How the Federal Government Can Hold the Oil and Gas Industry Accountable

The oil and gas industry has long taken advantage of the leasing and drilling system on America’s public lands and waters. For years, some of the top leaseholders have faced minimal consequences for repeatedly violating environmental and labor standards, dodging payments, and shedding liabilities. Indeed, these bad actors are still allowed to operate and buy new leases on public lands and waters. The Center for American Progress finds that more than 50 percent of the top oil and gas companies have exhibited one or more bad-actor behaviors, such as abandoning wells, shedding liabilities, dodging royalty payments, or committing environmental or labor violations. (see Methodology) As the Biden administration reforms the federal oil and gas program and aims to hold oil and gas companies accountable, it has an opportunity to create strong limits for bad actors through rulemakings at the U.S. Department of the Interior. Implementing such limits would help prevent the middle class from falling victim, yet again, to oil and gas industry greed.

Public lands and waters are shared resources that the federal government manages on behalf of all Americans. The federal government manages these public lands and waters in a variety of ways, including for conservation, recreation, grazing, and oil and gas production. The Bureau of Land Management (BLM) manages public land, or onshore, leasing, and the Bureau of Ocean Energy Management (BOEM) manages public water, or offshore, leasing. As of 2022, the oil and gas industry held more than 34,000 leases on public lands, covering more than 23.7 million acres.¹ In public waters, the oil and gas industry has more than 12 million acres under lease.²

While many companies participate in federal oil and gas leasing, a small number hold many of the leases. The top 20 companies, and their subsidiaries, operating onshore account for more than 40 percent of leases, covering more than 3 million acres.³ The top 20 companies offshore account for more than two-thirds of leased acres, covering more than 9 million acres.⁴ Many of the biggest companies have multiple subsidiaries that operate under the company’s original name, making it difficult to determine who is responsible for various oil and gas resources and the associated liabilities.⁵ Data on oil and gas industry leases are inconsistent and hard to find, further enabling the damaging behaviors of many companies.

The federal oil and gas leasing system has long been criticized by taxpayer, public land, and ocean advocates as being out of date and catering to the industry.⁶ A November 2021 Department of the Interior report found that “the program falls short of serving the public interest in a number of important respects,” including causing damage to taxpayers, the environment, recreation, and cultures.⁷ This is in addition to the fact that the federal government already heavily subsidizes fossil fuels, with billions of dollars in direct and indirect subsidies every year.⁸ All of this has augmented massive profits, with oil and gas companies making more than $200 billion in profits last year alone.⁹

Together, the top 20 companies onshore and offshore have had more than 3,000 penalties since 2000, according to Good Jobs First’s Violation Tracker.¹⁰ This corporate misconduct database “covers banking, consumer protection, false claims, environmental, wage & hour, safety, discrimination, price-fixing, and other cases” from federal, state, and local regulators.¹¹ It likely provides an underestimation of the number of penalties, since the tracker does not cover every company in the top 20. Whether counted or uncounted, however, companies are currently able to continue taking advantage of public lands and waters despite histories of violations that suggest they should not be trusted with public resources.

Bad-actor practices involve taking advantage of the leasing and drilling system to the detriment of others. For the oil and gas industry, this involves cheating taxpayers out of their fair share of payments, putting employees at risk, damaging the environment, and leaving others to, quite literally, clean up the mess. And these damaging practices occur on federal lands and waters without affecting companies’ ability to acquire additional leases or permits.¹² If these companies do not face accountability for bad behavior, they have no incentive for good behavior. Below are some of the most common examples of bad behavior for which companies that operate on public lands and waters should be held accountable.

Shedding liabilities

Abandoning wells

When companies are done extracting fuel from a well, they are supposed to properly plug the well so it does not pollute the surrounding area.¹³ But some companies abandon their wells to avoid paying to clean up damage.¹⁴ Abandoned wells have been piling up for decades, with more than 3 million dotting the United States.¹⁵ In federal waters, supermajor oil and gas companies—such as BP, Shell, Chevron, ExxonMobil, ConocoPhillips, TotalEnergies, and Eni—are the current or former owners of 88 percent of wells with plugging and abandoning liability.¹⁶ Carbon Tracker estimates it would cost $280 billion to plug all existing documented wells, both active and idle, on U.S. land.¹⁷ Taxpayers should not have to foot that bill. As of April 2021, evidence existed that Chevron, EOG Resources, and Occidental Petroleum all got new leases after they presumably orphaned some of their wells on federal land.¹⁸

Selling old assets

Some companies sell aging assets, such as old oil wells, and avoid the costs of cleaning up and properly retiring the associated infrastructure.¹⁹ In 2014, Occidental Petroleum created the spinoff company California Resources Corp., which absorbed Occidental’s California assets and the associated liabilities.²⁰ In 2020, California Resources had more than 17,000 wells and held up to $2 billion in environmental liability—35 percent of all environmental liability in the state—and declared bankruptcy.²¹

Some companies have been selling their assets for reasons other than avoiding cleanup costs. According to a 2022 ProPublica piece, “Shell has been shedding assets in part to hand off associated greenhouse gas emissions.”²² This is part of a larger pattern in the oil and gas industry, as companies sell polluting assets to try to meet environmental goals.²³ More and more frequently, those polluting assets are being sold to companies that have less stringent environmental goals than the previous owner.²⁴

Bankruptcies

In the past 10 years, 60 coal companies have declared bankruptcy, leaving communities with pollution and cleanup costs and former employees without health care or pensions.²⁵ But coal is not the only industry that has seemingly utilized bankruptcy to avoid cleaning up its mess; it would seem that some oil and gas companies are now following a similar playbook.²⁶ One of the largest oil and gas bankruptcies from 2018–2020 was that of Chesapeake Energy, which had $11.8 billion of debt.²⁷ Because of the bankruptcy, Chesapeake was able to settle with the Environmental Protection Agency (EPA) for $1.2 million, even though the EPA estimated Chesapeake could have been liable for more than $25 million of alleged violations.²⁸ From 2018–2020, the 25 largest oil and gas bankruptcies paid almost $200 million to executives while laying off more than 10,000 people.²⁹ In 2020, Diamond Offshore Drilling, despite receiving millions of dollars from a COVID-19 relief bill and paying its executives millions of dollars, laid off more than 100 employees.³⁰ This was the largest bankruptcy in the oil industry from 2018–2020.³¹

Insufficient bonds

When operating on public lands, oil and gas companies must post bonds to ensure that there is money for cleanup set aside from the outset. Current federal bond requirements, however, are far too low to cover the cost of reclamation, leaving taxpayers to either foot the bill or suffer from pollution. Current bonding standards, which have been proposed to be changed via a proposed rule, only require companies to set aside $10,000 for a single lease, $25,000 for a statewide bond covering all their wells in one state, and $150,000 for a nationwide bond covering all their wells in the United States.³² The biggest companies, however, can have thousands of wells, and the estimated cost for complete reclamation of one well is $76,000.³³

Not only are bonds too low, but companies can also use accounting methods to discount estimated cleanup costs.³⁴ Public Citizen looked at 11 companies with more than 57,000 wells and $1.5 billion of environmental liabilities total, based on the companies’ Securities and Exchange Commission records, and found those companies only have $281 million total in bonds.³⁵ Furthermore, based on Carbon Tracker estimates, the combined environmental liabilities for those 11 companies could be more than $10 billion.³⁶ One of those 11 companies is Chesapeake Energy, which Carbon Tracker estimates is up to $2 billion short on bonds for the cleanup of more than 11,000 wells.³⁷

Dodging royalty payments

Oil and gas companies pay royalties, or a percentage of the profits from sales, on the fuel they extract from public, private, and Tribal lands and waters to those respective groups. But there are numerous examples of companies avoiding proper payment of royalties, the consequence of which is that people do not end up receiving their fair share of royalties. According to Accountable US, of the top 20 onshore companies in 2021, 12 had records that show that they have repeatedly and purposefully underpaid the owners of their mineral leases, including the American public.³⁸ For example, that year, Devon Energy agreed to pay more than $6 million to resolve allegations that it “knowingly underreported and underpaid royalties” to the American public, through the Department of the Interior.³⁹ Since 2000, Chevron has been fined more than $213 million for False Claims Act or related offenses.⁴⁰ EOG Resources, a former subsidiary of Enron,  was even investigated by the Department of Interior for “alleged unauthorized drilling, extraction and sale of federal minerals”; it settled for hundreds of thousands of dollars.⁴¹

Repeated environmental violations

According to Good Jobs First’s Violation Tracker, the top 20 onshore and offshore oil and gas companies have more than 2,200 environmental violations, or more than one violation every fourth day for more than two decades.⁴² (see Table 1) This totals more than $44 billion since 2000.⁴³ ExxonMobil has the most environmental penalties: 442.⁴⁴ BP—the fourth-largest operator offshore—has been fined the most money, more than $36 billion, largely because of the Deepwater Horizon oil spill, which resulted in a $20.8 billion environmental fine, the largest in history.⁴⁵ Since Deepwater Horizon, BP has been fined more than $1 billion, with 94 offshore leak events in 2021 alone.⁴⁶ BP was only outdone by Shell, which had 120 leak events offshore the same year, according to the Bureau of Safety and Environmental Enforcement (BSEE).⁴⁷ Not only was BP allowed to continue profiting from the use of public resources after the Deepwater Horizon accident, but it also has not significantly changed its practices.

On land, there were at least 2,449 spills last year, totaling more than 7.5 million gallons, just in Colorado, New Mexico and Wyoming.⁴⁸ Occidental Petroleum spilled almost double the volume in 2022 that it did in 2021.⁴⁹ Almost 18 million people live within 1 mile of active oil and gas wells; a disproportionately high number of these people are part of historically marginalized communities, such as Black, Hispanic, Asian, and Native American communities and those living below the poverty line, so pollution from those wells will affect them first.⁵⁰

Poor labor standards

The oil and gas industry treats not only the environment poorly, but also its own employees. For example, since 2000, Marathon Petroleum Corp. has had more than 50 labor-related violations that have meant more than $67 million in fines.⁵¹ Fieldwood Energy has received almost 1,800 “shut-in incidents of noncompliance,” according to the BSEE, which occur when a violation threatens human health or safety or is otherwise severe.⁵² A 2023 survey of oil and gas workers showed that companies have cut pay and staff, and one-third of workers say they have been instructed to break safety protocols.⁵³ It’s likely that fatalities, based on BSEE data, and other worker safety incidents are insufficiently reported, further skewing the understanding of labor violations.⁵⁴ Furthermore, only 4 percent of workers in the U.S. oil and gas extraction industry were in a union last year, leaving most workers vulnerable to exploitation.⁵⁵

The bad-actor practices that oil and gas companies have demonstrated on U.S. public lands and waters can be solved through strong regulations that hold the industry accountable. The Department of the Interior has the authority to make companies pay their fair share, clean up the environment, protect individuals and communities at risk from oil and gas extraction, and limit who is allowed to extract resources from shared U.S. lands.

Finalize a strong BLM oil and gas rule

The BLM recently released a draft rule to reform the outdated oil and gas leasing system on public lands.⁵⁶ Many provisions in the draft would help ensure that the companies profiting off public resources act as responsible stewards of those resources. The BLM must finalize a strong rule that requires companies to pay their fair share and helps decrease industry speculation and abuse.

The BLM should finalize components of the draft rule, including provisions to:

• Increase minimum bonds to $150,000 per lease and $500,000 for statewide bonds, as well as eliminate nationwide bonds. Higher bonds will help ensure that taxpayers are protected from pollution and cleanup costs.
• Raise rates for royalties, rents, and bids to ensure that taxpayers see a fair return for the extraction of public resources. Higher rates will help reduce speculation by those who do not intend to produce oil and gas but simply sell the lease at a later date for profit.
• Eliminate anonymous expressions of interest and implement a fee for those expressions to help reduce speculative leasing and increase transparency. The rule would also eliminate the practice of noncompetitive leasing, whereby parcels of land unsold at auction are available with the bonus bid requirement waived, allowing lessees to pay only an administrative fee and $1.50 per acre.⁵⁷
• Implement a prioritization system that takes into account oil and gas resources and existing oil and gas infrastructure, as well as cultural, historical, recreational, and wildlife features, to help reduce speculative leasing and ensure that BLM lands are put to their best use for the public good.
• Crack down on idle wells by requiring companies to provide rationale and seek approval to leave wells idle. The draft rule specifies that nonproducing, or idle, wells should be permanently closed within four years of being shut in, barring justification for improper retirement. Idle wells are a high liability for the public, and this regulation would help prevent pollution and taxpayer liability, while holding the industry accountable.
• Formalize leasing as discretionary and affirm that leasing—or lack thereof—can and should be done in the public interest.

Strengthen bad-actor provisions in the BLM oil and gas rule

The draft BLM oil and gas rule is a solid start, but strengthening certain aspects of the rule would help ensure a fair oil and gas leasing program for everyone. The draft rule newly defines “responsible bidders and lessees” as companies that have a record of compliance, that have not defaulted on past bids, and that can fulfill the other leasing requirements. But the rule should include stronger language about what defines a bad actor and what disqualifies parties from leasing and drilling America’s public resources. Such disqualifications should include:

• Repeated or ongoing environmental violations that may be damaging to the natural environment and/or human health
• Repeated or ongoing labor violations that may be related to compensation and/or safety
• Repeated or ongoing financial violations, such as dodging royalty payments or failing to make timely payments
• Operation of a significant number of inactive or nonproducing wells and/or leases
• Violation of federal or state reclamation requirements

Such bad actors should not be eligible for new leases or permits until they have resolved all outstanding issues and demonstrated that they are capable of changing their practices. Further, leases of companies found not to be a qualified or responsible lessee should be subject to cancellation. This will prevent them from not properly compensating, polluting the lands and waters of, and jeopardizing the health of the American public. Further, the Department of the Interior should create a public registry of individuals and companies currently identified as not being a “responsible bidder” or “responsible lessee.”⁵⁸ This could include, but is not limited to, maintaining and making publicly available the list of entities in noncompliance with reclamation requirements of Section 17(g) of the Mineral Leasing Act.⁵⁹

Additionally, the BLM can strengthen the draft rule by:

• Continuing to review and adjust new royalty, rent, and bids in line with larger economic trends
• Providing further direction as to how lease prioritization criteria should guide the selection of lands that will be offered for lease

Strengthen BOEM’s proposed financial assurance rule

BOEM currently has a draft rule that would update how the agency determines what companies are required to provide bonds when leasing in federal waters, based on the companies’ financial reliability.⁶⁰ The rule makes some progress toward ensuring that companies are held responsible for decommissioning costs but can and should be strengthened before it is finalized. In the absence of getting rid of all waivers for financial assurance, BOEM should:

• Maintain a potential lessee’s record of compliance as a criteria for leasing.
• Disqualify companies from leasing if they have existing decommissioning obligations for idle or abandoned wells.
• Require higher credit ratings than currently proposed.
• Remove valuation of proven reserves as a factor for bonding requirements.
• Increase the assurance standard for proper reclamation from 70 percent to 90 percent, so that the public has the best chance of not being saddled with pollution or cleanup costs.

Release and finalize a strong offshore fitness-to-operate standard

The Department of the Interior identified the need for and committed to developing a “fitness to operate” standard in a November 2021 report.⁶¹ A rule defining responsible bidders and lessees would help cut down on the number of bad actors in the offshore leasing program by limiting the leasing and permitting eligibility of companies with unresolved violations. Similar to the recommendations for the BLM, a rule on a fitness-to-operate standard could limit companies with poor environmental, safety, or reclamation histories in obtaining new leases and permits.

Improve data collection

In addition to the draft rule’s components, the Department of the Interior should require improved data collection and public access to data to enforce these rules and hold industry accountable. As it currently stands, it can be difficult to determine which companies are causing damage, and how much, because of incomplete or ineffective records.⁶² For example, there is no comprehensive database to identify to what level companies are bonded and how far below the estimated total cleanup cost the bonds are. Where possible, the burden of collecting and publishing data should be on companies, not agencies.

Wealthy oil and gas companies have been taking advantage of loopholes in the federal leasing program for far too long, to the detriment of the nation’s revenue, workforce, and natural resources. The proposed BLM oil and gas rule would build a fairer system and ensure that the oil and gas industry actually pays its bills and cleans up after itself when it uses shared public lands. The proposed BOEM rule on financial assurance, if appropriately strengthened, and the suggested fitness-to-operate standard, could similarly help protect U.S. public waters. The American public knows that actions have consequences, and it’s time for the oil and gas industry to be held to a fair standard.

To determine how many of the top companies have exhibited bad-actor behavior, the authors started with the list of the top 20 companies operating on public lands and the top 20 operating offshore by number of leases (Table 1), which totaled 38 companies. Any company with at least one example of bad-actor behavior included in this brief or one violation listed in the Good Jobs First Violation Tracker was considered to have exhibited bad-actor behavior. Bad-actor behaviors include: abandoning wells; shedding liabilities through bankruptcy or selling old assets; dodging royalty payments; or committing environmental- or labor-related offenses.

When citing statistics from the Good Jobs First Violation Tracker, statistics that encompass all the companies from Table 1 are calculated by combining the appropriate value for all the companies from Table 1 that are listed in the tracker. Statistics for specific companies are based on the summary statistics provided on the parent company summary page of the Good Jobs First’ Violation Tracker.

The authors would like to thank Nicole Gentile, Shanée Simhoni, Meghan Miller, Keenan Alexander, and Beatrice Aronson for their contributions to this brief.