The U.S. Bureau of Land Management (BLM) has the right idea with its measured approach to oil shale production in the western United States given the risks involved, according to a white paper by sustainability advocate Ceres.

BLM has proposed to focus oil shale production in Wyoming, Utah and Colorado on “research, development, and demonstration” (RD&D) leases only and to reduce the available acreage to about 500,000 acres from nearly two million acres under an earlier plan (see Shale Daily, Feb. 17, 2011). The agency’s Draft Programmatic Environmental Impact Statement has been criticized by some officials in the region as being anti-development and too accommodating of environmentalists (see Shale Daily, April 11). The Ceres white paper takes the opposite position.

Oil shale is not the same as shale oil. Oil shale comes from kerogen-rich rocks closer to the surface than shale oil formations. The rocks have to be heated to extremely high temperatures to convert the kerogen into oil. The economics and environmental concerns of oil shale are considerably different from those of shale oil.

“Given the wide array of uncertainties, BLM’s proposed leasing approach on oil shale makes sense,” said Ceres President Mindy Lubber, citing regulatory risks, water constraints and numerous other questions about various technologies being pursued to extract a non-liquid form of oil from shale rock. “Investors should be similarly cautious in evaluating future investment in this space.”

While oil shale reserves beneath the three states in the Green River Formation are vast, holding more than three times the proven reserves of Saudi Arabia, the Ceres white paper, “Investor Risks from Oil Shale Development” urges caution.

“Oil shale technologies are still highly speculative, and proving them to be commercially viable will be difficult and require a long period of time with uncertain outcomes,” said Paul Bugala, senior sustainability analyst for extractive industries at Calvert Investments. “The little that state and federal regulators know about the environmental impacts, especially in the areas of water use and land reclamation, further indicates that caution should be exercised.”

The paper, prepared by David Gardiner & Associates LLC, highlighted five risks of oil shale development:

More than 70% of the Green River Formation oil shale resources lie beneath federal lands. BLM is considering public comments on its proposal to limit development to RD&D leases on 252,181 acres in Utah, 174,476 acres in Wyoming and 35,308 acres in Colorado. A decision is expected this fall.