Oil and Gas Management: Continued Attention to Interior's Human Capital Challenges Is Needed
Published: 2014-02-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Interior employs a wide range of highly trained specialists and scientists with key skills to oversee oil and gas operations on leased federal lands and waters. GAO and others have reported that Interior has faced challenges hiring and retaining sufficient staff to carry out these responsibilities. In February 2011, GAO added Interior's management of federal oil and gas resources to its list of programs at high risk of fraud, waste, abuse, and mismanagement in part because of Interior's long-standing human capital challenges.
This testimony and the January 2014 report on which it is based address (1) the extent to which Interior continues to face challenges hiring and retaining key oil and gas staff and the causes of these challenges, (2) Interior's efforts to address its hiring and retention challenges, and (3) the effects of hiring and retention challenges on Interior's oversight of oil and gas activities. To do this work, GAO surveyed all 44 Interior offices that oversee oil and gas operations, of which 40 responded; analyzed offshore inspection records and other documents; and interviewed agency officials.
section_title: What GAO Found
paragraphs: The Department of the Interior continues to face challenges hiring and retaining staff with key skills needed to manage and oversee oil and gas operations on federal leases. Interior officials noted two major factors that contribute to challenges in hiring and retaining staff: lower salaries and a slow hiring process. In response to GAO's survey, officials from a majority of the offices in the three Interior bureaus that manage oil and gas activities—the Bureau of Land Management (BLM), the Bureau of Ocean Energy Management (BOEM), and the Bureau of Safety and Environmental Enforcement (BSEE)—reported ongoing difficulties filling vacancies, particularly for petroleum engineers and geologists. Many of these officials also reported that retention is an ongoing concern as staff leave for positions in industry. Bureau of Labor Statistics data confirm a wide gap between industry and federal salaries for petroleum engineers and geologists. According to Office of Personnel Management (OPM) data, the fiscal year 2012 attrition rate for petroleum engineers at BLM was over 20 percent, or more than double the average federal attrition rate of 9.1 percent. Field office officials stated that attrition is of concern because some field offices have only a few employees in any given position, and a single separation can significantly affect operations. Additionally, Interior records show that the average time required to hire petroleum engineers and inspectors in recent months generally exceeded 120 calendar days—much longer than OPM's target of 80 calendar days.
Interior and the three bureaus—BLM, BOEM, and BSEE—have taken some actions to address their hiring and retention challenges, but they have not fully used their existing authorities to supplement salaries or collect and analyze hiring data to identify the causes of delays in the hiring process. For instance, BLM, BOEM, and BSEE officials said that recruitment, relocation, and retention incentives are key options to help hire and retain staff, but the bureaus' use of these incentives to attract and retain petroleum engineers and inspectors has been limited for various reasons. Moreover, Interior and its bureaus have taken some steps to reduce hiring times, but they do not have complete and accurate data on hiring times. For instance, while BSEE and BOEM collect hiring data on a biweekly basis, the data are used primarily to track the progress of individual applicants as they move through the hiring process. Likewise, a BLM official stated that the bureau does not systematically analyze data on hiring times. Without reliable data on hiring times, Interior's bureaus cannot identify how long it takes to complete individual stages in the hiring process or effectively implement changes to expedite the hiring process.
According to BLM, BOEM, and BSEE officials, hiring and retention challenges have made it more difficult to carry out oversight activities in some field offices. For example, many BLM and BSEE officials GAO surveyed reported that vacancies have resulted in a reduction in the number of inspections conducted. As a result of these challenges, bureau officials cited steps they have taken to address vacancies in key positions, such as borrowing staff from other offices or using overtime, but these are not sustainable, long-term solutions.
section_title: What GAO Recommends
paragraphs: In its January 2014 report, GAO recommended that Interior explore its oil and gas management bureaus' expanded use of recruitment, relocation, retention, and other incentives and systematically collect and analyze hiring data. Interior generally agreed with GAO's recommendations. GAO is not making any new recommendations in this testimony.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of the Interior’s  challenges to hiring and retaining staff to manage and oversee oil and  gas activities on leased federal lands and waters. Interior plays an  important role in permitting the development of new oil and gas wells on  federal lands and waters and inspecting those wells to ensure compliance  with environmental, safety, and other regulations.
In recent years, federal leases onshore and in offshore federal waters  produced a substantial portion of the natural gas and oil produced in the  United States. In 2012, onshore federal leases produced 13 percent of  domestic natural gas and 5 percent of domestic oil, while in 2011—the  most recent year for which data are available—offshore federal leases  produced almost 24 percent of domestic natural gas and over 6 percent  of domestic oil. Increasing oil prices, along with advances in technologies,  such as hydraulic fracturing and horizontal drilling in shale plays onshore,  and deepwater drilling offshore, have made it possible to develop  substantially more oil and gas resources. Such technological advances  make it imperative that Interior hire and retain sufficient staff to oversee  oil and gas activities on federal lands and waters.
Within Interior, three bureaus are responsible for regulating the processes  that oil and gas companies must follow when leasing, drilling, and  producing oil and gas from federal leases. The Bureau of Land  Management (BLM) oversees onshore federal oil and gas activities, the  Bureau of Ocean Energy Management (BOEM) oversees offshore oil and  gas leasing, and the Bureau of Safety and Environmental Enforcement  (BSEE) reviews applications for drilling and inspects offshore oil and gas  activities.
Interior’s management of oil and gas activities on federal leases has been  the focus of a large body of our work over the past several years, and we  have reported on the weaknesses and challenges to Interior’s oversight of  federal oil and gas and recommended specific actions to address them. In  February 2011, we added Interior’s management of federal oil and gas  resources to GAO’s list of programs at high risk of fraud, waste, abuse,  and mismanagement in part because of Interior’s long-standing and  continued human capital challenges. In July 2012, we reported, among  other things, that BOEM and BSEE continued to face challenges hiring  and retaining staff for oversight of oil and gas activities in the Gulf of  Mexico, and did not have strategic workforce plans in place to outline  strategies to address their human capital challenges.
In this context, my testimony today discusses the findings from our recent   January 2014 report on Interior’s challenges in hiring and retaining  sufficient staff to manage oil and gas activities on federal leases, as well  as the status of recommendations from our prior work relating to Interior’s  human capital challenges. Accordingly, this testimony addresses (1) the extent to which Interior continues to face challenges hiring and retaining  key oil and gas staff and the causes of these challenges, (2) Interior’s  efforts to address its hiring and retention challenges, and (3) the effects of  hiring and retention challenges on Interior’s oversight of oil and gas  activities.
Our January report included the results of a survey of management  officials representing all 44 Interior offices responsible for oil and gas  oversight operations—3 BOEM regional offices, 5 BSEE district offices  and 3 BSEE regional offices, and 33 BLM field offices and 1 BLM state  office. We received responses from 40 offices for an overall response rate  of 91 percent. We also analyzed offshore inspection records and other  documents and interviewed agency officials. Additional information on our  scope and methodology is available in our January report. The work upon  which this testimony is based was conducted 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.
subsections: section_title: Interior Continues to Face Challenges Hiring and Retaining Key Oil and Gas Staff, Primarily Because of Higher Industry Salaries and the Lengthy Federal Hiring Process
paragraphs: We found that Interior continues to experience problems hiring and  retaining sufficient staff to provide oversight and management of oil and  gas activities on federal lands and waters. BLM, BOEM, and BSEE office  managers we surveyed reported that they continue to find it difficult to fill  vacancies for key oil and gas oversight positions, such as petroleum  engineers, inspectors, geologists, natural resource specialists, and  geophysicists. These managers reported that it was difficult to retain staff  to oversee oil and gas activities because staff leave for higher salaries in  the private sector. They also reported that high rates of attrition are a  concern because some Interior offices have just one or two employees  per position, so a single retirement or resignation can significantly affect  office operations and oversight. Nearly half of the petroleum engineers  that left BLM in fiscal year 2012 resigned rather than retired, suggesting  that they sought employment outside the bureau. According to Office of  Personnel Management (OPM) data, the fiscal year 2012 attrition rate for  petroleum engineers at BLM was over 20 percent, or more than double  the average federal attrition rate of 9.1 percent. We found hiring and  retention problems were most acute in areas where industry activity is  greatest, such as in the Bakken shale play in western North Dakota,  because the government is competing there with industry for the same  group of geologists and petroleum engineers.
Interior officials cited two major factors that affect the agency’s ability to  hire and retain sufficient staff to oversee oil and gas activities on federal  leases:
Higher industry salaries. BLM, BOEM, and BSEE office managers  surveyed reported that they have lost potential applicants and staff to  industry because it can pay higher salaries. Bureau of Labor Statistics  data confirm that there is a wide and growing gap between industry  and federal salaries for some positions, particularly petroleum  engineers and geologists. For example, from 2002 through 2012,  mean federal salaries for petroleum engineers have remained fairly  constant at about $90,000 to $100,000 per year whereas private  sector salaries have steadily increased from about $120,000 to over  $160,000 during this same time period.
The lengthy federal hiring process. BLM, BOEM, and BSEE officials  surveyed reported that the federal hiring process has affected their  ability to fill key oil and gas positions because it is lengthy, with  multiple required steps, and that many applicants find other  employment before the federal hiring process ends. We analyzed  Interior’s hiring data and found that the average hiring time for  petroleum engineers was 197 days, or more than 6 months, at BOEM  and BSEE. BLM fared a little better; its average hiring time for  petroleum engineers was 126 days, or a little more than 4 months.  However, all hiring times were much longer than 80 calendar days— OPM’s target.
According to BLM, BOEM, and BSEE officials, other factors have  contributed to difficulties hiring and retaining key oil and gas oversight  personnel, such as few qualified applicants in remote areas, or areas with  a high cost of living.
section_title: Interior Has Taken Some Actions to Address Hiring and Retention Challenges
paragraphs: Interior and its three bureaus—BLM, BOEM, and BSEE—have taken  some steps to address hiring and retention challenges but could do more.  Interior has used special salary rates and incentives to increase hiring  and retention for key oil and gas positions, but use of these incentives  has been limited. Interior has taken some steps to reduce the time it takes  to hire oil and gas oversight staff but does not collect data to identify the  causes of delays in the hiring process and opportunities for reducing  them. Finally, Interior has taken some actions to improve recruiting, such  as developing workforce plans to coordinate hiring and retention efforts,  but this work is ongoing, and the extent to which these plans will help is  uncertain.
Special salary rates. For fiscal years 2012 and 2013, Congress approved  a special 25 percent base pay increase for geologists, geophysicists, and  petroleum engineers at BOEM and BSEE in the Gulf of Mexico.  According to Interior officials in the Gulf of Mexico, this special pay  authority helped retain some geologists, geophysicists, and petroleum  engineers, at least in the near term. BOEM and BSEE requested an  extension of this special pay authority though fiscal year 2014. In 2012,  BLM met with OPM officials to discuss special salary rates for petroleum  engineers and petroleum engineering technicians in western North  Dakota and eastern Montana, where the disparity between federal and  industry salaries is most acute, according to a BLM official. A BLM official  told us that OPM requested that BLM provide more data to support its  request. The official also told us that BLM submitted draft language to  Congress requesting special salary rates through a congressional  appropriation. According to Interior officials, all three bureaus are  preparing a department-wide request for special salary rates to submit to  OPM.
Incentives. BLM, BOEM and BSEE have the authority to pay incentives in  the form of recruitment, relocation, and retention awards of up to 25  percent of basic pay, in most circumstances, and for as long as the use of  these incentives is justified, in accordance with OPM guidance, such as in  the event an employee is likely to leave federal service. However, we  found that the bureaus’ use of these incentives has been limited. For  example, during fiscal years 2010 through 2012, the three bureaus hired  66 petroleum engineers but awarded just four recruitment incentives, five  relocation incentives, and four retention incentives. BLM awarded two of  the four retention incentives in 2012 to help retain petroleum engineers in  its North Dakota Field Office. OPM data showed that, in 2011, Interior  paid about one-third less in incentive awards than it did in 2010. BLM  officials cited various factors that contributed to the limited use of  incentives, such as limited funds available for incentives. A BLM official  also told us that there was confusion about an OPM and Office of  Management and Budget (OMB) requirement to limit incentive awards to  2010 levels and that some field office managers were uncertain about the  extent to which office managers were allowed to use incentive awards.  Without clear guidance outlining when these incentives should be used,  and a means to measure their effectiveness, we concluded that Interior  will not be able to determine whether it has fully used its authority to offer  incentives to hire and retain key oil and gas oversight staff.
Hiring times. To improve its hiring times, Interior participated in an OPM- led, government-wide initiative to streamline the federal hiring process. In  2009, a team of hiring managers and human resources specialists from  Interior reviewed the department’s hiring process and compared it with  OPM’s 80 calendar-day hiring target. The team identified 27 action items  to reduce hiring times, such as standardizing position descriptions and  reducing the number of managers involved in the process. Interior and its  bureaus implemented many of the action items over the past few years  and made significant progress to reduce hiring times, according to Interior  officials and agency records. For example, BSEE reduced the time to  select eligible applicants from 90 to 30 days by limiting the amount of time  allowed for managers to review and select applicants. A BLM official told  us that the bureau is working to automate vacancy announcements to  improve the efficiency of its hiring process. However, neither the  department nor the three bureaus have complete and accurate data on  hiring times that could help them identify and address the causes of  delays in the hiring process. Beginning in 2011, Interior provided quarterly  data on hiring times to OPM, calculated based on Interior’s personnel and  payroll databases. However, we identified discrepancies in some of the  data—for example, in some cases, hiring times were erroneously  recorded as 0 or 1 day. In addition, none of the bureaus systematically  analyze the data collected. For instance, BSEE and BOEM collect hiring  data on a biweekly basis, but officials told us they use the data primarily  to track the progress of individual applicants as they move through the  hiring process. Likewise, a BLM official stated that the bureau does not  systematically analyze data on hiring times. Without reliable data on  hiring times, Interior’s bureaus cannot identify how long it takes to  complete individual stages in the hiring process or effectively implement  changes to expedite the hiring process.
Recruiting. BLM, BOEM, and BSEE have taken some steps to improve  recruiting. In 2012, BOEM and BSEE contracted with a consulting firm to  draft a marketing strategy highlighting the advantages of employment at  the bureaus, such as flexible work hours and job security. BOEM and  BSEE used this marketing strategy to revise the recruiting information on  their external websites and develop recruiting materials such as  brochures and job fair displays. According to a BLM workforce strategy  planning document, the bureau is considering contracting with a  consulting firm to review its recruiting strategy. All three bureaus are also  visiting colleges and universities to recruit potential applicants for oil and  gas positions, and each has had some success offering student intern  positions that may be converted to full-time employment.
Workforce planning. Interior is participating in a government-wide initiative  led by OPM to identify and address critical skills gaps across the federal  government. The effort aims to develop strategies to hire and retain staff  possessing targeted skills and address government-wide and  department-specific mission-critical occupations and skill gaps. In March  2012, Interior issued a plan providing an overview of workforce planning  strategies that it can use to meet emerging workforce needs and skills  gaps within constrained budgets. As part of the next phase of this effort,  Interior asked its bureaus to develop detailed workforce plans using a  standardized model based on best practices used at Interior. Both  planning efforts are ongoing, however, so it is too early to assess the  effect on Interior’s hiring and retention challenges for key oil and gas  positions at this time. BLM, BOEM, and BSEE are developing or  implementing workforce plans as well. As we reported in July 2012,  BOEM and BSEE did not have strategic workforce plans, and we  recommended that the bureaus develop plans to address their hiring and  retention challenges.workforce plan, and BOEM officials told us that they expect to complete  one in 2014. BLM issued a workforce planning strategy in March 2012  that outlined strategic objectives to address some of its key human capital  challenges; however, this strategy does not include implementation;  address challenges with the hiring process; or outline mechanisms to  monitor, evaluate, or improve the hiring process; so it is too soon to tell  whether BLM’s planning strategy will help the bureau address its human  capital challenges. Moreover, we found that the bureaus’ efforts do not  appear to have been conducted as part of an overarching workforce plan,  or in a coordinated and consistent manner, therefore the bureaus do not  have a basis to assess the success of these efforts or determine whether  and how these efforts should be adjusted over time.
section_title: Hiring and Retention Challenges Have Made it More Difficult for Interior to Carry Out Some Oversight Activities
paragraphs: The BLM, BOEM, and BSEE officials that we interviewed and surveyed  reported that hiring and retention challenges have made it more difficult to  carry out their oversight activities. These officials stated that position  vacancies have resulted in less time for oversight, and vacancies directly  affect the number of oversight activities they can carry out—including the  number of inspections conducted and the time for reviewing applications  to drill. Officials at some BLM field offices told us that they have not been  able to meet their annual inspection and enforcement goals because of  vacancies.
Of the 20 offices with inspector vacancies that we surveyed, 13  responded that they conducted fewer inspections in 2012 compared with  what they would have done if fully staffed, and 9 responded that the  thoroughness of inspections was reduced because of vacancies. Of the  21 BLM and BSEE offices with petroleum engineer vacancies, 8 reported  that they reviewed fewer applications to drill in 2012 compared with what  they would have done if fully staffed.
BSEE officials told us that fewer or less-thorough inspections may mean  that some offices are less able to ensure operator compliance with  applicable laws and regulations and, as a result, there is an increased risk  to human health and safety due to a spill or accident. According to a  BSEE official, the longer federal inspectors are away from a site, the  more likely operators are to deviate from operating in accordance with  laws and regulations.
Officials at each of the three bureaus cited steps they have taken to  address vacancies in key oil and gas positions; specifically, reassigning  staff from lower-priority to higher-priority tasks, borrowing staff from other  offices, or increasing overtime. However, each of these steps comes at a  cost to the agency and is not a sustainable solution. Interior officials told  us that moving staff from lower to higher priority work means that the  lower priority tasks—many of which are still critical to the bureaus’  missions—are deferred or not conducted, such as processing permits.  Likewise, offices that borrow staff from other offices gain the ability to  carry out activities, but this comes at a cost to the office that loaned the  staff. With regard to overtime, BOEM officials reported that a heavy  reliance on overtime was exhausting their staff.
BLM and BSEE are developing and implementing risk-based inspection  strategies—long recommended by GAO and others—as they work to  ensure oversight resources are efficiently and effectively allocated;  however, staffing shortfalls and turnover may adversely affect the  bureaus’ ability to carry out these new strategies. In 2010, we reported  that BLM routinely did not meet its goals for conducting key oil and gas  facility inspections, and we recommended that the bureau consider an  alternative inspection strategy that allows for the inspection of all wells  within a reasonable time frame, given available resources. In response  to this recommendation, in fiscal year 2011, BLM implemented a risk- based inspection strategy whereby each field office inspects the highest  risk wells first. Similarly, BSEE officials told us that they have contracted  with Argonne National Laboratory to help develop a risk-based inspection  strategy.
In our January 2014 report, to address the hiring challenges we identified,  we recommended that Interior explore its bureaus’ expanded use of  recruitment, relocation, retention, and other incentives and systematically  collect and analyze hiring data. Interior generally agreed with our  recommendations.
Chairman Lamborn, Ranking Member Holt, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to answer any questions that you may have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: If you or your staff members have any questions concerning this  testimony, 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 statement. Other individuals  who made key contributions include Christine Kehr, Assistant Director;  Mark Braza, Glenn Fischer, Michael Kendix, Michael Krafve, Alison  O’Neill, Kiki Theodoropoulos, Barbara Timmerman, and Arvin Wu.
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