Fiscal Year (FY) 2009 Oil and Gas Inspection and Enforcement (I&E) Strategy Matrices Instructions and Strategy Goals; DD: 11/03/08

UNITED STATES DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENTWASHINGTON, D.C. 20240 September 15, 2008 In Reply Refer To:3160 (310) P EMS TRANSMISSION 09/26/2008Instruction Memorandum No. 2008-196Expires: 09/30/2009 To:                   All Field OfficialsFrom:               Assistant Director, Minerals and Realty ManagementSubject:           Fiscal Year (FY) 2009 Oil and Gas Inspection and Enforcement (I&E) Strategy Matrices Instructions and Strategy Goals                                           DD:  11/03/08                                                                                                                                                          Program Area: Oil and Gas ManagementPurpose:  To provide Field Offices (FO) with I&E Strategy Inspection Plan Matrices instructions and goals for conducting Oil and Gas I&E activities in FY 2009.Policy/Action: For FY 2009, the FOs are required to inspect all Federal and Indian cases meeting the High Priority criteria of the Federal Oil and Gas Royalty Management Act (FOGRMA) and 33 percent of the remaining Federal and Indian production cases.  Any additional inspection time available should first be allocated to performing additional Indian production case inspections.  The criteria for FOGRMA High production has changed this year.  If a case/operator combination produces at least an average of 6,000 barrels of oil per month or 80,000 MCF of natural gas per month or greater, it is identified as a FOGRMA High Priority category for production.  The criteria changed from an average of 12,000 barrels of oil or more per month or 120,000 MCF of natural gas or more per month.  The operator compliance history to determine a FOGRMA High rating will remain the same:  two major violations, or a total of six FOGRMA-related violations within the preceding 24-month period.   The Bureau of Land Management (BLM) personnel enforce standards and requirements of applicable laws, regulations, and Onshore Orders; their increased visibility on producing cases provides additional oversight of measurement and sales functions.  It is the BLM’s responsibility to ensure that all production is properly measured and accounted for while minimizing the loss of these resources.  Attachment 1 provides detailed minimum strategy requirements for the various inspection types which are critical to meeting the BLM’s fiduciary responsibilities for Indian revenues based on production of ever-increasing values of oil and gas.Producing cases will be inspected where problems in measurement or sales have been identified with additional emphasis on witnessing these activities.  Failure to perform correct measurement or sales activities by either the operator/producer or purchaser will result in BLM inspectors performing more intense and detailed inspections, as well as possible additional reviews and inspections.  In addition, the operator/producer will be required to explain the event and submit a corrective action plan for the BLM’s review and approval.  Minimum requirements for these corrective action plans are: 1) a detailed description of the event and identification of all wells and facilities that could have been affected by the event; 2) the corrective action taken and any adjustments made to volumes of oil and natural gas produced; and 3) any actions that will be performed in the future to ensure that the potential for this type of event to occur is reduced.  The approved corrective action plans will supplement the current Site Security Plans on file and will be minimum standards with which the operator/producer must comply in the future. For FY 2009, the method for counting Production Records Review (PR) and Records Review (RR), which includes the review of Oil and Gas Operations Report (OGOR) data, is changing.  A Production Inspection Production Records Review (PI/PR) or Production Inspection Records Review (PI/RR) that reviews production data for 6 months or less will be counted as one inspection.  If discrepancies are found, and the review is expanded beyond 6-months’ data, the PI inspection will be closed, and a Records Verification Review (RV) inspection will be opened.  Remarks must reference the original PI inspection to indicate that the RV/PR or RV/RR is a follow-up inspection because more data was required.  For every additional 6 months reviewed, an additional RV inspection will be added.  For example, in the case where 2 years and 4 months of data was reviewed, five separate (RV/PR or RV/RR) inspections would be entered into AFMSS and counted when the review is completed.Petroleum Engineering Technicians (PETs) are still required to check the isolation valve in the equalizer line (there may be multiple valves and lines if there are more than two production tanks on a facility) to ensure it is fully operational and can isolate the production tank for the sale of oil.  The PETs should not take the equipment apart; they are to check and see if the valves are tight, or appear to have been tampered with (such as a loose handle, possibly indicating the ball inside the valve may have been removed).  If even one valve is found to be missing the internal components, this finding is elevated immediately to the local BLM Law Enforcement, the BLM Washington Office (AD-300 and WO-310) and the Inspector General, following standard protocol.  The bi-weekly equalizer valve report is no longer required.  Inspections should document the fact that the equalizer valves were checked.Cases rated High to the FOGRMA Standard for Production:  For cases that are rated High for production and have been inspected for the past 3 years with no measurement problems or volume discrepancies detected, a Records Verification/Records Review (RV/RR) may be conducted to fulfill minimum FOGRMA requirements.  The RV/RR may be performed by the Production Accountability Technician (PAT) or PET.  This technique will allow PATs and PETs to focus on cases that have a higher potential for measurement problems.Cases rated High to the FOGRMA Standard for Compliance:  Cases rated High for compliance would normally be inspected for the type of violation that caused the case to become FOGRMA High for compliance initially.  For FY 2009, if the compliance issue did not involve measurement of oil or gas, health and safety, or environmental issues, an inspection of that case will not be required as long as the operator corrected the violation from the previous FY.High Priority Drilling Inspections:  Drilling inspections on High Priority drilling wells will be conducted as outlined below.  The priority will be determined at the time of Application for Permit to Drill (APD) approval and inspections conducted in accordance with that priority.  It is critical that this priority setting is based upon real concerns rather than classifying all drilling as High Priority.  For high priority drilling inspections, if the reason for the high priority is related to the drilling activities and not environmental issues, not all wells being drilled need to be inspected.  If the drilling rig and crew being used to drill the well have been previously inspected  and found to be in compliance, that drilling rig and crew will be inspected on an average of once for every three wells drilled, as a general rule.  An exception to this practice will be made if conditions warrant additional drilling inspections.  This change is being implemented to help increase the number of production accountability inspections completed.The FOs are encouraged to exceed these minimum strategy goals whenever possible.  For those FOs that cannot meet the minimum strategy goals outlined in attachment 1, the inspection workloads are listed below in priority order for distribution of inspection resources to achieve the goals of the program.  These inspection workload priorities are to be observed when designing Inspection Plan Matrices for FY 2009.  All High Priority inspections are important and must take priority over any Low Priority inspections.Please note that emphasis continues to be placed on Environmental/Surface Inspection (ES) types.  High Priority environmental inspections should receive the same attention as other High Priority inspection types.  High Priority environmental drilling (DW-SD) and environmental plugging (PD-SA) inspections will take precedence over Low Priority environmental production (ES-SP) inspections.In past years, the I&E strategy has shown inspection workload priorities in one table.  This year, to give a better understanding of these priorities and the specialist involved in doing these inspections, the inspection workloads priority order has been broken down into two separate lists, one for production, drilling, and abandonment inspectors performed by PETs and one for surface compliance specialists.INSPECTION WORKLOADS –PRIORITY ORDERFor production, drilling, and abandonment inspectors (PETs):

1. High Priority drilling wells.
2. High Priority plugging and abandonment operations.
3. Federal and Indian production cases rated High for FOGRMA criteria (see attachment 2 for details).
4. High Priority Production inspections on new producing oil and gas wells (see attachment 2 for details).
5. Cases that have had a change of Operator (see attachment 2 for details).
6. Inspections during any well production testing occurring during or after High Priority drilling operations but before the well is placed on a producing well status (see attachment 2 for details).
7. High Priority workover operations.
8. Thirty-three percent of the remaining Indian production cases.
9. Thirty-three percent of the remaining Federal production cases.

For surface compliance specialists

1. High Priority drilling wells (surface compliance).
2. High Priority environmental inspections (see attachment 2 for details).
3. Interim Reclamation Inspections (see attachment 2 for details).
4. High Priority workover operations (surface compliance).
5. Final Reclamation Inspections.     

Creating the Inspection Strategy MatricesFor those FOs that do not have responsibility for Indian data, the FY 2009 I&E Strategy Matrices will be created within their Automated Fluid Minerals Support System (AFMSS) databases. On July 7, 2008, Indian AFMSS was returned online for 10 FOs.  However, since those databases were unavailable for over 3 years, we realize the time commitment necessary to eliminate the data entry backlog.  Therefore, the 10 FOs with both Federal and Indian data will continue to complete the Federal I&E Strategy into Non-Indian AFMSS, while completing a manual Excel spreadsheet for the Indian data.  However, even though the manual spreadsheet will be used to calculate Indian data, that data must be manually input into Indian AFMSS.  Instructions for preparing both the Non-Indian AFMSS and Excel spreadsheet matrices are included in attachments 3 and 4, respectively.  Attachment 5 contains the Excel spreadsheet that may be used in developing the Indian strategy.  Instructions for manually inputting data into Indian AFMSS are also included in attachment 6.  In addition, when creating the matrices, identify the following in the Special Consideration Section, if applicable:   

• Any inspection workload incurred in conjunction with the Idle/Orphan Well Liability Initiative.  This workload may be identified within the matrices framework by adjusting case/operator priority ratings, adjusting average inspection hours that will be incurred on follow-up of idle wells, and including any additional plugging or workover activities that may occur as a result of reviewing those wells.  Under Special Considerations, identify the Idle/Orphan workload planned so that this number is distinguished from normal plugging and workover operations.

• The emphasis on Production Accountability continues to be a top priority.  During the preparation of the matrices, indicate the estimated number of detailed production records reviews (coded as PI/PR) that are planned in FY 2009.

• When prioritizing High FOGRMA production cases that have been inspected in the previous 3 years and no measurement problems or volume discrepancies were noted, a Records Verification/Records Review (coded as RV/RR) may be conducted that will suffice to meet the inspection requirement for FY 2009.  However, if during the RV/RR process review a reporting problem or volume discrepancy is found, the inspection must be elevated to a Production Inspection/Production Records Review (coded as PI/PR) and those activities performed are part of the PI/PR inspection. 

• The National Operations Center (NOC) is in the process of identifying the work flow and forming a team of PATs to assist FOs in performing RV/RR.  State I&E coordinators should maintain a list of potential cases to be reviewed by the NOC.  During this first year, simpler cases should be provided for NOC review (avoid large cases with complex measurement issues).  There will be additional coordination with State I& E Coordinators as the PAT business and implementation plans are developed.  Specific guidance and detailed procedures for communication with the NOC PAT team will be provided during the second quarter of 2009.  

• All drilling inspections rated High must meet the criteria rating as outlined in attachment 1 priority rating standards.  Special care should be exercised in classifying field development drilling wells as High for routine casing and cementing operations. 

All State Office (SO) I&E Coordinators will be responsible for ensuring proper rating of drilling inspection items.

• Oversight and Guidance:  Inspection priorities for all inspections rated High will be reviewed by the SO I&E Coordinators to ensure compliance with the priority rating standards.

• Rating inspections to the correct criteria in attachment 1 ensures that inspection resources are maximized.  Example:  All drilling wells should not be rated High if the wells do not meet the criteria in attachment 1.

• In development of the strategy matrices, FOs will need to coordinate several different areas, including:

• Coordination must take place with the applicable Tribes and/or the Bureau of Indian Affairs to ensure their concerns are met regarding the prioritization of cases.

• Interdisciplinary coordination must occur within FOs to ensure that all environmental priority ratings are coordinated with appropriate staff such as Natural Resource Specialists or Environmental Scientists.

• Coordination must occur to ensure that idle/orphan well inspections related to that initiative or other concerns are incorporated and prioritized in the Inspection Plan Matrices. 

• Coordination with FOs and SO budget teams must also occur to ensure that each is aware of the needs of the I&E program and that the units of accomplishment for the budget are an accurate reflection of the Planned Strategy workload. 

• Coordination between State and FOs is essential to ensure all inspection goals are met. 

Along with the use of the BLM’s budget system, the Quarterly Progress Report feature in AFMSS provides management with an excellent tool to monitor the completion of I&E goals.  The Quarterly Progress Report should be generated and reviewed at least at midyear and the end of the third quarter FY 2009.  Any necessary adjustments must be implemented to ensure the accomplishment of the I&E Strategy goals identified in the matrices.  Timeframe:  Inspection plan matrices must be completed and the official strategy matrix must be entered into AFMSS by November 3, 2008.  For Indian inspections, the official strategy matrix must be entered into Indian AFMSS even if the Excel spreadsheet was used to develop the strategy.Budget Impact:  Any changes in resource needs will be reflected in the inspection plan matrices for FY 2009.  Additional resources for FOs with shortfalls to meet their workload will be subject to budget availability.Background:  The instructions for preparing the Inspection Plan Matrices are provided on an annual basis to coincide with any current updates to AFMSS and/or other policy changes that may occur on an annual basis.   Manual/Handbook Sections Affected:  The I&E Strategy matrices and goals instructions will be included in the Inspection and Enforcement Handbook, currently being developed. Coordination:  This memorandum was coordinated with the WO-310 I&E Specialists, SO I&E Coordinators, NOC personnel, and FO personnel.   Contact:  Any questions regarding the Strategy goals may be referred to William Gewecke at (202) 452-0337, or william_gewecke@blm.gov.  Technical questions regarding preparation of the Strategy Matrices on the Excel spreadsheet form may be referred to Carol Larson at (406) 233-3655, or carol_larson@blm.gov.  Signed by:                                                       Authenticated by:Jeff Holdren                                                    Robert M. WilliamsActing, Assistant Director                              Division of IRM Governance,WO-560Minerals and Realty Management  6 Attachments   1 – Oil and Gas Inspection and Enforcement Strategy Goals (6 pp)   2 – Selected Inspection Workload Explanations (5 pp)   3 – Creating Inspection and Enforcement (I&E) Strategy Matrices for New Fiscal Year (FY) 2009 in the Automated Fluid Minerals Support System (AFMSS) (9 pp)   4 – Instructions for Completing the Inspection and Enforcement (I&E) Strategy Matrix For Fiscal Year (FY) 2009 (5 pp)   5 – Excel Spreadsheet Files (Federal_Indian_strategy_matrix_form.xls) (2 pp)   6 – Instructions for Manual Data Entry of Indian I&E Matrix into Indian AFMSS (3 pp)