Procedures for Responding to Requests for State Director Review Following Certain Oil and Gas Operation Decisions

IM 2011-141
Instruction Memorandum



Washington, DC 20240


June 27, 2011


In Reply Refer To:

3163 (310) P



Instruction Memorandum No. 2011-141

Expires:  09/30/2012  


To:                   All Field Offices

From:               Assistant Director, Minerals and Realty Management

Subject:           Procedures for Responding to Requests for State Director Review Following Certain Oil and Gas Operation Decisions


Program Areas:  Oil and Gas Operations.

Purpose:  This Instruction Memorandum provides the Bureau of Land Management (BLM) policy regarding response to requests for State Director Reviews (SDR) filed by the Federal oil and gas lessee, operator, or third party (affected party) regarding decisions made by the Authorized Officer (AO).

Policy/Action:  General Guidance.  It is the BLM’s policy to timely respond to requests for SDR.  The regulations at 43 CFR 3165.3(d) require the State Director to issue a final decision within 10 business days after receipt of a complete written request for administrative review or within 10 business days after an oral presentation has been made.  In the event that it is not possible to respond to a request for SDR within 10 days, the state office will contact the affected party and indicate that the decision will be delayed. 

The regulations in 43 CFR 3165.3 and 43 CFR 3185.1 provide that an SDR may be requested by any adversely affected party from any instruction, order, or decision issued under the regulations in 43 CFR 3160, “Onshore Oil and Gas Operations,” or 43 CFR 3180, “Onshore Oil and Gas Unit Agreements-Unproven Areas.”  An adversely affected party may also request SDR from an instruction, order, or decision regarding secondary units.  The request must be filed with the State Director in writing within 20 business days of receipt of the instruction, order, or decision, or of the date on which the document is considered to be received.  Extensions of time for submitting supporting data may be granted by the State Director for good cause if the affected party files the SDR within 20 business days.

The AO’s decision remains in effect until stayed, modified, or overturned.  If an affected party seeks a stay of the AO’s decision, the State Director will base approval or denial of a stay upon the record, and the potential for permanent harm if the decision remains in full force and effect.  A request for review and a stay of the AO’s decision will not result in a suspension of the requirement for compliance with the notice of violation, or stop the daily accumulation of assessments or penalties, unless the State Director so determines (43 CFR 3165.3(e)).

An oral presentation may be requested by the affected party.  The oral presentation is not an adversarial hearing.  The oral presentation is intended as an opportunity for the affected party to present or explain any supplemental information that it wishes to add to the record.  The State Director will receive the affected party’s presentation and exhibits and may ask questions, but will not argue the merits of the case.  Appropriate representatives from the field office may attend the oral presentation at the State Director’s discretion.

The State Director may consult with the AO who made the decision that is under SDR.  If the affected party initiates a conversation, the State Director may discuss the issues, but should reach an understanding with the affected party as to whether the conversation will be the oral presentation, or will be in addition to the oral presentation.  In any event, it is imperative that the State Director have documentation in the file supporting the facts on which he or she relies in making the decision.  If the State Director anticipates an appeal to the Interior Board of Land Appeals (IBLA), he or she may consider making an administrative record.

The State Director’s decision may be appealed to the IBLA.  Therefore, it must include the standard information concerning appeals and stays (see Attachment 1), excepting for a decision concerning civil penalties must also include instructions on seeking a hearing before an administrative law judge (see Attachment 2).

The BLM’s authority over a case during an appeal or litigation - During an appeal to the IBLA or to a United States District Court, the decision that is appealed remains in full force and effect, unless stayed by the IBLA or the court (see 43 CFR 3165.4).  If a question arises as to what may or may not be done, the BLM must discuss the problem with the appropriate attorney in the Solicitor’s Office.  Moreover, even though an appeal has been filed, informal efforts to resolve the problem may continue, but the Solicitor’s Office must be involved.

Guidance on Review of Assessments or Proposed Civil Penalties - The State Director may compromise or reduce the amount of the assessments (43 CFR 3163.1(e)) or the proposed civil penalties (43 CFR 3163.2(h) and BLM Manual Section-1203, Delegation of Authority).

There is no fixed formula or matrix for reduction of proposed assessments or civil penalties, or the amount of the reduction or percentage of the original amount that is reasonable or acceptable.  Nonetheless, State Directors should consider the following five factors:

  1. Good or bad faith of the violator;
  2. Injury to the public;
  3. Benefit derived by the violator;
  4. Ability of violator to pay; and
  5. Deterrence of future violations or vindication of the Secretary’s authority.

All of those factors are inherently fact-specific.  It is the violator’s burden to provide evidence and to persuade the State Director that the reduction is appropriate.  The following is offered as guidance:

  1. Good faith/Bad faith.  Was the violation intentional or accidental?  Did the operator try to hide the violation, or did the operator notify the BLM of the violation and cooperate with the BLM in resolving it?  One or two offenses may not be bad faith but several repeat offenses may indicate bad faith.
  2. Injury to the Public.  The public has a variety of interests that the statutes, regulations, lease stipulations, and conditions of approval are meant to protect.  Threats to public health and safety would be examples of highly injurious violations.  “Paperwork” violations, though less serious than immediate threats to health and safety, may result in the BLM and other governmental agencies being thwarted in performing their duties for the public.  Missing or erroneous documents may make it difficult or impossible for the BLM or other agencies to enforce legal requirements, monitor performance, determine the existence, scope or extent of potential violations, or to conduct audits.
  3. Benefit Derived by the Violator.  Has the violator improperly augmented its revenue, avoided costs of required conduct (such as environmental or resource protection, or site security), evaded a royalty, penalty, or fee, or gained an unfair competitive advantage as the result of the violation?     
  4. Ability to Pay.  The State Director may appropriately consider the violator’s ability to pay the proposed penalty amount.  This consideration generally becomes relevant when a violator would be unable to pay a penalty amount that would otherwise be appropriate.  However, in rare instances, a violation could result in such serious damage that whether a violator survives financially may be a secondary or minor consideration in determining a proposed penalty amount. 
  5. Deterrence of future violations.  It is the policy of the BLM to deter violations, especially those that cause or threaten harm to the public health or safety, or to Federal lands or the environment, that cause or threaten a loss of revenue and those that could impair the ability of the BLM or other agencies to carry out their duties under the statutes and regulations.  The Secretary has numerous duties regarding Federal and Indian lands.  The public has a right to expect that lessees and operators comply with legal requirements under the statutes and regulations.  Assessing appropriate civil penalties is meant to deter violations of those requirements.     

Those five factors, although appropriate, are not necessarily the only considerations that may enter into a State Director’s review of a particular proposed penalty.

Timeframe:  The policy contained in this IM is effective immediately.

Budget Impact:  The budget impact of this policy is minimal; however, it may increase travel costs slightly.

Background:  In most instances, the affected party who is requesting an SDR is the operator of the Federal or Indian oil and gas lease, and the request is to review an order issued by the AO in the field office.  The operator may request review of an assessment that was imposed by the AO (for example) for the operator’s failure to timely correct a deficiency or to timely respond to a demand for information.  The State Director in an SDR decision or review of an assessment determines whether the AO’s action conforms to established regulations and policy.  The State Director considers if the AO’s decision was technically and procedurally correct.

The regulations in 43 CFR 3165(d) regarding the length of time (10 days) for an SDR decision applies to all cases, the BLM should always do everything possible to comply with its regulations, including time limits.  However, there is nothing in the regulations that nullifies civil penalties or deprives the State Director of jurisdiction if a SDR decision is issued later than the 10-day deadline.  A late decision also does not prejudice an appeal by the violator because the time to seek a hearing or to appeal starts when the decision is received by the applicant.

For civil penalties, the State Director must state the reasons for determining the amount of the proposed penalty and whether it should be remitted or reduced.  The regulations do not provide a numerical formula, matrix, or tables for reduction of proposed civil penalties, and this guidance document does not supplant the regulations.  Expressly considering each of the five factors, including any other considerations, in the State Director’s decision should help convince the courts that the BLM has reached a reasonable decision. 

Occasionally, the requestor of an SDR is a third party who disagrees with the AO’s decision to issue a Finding of No Significant Impact for a proposed action or with the AO’s decision to approve an Application for Permit to Drill. 

Manual/Handbook Sections Affected:  None.

Coordination:  This guidance has been coordinated with the Solicitor and each state office.

Contact:  If you have any questions or concerns, please contact me at 202-208-4201, or your staff may contact Steven Wells, Division Chief, Washington Office Division of Fluid Minerals (WO-310), at 202-912-7143 or William Gewecke (WO-310) at 202-912-7152.



Signed by:                                                                  Authenticated by:

Timothy R. Spisak                                                      Robert M. Williams

Acting, Assistant Director                                          Division of IRM Governance,WO-560

Minerals and Realty Management



2 Attachments

     1 – Appeals Language to Include in SDR Decisions (1 p)

     2 – Appeals Language to Include Associated With Proposed Civil Penalty Assessments (1 p) 

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