Report recommends sweeping changes for Agency management of Osage leases

Mike ErwinJournal-Capital

Management of the Osage Nation minerals estate by the Bureau of Indian Affairs is “fundamentally flawed” and in need of significant reforms to become more effective, a recent evaluation for the U.S. Department of the Interior concluded.

The 70-page federal report released last month by the Inspector General’s office recommended 33 changes for improving the Osage Agency’s management of its oil and gas program.

“BIA can only reform the program through sweeping changes in how the Agency conducts oil and gas activities,” Deputy Inspector General Mary L. Kendall stated in a memorandum accompanying the report.

Five of the recommended reforms already have been implemented, while 27 other recommendations “are resolved and not implemented,” stated the report, which was presented to Kevin Washburn, the department’s Assistant Secretary-Indian Affairs, and BIA Director Michael Black on Oct. 20. The resolved issues are to be referred to the Assistant Secretary for Policy, Management and Budget “for tracking their implementation,” the report said.

Several recommendation call for the Osage Agency to hire additional oil-and-gas industry professionals — including a petroleum engineer and an environmental-protection specialist — to assist with its reforms of the management program. Federal inspectors said they were “encouraged by early reports of agency action toward hiring key personnel and working with the Office of Natural Resource Revenue to explore implementing some of our recommendations.”

“Unresolved” by the report was the need for the Agency to formulate a plan for identifying abandoned wells and to develop “a prioritized list based on risk” of wells to be plugged.

The Inspector General noted that many of the report’s findings had been pointed out in a 1990 study and that few of the previously-detected deficiencies had been addressed. Included among those were suggestions to clarify and update regulations and make improvements to the Agency’s antiquated data system. Target dates for implementing recommendations of the report ranged from December 2013 through December 2017.

Also referenced in the current recommendations was the non-compliance of the Osage Agency with the National Environmental Policy Act — an issue which recently resulted in a class-action lawsuit that has seriously curtailed oil and gas operations on the tribal lands.

The evaluation cited “many competing interests” in the Agency’s oil and gas operations (identified as the Osage Nation Minerals Council, leaseholders and operators, and surface owners) which “contribute to the complexity of managing the Osage Nation’s mineral estate and put significant pressures on Agency staff.”

Osage County holds a unique status as a result of it having been comprised of land purchased by the tribe as a reservation for the Osage people. Ever since oil was discovered on the Osage Reservation in the 1890’s, commercial producers have paid royalties to tribal members for the sale of oil and gas derived from what is now Osage County. The BIA serves as an intermediary between producers and the Osage Nation.

Tribal interests are represented by the eight-member Osage Minerals Council, an elected governing body created in 1906 and formerly known as the Osage Tribal Council. The ON Constitution vests the Minerals Council with powers to utilize, develop, protect and conserve all natural resources within the boundaries of the territory of the Nation “for the maximum benefit of the Osage people.” The ON Constitution further states that preservation of the Osage Mineral Estate shall be “the perpetual obligation” of the tribal government.

“We believe that if BIA implements all of our recommendations, the Agency’s management of the Osage Nation’s oil and gas program will become more effective,” the report continued.