Fiscal Year 2010 Oil and Gas Inspection and Enforcement Strategy Matrices Instructions and Strategy Goals; DD: 11/02/2009

UNITED STATES DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENTWASHINGTON, D.C. 20240 September 30, 2009 In Reply Refer To:3160 (310) P EMS TRANSMISSION 10/02/2009Instruction Memorandum No. 2009-225Expires: 09/30/2010To:                       All Field OfficialsFrom:                   Assistant Director, Minerals and Realty ManagementSubject:               Fiscal Year 2010 Oil and Gas Inspection and Enforcement Strategy Matrices Instructions and Strategy Goals                                                 DD:  11/02/2009                                                                                                                                                              Program Area:  Oil and Gas Management.Purpose:  This Instruction Memorandum (IM) provides field offices (FO) with Oil and Gas Inspection and Enforcement (I&E) Strategy Inspection Plan Matrices instructions and goals for conducting Oil and Gas I&E activities in Fiscal Year (FY) 2010.Policy/Action:  For FY 2010, 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 should first be allocated to performing additional Indian production case inspections.  The criteria for FOGRMA High production remains the same as last year: an average of 6,000 barrels of oil per month or 80,000 thousand cubic feet (mcf) of natural gas per month or greater is a FOGRMA High for production.  The operator compliance history to determine a FOGRMA High rating also remains 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.  The Inspection and Enforcement Documentation and Strategy Development Handbook provides detailed minimum strategy requirements for the various inspection types.  These inspections 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 where identified problems in measurement and sales have occurred will be inspected with additional emphasis on witnessing these activities.  Failure to perform correct measurement and sales activities by the operator/producer, purchaser, or transporter will result in BLM inspectors performing more intense and detailed inspections.  In addition, the operator/producer, purchaser, or transporter 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) description of the event and identification of all wells and facilities that could have been affected, 2) the corrective action taken and any adjustments made to volumes of oil and natural gas, and 3) 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.  These plans will be required when the Incidents of Noncompliance (INC) involve measurement and sales activities that have the potential to reduce the effectiveness of the BLM’s production accountability efforts.Petroleum Engineering Technicians (PET) are reminded that it is 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 the valve 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 to 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 to be elevated immediately to the local BLM Law Enforcement, the BLM Washington Office (AD-300 and WO-310), and the Office of the Inspector General (OIG) following standard protocol as outlined in IM 2009-115.  Inspections must document the fact that the equalizer valves were checked.The FOs are encouraged to exceed these minimum strategy goals whenever possible.  For those FOs that cannot meet the minimum strategy goals outlined in the Inspection and Enforcement Documentation and Strategy Development Handbook, 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 2010.  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 (ES-SD), High Priority environmental inspections, and interim reclamation (ES-IR) inspections will take precedence over other Low Priority environmental/surface inspection activities. 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 (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 1 for details).
4. High Priority production inspections on new producing oil and gas wells (see Attachment 1 for details).
5. Cases that have had a change of operator (see Attachment 1 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 1 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 1 for details).
3. Interim Reclamation inspections (see Attachment 1 for details).
4. High Priority workover operations (surface compliance).
5. Final Reclamation inspections.

Creating the Inspection Strategy MatricesFor all FOs, the FY 2010 I&E Strategy Matrices are to be created within the Automated Fluid Minerals Support System (AFMSS) databases.  For the FOs with Indian Trust responsibility, an I&E Strategy Matrix must be created in Non-Indian AFMSS as well as the Indian AFMSS.  A combined strategy is no longer available.  In addition, when creating the matrices, identify the following in the Special Consideration Section, if applicable:   

• Identify any inspection workload incurred in conjunction with the Idle/Orphan Well Liability Initiative.  This workload can 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 noting 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 you plan to conduct in FY 2010.  Attachment 2 contains a short list of documents that at minimum must be requested and used when an INC is necessary.

• 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 2010.  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) Fluid Minerals Section is available to assist field offices in performing production accountability.  State I&E Coordinators may submit a list of potential leases or agreements to be reviewed by the NOC, listing no more than 10 cases ranked in priority order per each field office.  Draft procedures for communication with the NOC Production Accountability Technician (PAT) team are included in Attachment 3.  The NOC Director will be issuing an Instruction Memorandum shortly with more details.

• All drilling inspections rated High must meet the criteria rating as outlined in the Inspection and Enforcement Documentation and Strategy Development Handbook.  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 the 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 they do not meet the criteria in Attachment 1.

In development of the strategy matrices, FOs must 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 the 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 Planned Strategy workload. 

• Coordination between the SO and reporting 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 an excellent tool to monitor the completion of I&E goals.  This report must be generated and reviewed at least at midyear and the end of the third quarter FY 2009, and any necessary adjustments implemented to ensure the accomplishment of I&E Strategy goals identified in the matrices. Timeframe:  Inspection plan matrices must be completed and official strategy matrix must be entered into both Indian and Non-Indian AFMSS by November 2, 2009. Budget Impact:  Any changes in resource needs will be reflected in the inspection plan matrices for FY 2010.  Additional resources for FOs with shortfalls to meet their workloads 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:  None. Coordination:  This memorandum was coordinated with the WO-310 I&E Specialists, SO I&E Coordinators, NOC personnel, and FO personnel.  Contact:  If you have any questions concerning the content of this IM, please contact me at 202-208-4201.  Any questions regarding the Strategy goals should be referred to William Gewecke at (202) 912-7152, or william_gewecke @blm.gov.  Technical questions regarding preparation of the Strategy Matrices should be referred to Carol Larson at (406) 233-3655, or carol_larson@blm.gov.  Signed by:                                                                   Authenticated by:Michael Nedd                                                             Robert M. WilliamsAssistant Director                                                       Division of IRM Governance,WO-560Minerals and Realty Management  3 Attachments     1 – Selected Inspection Workload Explanations (5 pp)2 – Production Accountability Documents (1 p)3 – Information Transfer Procedure (9 pp)