Indian Energy Development: Actions Needed to Address BIA Management Challenges
Published: 2015-10-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Indian energy resources hold significant potential for development, but according to a 2014 Interior document, these resources are underdeveloped relative to surrounding non-Indian resources. Development of Indian energy resources is a complex process that may involve federal, tribal, and state agencies. Interior's BIA has primary authority for managing Indian energy development and generally holds final decision-making authority for leases and other permits required for development.
The Energy Policy Act of 2005 provided the opportunity for interested tribes to pursue TERAs—agreements between a tribe and Interior that allow the tribe to enter into energy leases and agreements without review and approval by Interior. However, no tribe has entered into a TERA.
This testimony highlights the key findings of GAO's June 2015 report (GAO-15-502). It focuses on factors that have (1) hindered Indian energy development and (2) deterred tribes from pursuing TERAs. For the June 2015 report, GAO analyzed federal data; reviewed federal, academic, and other literature; and interviewed tribal, federal and industry stakeholders.
section_title: What GAO Found
paragraphs: In its June 2015 report, GAO found that Bureau of Indian Affairs' (BIA) management shortcomings and other factors—such as a complex regulatory framework, limited capital and infrastructure, and varied tribal capacity—have hindered Indian energy development. Specifically, BIA's management has the following shortcomings:
BIA does not have the data it needs to verify ownership of some Indian oil and gas resources, easily identify resources available for lease, or identify where leases are in effect, as called for in Secretarial Order 3215. GAO recommended that Interior direct BIA to identify land survey needs and enhance mapping capabilities. In response, Interior stated it will develop a data collection tool to identify the extent of the survey needs in fiscal year 2016, and enhance mapping capabilities by developing a national dataset composed of all Indian land tracts and boundaries in the next 4 years.
BIA's review and approval is required throughout the development process, but BIA does not have a documented process or the data needed to track its review and response times, as called for in implementation guidance for Executive Order 13604. According to a tribal official, BIA's review of some of its energy-related documents, which can include leases, right-of-way agreements, and appraisals, took as long as 8 years. In the meantime, the tribe estimates it lost more than $95 million in revenues it could have earned from tribal permitting fees, oil and gas severance taxes, and royalties. GAO recommended that Interior direct BIA to develop a documented process to track its review and response times. In response, Interior stated it will try to implement a tracking and monitoring mechanism by the end of fiscal year 2017 for oil and gas leases. However, it did not indicate whether it intends to track and monitor the review of other energy-related documents that must be approved before development can occur. Without comprehensive tracking and monitoring of its review process, it cannot ensure that documents are moving forward in a timely manner, and lengthy review times may continue to contribute to lost revenue and missed development opportunities.
Some BIA regional and agency offices do not have staff with the skills needed to effectively evaluate energy-related documents or adequate staff resources. GAO is conducting ongoing work on this issue.
GAO also found in its June 2015 report that a variety of factors have deterred tribes from seeking tribal energy resource agreements (TERA). These factors include uncertainty about some TERA regulations, costs associated with assuming activities historically conducted by federal agencies, and a complex application process. For instance, one tribe asked Interior for additional guidance on the activities that would be considered inherently federal functions—a provision included in Interior's regulations implementing TERA. Interior did not provide the clarification requested. Therefore, the tribe had no way of knowing what efforts may be necessary to build the capacity needed to assume those activities. GAO recommended that Interior provide clarifying guidance. In response, Interior officials stated that the agency is considering further guidance, but it did not provide a timeframe for issuance.
section_title: What GAO Recommends
paragraphs: In its June 2015 report, GAO recommended that Interior take steps to address data limitations, track its review process, and provide clarifying guidance. In an August 2015 letter to GAO after the issuance of the report, Interior generally agreed with the recommendations and identified some steps it intends to take to implement them.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our recent report on the  development of Indian energy resources. As you know, Indian energy  resources hold significant potential for development and, for some Indian  tribes and their members, energy development already provides  economic benefits, including funding for education, infrastructure, and  other public services. According to Department of the Interior (Interior)  data, in fiscal year 2014, development of Indian energy resources  provided over $1 billion in revenue to tribes and individual Indian resource  owners. However, even with considerable energy resources, according to  a 2014 Interior document, Indian energy resources are underdeveloped  relative to surrounding non-Indian resources.
Development of Indian energy resources is a complex process that may  involve a range of stakeholders, including federal, tribal, and state  agencies. Interior’s Bureau of Indian Affairs (BIA), through its various  regional, agency, and other offices, has primary authority for managing  Indian energy development and, in many cases, holds final decision  making authority. Federal management and oversight of Indian energy  development is to be conducted consistent with the federal government’s  fiduciary trust responsibility to federally recognized Indian tribes and  individual Indians. However, in recent decades, Indian tribes and  individual Indians have asserted that Interior has failed to fulfill its trust  responsibility, mainly with regard to the management and accounting of  tribal and individual trust funds and trust assets. For example, Interior  recently settled numerous “breach of trust” lawsuits, including Cobell v.
Salazar, one of the largest class action suits filed against the United  States.
Federal policy has supported greater tribal autonomy and control by  promoting and supporting opportunities for increased tribal self- determination and self-governance, including promoting tribal oversight  and management of energy resource development on tribal lands. For  example, in 2005, Congress passed the Indian Tribal Energy  Development and Self-Determination Act (ITEDSA), part of the Energy  Policy Act of 2005, to provide an option for federally recognized tribes to  exercise greater control of decision-making over their own energy  resources. The ITEDSA provides for interested tribes to pursue a Tribal  Energy Resource Agreement (TERA)—an agreement between a tribe  and the Secretary of the Interior that allows the tribe, at its discretion, to  enter into leases, business agreements, and right-of-way (ROW)  agreements for energy resource development on tribal lands without  review and approval by the Secretary. However, no tribe has entered into  a TERA with Interior, and shortcomings in BIA’s management that we  identified in our June 2015 report highlight the need for tribes to build the  capacity to perform the duties that would enable them to obtain greater  tribal control and decision-making authority over the development of their  resources.
In this context, my testimony today discusses the findings from our June  2015 report on Indian energy development. Accordingly, this testimony  addresses the factors that have (1) hindered Indian energy resource  development and (2) deterred tribes from seeking TERAs. In addition, I  will highlight several key actions that we recommended in our report that  Interior can take to help overcome challenges associated with the  administration and management of Indian energy resources.
To conduct the work for our June 2015 report, we reviewed and  synthesized literature including more than 40 reports, conference  proceedings, hearings statements, and other publications from federal  and tribal governments; industry; academics; and nonprofit organizations.  We also obtained available data on key dates associated with the review  and approval of energy-related documents for planned or completed  utility-scale renewable projects from several BIA regional and local  officials, tribal officials, and industry representatives. Further, we  interviewed a nongeneralizable sample of stakeholders representing 33  Indian tribes, energy development companies, and numerous federal  agencies and organizations, including officials from BIA, Office of Indian  Energy and Economic Development, Department of Energy, National  Renewable Energy Laboratory, and the Bureau of Land Management  (BLM). We did not evaluate tribal activities or actions to govern the  development of their resources or assess any potential barriers to energy  development such actions or activities may pose. Our June 2015 report  includes a detailed explanation of the scope and methodology used to  conduct our work.
We conducted the work on which this testimony is based 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: Shortcomings in BIA’s Management and a Variety of Other Factors Have Hindered Indian Energy Development
paragraphs: Factors, such as shortcomings in BIA’s management and additional  factors generally outside of BIA’s management responsibilities—such as  a complex regulatory framework, tribes’ limited capital and infrastructure,  and varied tribal capacity—have hindered Indian energy development.  Specifically, according to some of the literature we reviewed and several  stakeholders we interviewed, BIA’s management has three key  shortcomings.
First, BIA does not have the data it needs to verify ownership of some oil  and gas resources, easily identify resources available for lease, or easily  identify where leases are in effect, inconsistent with Interior’s Secretarial  Order 3215, which calls for the agency to maintain a system of records  that identifies the location and value of Indian resources and allows for  resource owners to obtain information regarding their assets in a timely  manner. The ability to account for Indian resources would assist BIA in  fulfilling its federal trust responsibility, and determining ownership is a  necessary step for BIA to approve leases and other energy-related  documents. However, in some cases, BIA cannot verify ownership  because federal cadastral surveys—the means by which land is defined,  divided, traced, and recorded—cannot be found or are outdated. It is  additionally a concern that BIA does not know the magnitude of its  cadastral survey needs or what resources would be needed to address  them.
We recommended in our June 2015 report that the Secretary of the  Interior direct the Director of the BIA to take steps to work with BLM to  identify cadastral survey needs. In its written comments on our report,  Interior did not concur with our recommendation. However, in an August  2015 letter to GAO after the report was issued, Interior stated that it  agrees this is an urgent need and reported it has taken steps to enter into  an agreement with BLM to identify survey-related products and services  needed to identify and address realty and boundary issues. In addition,  the agency stated in its letter that it will finalize a data collection  methodology to assess cadastral survey needs by October 2016.
In addition, BIA does not have an inventory of Indian resources in a  format that is readily available, such as a geographic information system  (GIS). Interior guidance identifies that efficient management of oil and gas  resources relies, in part, on GIS mapping technology because it allows  managers to easily identify resources available for lease and where  leases are in effect. According to a BIA official, without a GIS component,  identifying transactions such as leases and ROW agreements for Indian  land and resources requires a search of paper records stored in multiple  locations, which can take significant time and staff resources. For  example, in response to a request from a tribal member with ownership  interests in a parcel of land, BIA responded that locating the information  on existing leases and ROW agreements would require that the tribal  member pay $1,422 to cover approximately 48 hours of staff research  time and associated costs. In addition, officials from a few Indian tribes  told us that they cannot pursue development opportunities because BIA  cannot provide the tribe with data on the location of their oil and gas  resources—as called for in Interior’s Secretarial Order 3215. Further, in  2012, a report from the Board of Governors of the Federal Reserve  System found that an inventory of Indian resources could provide a road  map for expanding development opportunities. Without data to verify  ownership and use of resources in a timely manner, the agency cannot  ensure that Indian resources are properly accounted for or that Indian  tribes and their members are able to take full advantage of development  opportunities.
To improve BIA’s efforts to verify ownership in a timely manner and  identify resources available for development, we recommended in our  June 2015 report that Interior direct BIA to take steps to complete GIS  mapping capabilities. In its written comments in response to our report,  Interior stated that the agency is developing and implementing  applications that will supplement the data it has and provide GIS mapping  capabilities, although it noted that one of these applications, the National  Indian Oil and Gas Evaluation Management System (NIOGEMS), is not  available nationally. Interior stated in its August 2015 letter to GAO that a  national dataset composed of all Indian land tracts and boundaries with  visualization functionality is expected to be completed within 4 years,  depending on budget and resource availability.
Second, BIA’s review and approval is required throughout the  development process, including the approval of leases, ROW  agreements, and appraisals, but BIA does not have a documented  process or the data needed to track its review and response times. In  2014, an interagency steering committee that included Interior identified  best practices to modernize federal decision-making processes through  improved efficiency and transparency. The committee determined that  federal agencies reviewing permits and other applications should collect  consistent data, including the date the application was received, the date  the application was considered complete by the agency, the issuance  date, and the start and end dates for any “pauses” in the review process.  The committee concluded that these dates could provide agencies with  greater transparency into the process, assist agency efforts to identify  process trends and drivers that influence the review process, and inform  agency discussions on ways to improve the process.
However, BIA does not collect the data the interagency steering  committee identified as needed to ensure transparency and, therefore, it  cannot provide reasonable assurance that its process is efficient. A few  stakeholders we interviewed and some literature we reviewed stated that  BIA’s review and approval process can be lengthy. For example,  stakeholders provided examples of lease and ROW applications that  were under review for multiple years. Specifically, in 2014, the Acting  Chairman for the Southern Ute Indian Tribe testified before this  committee that BIA’s review of some of its energy-related documents took  as long as 8 years. In the meantime, the tribe estimates it lost more than  $95 million in revenues it could have earned from tribal permitting fees, oil  and gas severance taxes, and royalties. According to a few stakeholders  and some literature we reviewed, the lengthy review process can  increase development costs and project times and, in some cases, result  in missed development opportunities and lost revenue. Without a  documented process or the data needed to track its review and response  times, BIA cannot ensure transparency into the process and that  documents are moving forward in a timely manner, or determine the  effectiveness of efforts to improve the process.
To address this shortcoming, we recommended in our June 2015 report  that Interior direct BIA to develop a documented process to track its  review and response times and enhance data collection efforts to ensure  that the agency has the data needed to track its review and response  times. In its written comments, Interior did not fully concur with this  recommendation. Specifically, Interior stated that it will use NIOGEMS to  assist in tracking review and response times. However, this application  does not track all realty transactions or processes and has not been  deployed nationally. Therefore, while NIOGEMS may provide some  assistance to the agency, it alone cannot ensure that BIA’s process to  review energy-related documents is transparent or that documents are  moving forward in a timely manner. In its August 2015 letter to GAO,  Interior stated it will try to implement a tracking and monitoring effort by  the end of fiscal year 2017 for oil and gas leases on Indian lands. The  agency did not indicate if it intends to improve the transparency of its  review and approval process for other energy-related documents, such as  ROW agreements and surface leases—some of which were under review  for multiple years.
Third, some BIA regional and agency offices do not have staff with the  skills needed to effectively evaluate energy-related documents or  adequate staff resources, according to a few stakeholders we interviewed  and some of the literature we reviewed. For instance, Interior officials told  us that the number of BIA personnel trained in oil and gas development is  not sufficient to meet the demands of increased development. In another  example, a BIA official from an agency office told us that leases and other  permits cannot be reviewed in a timely manner because the office does  not have enough staff to conduct the reviews. We are conducting ongoing  work for this committee that will include information on key skills and staff  resources at BIA involved with the development of energy resources on  Indian lands.
According to stakeholders we interviewed and literature we reviewed,  additional factors, generally outside of BIA’s management responsibilities,  have also hindered Indian energy development, including a complex regulatory framework consisting of multiple jurisdictions  that can involve significantly more steps than the development of  private and state resources, increase development costs, and add to  the timeline for development;  fractionated, or highly divided, land and mineral ownership interests;  tribes’ limited access to initial capital to start projects and limited  opportunities to take advantage of federal tax credits; dual taxation of resources by states and tribes that does not occur on  private, state, or federally owned resources; perceived or real concerns about the political stability and capacity of  some tribal governments; and  limited access to infrastructure, such as transmission lines needed to  carry power generated from renewable sources to market and  transportation linkages to transport oil and gas resources to  processing facilities.
section_title: A Variety of Factors Have Deterred Tribes from Entering into TERAs
paragraphs: A variety of factors have deterred tribes from pursuing TERAs.  Uncertainty associated with Interior’s TERA regulations is one factor. For  example, TERA regulations authorize tribes to assume responsibility for  energy development activities that are not “inherently federal functions,”  but Interior officials told us that the agency has not determined what  activities would be considered inherently federal because doing so could  have far-reaching implications throughout the federal government.  According to officials from one tribe we interviewed, the tribe has  repeatedly asked Interior for additional guidance on the activities that  would be considered inherently federal functions under the regulations.  According to the tribal officials, without additional guidance on inherently  federal functions, tribes considering a TERA do not know what activities  the tribe would be assuming or what efforts may be necessary to build the  capacity needed to assume those activities.
We recommended in our June 2015 report that Interior provide additional  energy development-specific guidance on provisions of TERA regulations  that tribes have identified as unclear. Additional guidance could include  examples of activities that are not inherently federal in the energy  development context, which could assist tribes in identifying capacity  building efforts that may be needed. Interior agreed with the  recommendation and stated it is considering further guidance but did not  provide additional details regarding issuance of the guidance.
In addition, the costs associated with assuming activities currently  conducted by federal agencies and a complex application process were  identified by literature we reviewed and stakeholders we interviewed as  other factors that have deterred any tribe from entering into a TERA with  Interior. Specifically, through a TERA, a tribe assuming control for energy  development activities that are currently conducted by federal agencies  does not receive federal funding for taking over the activities from the  federal government. Several tribal officials we interviewed told us that the  tribe does not have the resources to assume additional responsibility and  liability from the federal government without some associated support  from the federal government.
In conclusion, our review identified a number of areas in which BIA could  improve its management of Indian energy resources and enhance  opportunities for greater tribal control and decision-making authority over  the development of their energy resources. Interior stated it intends to  take some steps to implement our recommendations, but we believe  Interior needs to take additional actions to address data limitations and  track its review process. We look forward to continuing to work with this  committee in overseeing BIA and other federal programs to ensure that  they are operating in the most effective and efficient manner.
Chairman Barrasso, Ranking Member Tester, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  answer any questions that you may have at this time.
section_title: GAO Contacts and Staff Acknowledgement
paragraphs: If you or your staff members have any questions about 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 testimony. Christine Kehr (Assistant  Director), Alison O’Neill, Jay Spaan, and Barbara Timmerman made key  contributions to this testimony.
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