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Interior Revisits Western Oil Shale Leases

The Interior Department said Tuesday it will take another pass at the rules set by the last administration for extracting shale oil from two million acres of federal land in Utah, Colorado and Wyoming, with the possibility of cutting the acreage total and raising royalties.

The announcement by Interior Secretary Ken Salazar is part of a settlement with environmental groups that sued to halt the authorization for commercial leasing of the western acreage for shale oil development.

In a teleconference Bureau of Land Management (BLM) Director Bob Abbey said his agency may do further analysis of the environmental impact and consider changing the 5% royalty rate.

Further, Abbey conceded that the BLM was "not sure that two million acres should be allocated for this type of use, but nonetheless we are willing to go back and revisit that issue.

"We remain adamantly supportive of (oil shale) RD&D [research, development and demonstration] efforts that seek to develop critical information about the commercial viability of oil shale technology," he added.

Abbey confirmed that a settlement had been offered in two lawsuits in U.S. District Court in Colorado over the oil shale moves. The lawsuits were filed in January 2009 by 13 conservation groups.

"We are very hopeful that they will accept our offer," Abbey said.

Kate Colarulli, a director for the Sierra Club, confirmed Tuesday that the San Francisco-based organization was one of the 13 plaintiffs. "The plaintiffs and BLM are all happy with where this is right now," Colarulli said. "Essentially the settlement is going back to look at the royalty rates that are being charged on these lands, and to look and see if it made sense to open this much land (for potential development)."

Salazar maintained that his department wants to help private industry develop a new generation of oil shale technologies. He said three companies, which were nominated last year, have been selected for RD&D projects.

"We need to know whether the technologies being developed are viable on a commercial scale," Salazar said. "The companies working on these challenges report they are several years away from knowing whether their technologies will work."

Abbey added that the BLM was "taking a fresh look at commercial oil shale rules and plans that were issued. We will update them based upon the latest research and technologies to account for expected water demands in the arid West, and to ensure that they provide a fair return to the taxpayers."

Salazar said oil shale's future depended on finding an adequate supply of water, especially in the dry Colorado River basin, where most of the oil shale lies. He added that minimizing the industry's impact on the land, wildlife and watersheds would be another challenge. The question remains, he said: "Where will the water come from to be able to fuel commercial-scale oil shale development in this part of the arid West?"

Tuesday's action, the latest in the battle over the oil shale development, was quickly condemned by House Natural Resources Committee Chairman Doc Hastings, R-WA, as leading to increased reliance on foreign oil. "Since taking office, the Obama administration has done nothing but hinder the production of U.S. oil shale. Their actions only serve to delay the development of at least a trillion barrels of U.S. oil resources and prevent the creation of thousands of new U.S. jobs."

Hastings noted that a month after taking office in 2009, the administration revised the oil shale program's rules, "decreasing lease acreage by 87%, demanding unrealistic timelines for investment into cutting edge research, including unattainable production requirements and implanting variable royalty rates." The new rules were the reason only three companies applied in the latest round of leasing, the chairman said.

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