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. 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. 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. 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. 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.