Oil and Gas: Interior Could Do More to Account for and Manage Natural Gas Emissions
Published: 2016-07-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Interior's BLM oversees and accounts for onshore oil and gas production on federal lands. Interior generally collects royalties for this oil and gas, but its guidance, which was issued over 30 years ago, may exempt gas that is vented, flared, or used to operate equipment on the lease. Increased oil production in recent years has resulted in a rise in flared gas in certain regions where there is limited infrastructure to transport or process gas associated with oil production. BLM has proposed updating its venting and flaring regulations to clarify how such emissions are to be managed.
GAO was asked to review Interior's management of natural gas emissions onshore. This report examines (1) the extent to which Interior can account for these emissions and (2) how BLM field offices have managed requests to vent or flare. GAO analyzed Interior data, including a simple random sample of venting or flaring requests from fiscal year 2014, the most recent year for which data were available; reviewed Interior documents; and interviewed officials from a nongeneralizable sample of six BLM field offices selected based on increased natural gas emissions in recent years. GAO also interviewed operators with leases managed by two BLM field offices.
section_title: What GAO Found
paragraphs: The Department of the Interior's (Interior) guidance to oil and gas operators on its reporting requirements has limitations that may hinder the extent to which it can account for natural gas emissions on onshore federal lands (leases). Interior is required to ensure that oil and gas operations are conducted in a manner that minimizes waste. As part of its oversight activities, Interior requires operators to submit monthly Oil and Gas Operations Reports (OGOR). Interior uses these reports to track volumes of oil and gas produced on federal lands, including gas that may be exempt from royalties, such as gas released into the air (vented), burned (flared), or used to power equipment on the lease (lease use). Historically, Interior's focus has been on collecting data from royalty-bearing oil and gas production, and thus it has provided limited guidance on how operators are to report natural gas emissions. For example, Interior
does not provide specific instructions on how to estimate natural gas emissions, which results in operators using varying estimation methods that may be difficult to verify;
does not specify which natural gas emissions activities should be reported, resulting in operators not reporting some emissions (e.g., from storage tanks).
As a result of these limitations, Interior may not have a consistent accounting of natural gas emissions from onshore federal leases, and does not have the information it needs to reasonably ensure it is minimizing waste on these leases.
The Bureau of Land Management's (BLM) field offices have not consistently followed BLM's existing guidance in managing operators' venting or flaring requests. GAO found that BLM field offices have approved venting or flaring requests that did not include the documentation BLM's guidance requires. Specifically, in fiscal year 2014, GAO found that BLM received 1,281 venting or flaring requests from operators. GAO reviewed the documentation for a random sample of 100 of those requests and, based on this sample, estimates that 90 percent (+/-8) of the requests to BLM did not provide the documentation required by BLM guidance. GAO also estimates that BLM approved 70 percent (+/-9) of these venting or flaring requests and, for nearly half of the approvals, allowed operators to flare gas royalty-free. Further, GAO found that selected BLM field offices have applied BLM guidance differently to venting or flaring requests. For example, officials in two BLM field offices GAO reviewed said they used their authority under the existing guidance to charge royalties on flared gas, while a third field office was considering doing so. The other three field offices GAO reviewed have interpreted BLM guidance as allowing all venting or flaring requests in their regions to be approved royalty-free. BLM's proposed update to its regulations, if finalized, would clarify how BLM will manage future venting or flaring requests. Interior officials told GAO that they expect to finalize the proposed update to its regulations by the end of calendar year 2016 and that finalizing the regulations is an Administration priority.
section_title: What GAO Recommends
paragraphs: GAO is making four recommendations to Interior, including providing additional guidance on how operators are to report natural gas emissions. Interior generally concurred with these recommendations.

section_title: Letter
paragraphs: In fiscal year 2015, oil and gas companies produced more than 3.3 trillion  cubic feet of natural gas and more than 171 million barrels of oil from  onshore oil and gas leases on federal lands managed by the Department  of the Interior’s (Interior) Bureau of Land Management (BLM), according  to data provided by Interior. BLM is responsible for managing and  accounting for approximately 700 million subsurface onshore acres and  production from nearly 100,000 federal onshore oil and gas wells.  According to Interior, production from these wells accounts for 11 percent  of the nation’s natural gas supply and 5 percent of its oil supply. Under  the Minerals Leasing Act of 1920, BLM is required to ensure that firms  producing oil and gas use all reasonable precautions to prevent waste of  oil or gas developed on these lands. The act also authorizes Interior to  collect royalties on oil and gas produced on federal lands. Interior’s  Office of Natural Resources Revenue (ONRR) collects these royalties,  which its data show totaled nearly $2.2 billion in fiscal year 2015.
Interior requires monthly Oil and Gas Operations Reports (OGOR) from  oil and gas companies (operators), which track and account for volumes  of oil and gas produced on all federal lands. While most of the natural gas  produced on leased federal lands and waters is sold, some is lost during  production for various reasons, including leaks and releases for ongoing  operational or safety procedures. This natural gas is either released  directly into the atmosphere (vented) or burned (flared). In addition to  gas that is lost during production, some natural gas may be used to  operate equipment on the lease (lease use). When we refer to vented,  flared, and lease use gas collectively, we use the term natural gas  emissions. Until recently, Interior has generally exempted operators from  paying royalties on reported natural gas emissions.
Natural gas emissions, as estimated by Interior and other sources, make  up a relatively small but uncertain percentage of total natural gas  production on public lands. However, flaring has generally increased in  recent years as technological advances, such as horizontal drilling and  hydraulic fracturing in shale formations, have led to the rapid  development of oil and gas resources. These resources are often in  remote areas where the infrastructure to transport or process the gas  associated with oil deposits has not kept pace with rapid increases in oil  production. Interior data show a substantial increase in flaring in recent  years in New Mexico and North Dakota.
In an October 2010 report, we found that natural gas emissions have both  economic and environmental implications. On federal oil and gas leases,  natural gas that is vented, flared, or used on the lease instead of captured  for sale represents a loss of royalty revenue for the federal government.  For example, in our October 2010 report, we found that the  Environmental Protection Agency’s (EPA) estimate of 126 billion cubic  feet of natural gas vented or flared from onshore federal leases in 2008  represented approximately $58 million in federal royalty payments.
Vented, flared, and lease use gas are also sources of greenhouse gas  emissions—primarily methane and carbon dioxide. Natural gas consists  primarily of methane, and methane (released through venting) is 34 times  more potent by weight than carbon dioxide (released through flaring) in its  ability to warm the atmosphere over a 100-year period, and 86 times  more potent over a 20-year period, according to the Intergovernmental  Panel on Climate Change. Overall, EPA has found that oil and natural  gas systems are the nation’s second largest stationary source of  greenhouse gases—accounting for 236 million metric tons of carbon  dioxide equivalent in 2014.
According to Interior officials, BLM has been updating its regulations on  natural gas emissions for a number of years, but it can take years to  propose and finalize such regulations. On January 22, 2016, BLM  announced its proposed methane and waste reduction regulations that  would update its existing guidance on venting, flaring, and lease use  gas. Among other things, the proposed regulations would clarify when  gas lost through venting, flaring, or leaks is subject to royalties, and when  oil and gas used on site would be royalty-free. Interior officials we  interviewed told us that BLM plans to finalize these regulations by the end  of calendar year 2016. BLM’s proposed regulations are part of an  interagency effort known as the President’s Climate Action Plan’s  Strategy to Reduce Methane Emissions—which sets a goal to cut  methane emissions from the oil and gas sector by 40 to 45 percent from  2012 levels by 2025 and calls upon BLM to “lead by example” on public  lands. Some state agencies—such as air quality and oil conservation  offices—have also taken actions that have addressed natural gas  emissions, including those from oil and gas produced on leased federal  land within those states.
In light of these actions, you asked us to review Interior’s management of  natural gas emissions on onshore federal oil and gas leases. This report  examines (1) the extent to which Interior can account for natural gas  emissions from onshore federal leases and (2) how selected BLM field  offices have managed requests to vent or flare natural gas on onshore  leases.
To conduct this work, we interviewed Interior officials and operators about  reported natural gas emissions and factors that affect how Interior  accounts for them. We also reviewed BLM regulations and documents  and interviewed officials from six BLM field offices in Carlsbad, New  Mexico; Casper, Wyoming; Dickinson, North Dakota; Farmington, New  Mexico; Miles City, Montana; and Vernal, Utah. We selected these six  offices based on the high volumes of natural gas that are vented, flared,  and used on leases managed by these offices and their overall oil and  gas production volumes. We also reviewed BLM’s proposed new  regulations that were announced in January 2016.
In addition, we interviewed oil and gas and air quality regulatory officials  from five states with high natural gas production—Colorado, New Mexico,  North Dakota, Utah, and Wyoming—on actions these states have taken  to address natural gas emissions from oil and gas leases in these states  (see app. I). Because these six BLM field offices and five states were  nonprobability samples, our findings cannot be generalized to other BLM  field offices or states, but they can provide insights into oil and gas  operations for key producing regions in the United States. In addition, we  analyzed a simple random sample of 100 of the 1,281 fiscal year 2014  venting or flaring requests to assess the extent to which field office  supervisors approved these and followed BLM’s guidance for doing so.  These findings can be generalized to all BLM field offices. To assess  the reliability of BLM’s venting and flaring request data, we compared our  data set with other published data and interviewed knowledgeable agency  officials, including officials in the field responsible for data entry. We found  these data sufficiently reliable for assessing BLM field office compliance  with BLM’s venting and flaring guidance.
We conducted this performance audit from January 2015 to July 2016 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: Background
paragraphs: This section provides an overview of (1) the oil and gas production  process and release of natural gas emissions, (2) the recent oil  production boom and associated natural gas, and (3) Interior’s reporting  requirements on natural gas emissions.
subsections: section_title: The Oil and Gas Production Process and Release of Natural Gas Emissions
paragraphs: The oil and gas production process on federal leases involves several  stages, including the drilling, development, and initial production of these  hydrocarbons along with routine operation and maintenance activities  throughout the life of a field. Throughout these stages, operators typically  vent or flare some natural gas, often intermittently (see fig. 1). Venting is  the direct release of natural gas into the atmosphere, and flaring is the  release of natural gas to a flare stack where it can be safely combusted.  Although gas may be vented or flared throughout these stages, where  feasible, flaring is generally preferable to venting because it can prevent  accidental fires or explosions and it reduces the climate impact of oil and  gas production. Leaks, or “fugitive” emissions, may occur at any stage  of the production process.
section_title: The Recent Oil Production Boom and Associated Natural Gas
paragraphs: The combination of advances in horizontal drilling techniques and  hydraulic fracturing along with relatively high oil prices in the past few  years have allowed the development of oil and natural gas from  unconventional reservoirs, such as shale formations that were previously  uneconomical to develop, and have led to historically high production  levels. In a September 2012 report, we found that from 2007 to 2011  shale oil production increased more than fivefold, and shale gas  production increased more than fourfold—driving increases in U.S. oil and  gas production. Oil and natural gas are often found together in the same  reservoir but may vary in relative amounts. In areas where the primary  purpose of drilling is to produce oil, operators may flare associated  natural gas because no local market exists for the gas and transporting it  to a distant market may not be economically feasible. For onshore oil and  gas production on federal lands, rapid development occurred in states  such as New Mexico and North Dakota, and the bulk of the flaring took  place in areas overseen by a handful of BLM offices in those two states.  As shown in figure 2, of the 33 BLM field offices that manage oil and gas  production, most of the flaring reported on federal lands that occurred in  calendar year 2013 occurred in North Dakota, New Mexico, and South  Dakota, managed primarily by BLM field offices in Carlsbad, New Mexico,  and Dickinson, North Dakota.
section_title: Interior’s Reporting Requirements on Natural Gas Emissions
paragraphs: Several federal regulations apply to Interior’s management of natural gas  emissions and operators’ responsibilities to report these emissions.
First, federal regulations require an authorizing officer at Interior to  oversee and enforce regulations related to the development of and  operations on federal oil and gas leases (see fig. 3). Authorizing officers  or “supervisors” are typically BLM field office officials who approve  venting or flaring requests. Venting, flaring, and other royalty-free uses of  oil and natural gas on BLM-administered leases are currently governed  by BLM guidance known as Notice to Lessees and Operators of Onshore  Federal and Indian Oil and Gas Leases (NTL-4A), which the U.S.  Geological Survey issued in 1979, before BLM assumed oversight  responsibility for onshore oil and gas development and production. NTL- 4A generally prohibits venting or flaring of gas, but provides for a number  of exemptions to this prohibition, both for short-term or emergency  venting or flaring and for venting or flaring for longer periods (i.e., long- term), if operators obtain supervisory approval in advance.
Second, federal regulations call for royalties to be computed based on the  quantity and quality of produced, unprocessed gas at a measurement  point approved by BLM. Losses of gas (i.e., those from natural gas  emissions) are generally not subject to royalties provided that such losses  meet BLM requirements. However, BLM field office supervisors apply  criteria set in NTL-4A to determine whether approved gas lost through  venting or flaring is “unavoidably lost,” and therefore royalty-free, or  “avoidably lost,” and therefore subject to royalties. For example, under  NTL-4A, venting or flaring gas vapors released from storage tanks or low  pressure production vessels is generally considered to be unavoidably  lost, and no royalties are due. However, BLM supervisors may determine  that vented or flared gas is avoidably lost if (1) the losses are due to  negligence on the part of the lessee or operator; (2) the losses are due to  the failure of the lessee or operator to take all reasonable measures to  prevent or to control the losses; or (3) the losses are due to the failure of  the lessee or operator to comply fully with the applicable lease terms and  regulations, appropriate provisions of the approved operating plan, or the  prior written orders of the supervisor. Generally, operators are to submit  venting or flaring requests to a supervisor at their local BLM field office in  advance to obtain an approval and determination of whether losses are  unavoidable or avoidable. BLM field office officials we spoke with told  us, however, that because of backlogs in the venting or flaring requests  submitted to BLM, operators may sometimes seek and obtain verbal  approval to vent or flare, and then later submit a written request once  venting or flaring is under way. In addition, NTL-4A provides that no  royalty obligation shall accrue on any produced gas that is used on the  same lease for beneficial purposes (i.e., lease use). This royalty  exception is sometimes referred to as the beneficial use or lease use  exception.
Third, federal regulations require operators to report monthly oil and gas  production to Interior on the OGOR. Moreover, NTL-4A provides that  the volume of oil or gas produced, whether sold, avoidably or unavoidably  lost, vented or flared, or used on lease, must be reported. To assist  operators in fulfilling Interior’s reporting requirements for oil and gas  produced on federal leases, ONRR’s Minerals Production Reporter  Handbook provides instructions on how to complete the OGOR, including  a description of various reporting categories. The handbook includes  several categories for natural gas emissions that are royalty-free,  including categories for vented gas associated with oil wells, vented gas  associated with gas wells, flared gas associated with oil wells, flared gas  associated with gas wells, lease use gas, gas that is “spilled and/or lost”  unavoidably, and gas lost to evaporation or shrinkage. The handbook  also includes categories for natural gas emissions that are royalty- bearing, specifically for gas that is spilled and/or lost avoidably.
section_title: Interior’s Guidance to Operators on Reporting Requirements Has Limitations That May Hinder the Extent to Which It Can Account for Natural Gas Emissions
paragraphs: Interior’s limited guidance to operators on how to report natural gas  emissions on the OGOR may hinder the extent to which it can account for  such emissions. Interior officials told us that their focus has historically  been on collecting data on royalty-bearing oil and gas production rather  than on natural gas emissions, which until recently have generally been  royalty-free. Thus, the guidance Interior has provided to operators on how  to report natural gas emissions has not ensured that these data are  consistent and complete. Without such data, Interior cannot ensure that  operators are minimizing waste on federal oil and gas leases and  collecting all royalties that are owed.
We identified several key limitations with Interior’s guidance for operators  OGOR reporting that may hinder Interior’s ability to accurately account for  natural gas emissions and potentially collect royalties when appropriate.  First, Interior’s guidance does not provide specific instructions on how to  estimate natural gas emissions on the OGOR. Second, Interior provides  limited guidance on which OGOR reporting categories operators are to  use to report flared volumes. Third, Interior’s guidance does not specify  which activities are to be reported under OGOR categories for natural gas  emissions. In addition, Interior does not require operators to differentiate  between types of lease use volumes reported on the OGOR, which, going  forward, could help Interior track progress toward its new goals for  methane reduction. If finalized, BLM’s recently proposed methane and  waste reduction regulations could clarify and alter BLM’s policies on  natural gas emissions, but these proposed regulations do not address the  key limitations in reporting and accounting for emissions that we  identified.
Interior does not provide specific instructions on how to estimate natural  gas emissions on the OGOR. Interior’s guidance to operators for  reporting natural gas emissions on the OGOR does not specify how they  are to estimate reported natural gas emissions that have occurred without  measurement. Instead, BLM’s guidance on natural gas emissions, NTL- 4A, provides a list of eight general methods operators shall use to  estimate emissions, which include, among others, the use of historic  production data or estimates based on the expected production of other  nearby wells. However, NTL-4A does not provide any specific detail or  instruction on how to develop estimates of natural gas emissions based  on these general methods. Furthermore, the guidance allows for use of  any estimation method that is approved by a BLM supervisor. With regard  to measurement, BLM’s Onshore Oil and Gas Order No. 5 provides  guidance on how to measure gas production but it does not provide any  specific guidance on estimating natural gas emissions. In addition,  BLM’s proposed methane and waste reduction regulations contain  provisions that require operators to report quantities of all vented or flared  gas, and to meter flared volumes when gas flaring meets or exceeds  certain thresholds, but contain no guidance on how to estimate or  measure natural gas emissions below those thresholds.
In the absence of guidance with specific instructions on how to estimate  natural gas emissions, we found that operators may use varying  approaches to estimate emissions. Specifically, some BLM field office  officials we interviewed told us that operators may meter long-term flaring  volumes but use various techniques to estimate short-term flaring,  venting, and lease use emissions. Some BLM field office officials that we  spoke with also said that for short-term flaring, operators may rely on “gas  to oil ratios” where the gas is metered temporarily to establish the ratio  between associated gas and produced oil to estimate nonmetered flaring  volumes. For venting and lease use volumes, however, BLM field office  officials we interviewed told us that operators may use engineering  estimates based on equipment specifications, which can vary—even for  the same piece of equipment—based on the assumptions made by  individual operators.
Without specific instructions from BLM on how to develop estimates of  natural gas emissions, it may also be difficult for BLM’s production  accountability staff to determine which method operators are using to  estimate natural gas emissions and to verify their accuracy during  periodic records reviews. For example, one operator we interviewed told  us that until 2 years ago, officials at the company used rough estimates to  report volumes of vented, flared, or lease use gas on the OGOR, but the  company recently changed course and adopted the estimation techniques  EPA prescribed in its regulations for its Greenhouse Gas Reporting  Program. In contrast, another operator we interviewed told us that it  continues to estimate natural gas emissions based on history and  experience in the field. In addition, in our limited analysis of five detailed  records that BLM provided to us—which contained operators’  documentation of natural gas emissions volumes—we found that only one  operator reported lease use gas, and for that case, we could not  determine which method the operator used to estimate lease use  volumes. Although some BLM field office officials we spoke with told us  they felt that the OGOR volume estimates were fairly reliable, without  consistent accounting, Interior does not have the information it needs to  have reasonable assurance that it is minimizing waste on federal oil and  gas leases.
Interior provides limited guidance on which OGOR categories operators  are to use to report flared volumes. Interior provides limited agency-wide  guidance to operators on which OGOR categories to use when reporting  volumes of flared gas, and only two BLM field offices we reviewed provide  any additional instruction. As described above, under BLM’s NTL-4A, field  office supervisors have some discretion in determining whether an  operator’s request to vent or flare beyond the initial production phase  should be approved and is subject to royalties. If the BLM supervisor  determines that a loss of natural gas occurs for reasons beyond the  operator’s control, such as line failures or equipment malfunction, then  the vented or flared volumes are deemed unavoidably lost and are  royalty-free. If the BLM supervisor determines that the loss occurs for  reasons such as negligence or the failure of lessee or operator to take all  reasonable measures to prevent or control the loss of gas, then the  vented or flared volumes are deemed avoidably lost and are royalty- bearing. Operators must report both royalty-free and royalty-bearing  vented or flared gas volumes on the OGOR.
Based on interviews with BLM field office officials and our review of  ONRR’s guidance, we found that operators use four different categories  to report flared gas on the OGOR, and two of these categories may also  include other types of nonflared emissions. Within the OGOR, there are  two categories specifically dedicated to flared gas—one for gas flared  from oil wells and one for gas flared from gas wells—both of which are for  royalty-free volumes. However, in the absence of clear agency-wide  guidance on how to report volumes of flared gas on the OGOR— particularly royalty-bearing flared gas—some BLM field offices have  allowed operators to report such volumes under two additional categories.
One of these categories is for avoidably lost oil and gas spills, which also  includes royalty-bearing leaks and spills. Since 2011, two BLM field  offices we reviewed have instructed operators to use this category to  report royalty-bearing flaring since there is currently no reporting category  on the OGOR specifically for royalty-bearing flaring. However, even with  such instructions in place, officials at one of these offices told us that  records reviews have shown that operators sometimes erroneously report  royalty-bearing flaring under the two royalty-free flaring categories on the  OGOR. The second of these additional categories that operators have  used to report flaring is the category for unavoidably lost oil and gas  spills, which is a royalty-free category. Including flared gas volumes  under these two additional categories—which commingle flared volumes  with other types of emissions—makes it difficult for Interior to account for  flaring on the OGOR. Moreover, because ONRR uses OGOR data to help  validate royalty payments, Interior may not be able to reasonably ensure  that operators are minimizing waste on federal oil and gas leases or that  all royalties actually owed on flared gas are collected. BLM’s proposed  methane and waste reduction regulations do not alter OGOR categories  operators should use to report flared gas.
Interior does not clearly specify which activities are to be reported under  OGOR reporting categories for natural gas emissions. Interior’s guidance  to operators does not include specific criteria for which activities should  be reported under OGOR reporting categories for natural gas emissions,  and operators may not be reporting some of these activities. For  example, in an October 2010 report, we found that operators did not  report operational sources such as venting from oil storage tanks,  pneumatic valves, or glycol dehydrators.
Some BLM field office officials we interviewed told us that operators still  may not be reporting certain natural gas emissions activities on the  OGOR. For example, officials at several BLM offices told us that  operators generally do not report storage tank emissions. ONRR’s  guidance does not specify which reporting category should be used to  report such emissions, though its Minerals Production Reporter  Handbook requires operators to report volumes from unavoidably lost  production, which according to BLM’s guidance NTL-4A, includes gas  vapors released from storage tanks or other low-pressure production  vessels. In addition, officials at one BLM field office told us that while they  believe gas emitted during well completions should be reported on the  OGOR, they could not point to specific guidance instructing operators  where to report such volumes and were not certain of the extent to which  operators were actually reporting them.
Interior officials also told us that operators are not instructed to report— and typically do not report—natural gas emissions from system-wide  leaks, although there is a reporting category for unavoidably spilled  and/or lost volumes. One operator told us that leaks are typically too  insignificant to be reported, while another stated that if there was a gas  leak, they would probably report that under the OGOR reporting category  for vented emissions. Similarly, there is no guidance to operators on  where to report emissions from newer technologies, such as vapor  recovery units and vapor combustion units, though one operator stated  that it reports gas collected from vapor recovery units under the OGOR  reporting category for gas that is sold. As a result of this uncertainty with  the data, Interior may not have a clear accounting of natural gas  emissions, which could limit Interior’s ability to ensure that lessees pay  royalties in the proper amounts and minimize waste of natural gas. In its  proposed regulations, BLM has not provided additional guidance to  operators on which activities should be included under the natural gas  emissions reporting categories on the OGOR.
Interior does not require operators to differentiate between types of lease  use volumes reported on the OGOR. Interior’s OGOR reporting category  for lease use gas does not distinguish between combusted and  noncombusted emission volumes, making it more difficult for Interior to  accurately track progress toward reducing greenhouse gases on federal  lands. Natural gas consists primarily of methane, which when combusted  becomes primarily water vapor and carbon dioxide. For example, when  natural gas is used to run equipment like generators, the methane is  converted into carbon dioxide in the combustion process. In contrast,  when natural gas is used to run pneumatic equipment on a lease, like  valves to control gas flows, the gas is not combusted. Instead, some  natural gas is released into the atmosphere, mostly in the form of  methane. Because methane has a much greater climate impact than  carbon dioxide, the impact of using the same amount of natural gas in a  pneumatic valve compared to a generator is very different. As a result of  current OGOR reporting requirements, combusted and noncombusted  lease use volumes are reported in a single OGOR reporting category— making it difficult for Interior to accurately estimate the greenhouse gas  emissions from lease use volumes reported on the OGOR.
Although Interior does not require operators to report on greenhouse gas  emission volumes on the OGOR, Interior’s OGOR database is the only  federal database that tracks natural gas emissions on federal leases and  therefore is the most useful source of data for Interior to use when  tracking greenhouse gas emissions from federal lands. BLM’s proposed  methane and waste reduction regulations would not require direct  reporting on all greenhouse gas emissions, but having separate reporting  categories for combusted and noncombusted lease use volumes could  better position Interior to track progress against the new goals to cut  methane emissions under the President’s Climate Action Plan’s Strategy  to Reduce Methane Emissions.
section_title: BLM Has Not Consistently Followed Its Existing Guidance in Managing Operators’ Venting or Flaring Requests
paragraphs: BLM has approved operators’ requests to vent or flare gas royalty-free  without having the documentation its guidance requires. Field offices  have also applied BLM’s guidance differently, which has resulted in some  field offices requiring royalty payments on flared gas while other field  offices do not. However, BLM has recently proposed new methane and  waste reduction regulations that may alter its management of venting or  flaring requests in the future.
subsections: section_title: BLM Has Approved Many Venting or Flaring Requests That Do Not Comply with Its Guidance
paragraphs: BLM officials have approved many venting or flaring requests that do not  comply with BLM’s existing guidance, NTL-4A, which requires operators  to provide specific documentation for requests to vent or flare beyond a  short-term basis. Generally, venting or flaring on a short-term basis in  temporary or emergency circumstances is described in NTL-4A as  “authorized venting or flaring of gas.” Alternatively, venting or flaring  requests that are more long term in nature—described in NTL-4A as  “other venting or flaring” of gas—may be approved if operators submit  documentation that consists of (1) an evaluation report providing an  economic and a geologic justification to flare or (2) an action plan that  will eliminate venting or flaring of the gas within 1 year from the date of  application.
Requests to vent or flare gas have increased substantially in recent  years. BLM reported that venting or flaring requests rose from 50 in 2005  to over 600 in 2011 and to about 1,250 in 2014. Our analysis of venting or  flaring requests for fiscal year 2014 indicates that operators submitted a  total of 1,281 requests to vent or flare gas to 16 BLM field offices  nationwide, with over 80 percent of these requests submitted to just two  field offices: Carlsbad, New Mexico, and Dickinson, North Dakota.  Officials in both of these offices told us that in recent years they have  been short-staffed and have had to triage backlogs of over 1,000 venting  or flaring requests against other priorities, such as processing drilling  permits or permitting rights-of-way for gas gathering pipeline. Figure 4  presents the number of venting or flaring requests submitted to each field  office in fiscal year 2014.
To better understand the reasons operators submitted requests to vent or  flare gas and the extent to which BLM approved requests, we analyzed a  random sample of 100 requests submitted to BLM field offices in fiscal  year 2014. Based on our analysis of the sample, we estimate that 99  percent of operator submitted requests were requests to flare (rather than  vent).
Based on our sample of venting or flaring requests, we found that  operators cited a variety of reasons they needed to vent or flare. As  shown in figure 5, the vast majority of the requests cited limitations with  existing infrastructure as the reason the operators needed to vent or flare  gas, such as constrained pipeline capacity or problems with receiving gas  plants. In contrast, only an estimated 9 percent of the requests cited that  wells were not connected to—or were waiting to be connected to—gas  gathering infrastructure as the reason operators needed to vent or flare  gas.
Based on our sample, we also found that almost all venting or flaring  requests in fiscal year 2014 did not contain the documentation needed to  meet the criteria described in BLM’s guidance NTL-4A for long-term  venting or flaring or an explanation for authorized short-term venting or  flaring. Specifically, we estimate that 90 percent of venting or flaring  requests did not have the documentation for BLM to determine whether  approval of long-term venting or flaring was justified or an explanation for  authorized short-term venting or flaring. Figure 6 shows our estimates of  the documentation that operators provided to BLM as a justification to  vent or flare.
Nonetheless, we estimate that BLM approved about 70 percent of venting  or flaring requests submitted in fiscal year 2014, and of the approved  requests, roughly half were approved royalty-free (see fig. 7). We  estimate that nearly all of the requests that BLM approved royalty-free did  not include the documentation required for long-term venting or flaring.
In discussing our sample with BLM officials, these officials said that  Interior recognizes there are systemic shortcomings in how venting or  flaring requests are submitted and approved. As discussed above, Interior  officials told us that their focus has historically been on collecting data on  royalty-bearing oil and gas production, so natural gas emissions have  received less attention. In addition, BLM field office officials have  described heavy workloads and a shortage of personnel that have  hindered their ability to review and approve the high volumes of venting or  flaring requests they have received from operators. Thus, operators have  submitted—and received BLM’s approvals for—venting or flaring requests  that do not contain all of the documentation required by NTL-4A.  However, without collecting and reviewing the required documentation  BLM supervisors cannot demonstrate that they have followed existing  guidance or that they have the necessary information to inform their  decisions about whether venting or flaring is needed or whether such  volumes should be subject to royalties.
section_title: Selected Field Offices Have Applied BLM Guidance Differently to Venting or Flaring Requests
paragraphs: Officials in the six field offices we reviewed interpreted NTL-4A differently  with respect to charging royalties on approved venting or flaring, which  may have resulted in the operators seeking to vent or flare not receiving  consistent treatment across offices. Two of the six BLM field offices we  reviewed—the Carlsbad, New Mexico, office and the Casper, Wyoming,  office—approved long-term flaring of some gas but also determined that  the flared gas was avoidably lost and therefore subject to royalties. The  BLM field office in Dickinson, North Dakota, is also considering doing so.  The other three field offices we reviewed—in Farmington, New Mexico;  Miles City, Montana; and Vernal, Utah—have interpreted NTL-4A to mean  that when the authorizing official approves a request to flare, the flared  gas will be treated as unavoidably lost gas, which is royalty-free.
Officials we spoke with in the Carlsbad office told us that they charged  royalties on flared gas because oil production in their region boomed and  operators made an economic choice to flare gas associated with their oil  wells—and pay the royalties—rather than wait until gas gathering pipeline  was available. Before deciding to charge royalties, field office officials we  interviewed told us that they met with operators in the region to determine  when wells could be shut in without endangering reservoir life and  recoverable reserves in order to help them determine whether flared gas  in the region was avoidably or unavoidably lost. As a result of these  discussions, these officials told us they concluded that within their region  operators could generally restrict production at their established wells  without endangering the amount of oil that these wells could ultimately  produce. Therefore, these officials concluded that much of the gas flared  from oil wells in the region was considered avoidably lost or “wasted gas”  and therefore royalties were due. Further, field office officials told us that  charging royalties on flared gas could provide a small incentive for  operators to develop infrastructure for gathering gas from oil wells.  According to our analysis of ONRR data, royalties from flaring from  onshore federal leases generated $4.5 million in revenue in fiscal year  2014.
Officials in the Casper office told us that they followed Interior’s guidance,  which they interpreted as allowing them to charge royalties on gas flared  from oil wells under some circumstances. Specifically, the officials we  interviewed told us that operators citing lack of infrastructure to transport  gas produced on oil wells could be approved to flare royalty-free if they  could economically justify the lack of infrastructure, such as by the cost to  connect to the nearest available pipeline. However, operators citing lack  of pipeline capacity on existing pipelines as a justification to flare would  be required to pay royalties. This is because the operators would have  generally chosen to expand their production beyond the capacity of the  existing pipeline infrastructure, knowing that capacity constraints could  result in the need to flare on some occasions.
Officials in the Dickinson office told us that they are considering charging  royalties on some flared gas. As a result of an increase in flaring requests  in recent years, as well as limited staff and a concurrent increase in the  number of applications for drilling permits, this office faced a backlog of  2,211 flaring requests by August 2015. In that month, BLM officials in the  Dickinson office proposed a formula for resolving 1,943 of their 2,211  pending flaring requests—requests for flaring that has already concluded.  The proposed formula would assign the first 6 days of flaring as  unavoidably lost (i.e., no royalties due) gas with flaring that exceeded the  6-day threshold as avoidably lost (i.e., royalties due) gas. For the  remaining 268 of the 2,211 pending flaring requests—requests for flaring  that was ongoing or may occur in the future—the field office proposed  reviewing the merits of each request individually, as the guidance  outlines, to determine whether gas was or would be avoidably or  unavoidably lost. According to a field office official, however, operators  formally objected to the proposed formula, so officials may have to review  the merits of each venting or flaring request individually.
In the three other field offices we reviewed—Farmington, New Mexico;  Miles City, Montana; and Vernal, Utah—officials cited various reasons for  not charging royalties on approved long-term flaring requests. Overall,  these offices tended to generalize about the industry in their regions and  the need to vent or flare, approving all requests as unavoidably lost gas  and royalty-free. For example, in the Farmington office, officials we spoke  with told us that their region was dominated by gas development, so  flaring was not as much an issue for their office. In the Miles City office,  officials we interviewed told us that there was little associated gas at oil  wells in their region, and that charging royalties on flared gas might make  it more costly for operators to drill new wells or shorten the life of existing  wells, which they were reluctant to do. In the Vernal office, officials we  spoke with told us that they had considered charging royalties on flared  gas, but they were concerned that the alternative to flaring—shutting in a  well—might damage oil recoverability from wells in their region.
section_title: BLM’s Proposed Regulations May Alter How It Manages Future Venting or Flaring Requests
paragraphs: BLM’s proposed methane and waste reduction regulations would reduce  the number of venting or flaring requests field offices officials will have to  individually review and acknowledges the substantial variation in how it  has interpreted and applied its existing guidance. In this regard, the  proposed regulations, if adopted, would include updated guidance on  which gas volumes should be considered avoidably or unavoidably lost.  Specifically, instead of requiring BLM field office officials to review the  merits of each flaring request individually, BLM proposes setting monthly  flaring limits on each well with a requirement that operators meter flaring  above certain monthly limits. According to officials, if upon inspection or  review, an operator is found to be exceeding flaring limits, it would be  subject to penalties for noncompliance with the regulations. However,  operators could seek an exception from BLM to flare above the monthly  per-well limit based on an economic and geologic justification similar to  that required in the existing guidance. The proposed regulations also  require operators to communicate their anticipated gas collection needs  to pipeline operators at the time they apply to drill a new well, which may  reduce an operator’s need to flare gas assuming the infrastructure is  developed. The proposed regulations also would, among other things,  mandate reductions in venting from pneumatic devices and require  inspections to detect and repair leaks in the oil and gas production  process. As discussed above, Interior officials we spoke with told us that  BLM plans to finalize the proposed regulations by the end of calendar  year 2016, and they told us that finalizing the proposed regulations is an  Administration priority.
section_title: Conclusions
paragraphs: To fulfill its responsibility to ensure that operators use all reasonable  precautions to prevent waste of oil or gas on federal leases, Interior must  be able to account for oil and gas produced from these leases, including  how it is sold, lost, or used. Natural gas emissions are an important  component of this accounting and affect both BLM’s collection of royalties  as well as its tracking of harmful greenhouse gas emissions from federal  leases. Since Interior has historically focused on royalty-bearing oil and  gas production and has limited guidance on how to report natural gas  emissions, it cannot yet consistently account for these emissions on  federal leases. Better guidance for OGOR reporting could improve  Interior’s ability to account for natural gas emissions and better ensure  that royalties are collected where appropriate on these emissions.  Further, improved reporting from operators could also help Interior better  track its efforts to curb greenhouse gases from federal leases and its new  goals for methane reduction.
section_title: Recommendations for Executive Action
paragraphs: We are making four recommendations to the Secretary of the Interior.
To help improve reporting of emissions data on the OGOR, the Secretary  of the Interior should direct BLM or ONRR, as appropriate, to take the  following four actions:
BLM should provide additional guidance on how to estimate natural  gas emissions from federal oil and gas leases.
ONRR should provide additional guidance on how to report royalty-free and royalty-bearing flaring and consider  creating a separate category for royalty-bearing flaring; how to report certain unreported or underreported emissions, such  as emissions from storage tanks and gas vented during well  completions; and how to differentiate between combusted and noncombusted lease  use volumes reported on the OGOR, which could assist Interior in  measuring its progress toward greenhouse gas reduction goals.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided our draft report to Interior for review and comment. Interior  provided written comments, in which it concurred with two of the six  recommendations in the draft report, partly concurred with two others,  and did not concur with the remaining two recommendations. Interior’s  comments reflected the views of BLM and ONRR. Interior’s comments  are reproduced in appendix III and key areas are discussed below.  Interior also provided technical comments, which we incorporated as  appropriate.
Interior partially concurred with our third and fourth recommendations,  which would have ONRR provide guidance on how to report certain  unreported or underreported emissions and on how to differentiate  between combusted and non-combusted lease use volumes on the  OGOR, respectively. Regarding these recommendations, Interior said  ONRR would defer to BLM to provide guidance on how the emissions  discussed should be accounted for by Interior. Once these decisions are  made, ONRR would work with BLM to develop requirements for reporting  volumes on the OGOR and collecting royalties, as appropriate. We  recognize that these actions will require a collaborative effort between  ONRR and BLM, as noted in Interior’s letter, and if implemented as  described, would address the intent of our third and fourth  recommendations.
Interior did not concur with two recommendations included in the draft  report, which would have BLM apply its existing guidance on venting and  flaring and issue interim guidance on the circumstances under which  long-term flaring would be subject to royalties, respectively. Regarding  these recommendations, Interior noted that finalizing BLM’s proposed  rule, the Methane and Waste Prevention Rule, will directly address many  of the concerns pointed out in the findings and recommendations directed  at BLM. In its letter, Interior stated that finalizing the proposed rule is an  Administration priority, and that it expects the rule to be finalized by the  end of calendar year 2016.  Furthermore, Interior said that issuing interim  guidance before the rule is finalized would divert resources from BLM’s  rulemaking effort, and would likely create significant confusion among  BLM staff and the industry when the new rule is issued several months  later. In response to BLM’s timeframe and stated prioritization for  finalizing its proposed rule, we removed these recommendations and  modified the report accordingly.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, 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 report. GAO staff who made major contributions to this report  are listed in appendix IV.
section_title: Appendix I: Regulatory Actions to Reduce Natural Gas Emissions in Selected States
paragraphs: Since operators of federal leases may be subject to state regulations and  policies regarding natural gas emissions, we reviewed the regulatory  activity in five states with high federal oil and gas production and  emissions. One of the five states we reviewed—Colorado—has adopted  regulations intended to reduce natural gas emissions from oil and gas  produced on all lands in the state. Two others—North Dakota and  Wyoming—have taken similar regulatory actions within specific areas of  their states. Another state—Utah—has taken regulatory actions that  indirectly address natural gas emissions. The fifth state we reviewed— New Mexico—recently took an action that may reduce natural gas  emissions.
These states have undertaken various actions to address natural gas  emissions, as follows:
Colorado: In February 2014, Colorado adopted regulations that apply  statewide to limit venting and to capture fugitive emissions, such as  those emissions that leak from equipment. These regulations include  a requirement that operators collect or flare 95 percent of gas  associated with new wells. In addition, operators are required to use  leak detection equipment at oil and gas facilities across the state.  Colorado’s leak detection requirements vary by the amount of  emissions produced at a facility, with higher-producing facilities  required to check for leaks more often. In addition, the regulations  mandate the use of low-bleed pneumatic devices and increased the  gas capture target for certain storage tanks.
North Dakota: North Dakota has targeted the amount of gas flared  from two geologic formations in the state by imposing restrictions on  the amount of gas operators may flare from existing and new  sources. North Dakota has imposed gas capture targets to decrease  flaring by setting goals for the amount of gas that operators must  collect each year; these goals increase in later years. Operators are  currently working to meet a gas capture target of 85 percent for  November 2016. North Dakota also requires operators, when they  apply to drill a new oil well, to include a gas capture plan. According to  state officials, gas capture plans help facilitate discussions between  oil producers and firms that process and transport gas, and they have  improved the speed at which new wells are connected to gas  gathering infrastructure. State officials also told us that to meet the  state’s gas capture target, operators have reduced production at  some wells and delayed completing others.
Wyoming: According to state officials, reducing vented natural gas  emissions has been a focus for the state of Wyoming. Wyoming has  an ozone nonattainment area in the Upper Green River Basin, and  regulations require operators in the nonattainment area, among other  things, to use leak detection equipment to identify facilities with  fugitive emissions. Generally, operators must check for leaks  quarterly under the state’s leak detection program, but according to  state officials, operators with satisfactory prior performance records  may be allowed to check for leaks less frequently. The regulations  also require that operators replace high-bleed pneumatic controllers  with low-bleed controllers. According to a state official, Wyoming is  reviewing its flaring rules and considering requiring gas capture plans.
Utah: Utah has adopted regulations requiring oil and gas operators to  minimize their emissions of volatile organic compounds—a group of  chemicals that contribute to the formation of ground-level ozone— which effectively prohibit venting from oil and gas wells, according to a  state official. According to this official, because Utah is concerned with  the Uinta Basin being designated an ozone nonattainment area the  state’s actions have been focused on reducing ozone in the area  rather than on reducing volumes of flared gas.
New Mexico: According to state officials, New Mexico was considering  actions that could reduce emissions from oil and gas leases in the  state, including on federal leases, and in April 2016, the New Mexico  Energy, Minerals and Natural Resources Department issued a notice  to operators of a new gas capture planning requirement. Effective  May 1, 2016, operators are required to submit a gas capture plan  outlining actions to be taken to reduce venting and flaring at new well  completions.
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report examines (1) the extent to which the Department of the  Interior (Interior) can account for natural gas emissions from onshore  federal leases and (2) how selected Bureau of Land Management (BLM)  field offices have managed requests to vent or flare natural gas emissions  on onshore leases.
To conduct this work, we reviewed relevant laws, regulations, and BLM  and Office of Natural Resources Revenue (ONRR) guidance. We also  reviewed independent studies of Interior’s accounting of onshore natural  gas emissions conducted by Interior’s Office of Inspector General as well  as related reports prepared by other federal entities, such as the  Environmental Protection Agency (EPA) and the Congressional Research  Service. We also reviewed BLM’s proposed regulations to reduce waste  of natural gas from venting, flaring, and leaks during oil and natural gas  production activities on onshore federal and Indian leases that were  proposed in January 2016.
We interviewed officials from Interior’s offices responsible for accounting  for onshore natural gas emissions—BLM and ONRR. Specifically, we  interviewed BLM officials in BLM headquarters; BLM’s National  Operations Center in Lakewood, Colorado; and six BLM field offices we  selected primarily based on (1) the volume of flared gas emitted in that  region, (2) the amount of lease use gas consumed in that region, and (3)  the volume of vented gas in that region in fiscal year 2014, the most  recent year for which complete data were available. These field offices  are located in Carlsbad, New Mexico; Casper, Wyoming; Dickinson, North  Dakota; Farmington, New Mexico; Miles City, Montana; and Vernal, Utah.  We visited the two BLM field offices overseeing the largest amount of  flaring—Carlsbad, New Mexico, and Dickinson, North Dakota. Because  this was a nonprobability sample, our findings are not generalizable to  other BLM field offices but help illustrate how some offices have  accounted for and managed natural gas emissions. We also visited and  interviewed officials at ONRR’s office in Lakewood, Colorado. In addition,  we interviewed representatives from oil and gas companies (operators)  and environmental organizations.
To examine the extent to which Interior can account for natural gas  emissions from onshore federal leases, we reviewed the guidance Interior  provides on reporting natural gas emissions, including BLM’s Notices to  Lessees and instruction memorandums and ONRR’s Minerals Production  Reporter Handbook. To examine the methodology used by operators to  measure or estimate natural gas emissions, we reviewed the instructions  in ONRR’s Minerals Production Reporter Handbook on how operators are  to report natural gas emissions in monthly Oil and Gas Operations  Reports (OGOR). We interviewed BLM and ONRR officials on how  natural gas emissions are estimated and reported on the OGOR. We  obtained contact information for operators from the field offices and  interviewed representatives from four operators operating in New Mexico  and North Dakota that were able to meet with us during our fieldwork. We  asked them how they calculated and reported natural gas emission  volumes for the OGOR. We examined five records provided by BLM for  examples of documentation of natural gas emissions volumes that  operators submitted to BLM for its records review. To examine the  guidance BLM provides to operators regarding reporting flared volumes  on the OGOR, we reviewed BLM’s existing guidance on venting and  flaring—Notice to Lessees and Operators of Onshore Federal and Indian  Oil and Gas Leases (NTL-4A)—and interviewed officials from our  selected field offices on how such volumes are to be reported on the  OGOR. To compare Interior’s methodology for measuring and estimating  natural gas emissions with that from another agency, we also examined  how EPA collects emissions data from operators for its Greenhouse Gas  Inventory and Greenhouse Gas Reporting programs.
To examine how selected BLM field offices managed requests to vent or  flare natural gas emissions on onshore federal leases, we reviewed BLM  regulations and documents and interviewed BLM officials. To examine  BLM’s actions to implement NTL-4A, we analyzed all fiscal year 2014  venting or flaring requests recorded in BLM’s Automated Fluid Minerals  Support System. Fiscal year 2014 was the most recent year for which  BLM could provide complete data. Specifically, we examined electronic  data for 1,281 venting or flaring requests that were sent to 17 BLM field  offices nationwide. We assessed the reliability of these data by  interviewing knowledgeable BLM officials responsible for data entry and  compared our data set with other published data. We determined that  these data were sufficiently reliable for assessing BLM field office  compliance with BLM’s venting and flaring guidance.
To better understand the rationale behind BLM’s acceptance or rejection  of these requests, we selected a simple random sample of 100 of the  1,281 venting or flaring requests for further review. Estimates based on a  probability sample are subject to sampling error. Because we followed a  probability procedure based on random selections, our sample is only one  of a large number of samples that we might have drawn. Since each  sample could have provided different estimates, we express our  confidence in the precision of our particular sample’s results as a 95  percent confidence interval (e.g., plus or minus 10 percentage points).  This is the interval that would contain the actual population value for 95  percent of the samples we could have drawn. These findings can be  generalized to all BLM field offices. We requested additional  documentation from BLM field offices for 64 of these 100 requests that  based on our review of the venting or flaring requests did not appear to  result in revenue-bearing flaring. For each of these 100 requests, we  reviewed the remarks field and any additional documentation that we  requested and received, and determined for each venting or flaring  request the NTL-4A provision and rationale, if applicable, that was used  to justify royalty-free venting or flaring. We also interviewed BLM field  office officials from our six selected field offices about implementation of  NTL-4A in their respective offices.
To describe the actions some states have taken to address natural gas  emissions on onshore leases, we selected the five states with the largest  federal production of oil and gas as reported by operators on the OGOR  for fiscal year 2014 (see app. I). These states were Colorado, New  Mexico, North Dakota, Utah, and Wyoming. We reviewed venting and  flaring regulations and policies for each state. Using a standard set of  questions, we also interviewed the air quality and oil conservation offices  for each of the selected states. Because this was a nonprobability  sample, our findings from these states are not generalizable to other  states but provide information on actions some states have taken to  reduce natural gas emissions from onshore leases.
We conducted this performance audit from January 2015 to July 2016 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.
section_title: Appendix III: Comments from the Department of the Interior
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Dan Haas (Assistant Director),  Carl Barden, Chuck Bausell, Richard Burkard, Keya Chateauneuf, Cindy  Gilbert, Paul Kazemersky, Alison O’Neill, Katrina Pekar-Carpenter, Sara  Sullivan, Jack Wang, and Arvin Wu made key contributions to this report.