Fiscal Year 2012 Oil and Gas Inspection and Enforcement Strategy Matrices Instructions and Strategy Goals
UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
Washington, DC 20240
September 30, 2011
In Reply Refer To:
3160 (310) P
EMS TRANSMISSION 10/05/2011
Instruction Memorandum No. 2011-197
Expires: 09/30/2012
To: All Field Officials
From: Assistant Director, Minerals and Realty Management
Subject: Fiscal Year 2012 Oil and Gas Inspection and Enforcement Strategy Matrices Instructions and Strategy Goals
DD: 11/30/2011
Program Area: Oil and Gas Management, Inspection and Enforcement.
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) 2012.
Policy/Action: For FY 2012, the Bureau of Land Management (BLM) will continue the risk-based strategy for production inspections, records verification (production accountability reviews independent of production inspections (PI)), and well status checks. Inspections for drilling, abandonment, environmental, and workovers will continue to follow guidance in the BLM Handbook H-3160-5 Inspection and Enforcement Documentation and Strategy Development Handbook. In addition, this year the FOs are to include the number of meter calibrations, gas sample collections witnessed, orifice plates inspections, and meter tube activities planned to be completed during the year. This change to the strategy is a result of the recommendations made by both the General Accounting Office (GAO) and the Office of Inspector General for the Department of Interior (OIG).
The risk-based strategy for production inspections, records verification (production accountability reviews performed, such as PI PR, PI RR, RV RR, and RV PR), and well status checks can be found in Attachment 1. This is the same risk-based strategy used last year. The risk factors are based on a scale of 1 to 10, with 1 being the lowest and 10 the highest. All of the risk factors are also weighed on importance of the risk. Using these weighting factors, all the risks factors for an identified type of inspection are averaged together to arrive at a final risk factor. Attachment 1 details the risk factors for each inspection type which are presently being used for the risk-based strategy.
For FY 2012 the minimum high risk factor for production inspections, records verification (production accountability reviews performed independent of a PI), and well status checks will be 4.0. For production inspections, the goal is to inspect all high risk factor cases (overall production inspection risk factor of 4.0 and above) and at least one-third of the cases with overall risk factors lower than 4.0. For records verification (production accountability reviews), the goal is to complete reviews of 10 percent of the producing cases. The cases selected for review are to be the highest overall records verification high risk factor cases.
To assist in tracking the number of meter calibrations, gas sample collections witnessed, orifice plate inspections, and meter tube activities, the FOs will enter the type of activity completed, how many wells, and which wells were involved into the activity inspection remarks in the Automated Fluid Minerals Support System (AFMSS). (For example: 1 meter tube inspected on well 51X.)
For well status checks in FY 2012, the goal is to have each FO inspect the top 20 percent of the wells that fall into this category. The wells selected for inspections are to be the wells with the top high risk factors for well status.
Inspections for drilling, abandonment, environmental, and workovers will continue to be estimated as directed in Washington Office (WO) IM 2009-225, dated September 30, 2009.
Taking into consideration the number of inspection hours available to the FO annually, the FO will develop a plan to identify the number of inspections that will be completed during the year. Each FO is required to start with the highest rated risk-based cases and then proceed in priority order using the risk-based strategy when doing inspections for each type of inspection.
If a FO is not able to meet these goals, the FO is required to submit a memorandum to the WO, through the state office, outlining FO needs to meet the goal. This memorandum is to include the number and type of inspectors or technicians that are required to meet the goal, the number and types of vacancies related to oil and gas I&E that the FO current has, and the efforts to fill these vacancies. All vacancies are assumed to be fully funded by current base funding. In addition to sending a copy to the Fluid Minerals Division (WO-310), the request for additional funding must be included in the next feedback communication to the WO on budget (i.e., Planning Target Allocations (PTA), Annual Work Plan (AWP)).
AFMSS will be amended to handle the creation of this risk-based strategy. Once AFMSS has been amended, most of the strategy will be developed through AFMSS. The Minerals and Realty Management Directorate (WO-300) is working with the Information Resources Management (IRM) to begin the needed modifications to AFMSS for the risk-based strategies. For the FY 2012 strategy, the FO will complete the risk-based portions of the strategy using the Excel spreadsheet in Attachment 2. The WO-310 will be supplying the FOs with the Office of Natural Resources Revenue (ONRR) risk factors once they are received. If the ONRR risk factors are not received before the completion deadline for the FY 2012 strategy, leave these columns blank.
The FOs will use the completed spreadsheets along with estimates of the number of drilling, abandonment, environmental, and workover inspection goals in completing their strategies. The FOs will then determine, based on present staffing and not PTA funding, how many inspections will be planned. In determining the number of each type of inspection, the following priorities are to be used.
INSPECTION WORKLOADS – PRIORITY ORDER
For production, drilling, and abandonment inspectors (Petroleum Engineering Technicians (PET)):
- High Priority drilling wells.
- High Priority plugging and abandonment operations.
- Federal and Indian production cases with a risk factor of 4.0 and above. (Inspections are generally to be conducted in risk-factor order considering location of cases to minimize travel times and cost.)
- Meter Calibrations, Gas Sample Collections, Orifice Plates Inspections, and Meter Tube Activities.
- Cases that have had a change of operator (see Attachment 3 for details).
- 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 3 for details).
- High Priority workover operations.
- One-third of Federal and Indian production cases with a risk factor below 4.0. (Inspections are to be conducted in risk-factor order and not random.)
- Well status checks.
For surface compliance specialists:
- High Priority drilling wells (surface compliance).
- High Priority environmental inspections (see Attachment 3 for details).
- Interim Reclamation inspections (see Attachment 3 for details).
- High Priority workover operations (surface compliance).
- Final Reclamation inspections.
Please note that emphasis continues to be placed on Environmental/Surface (ES) inspection types. High Priority environmental inspections should receive the same attention as other High Priority inspection types. Fee surface/Federal mineral locations are not exempt from ES inspections and should be included when developing the Inspection Strategy Matrices. All FOs must ensure that all surface inspectors have been adequately trained (i.e. a good understanding of applicable regulations, BLM surface standards, and the ability to determine inadequate surface operations) before allowing them to conduct ES inspections.
Creating the Inspection Strategy Matrices
For all FOs, the FY 2012 I&E Strategy Matrices are to be created using the spreadsheets for production, records verification, and well status activity and estimates for the remaining inspection types. This data is to be entered into the strategy matrix in AFMSS. Attachment 4 provides details on how to enter the production and records verification inspections into the matrix. For the FOs with Indian Trust responsibility, a Strategy Matrix must be created in Non-Indian AFMSS as well as the Indian AFMSS. In addition, when creating the matrices, identify the following in a separate memorandum, as applicable:
- The National Operations Center (NOC) Fluid Minerals Section is available to assist FOs in performing production accountability. State I&E Coordinators may submit a list of potential leases or agreements to be reviewed by the NOC, ranked in priority order per each FO. The NOC issued IM OC-2011-037, dated April 7, 2011, with details on procedures in working with the NOC Fluid Minerals Section.
- 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.
In addition to completing the strategy in AFMSS, the attached excel spreadsheet in Attachment 5 must be completed and returned to WO-310 through the state office by November 30, 2011. This spreadsheet gives the details needed to show GAO and OIG that their recommendations are being fulfilled. At the end of FY 2012, each FO is required to submit the spreadsheet again showing the inspections accomplished during the year. This year end completed spreadsheet is to be submitted to WO-310 through the state office no later than October 12, 2012.
All State Office I&E Coordinators will be responsible for ensuring the proper rating of all inspection items.
- Oversight and Guidance: Inspection priorities for all inspections rated High will be reviewed by the State Office I&E Coordinators to ensure compliance with the priority rating standards.
- Rating inspections to the correct criteria ensures that inspection resources are maximized. Example: All drilling wells should not be rated High if they do not meet the criteria in the “Inspection and Enforcement Documentation and Strategy Development Handbook.”
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 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 2012, and any necessary adjustments implemented to ensure the accomplishment of I&E Strategy goals identified in the matrices.
PETs 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 OIG following standard protocol as outlined in IM 2009-115, Oil and Gas Theft Reporting Guidelines and Format. Inspection remarks must document the fact that the equalizer valves were checked.
Review teams inspected 10 field offices during 2011. Recommendations include:
- Documentation must be complete and accurate.
- Managers and supervisors on a regular basis must be engaged and understand the level of completeness in the recordation.
- Orders and INCs need to be documented and completed with follow-up.
- The State Leads for Inspection and Enforcement will participate actively in the program, and even across state lines to provide a cadre of needed expertise, program leadership and support.
- There will be regular meetings, at least by monthly teleconference calls to assess enforcement progress, identify emerging needs, address challenges, and provide remedies by generating guidance.
- Production and production accountability must remain a priority for inspection and expanded in emphasis.
- The safety of the staff while in the field is paramount, just as is the proper training to maintain technical proficiency across all disciplines.
- Offices may need to adjust staffing and funding on a periodic basis, including sharing resources where it makes good business sense.
Timeframe: Inspection plan matrices must be completed and official strategy matrix must be entered into both Indian and Non-Indian AFMSS by November 30, 2011. The spreadsheet showing all inspections completed during the fiscal year is to be submitted no later than October 12, 2011.
Budget Impact: Any changes in resource needs will be reflected in the inspection plan matrices for FY 2011. Additional resources for FOs with shortfalls to meet their workloads will be subject to budget availability.
Background: The GAO report 10-313 Recommendations 10 and 11 require the BLM to change the yearly strategy to a risk-based strategy and require goals be set for certain types of inspections. The OIG report CR-IS-MOA-0004-2009 Recommendations 2, 4, and 5 require that beneficial use cases be inspected to ensure that gas or oil used on lease is reasonable and properly accounted. To meet these requirements, the BLM has developed this risk-based strategy.
In the past the Inspection Strategy has been based on the amount of production, operator compliance, and High or Low Priority ratings. Production inspections were based on whether the average monthly production met the Federal Oil and Gas Royalty Management Act (FOGRMA) High category or if the operator had a compliance rating which made it a FOGRMA High. The remaining inspection types (drilling, abandonment, environmental, workover, etc.) were rated as either High or Low based on standards for each type of inspection. This strategy required that all production and compliance cases rated FOGRMA High and one third of the remaining cases were inspected annually. Drilling, abandonment, environmental, workover, etc., cases rated High were also inspected annually. The FOs would then evaluate the number of inspection hours available to develop a plan for which inspections would be completed during the year. Certain types of inspections (drilling and abandonment) were estimated based on what the FO expected would occur during the year. This old strategy did not establish, other than the FOGMRA Highs, which cases were to be inspected during the year.
Manual/Handbook Sections Affected: The required changes will be made to the Inspection and Enforcement Documentation and Strategy Development Handbook as time allows.
Coordination: This memorandum was coordinated with the WO-310 I&E Specialists, State Office 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. Questions regarding the Strategy goals should be referred to William Gewecke at 202-912-7152, or wgewecke@blm.gov. Technical questions regarding preparation of the Strategy Matrices should be referred to Carol Larson at 406-233-3655, or clarson@blm.gov.
Signed by: Authenticated by:
Michael Nedd Robert M. Williams
Assistant Director Division of IRM Governance,WO-560
Minerals and Realty Management
5 Attachments
1 – Risk-Based Inspection Strategy (10 pp)
2 – Risk Analysis Spreadsheet for FY 2012 (4pp)
3 – Selected Inspection Workload Explanations (4 pp)
4 – Guidance for Creating I&E Strategy Matrix in AFMSS for FY 2011 (5 pp)
5 – Federal and Indian Strategy Matrix for FY 2012 Spreadsheet (3pp)