Drilling Without Approval (DWOA)

UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
WASHINGTON, D.C. 20240
http://www.blm.gov

September 30, 2016

In Reply Refer To:

3160 (310) P

EMS TRANSMISSION 10/04/2016

Permanent Instruction Memorandum No. 2016-001                   

To:                   All Field Office Officials

From:               Assistant Director, Energy, Minerals, and Realty Management

Subject:           Drilling Without Approval (DWOA)

Program Area: Oil and Gas Exploration and Operations.

Purpose: This Instruction Memorandum (IM) outlines the Bureau of Land Management’s (BLM) policy and procedures to detect, take enforcement actions against, process, and deter cases of drilling into a Federal or Indian oil and gas lease without approval.

Policy/Action: Drilling for oil and gas without approval on leased Federal or Indian land is a violation of 43 C.F.R. § 3162.3-1(c).  The BLM is authorized to assess fines (43 C.F.R. § 3163.1(b)(2)) and shut down operations (43 C.F.R. § 3163.1(a)(3)) until a complete Application for Permit to Drill (APD) is received, reviewed, and approved.

DWOA cases include those where a Federal or Indian oil and gas lessee, working interest owner, or operator drills a well into the leasehold with the intent to produce oil and/or gas or to explore the mineral resources, or causes surface disturbance on Federal or Indian surface preliminary to drilling, before the BLM approves an APD.

DWOA differs from mineral trespass.  Mineral trespass is where a party who is not the lessee, working interest owner, or operator, drills an oil and/or gas well into unleased Federal or Indian mineral estate, with the intent to produce oil and/or gas or to explore for mineral resources.  This IM does not address mineral trespass cases; which will be addressed in a separate IM. A third circumstance is where a well is drilled on leased lands without a BLM permit to drill and without permission from the lessee. In those circumstances, the BLM will implement this IM and will notify the lessee of the suspected trespass to the leased rights.

If the oil and gas estate is partially Federal- or partially Indian-owned (i.e. the mineral rights are held in undivided interest), determining if drilling constitutes DWOA or trespass depends on whether the party drilling the well is authorized by the co-tenant of the mineral estate and the laws of the state in which the well is drilled.  The BLM must consult with the Office of the Solicitor in these situations.

The attachments to this IM discuss detecting DWOA cases (Attachment 1), procedures to process DWOA cases, including compliance with the National Environmental Policy Act (NEPA), the Endangered Species Act, and the National Historic Preservation Act (Attachment 2), and measures that the BLM will take to deter DWOA cases from occurring in the future (Attachment 3).

Background: In recent years, Federal and Indian oil and gas DWOA cases increased largely due to technological advancements in horizontal drilling and periods of high oil prices, especially in areas with highly fragmented mineral ownership.

The most common factors behind the DWOA cases have included:

• Operators claimed to be unaware that the BLM had not issued a permit for their drilling operation due to change in personnel or because they acquired their lease from another company.
• Operators claimed to be unaware that Federal regulations require that their drilling operations may begin only after they are permitted by the BLM (e.g. they drilled on a partial Federal interest leases).
• Operators claimed to be unaware that an APD approved by the BLM was needed (e.g. they drilled on split-estate and relied on faulty information on mineral estate ownership).
• Operators knowingly drilled unpermitted wells because they viewed the assessment, authorized by 43 C.F.R. § 3163.1(b)(2), as a minor consequence in comparison to losing a fee lease (by not meeting the diligence requirement) or other logistical considerations.

In 2014, the Office of Inspector General (OIG) conducted an inspection of the BLM onshore oil and gas management program regarding DWOA.  This review occurred in the middle of the industry boom and on the heels of the BLM funding sequestration program cuts.  The inspection found that the BLM lacked nationwide policies to detect, take actions against, process and deter instances of DWOA and recommended that BLM develop nationwide DWOA policies and procedures.  This IM responds to the deficiencies identified by the OIG.

Pages of Manual/ Handbook Sections Affected: The BLM will append the procedures to detect DWOA into the MS-3160-2 Drainage Protection Manual.

Instruction Memorandums Affected: None

Contact: State Directors may direct questions or concerns to Michael D. Nedd, Assistant Director, Energy, Minerals, and Realty Management, at 202‑208‑4201.  Staff may contact Steven Wells, Chief, Fluid Minerals Division (WO-310) at 202-912-7143 or s1wells@blm.gov; Greg Noble, Petroleum Engineer (WO-310) at 307-231-5198 or gnoble@blm.gov.

Signed by:                                                                   Authenticated by:

Michael D. Nedd                                                        Robert M. Williams

Assistant Director                                                       Division of IT Policy and Planning,WO-870

Energy, Minerals, and Realty Management

3 Attachments

      1 – Detecting DWOA Cases, (2 pp)

      2 – Processing DWOA Cases, (4 pp)

      3 – Deterring DWOA Cases, (1 p)