriate amount of revenue for the rights to explore for, develop, and produce oil and gas from federal lands and waters. Additional revenues or financial assurances could be generated by (1) amending the General Mining Act of 1872 to collect federal royalties on gold, silver, copper, and other valuable minerals belonging to the United States, (2) requiring adequate financial assurances from hardrock mining operations to fully cover estimated reclamation costs, and (3) increasing the grazing fee for public lands managed by Interior's Bureau of Land

section_title: Letter
paragraphs: We are pleased to be here today to discuss our work at the Department of  the Interior. As the stewards for more than 500 million acres of federal  land—about one-fifth of the total U.S. landmass—and over 1.8 billion acres  of the Outer Continental Shelf, Interior agencies are responsible for a wide  array of programs to ensure that our nation’s natural resources are  adequately protected and that access to and use of those resources is  appropriately managed. Interior is to provide for the environmentally  sound production of oil, gas, minerals, and other resources found on the  nation’s public lands; honor the nation’s obligations to American Indians  and Alaska Natives; protect habitat to sustain fish and wildlife; help  manage water resources in western states; and provide scientific and  technical information to allow for sound decision-making about resources.  In recent years, Congress has appropriated over $10 billion annually to  meet these responsibilities. With these resources, Interior employs about  70,000 people in eight major agencies and bureaus at over 2,400 locations  around the country to carry out its mission. Interior’s management of this  vast federal estate is largely characterized by the struggle to balance the  demand for greater use of its resources with the need to conserve and  protect them for the benefit of future generations.
Our testimony today expands upon the issues raised in our 2009  Congressional and Presidential Transition Web site for the Department of  the Interior. Specifically, we will discuss management challenges in  six key areas: (1) resource protection, (2) Indian and island community  programs, which includes programs for four U.S. territories and three  sovereign island nations, (3) land acquisition and management,  (4) deferred maintenance, (5) royalties collection, and (6) other revenue  collections and financial assurances. Our testimony is based on findings  from a number of reports we have issued over the past few years on some  of Interior’s natural resource management programs.
subsections: section_title: Strengthening Resource Protection
paragraphs: Interior, working with the Department of Agriculture’s Forest Service, has  taken steps to help manage perhaps the most daunting challenge to its  resource protection mission—protecting lives, private property, and  federal resources from the threats of wildland fire. But concerns remain.  Interior also faces challenges in managing oil and gas operations on  federal lands, adapting to climate change, and resolving natural resource  conflicts through collaborative management.
subsections: section_title: Wildland Fire Management Challenges Persist
paragraphs: The wildland fire problems facing our nation continue to grow. The  average annual acreage burned by wildland fires has increased by  approximately 70 percent since the 1990s, and appropriations for the  federal government’s wildland fire management activities tripled from  about $1 billion in fiscal year 1999 to nearly $3 billion in fiscal year 2007.  As we have previously reported, a number of factors have contributed to  worsening fire seasons and increased firefighting expenditures, including  an accumulation of fuels resulting from past land management practices;  drought and other stresses, in part related to climate change; and an  increase in human development in or near wildlands. While Agriculture’s  Forest Service receives the majority of fire management resources,  Interior agencies—the National Park Service (NPS); the Bureau of Indian  Affairs (BIA); the U.S. Fish and Wildlife Service (FWS); and, particularly,  the Bureau of Land Management (BLM)—are key partners in responding  to the threats of wildland fire. Consequently, most of our work and  recommendations on wildland fire management address agencies in both  departments. Specifically, we have called on the agencies to    develop a cohesive strategy that identifies options and associated  funding to reduce potentially hazardous vegetation and address  wildland fire problems. In 1999, to address the problem of excess fuels  and their potential to increase the severity of wildland fires and the  cost of suppression efforts, we recommended that a cohesive strategy  be developed to identify the available long-term options for reducing  fuels and the associated funding requirements. Six years later, in 2005,  we reiterated the need for a cohesive strategy and broadened our  recommendation’s focus to better address the interrelated nature of  fuel reduction efforts and wildland fire response. In January 2009,  agency officials told us they were working to create such a cohesive  strategy, although they could not provide an estimate of when it would  be completed.   establish clear goals and a strategy to help contain wildland fire  costs. In 2007, we reported that the agencies were taking a number of  steps intended to help contain wildland fire costs, but had not clearly  defined cost-containment goals or developed a strategy for achieving  those goals. Agency officials identified several documents that they  believed provide clearly defined goals and objectives that make up  Interior’s strategy to contain costs. However, the documents lack the  clarity and specificity officials in the field need to help manage and  contain wildland fire costs. We therefore continue to believe that our  recommendations, if effectively implemented, would help the agencies  better manage their cost-containment efforts and improve their ability  to contain wildland fire costs.   continue to improve their processes for allocating fuel reduction  funds and selecting fuel reduction projects. Also in 2007, we identified  several shortcomings in the agencies’ processes for allocating fuel  reduction funds to field units and selecting fuel reduction projects,  shortcomings that limited the agency’s ability to ensure that funds are  directed where they will reduce risk most effectively. While Interior  has taken steps to improve its processes for allocating fuel reduction  funds and the information it uses in selecting fuel reduction projects,  we believe that Interior must continue these efforts so that it can more  effectively use its limited fuel reduction dollars. take steps to improve its use of a new interagency budgeting and  planning tool. In 2008, we reported on the Forest Service’s and  Interior’s development of a new planning tool known as fire program  analysis (FPA). FPA was intended, among other things, to allow the  agencies to analyze potential combinations of firefighting assets, and  potential strategies for reducing fuels and fighting fires so that they  could determine the most cost-effective mix of assets and strategies.  While recognizing that FPA represents a significant step forward and  shows promise in achieving certain of its objectives, we believe the  agencies’ approach to FPA’s development hampers it from meeting  other key objectives. We made a number of recommendations designed  to enhance FPA and the agencies’ ability to use it, and Interior, in  conjunction with the Forest Service, has identified several steps it is  considering taking to do so. It is not yet clear how successful these  steps will be. Furthermore, the steps the agencies outlined do not  address all the shortcomings we identified. We continue to believe  agency improvements are essential if the full potential of FPA is to be  realized.
section_title: Managing Oil and Gas Activities on Federal Lands
paragraphs: The number of oil and gas operations that are permitted by BLM for access  to federal oil and gas resources has increased dramatically—more than  quadrupling from fiscal year 1999 to fiscal years 2006 and 2007—in part as  a result of the desire to reduce the country’s dependence on foreign  sources of oil and gas. In June 2005, we reported that BLM has struggled to  deal with the increase in the permitting workload while also carrying out  its responsibility to mitigate the impacts of oil and gas development on  land that it manages. Overall, BLM officials told us that staff had to devote  increasing amounts of time to processing drilling permits, leaving less time  to ensuring the mitigation of the environmental impacts of oil and gas  development. While the Interior, Environment, and Related Agencies  Appropriation Act of Fiscal Year 2008 required BLM to charge a $4,000  processing fee for drilling permits, the act provided that the appropriation  for permit processing would be reduced by the amount of fees received;  thus the fee did not provide any additional resources for BLM to increase  its monitoring and enforcement activities for oil and gas development.  In its fiscal year 2009 budget request, BLM requested authority to  (1) permanently implement a cost recovery fee for processing applications  for permits to drill, (2) set the cost recovery fee at $4,150 for fiscal year  2009, and (3) deposit the revenues generated from the cost recovery fee in  BLM’s Service Charges, Deposits and Forfeitures Account. BLM estimated  the cost recovery fee would generate $34 million for fiscal year 2009.
Within the energy and minerals budget for fiscal year 2009, BLM also  requested a net increase of $7.8 million for oil and gas activities.
Just as we have had concerns about BLM’s protection of environmental  resources from oil and gas activities, we have had concerns, as we  reported in 2003, that FWS’s oversight of oil and gas operations on wildlife  refuge lands was not adequate. For example, we found that some refuge  managers took extensive measures to oversee operations and enforce  environmental standards, while others exercised little or no control. Such  disparities occurred for two primary reasons. First, FWS had not officially  determined its authority to require permits—which would include  environmental conditions to protect refuge resources—of all oil and gas  operations in refuges; we believe the agency has such authority. Second,  refuge managers lacked guidance, adequate staffing levels, and training to  properly oversee oil and gas activities. We also found that FWS was not  collecting complete and accurate information on damage to refuge lands  as a result of oil and gas operations and not identifying the steps needed to  address that damage. In June 2007, we reported that the FWS had  generally not taken sufficient actions to address five of the six  recommendations we had made in 2003 to improve FWS’s management  and oversight of oil and gas activities on national wildlife refuges.
section_title: Adapting to the Effects of Climate Change on Public Lands
paragraphs: A growing body of evidence shows that increasing concentrations of  greenhouse gases—primarily carbon dioxide, methane, and nitrous  oxide—in the Earth’s atmosphere have resulted in a warmer global climate  system, among other changes. In August 2007, we reported that, according  to experts, federal land and water resources are vulnerable to a wide range  of effects from climate change, some of which are already occurring.  These effects include (1) physical effects, such as droughts, floods, glacial  melting, and sea level rise; (2) biological effects, such as increases in  insect and disease infestations, shifts in species distribution, and changes  in the timing of natural events; and (3) economic and social effects,  such as adverse impacts on tourism, infrastructure, fishing, and other  resource uses.
BLM, FWS, and NPS have not made climate change a priority, and the  agencies’ strategic plans do not specifically address it. To better enable  federal resource management agencies to take into account the existing  and potential future effects of climate change on federal resources, we  recommended that the Secretary of the Interior and two other  departments develop guidance incorporating agencies’ best practices that  advises managers on how to address climate change effects on the  resources they manage. Interior and the other agencies generally agreed  with our recommendation.
The effects of a warmer climate have been clearly evident in Alaska. In  December 2003, we reported that coastal villages in Alaska are becoming  more susceptible to flooding and erosion in part because rising  temperatures cause protective shore ice to form later in the year, leaving  the villages vulnerable to fall storms. In addition, rising temperatures in  recent years have led to widespread thawing of the permafrost  (permanently frozen subsoil that is found in over approximately  80 percent of Alaska), causing serious damage. At that time, we found that  flooding and erosion affects 184 out of 213, or 86 percent, of Alaska Native  villages to some extent, and four villages in imminent danger planned to  relocate.
section_title: Resolving Natural Resource Conflicts Through Collaborative Management
paragraphs: Interior’s management of its vast federal estate is largely characterized by  the struggle to balance the demand for greater use of its resources with  the need to conserve and protect them for the benefit of future  generations. In February 2008, we reported that conflicts over the use of  our nation’s natural resources, along with increased ecological problems,  has led land managers to seek cooperative means to resolve natural  resource conflicts and problems. Collaborative resource management is  one such approach that communities began using in the 1980s and 1990s.
In 2004, an executive order on cooperative conservation encouraged such  efforts. Experts generally view collaborative resource management— involving public and private stakeholders in natural resource decisions— as an effective approach for managing natural resources. The benefits that  result from using collaborative resource management include less conflict  and litigation and improved natural resource conditions, according to  experts. Many experts also noted that there are limitations to the  approach, such as the time and resources it takes to bring people together  to work on a problem and reach a decision. BLM, FWS, NPS, and  Agriculture’s Forest Service face challenges in determining whether to  participate in a collaborative effort, measuring participation and  monitoring results, and sharing agency and group experiences. To enhance  the federal government’s support of and participation in collaborative  resource management efforts, we recommended that the Council on  Environmental Quality, working with the departments of the Interior and  of Agriculture take several actions to enhance the federal government’s  support of and participation in collaborative resource management efforts,  including the preparation of a written plan identifying goals, actions, and  time frames for carrying out cooperative conservation activities. Interior  generally agreed with our recommendations.
section_title: Strengthening the Accountability of Indian and Island Community Programs
paragraphs: We have reported on management weaknesses in Indian and island  community programs for a number of years—most recently on serious  delays in BIA’s program for determining whether the department will  accept land in trust and the need to assist seven island communities— four U.S. territories and three sovereign island nations—with  long-standing financial and program management deficiencies.
subsections: section_title: Improvements Needed in BIA’s Processing of Land in Trust Applications
paragraphs: BIA is the primary federal agency charged with implementing federal  Indian policy and administering the federal trust responsibility for about  2 million American Indians and Alaska Natives. BIA provides basic  services to 562 federally recognized Indian tribes throughout the United  States, including natural resources management on about 54 million acres  of Indian trust lands. Trust status means that the federal government holds  title to the land in trust for tribes or individual Indians; land taken in trust  is no longer subject to state and local property taxes and zoning  ordinances. In 1980, the department established a regulatory process  intended to provide a uniform approach for taking land in trust.
While some state and local governments support the federal government’s  taking additional land in trust for tribes or individual Indians, others  strongly oppose it because of concerns about the impacts on their tax base  and jurisdictional control.
We reported in July 2006 that while BIA generally followed its regulations  for processing land in trust applications from tribes and individual Indians,  it had no deadlines for making decisions on them. Specifically, the  median processing time for the 87 land in trust applications with decisions  in fiscal year 2005 was 1.2 years—ranging from 58 days to almost 19 years.  We recommended, among other things, that the department move forward  with adopting revisions to the land in trust regulations that include  (1) specific time frames for BIA to make a decision once an application is  complete and (2) guidelines for providing state and local governments  more information on the applications and a longer period of time to  provide meaningful comments on the applications. While the department  agreed with our recommendations, it has not revised the land in trust  regulations.
section_title: Improve Effectiveness and Accountability for Island Programs
paragraphs: The Secretary of the Interior has varying responsibilities to the island  communities of American Samoa, Guam, the Commonwealth of the  Northern Mariana Islands, and the U.S. Virgin Islands, all of which are U.S.  territories—as well as to the Federated States of Micronesia, the Republic  of the Marshall Islands, and the Republic of Palau, which are sovereign  nations linked with the United States through Compacts of Free  Association. The Office of Insular Affairs (OIA), which carries out the  department’s responsibilities for the island communities, is to assist the  island communities in developing more efficient and effective government  by providing financial and technical assistance and to help manage  relations between the federal government and the island governments by  promoting appropriate federal policies. The island governments have had  long-standing financial and program management deficiencies.
In December 2006, we reported on serious economic, fiscal, and financial  accountability challenges facing American Samoa, Guam, the  Commonwealth of the Northern Mariana Islands, and the U.S. Virgin  Islands. The economic challenges stem from dependence on a few key  industries, scarce natural resources, small domestic markets, limited  infrastructure, shortages of skilled labor, and reliance on federal grants to  fund basic services. In addition, efforts to meet formidable fiscal  challenges and build strong economies are hindered by financial reporting  that does not provide timely and complete information to management  and oversight officials for decision making. As a result of these problems,  numerous federal agencies have designated these governments as “high- risk” grantees. To increase the effectiveness of the federal government’s  assistance to these island communities, we recommended, among other  things, that the department increase coordination activities with other  federal grant-making agencies on issues of common concern relating to  the insular area governments. The department agreed with our  recommendations, stating that they were consistent with OIA’s top  priorities and ongoing activities. We will continue to monitor OIA’s actions  on our recommendations.
Also in December 2006, we reported on challenges facing the Federated  States of Micronesia and the Republic of the Marshall Islands. In 2003, the  United States approved amended compacts with the countries by signing  Compacts of Free Association with the two governments. The amended  compacts provide the countries with a combined total of $3.6 billion from  2004 to 2023, with the annual grants declining gradually. The single audits  for 2004 and 2005 for both countries reported (1) weaknesses in their  ability to account for the use of compact funds and (2) noncompliance  with requirements for major federal programs. We recommended, among  other things, that the department work with the countries to establish  plans to minimize the impact of declining assistance and to fully develop a  reliable mechanism for measuring progress towards program goals.  Furthermore, in June 2007 we reported that trust funds for both nations  may not provide sustainable income after the compact grants end, and we  recommended, among other things, improvements in trust fund  administration. The department agreed with the recommendations in our  December 2006 and June 2007 reports.
In our June 2008 assessment of the Compact of Free Association with the  Republic of Palau, we reported on the challenges Palau faced in dealing  with persistent financial management weaknesses and with achieving long  term economic self-sufficiency. We recommended that the department  formally consult with the government of Palau regarding Palau’s financial  management challenges and target future technical assistance toward  building Palau’s financial management capacity. The department  concurred with our recommendations.
section_title: Improving Federal Land Acquisition and Management
paragraphs: As the steward of more than 500 million acres of federal land, land  consolidation through sales and acquisitions and land management are  important functions for the Department of the Interior. However, the  Federal Land Transaction Facilitation Act of 2000 which, in part, was  intended to facilitate land consolidation, has had limited success. In  February 2008, we reported that BLM had raised $95.7 million in revenue  through May 2007 under the Federal Land Transaction Facilitation Act.  About 92 percent of this revenue came from land transactions in Nevada.  However, the four land management agencies (BLM, FWS, NPS, and  Agriculture’s Forest Service) have spent only $13.3 million of the revenues  raised for acquiring certain nonfederal lands, primarily those lying within  the boundaries of national parks, forests, wildlife refuges, and other  designated areas, known as inholdings, ($10.1 million) or for  administrative expenses to prepare land for sales ($3.2 million).
The agencies face several challenges to completing future land  acquisitions under the act. Most notably, the act requires that the agencies  use most of the funds to purchase land in the state in which the funds  were raised; this restriction has had the effect of making little revenue  available outside of Nevada. If Congress decides to reauthorize the act, we  suggested that it consider including additional lands for sale and greater  flexibility for acquisitions. We also made a number of recommendations to  the agencies to improve the implementation and compliance with the act.  Interior generally agreed with our recommendations.
In addition, Interior’s Fish and Wildlife Service is unlikely to achieve its  goals to protect certain migratory bird habitat, and it is generally not  managing a majority of its farmlands. In September 2007, we reported that  since the inception of the Small Wetlands Acquisition Program in the late  1950s, FWS has acquired and permanently protected about 3 million acres  of wetlands and grasslands in the Prairie Pothole Region. However, at the  current pace of acquisitions, it could take FWS about 150 years and  billions of dollars to acquire and permanently protect as much as possible  of an additional 12 million acres of “high-priority” habitat. Some emerging  market forces suggest that FWS may have only several decades before  most of its goal acreage is converted to agricultural uses.
We also reported in September 2007 that, according to FWS data, since  1986, the Service has received at least 1,400 conservation easements and  fee-simple farmlands covering 132,000 acres from the Department of  Agriculture’s Farm Service Agency. However, FWS is generally not  managing a majority of its farmlands. For 2002 through 2006, FWS has  inspected an annual average of only 13 percent of these lands. Because the  farmlands are now part of the National Wildlife Refuge System, we found  that FWS cannot dispose of unwanted farmlands. As a result, we  recommended that FWS develop a proposal to Congress seeking authority  for additional flexibility in dealing with farmlands FWS determines may  not be in the best interests of the National Wildlife Refuge System. Interior  agreed with our recommendations.
section_title: Reducing Interior’s Deferred Maintenance Backlog
paragraphs: Interior also faces a challenge in adequately maintaining its facilities and  infrastructure. The department owns, builds, purchases, and contracts  services for assets such as visitor centers, schools, office buildings, roads,  bridges, dams, irrigation systems, and reservoirs; however, repairs and  maintenance on these facilities have not been adequately funded. The  deterioration of facilities can impair public health and safety, reduce  employees’ morale and productivity, and increase the need for costly  major repairs or early replacement of structures and equipment. In  November 2008, the department estimated that the deferred maintenance  backlog for fiscal year 2008 was between $13.2 billion and $19.4 billion  (see table 1). Interior is not alone in facing daunting maintenance  challenges. In fact, we have identified the management of federal real  property, including deferred maintenance issues, as a governmentwide  high-risk area since 2003.
Interior has made progress addressing prior recommendations to improve  information on the maintenance needs of NPS facilities, BIA schools, and  BIA irrigation projects. For example, in February 2006 we reported that  BIA plans to hire experts in engineering and irrigation to thoroughly assess  the condition of all 16 irrigation projects every 5 years to further refine the  deferred maintenance estimate for these projects. It completed its first  assessment in July 2005, and expects to complete all 16 assessments by  2010. Although Interior has made a concentrated effort to address its  deferred maintenance backlog, the dollar estimate of the backlog has  continued to escalate. The 2008 backlog estimate is more than 60 percent  higher than the 2003 estimate of between $8.1 billion and $11.4 billion. The  funds included in the recently enacted stimulus package for Interior may  reverse this trend.
section_title: Ensuring the Accurate Collection of Royalties
paragraphs: Interior collects, on average, over $10 billion annually in mineral lease  revenues, but many material weaknesses in federal oil and gas  management and revenue collection processes and practices place an  unknown but significant proportion of royalties and other oil and gas  revenues at risk. These weaknesses also raise questions about whether  Interior is collecting an appropriate amount of revenue for the rights to  explore for, develop, and produce oil and gas on federal lands and waters.
subsections: section_title: Substantial Revenues May be at Risk Due to Inadequate Management Practices
paragraphs: With regard to overall revenue collection, in September 2008, we reported  that compared with other countries, the United States receives one of the  lowest shares of revenue for its oil and gas resources. A number of these  other countries and resource owners had responded to higher oil and gas  prices by increasing their share of oil and gas revenues to potentially  generate substantially more revenue. However, despite significant changes  in the oil and gas industry and widely fluctuating prices, Interior has not  systematically reexamined how the federal government is compensated  for oil and gas on federal lands for over 25 years. Furthermore, we have  found that Interior does less to encourage development of its leases than  do some state and private landowners.
Also in September 2008, we reported that Interior’s Minerals Management  Service’s (MMS) management of cash royalty collection lacks key controls,  such as the ability to effectively monitor and validate oil and gas company  adjustments to self-reported royalty data, including those made after  audits have been completed. Furthermore, MMS’s royalty compliance  efforts rely too heavily on self-reported data, but the more consistent use  of available third-party data as a check on self-reported data could provide  greater assurance that royalties are accurately assessed and paid. In  another September 2008 report, we found that for MMS’s Royalty-in-Kind  program, in which companies provide the federal government with oil or  gas in lieu of cash royalty payments, MMS’s oversight of natural gas  volumes is less robust than its oversight of oil volumes—a finding that  raises questions about the accuracy of company-reported volumes of  natural gas from which MMS must determine whether it is receiving its  appropriate share of production. In addition, we found that MMS’s annual  reports to Congress do not fully describe the performance of the Royalty- in-Kind program and, in some instances, may overstate the benefits of the  program.
Concerning workforce issues, we reported in June 2005 that BLM has  encountered persistent problems in hiring and retaining sufficient and  adequately trained staff to keep up with an increasing workload as a result  of rapid increases in oil and gas operations on federal lands. For  example, between 1999 and 2004, when applications for permits to drill  more than tripled, BLM was unable to keep up with the commensurate  increase in its workload, in part, as a result of an ineffective workforce  planning process, the lack of key data on workload activities, and a lack of  resources. BLM’s inability to attract and retain sufficiently trained staff has  kept the agency from meeting requirements to inspect the drilling and  production of oil and gas on federal lands. Lack of inspection puts federal  revenues at risk because inspections have found violations, including  errors in the volumes of oil and gas that operators reported. Furthermore,  in one of our September 2008 reports, we reported that Interior is not  meeting statutory or agency targets for inspecting certain onshore and  offshore leases and metering equipment for measuring oil and gas  production, raising questions about the accuracy of company-reported oil  and gas production figures. As a result, and based on Interior’s  comments, we recommended that Interior report to Congress any year in  which it does not meet its legal and agency requirements for completing  production inspections, along with the cause and a plan for achieving  compliance.
section_title: Substantial Revenue May be Forgone Because of Royalty Relief
paragraphs: In 2007 and 2008, we reported on MMS’s implementation of the Outer  Continental Shelf Deep Water Royalty Relief Act of 1995 and other  authorities for granting royalty relief for oil and gas leases. We found that  MMS had issued lease contracts in 1998 and 1999 that failed to include  price thresholds above which royalty relief would no longer be applicable.  As a result, large volumes of oil and natural gas are exempt from royalties,  which significantly reduces the amount of royalty revenues that the federal  government can collect. At least $1 billion in royalties has already been  lost because of this failure to include price thresholds. We developed a  number of scenarios that showed that forgone royalties from leases issued  between 1996 and 2000 under the act could be as high as $53 billion.  However, there is much uncertainty in this scenario as a result of the  inherent difficulties in estimating future production, ongoing litigation  over MMS’s authority to set price thresholds for some leases, and widely  fluctuating oil and gas prices. Other authorities for granting royalty relief  may also affect future royalty revenues. Specifically, under discretionary  authority, the Secretary of the Interior administers programs granting  relief for certain deep water leases issued after 2000, certain gas wells  drilled in shallow waters, and wells nearing the end of their productive  lives. In addition, the Energy Policy Act of 2005 mandates relief for leases  issued in the Gulf of Mexico during the 5 years following the act’s passage,  provides some relief for some gas wells that would not have previously  qualified for royalty relief, and addresses relief in certain areas of Alaska  where there currently is little or no production.
section_title: Enhancing Other Revenue Collections and Financial Assurances
paragraphs: Additional revenues or financial assurances could be generated through  hardrock mining operations by amending the General Mining Act of 1872  so that the federal government could collect federal royalties on minerals  extracted from U.S. mineral rights and by requiring adequate financial  assurances from hardrock mining operations to fully cover estimated  reclamation costs. Additional revenues could also be generated by  increasing the grazing fee for public lands managed by Interior’s Bureau of  Land Management.
subsections: section_title: Additional Revenue or Financial Assurances Could be Generated Through Hardrock Mining Operations
paragraphs: The General Mining Act of 1872 helped open the West by allowing  individuals to obtain exclusive rights to mine billions of dollars worth of  hardrock minerals from federal lands without having to pay a federal  royalty. In July 2008 we reported that the 12 western states, including  Alaska, assess multiple types of royalties on mining operations. States  may use similar names for the royalties they assess, but these can vary  widely in their forms and rates. Unlike the federal government, these  states charge royalties that allow them to share in the proceeds from  hardrock minerals extracted from state-owned lands, as well as levy taxes  that function like royalties, on private, state, and federal lands.
Under BLM regulations, hardrock mining operators who extract gold,  silver, copper, and other valuable mineral deposits from land belonging to  the United States are required to provide financial assurances, before they  begin exploration or mining, to guarantee that the costs to reclaim land  disturbed by their operations are paid. However, we reported in June 2005  that BLM did not have a process for ensuring that adequate assurances  were in place. When operators with insufficient financial assurances fail  to reclaim BLM land disturbed by hardrock mining operations, BLM is left  with public land that poses risks to the environment and public health and  safety, and requires millions of federal dollars to reclaim.
In March 2008, we found that the financial assurances required by BLM  were not adequate to fully cover estimated reclamation costs. According  to BLM, mine operators had provided financial assurances valued at  approximately $982 million to guarantee reclamation costs for  1,463 hardrock operations on BLM land. BLM also estimated that  52 mining operations had financial assurances that amounted to about  $28 million less than needed to fully cover estimated reclamation costs.  However, we found that the financial assurances for these 52 operations  were in fact about $61 million less than needed to fully cover estimated  reclamation costs. The $33 million difference between our estimated  shortfall and BLM’s occurs because BLM calculated its shortfall by  comparing the total value of financial assurances in place with the total  estimated reclamation costs. This calculation approach has the effect of  offsetting the shortfalls in some operations with the financial assurances  of other operations. However, financial assurances that are greater than  the amount required for an operation cannot be transferred to another  operation that has inadequate financial assurances. BLM officials agreed  that it would be valuable to report the dollar value of the difference  between financial assurances in place and required for those operations  where financial assurances are inadequate.
section_title: Additional Revenue Could be Generated Through an Adjustment to BLM Grazing Fees
paragraphs: Ten federal agencies manage grazing on over 22 million acres, with BLM  and the Forest Service managing the vast majority of this activity. In total,  federal grazing revenue amounted to about $21 million in fiscal year 2004,  although grazing fees differ by agency. For example, in 2004, BLM and the  Forest Service charged $1.43 per animal unit month, while other federal  agencies charged between $0.29 and $112 per animal unit month. We  reported in 2005 that while BLM and the Forest Service charged generally  much lower fees than other federal agencies and private entities, these  fees reflect legislative and executive branch policies to support local  economies and ranching communities. Specifically, BLM fees are set by a  formula that expired in 1985, but was extended indefinitely by executive  order in 1986. This formula takes into account a rancher’s ability to pay  and, therefore, the purpose is not primarily to recover the agencies’ costs  or capture the fair market value of forage. Instead, the formula is designed  to set a fee that helps support ranchers and the western livestock industry.  Other federal agencies employ market-based approaches to setting grazing  fees.
Using this formula, BLM collected about $12 million in receipts in fiscal  year 2004, while its costs for implementing its grazing program, including  range improvement activities, were about $58 million. Were BLM to  implement approaches used by other agencies to set grazing fees, it could  help to close the gap between expenditures and receipts and more closely  align its fees with market prices. Instead, for 2007, 2008, and 2009, the  grazing fee was set at $1.35 per animal unit month, the lowest level  allowable under the executive order. We recognize, however, that the  purpose and size of BLM’s grazing fee are ultimately for Congress to  decide.
Mr. Chairman, this concludes our prepared statement. We would be  pleased to answer any questions that you or other Members of the  Subcommittee may have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For further information about this testimony, please contact Robin M.  Nazzaro or Frank Rusco at (202) 512-3841 or nazzaror@gao.gov and  ruscof@gao.gov, respectively. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Jeffery D. Malcolm, Assistant Director, and Ross Campbell. Also  contributing to this testimony were Ron Belak, Jonathan Dent, Glenn  Fischer, Emil Friberg, Steve Gaty, Richard P. Johnson, Marissa Jones,  Carol Kolarik, Carol Herrnstadt Shulman, and Desirée Thorp.
section_title: Related GAO Products
subsections: section_title: High Risk Series
paragraphs: High-Risk Series: An Update. GAO-09-271. Washington, D.C.:   January 2009.
High-Risk Series: An Update. GAO-07-310. Washington, D.C.:   January 2007.
High-Risk Series: An Update. GAO-05-207. Washington, D.C.:   January 2005.
High-Risk Series: An Update. GAO-03-119. Washington, D.C.:   January 2003.
High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:  January 2003.
section_title: Interior Management Challenges
paragraphs: 2009 Congressional and Presidential Transition: Department of the  Interior (Web-based—http://www.gao.gov/transition_2009/agency/doi/).
Posthearing Questions: Major Management Challenges at the  Department of the Interior. GAO-07-659R. Washington, D.C.:   March 28, 2007.
Department of the Interior: Major Management Challenges.  GAO-07-502T. Washington, D.C.: February 16, 2007.
Major Management Challenges at the Department of the Interior   (2005 Web-based Update—http://www.gao.gov/pas/2005/doi.htm).
section_title: Resource Protection
subsections: section_title: Wildland Fires
paragraphs: Wildland Fire Management: Interagency Budget Tool Needs Further  Development to Fully Meet Key Objectives. GAO-09-68. Washington, D.C.:  November 24, 2008.
Wildland Fire Management: Federal Agencies Lack Key Long- and Short-  Term Management Strategies for Using Program Funds Effectively.  GAO-08-433T. Washington, D.C.: February 12, 2008.
Wildland Fire Management: Better Information and a Systematic  Process Could Improve Agencies’ Approach to Allocating Fuel Reduction  Funds and Selecting Projects. GAO-07-1168. Washington, D.C.:   September 28, 2007.
Wildland Fire Management: Lack of Clear Goals or a Strategy Hinders  Federal Agencies’ Efforts to Contain the Costs of Fighting Fires.  GAO-07-655. Washington, D.C.: June 1, 2007.
Wildland Fire Suppression: Lack of Clear Guidance Raises Concerns  about Cost Sharing between Federal and Nonfederal Entities.  GAO-06-570. Washington, D.C.: May 30, 2006.
Wildland Fire Management: Update on Federal Agency Efforts to Develop  a Cohesive Wildland Fire Strategy. GAO-06-671R. Washington, D.C.:   May 1, 2006.
Wildland Fire Management: Important Progress Has Been Made, but  Challenges Remain to Completing a Cohesive Strategy. GAO-05-147.  Washington, D.C.: January 14, 2005.
Wildland Fires: Forest Service and BLM Need Better Information and a  Systematic Approach for Assessing the Risks of Environmental Effects.  GAO-04-705. Washington, D.C.: June 24, 2004.
Wildland Fire Management: Additional Actions Required to Better  Identify and Prioritize Lands Needing Fuels Reduction. GAO-03-805.  Washington, D.C.: August 15, 2003.
Western National Forests: A Cohesive Strategy is Needed to Address  Catastrophic Wildfire Threats. GAO/RCED-99-65. Washington, D.C.:  April 2, 1999.
section_title: Other Resource Protection Products
paragraphs: Endangered Species Act: Many GAO Recommendations Have Been  Implemented, but Some Issues Remain Unresolved. GAO-09-225R.  Washington, D.C.: December 19, 2008.
Federal Land Management: Use of Stewardship Contracting Is  Increasing, but Agencies Could Benefit from Better Data and  Contracting Strategies. GAO-09-23. Washington, D.C.: November 13, 2008.
Bureau of Land Management: Effective Long-Term Options Needed to  Manage Unadoptable Wild Horses. GAO-09-77. Washington, D.C.:  October 9, 2008.
Wildlife Refuges: Changes in Funding, Staffing, and Other Factors  Create Concerns about Future Sustainability. GAO-08-797. Washington,  D.C.: September 22, 2008.
U.S. Fish and Wildlife Service: Endangered Species Act Decision  Making. GAO-08-688T. Washington, D.C.: May 21, 2008.
Hardrock Mining: Information on Abandoned Mines and Value and  Coverage of Financial Assurances on BLM Land. GAO-08-574T.  Washington, D.C.: March 12, 2008.
Yellowstone Bison: Interagency Plan and Agencies’ Management Need  Improvement to Better Address Bison-Cattle Brucellosis Controversy.  GAO-08-291. Washington, D.C.: March 7, 2008.
Natural Resource Management: Opportunities Exist to Enhance Federal  Participation in Collaborative Efforts to Reduce Conflicts and Improve  Natural Resource Conditions. GAO-08-262. Washington, D.C.:   February 12, 2008.
Climate Change: Agencies Should Develop Guidance for Addressing the  Effects on Federal Land and Water Resources. GAO-07-863. Washington,  D.C.: August 7, 2007.
U.S. Fish and Wildlife Service: Opportunities Remain to Improve  Oversight and Management of Oil and Gas Activities on National  Wildlife Refuges. GAO-07-829R. Washington, DC: June 29, 2007.
Endangered Species: Many Factors Affect the Length of Time to Recover  Select Species. GAO-06-730. Washington, D.C.: September 6, 2006.
Invasive Forest Pests: Lessons Learned from Three Recent Infestations  May Aid in Managing Future Efforts. GAO-06-353. Washington, D.C.:  April 21, 2006.
Endangered Species: Time and Costs Required to Recover Species Are  Largely Unknown. GAO-06-463R. Washington, D.C.: April 6, 2006.
Wind Power: Impacts on Wildlife and Government Responsibilities for  Regulating Development and Protecting Wildlife. GAO-05-906.  Washington, D.C.: September 16, 2005.
Hardrock Mining: BLM Needs to Better Manage Financial Assurances to  Guarantee Coverage of Reclamation Costs. GAO-05-377. Washington,  D.C.: June 20, 2005.
Oil and Gas Development: Increased Permitting Activity Has Lessened  BLM’s Ability to Meet Its Environmental Protection Responsibilities.  GAO-05-418. Washington, D.C.: June 17, 2005.
Invasive Species: Cooperation and Coordination Are Important for  Effective Management of Invasive Weeds. GAO-05-185. Washington, D.C.:  February 25, 2005.
Oil and Gas Development: Challenges to Agency Decisions and  Opportunities for BLM to Standardize Data Collection. GAO-05-124.  Washington, D.C.: November 30, 2004.
Endangered Species: More Federal Management Attention Is Needed to  Improve the Consultation Process. GAO-04-93. Washington, D.C.:  March 19, 2004.
Invasive Species: Clearer Focus and Greater Commitment Needed to  Effectively Manage the Problem. GAO-03-1. Washington, D.C.:   October 22, 2002.
section_title: Indian and Island Community Programs
subsections: section_title: Indian Land Management
paragraphs: Indian Issues: BLM’s Program for Issuing Individual Indian Allotments  on Public Lands Is No Longer Viable. GAO-07-23R. Washington, D.C.:  October 20, 2006.
Indian Issues: BIA’s Efforts to Impose Time Frames and Collect Better  Data Should Improve the Processing of Land in Trust Applications.  GAO-06-781. Washington, D.C.: July 28, 2006.
Indian Irrigation: Numerous Issues Need to Be Addressed to Improve  Project Management and Financial Sustainability. GAO-06-314.  Washington, D.C.: February 24, 2006.
Alaska Native Allotments: Conflicts with Utility Rights-of-Way Have Not  Been Resolved Through Existing Remedies. GAO-04-923. Washington,  D.C.: September 7, 2004.
Columbia River Basin: A Multilayered Collection of Directives and Plans  Guide Federal Fish and Wildlife Plans. GAO-04-602. Washington, D.C.:  June 4, 2004.
Alaska Native Villages: Most Are Affected by Flooding and Erosion, but  Few Qualify for Federal Assistance. GAO-04-142. Washington, D.C.:  December 12, 2003.
section_title: Island Communities
paragraphs: Commonwealth of the Northern Mariana Islands: Managing Potential  Economic Impact of Applying U.S. Immigration Law Requires  Coordinated Federal Decisions and Additional Data. GAO-08-791.  Washington, D.C.: August 4, 2008.
American Samoa: Issues Associated with Potential Changes to the  Current System for Adjudicating Matters of Federal Law. GAO-08-655.  Washington, D.C.: June 27, 2008.
Compact of Free Association: Palau’s Use of and Accountability for U.S.  Assistance and Prospects for Economic Self-Sufficiency. GAO-08-732.  Washington, D.C.: June 10, 2008.
Commonwealth of the Northern Mariana Islands: Pending Legislation  Would Apply U.S. Immigration Law to the CNMI with a Transition  Period. GAO-08-466. Washington, D.C.: March 28, 2008.
Compacts of Free Association: Trust Funds for Micronesia and the  Marshall Islands May Not Provide Sustainable Income. GAO-07-513.  Washington, D.C.: June 15, 2007.
Compacts of Free Association: Micronesia’s and the Marshall Islands’  Use of Sector Grants. GAO-07-514R. Washington, D.C.: May 25, 2007.
Compacts of Free Association: Micronesia and the Marshall Islands Face  Challenges in Planning for Sustainability, Measuring Progress, and  Ensuring Accountability. GAO-07-163. Washington, D.C.:   December 15, 2006.
U.S. Insular Areas: Economic, Fiscal, and Financial Accountability  Challenges. GAO-07-119. Washington, D.C.: December 12, 2006.
Compacts of Free Association: Development Prospects Remain Limited  for Micronesia and the Marshall Islands. GAO-06-590. Washington, D.C.:  June 27, 2006.
U.S. Insular Areas: Multiple Factors Affect Federal Health Care Funding.  GAO-06-75. Washington, D.C.: October 14, 2005.
Compacts of Free Association: Implementation of New Funding and  Accountability Requirements Is Well Underway, but Planning  Challenges Remain. GAO-05-633. Washington, D.C.: July 11, 2005.
American Samoa: Accountability for Key Federal Grants Needs  Improvement. GAO-05-41. Washington, D.C.: December 17, 2004.
Compact of Free Association: Single Audits Demonstrate Accountability  Problems over Compact Funds. GAO-04-7. Washington, D.C.:   October 7, 2003.
Compact of Free Association: An Assessment of Amended Compacts and  Related Agreements. GAO-03-890T. Washington, D.C.: June 18, 2003.
section_title: Federal Land Acquisition and Management
paragraphs: Federal Land Management: Federal Land Transaction Facilitation Act  Restrictions and Management Weaknesses Limit Future Sales and  Acquisitions. GAO-08-196. Washington, D.C.: February 5, 2008.
Prairie Pothole Region: At the Current Pace of Acquisitions, the U.S.  Fish and Wildlife Service Is Unlikely to Achieve Its Habitat Protection  Goals for Migratory Birds. GAO-07-1093. Washington, D.C.:   September 27, 2007.
U.S. Fish and Wildlife Service: Additional Flexibility Needed to Deal  with Farmlands Received from the Department of Agriculture.  GAO-07-1092. Washington, D.C.: September 18, 2007.
Interior’s Land Appraisal Services: Action Needed to Improve  Compliance with Appraisal Standards, Increase Efficiency, and  Broaden Oversight. GAO-06-1050. Washington, D.C.: September 28, 2006.
section_title: Deferred Maintenance Backlog
paragraphs: National Park Service: Major Operations Funding Trends and How  Selected Park Units Responded to Those Trends for Fiscal Years 2001  through 2005. GAO-06-431. Washington, D.C.: March 31, 2006.
Indian Irrigation Projects: Numerous Issues Need to Be Addressed to  Improve Project Management and Financial Sustainability. GAO-06-314.  Washington, D.C.: February 24, 2006.
Recreation Fees: Comments on the Federal Lands Recreation  Enhancement Act, H.R. 3283. GAO-04-745T. Washington, D.C.:   May 6, 2004.
National Park Service: Efforts Underway to Address Its Maintenance  Backlog. GAO-03-1177T. Washington, D.C.: September 27, 2003.
Bureau of Indian Affairs Schools: Expenditures in Selected Schools Are  Comparable to Similar Public Schools, but Data Are Insufficient to  Judge Adequacy of Funding and Formulas. GAO-03-955. Washington,  D.C.: September 4, 2003.
Bureau of Indian Affairs Schools: New Facilities Management  Information System Promising, but Improved Data Accuracy Needed.  GAO-03-692. Washington, D.C.: July 31, 2003.
National Park Service: Status of Agency Efforts to Address Its  Maintenance Backlog. GAO-03-992T. Washington, D.C.: July 8, 2003.
section_title: Royalties Collection
paragraphs: Oil and Gas Royalties: MMS’s Oversight of Its Royalty-in-Kind Program  Can Be Improved through Additional Use of Production Verification  Data and Enhanced Reporting of Financial Benefits and Costs.  GAO-08-942R. Washington, D.C.: September 26, 2008.
Mineral Revenues: Data Management Problems and Reliance on Self- Reported Data for Compliance Efforts Put MMS Royalty Collections at  Risk. GAO-08-893R. Washington, D.C.: September 12, 2008.
Oil and Gas Royalties: The Federal System for Collecting Oil and Gas  Revenues Needs Comprehensive Reassessment. GAO-08-691. Washington,  D.C.: September 3, 2008.
Oil and Gas Royalties: Litigation over Royalty Relief Could Cost the  Federal Government Billions of Dollars. GAO-08-792R. Washington, D.C.:  June 5, 2008.
Mineral Revenues: Data Management Problems and Reliance on Self- Reported Data for Compliance Efforts Put MMS Royalty Collections at  Risk. GAO-08-560T. Washington, D.C.: March 11, 2008.
Oil and Gas Royalties: A Comparison of the Share of Revenue Received  From Oil and Gas Production by the Federal Government and Other  Resources. GAO-07-676R. Washington, D.C.: May 1, 2007.
Oil and Gas Royalties: Royalty Relief Will Cost the Government Billions  of Dollars but Uncertainty Over Future Energy Prices and Production  Levels Make Precise Estimates Impossible at this Time. GAO-07-590R.  Washington, D.C.: April 12, 2007.
Royalties Collection: Ongoing Problems with Interior’s Efforts to Ensure  a Fair Return for Taxpayers Require Attention. GAO-07-682T.  Washington, D.C.: March 28, 2007.
Oil and Gas Royalties: Royalty Relief Will Likely Cost the Government  Billions, but the Final Costs Have Yet to Be Determined. GAO-07-369T.  Washington, D.C.: January 18, 2007.
Royalty Revenues: Total Revenues Have Not Increased at the Same Pace  as Rising Oil and Natural Gas Prices due to Decreasing Production  Sold. GAO-06-786R. Washington, D.C.: June 21, 2006.
Oil and Gas Development: Challenges to Agency Decisions and  Opportunities for BLM to Standardize Data Collection. GAO-05-124.  Washington, D.C.: November 30, 2004.
Mineral Revenues: Cost and Revenue Information Needed to Compare  Different Approaches for Collecting Federal Oil and Gas Royalties.  GAO-04-448. Washington, D.C.: April 16, 2004.
Mineral Revenues: A More Systematic Evaluation of the Royalty-in-Kind  Pilots Is Needed. GAO-03-296. Washington, D.C.: January 9, 2003.
section_title: Other Revenue Collections and Financial Assurances
paragraphs: Hardrock Mining: Information on State Royalties and Trends in  Mineral Imports and Exports. GAO-08-849R. Washington, D.C.:   July 21, 2008.
Hardrock Mining: Information on Abandoned Mines and Value and  Coverage of Financial Assurances on BLM Land. GAO-08-574T.  Washington, D.C.: March 12, 2008.
Recreation Fees: Agencies Can Better Implement the Federal Lands  Recreation Enhancement Act and Account for Fee Revenues.  GAO-06-1016. Washington, D.C.: September 22, 2006.
National Park Air Tour Fees: Effective Verification and Enforcement  Are Needed to Improve Compliance. GAO-06-468. Washington, D.C.:   May 11, 2006.
Livestock Grazing: Federal Expenditures and Receipts Vary, Depending  on the Agency and the Purpose of the Fee Charged. GAO-05-869.  Washington, D.C.: September 30, 2005.
Hardrock Mining: BLM Needs to Better Manage Financial Assurances to  Guarantee Coverage of Reclamation Costs. GAO-05-377. Washington,  D.C.: June 20, 2005.
Oil and Gas Development: Increased Permitting Activity Has Lessened  BLM’s Ability to Meet Its Environmental Protection Responsibilities.  GAO-05-418. Washington, D.C.: June 17, 2005.
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