“He stopped in almost every week and when he came in one particular Friday, I asked him how things were going and he said they’d never been better,” Bacon, 82, recalled last night. “He was expecting a group from Japan to take a tour that weekend. The following Sunday I was out in front of my house trimming the hedge — I had attended church earlier that morning — when my wife came out and said, ‘You won’t believe what I just heard on the news: Exxon is shutting down its operation here.’”

That day on May 2, 1982, became known as “Black Sunday,” when Exxon laid off 2,200 oil shale workers on Colorado’s Western Slope. The Colony Project, as it was called, had such a profound impact on the region that when Exxon walked away, small businesses in the area quickly mothballed, entire towns emptied out, there was a run on a local bank, and a bank president committed suicide.

“The best business to be in at the time would have been the moving business,” said Bacon, noting that thousands of residents fled the Grand Valley, which without warning was left in dire straits.

“It was total chaos. There was a big boom and an even bigger bust,” said Andrew Gulliford, a history professor at Fort Lewis College in Durango who authored Boomtown Blues: Colorado Oil Shale. “For many people, it’s a sobering event they look back on much like John F. Kennedy’s assassination — what were they doing? – but unlike with JFK’s assassination, they had to put their lives back together.”

It took a decade before the region bounced back. Now the Grand Valley’s economy is far more diversified. The outdoor recreation industry, organic farmers and vintners all depend on its environs.

Some of the locals who stuck around slapped “Exxon Sucks Rocks” bumper stickers on their cars and trucks, referring to the technology that heats shale rock and sand to extract organic kerogen, or fossilized algae, and refine it into synthetic fuel. Despite trying for nearly a century, engineers have so far been unable to make oil shale — not to be confused with shale oil — commercially viable.

Chevron is the latest to abandon oil shale in Colorado. The company was one of just three to hold oil shale leases in the state. Royal Dutch Shell and AMSO are the other two. Chevron, which began amassing acreage in Colorado for oil shale research back in the 1930s, decided it had other priorities.

An in-situ oil shale research project in Colorado. (USGS photo).

The resource’s potential keeps companies coming back too. Earlier this year Shell said it produced 1,700 barrels of oil from an oil shale project on private land in western Colorado and it recently broke ground on its first project on Bureau of Land Management property. A company executive recently declared that Shell, which began researching oil shale in 1981, is making “significant progress.”

Those who have seen this play out before are urging decision-makers to proceed with caution.

“I don’t think anybody knows exactly how this is going to end,” Bacon said. “If it really works out, it would be a tremendous boon, but we thought that was going to happen in the 1980s and it didn’t. Oil shale was going to be a big thing in the 1920s. Several times they got excited and it just didn’t gel.”

A new report, Oil Shale: A Century of Failure, from the Checks and Balances Project (pdf) details the devastation oil shale has had on communities. The Checks and Balances report comes as the BLM is closing its public comment period on its new oil-shale development plan (pdf).

Public Campaign, a nonprofit watchdog in Washington, D.C., noted that 30 percent of the $378,927 that Tipton, R-Colorado, reported raising in the first quarter of 2012 came from corporate political action committees (PACs) and party committees. Less than 14 percent of money the congressman raised in the first quarter came in donations of $200 or less, Public Campaign reported.

Oil and gas industry PACs handed over thousands in contributions, including checks from Chevron ($3,000), Koch Industries ($2,000), BP ($1,000), and Valero ($1,000). Tipton also received mining industry money from the PACs of Arch Coal ($2,000), Freeport McMoran Copper & Gold ($2,000) and Oxbow Carbon ($1,000) owned by Bill Koch, who is slightly less infamous than his brothers Charles and David who run Koch Industries. The Kochs also funded Tipton’s previous campaign.

Scott Tipton (Photo by Troy Hooper)

“Scott Tipton hauled in money from Big Oil, the mining industry, and lots of special interests. He raised more money each week, on average, than many Coloradan families make in a year,” said David Donnelly, national campaigns director at Public Campaign, noting Tipton averaged $31,600 in fundraising a week.

“If he’s spending time courting Big Oil, who’s looking out for his constituents?” Donnelly asked.

Messages left for Tipton’s spokesman were not returned.

Ever since replacing former Rep. John Salazar, Tipton has aggressively pursued oil and gas drilling and worked to weaken regulations that protect the public’s health and environment.

His zeal for industry is award-winning: The U.S. Chamber of Commerce, a right-wing outfit representing more than 3 million businesses that is often criticized for a perceived pro-pollution agenda, recently presented him with the Spirit of Enterprise Award for his pro-growth policies.

After accepting the award, Tipton went back to the capitol acting as if he wanted to win another one.

Just last week, the congressman unveiled a series of bills to expand oil and natural gas production, including one, HR 4381, that would require Interior Secretary Ken Salazar to conduct new lease sales in areas identified with the greatest energy potential and remove regulatory “delays and hurdles.”

The congressman crowed about HR 4381, which he is sponsoring, in a prepared statement, saying it would ensure “the nation’s energy needs are met … with a true all-of-the-above approach that will lower the cost of energy, jumpstart economic recovery, and get Americans working.”

The bill would mandate the Interior Department develop a new energy development plan every four years but it “sets the table against renewable energy from consideration” and it “ignores market forces by requiring arbitrary ‘necessary actions’ to facilitate energy development on the public lands,” according to Matt Garrington, the Colorado-based co-director of The Checks and Balances Project.

“It’s painful to watch members of Congress so blatantly pander for oil and gas lobby dollars,” he said.

Tipton is fighting for his political life in the sprawling 3rd Congressional District as he faces State House Minority Leader Sal Pace, a thirty-something Democrat trying to make the leap from state to federal policy-making. The Democratic Congressional Campaign Committee named Pace among 18 candidates best positioned to convert seats in the Republican-controlled House of Representatives from red to blue in November. The contest will be watched across the nation.

Shell in-situ oil shale research project in Rio Blanco County (USGS photo).

“Water is the defining resource in the West,” Mike Chiropolos, chief counsel for Western Resource Advocates, told reporters on a conference call this week. “There is an enormous uncertainty of what the impacts are of utilizing large quantities of that supply.”

The report, “Oil Shale 2050 (pdf), comes in advance of the Bureau of Land Management’s meetings in Colorado and Utah next week that ask for public feedback to the Department of Interior’s plan to dramatically scale back the acreage of lands available for oil shale and tar sands development. Federal officials are proposing to cut the Bush-era oil leasing inventory from 1.9 million acres to 462,000 for oil shale and from 431,000 acres to 91,000 for tar sands.

U.S. Rep. Doug Lamborn, R-Colorado, however, is sponsoring H.R. 3408, the “Pioneers Act,” which would revive the Bush-era plan to open vast amounts of public lands in Utah, Wyoming and western Colorado to oil shale and tar sands production. His bill made it out of the House Committee on Natural Resources last month, and House Speaker John Boehner has said oil shale revenues will partly pay for national transportation projects in the next five years.

Oil shale production, however, has yet to be proven commercially viable.

Oil shale is not to be confused with shale oil, which is oil trapped in rock formations. Shale oil only recently became a moneymaker as hydraulic fracturing, or “fracking,” techniques have proliferated. Oil shale, in contrast, doesn’t actually contain oil; it contains kerogen, or fossilized algae, locked in rock that requires an extensive heating process for it to be extracted and refined into oil.

Just weeks ago, Chevron abandoned its federal oil shale leases in Colorado to focus on more feasible energy plays — the latest in a long list of oil shale projects gone bust. The most infamous is Exxon’s exit from the massive Colony oil shale project 30 years ago on “Black Sunday” that left communities in western Colorado in economic ruin.

The resource’s potential keeps companies coming back. Shell recently said it had produced 1,700 barrels of oil from an oil shale project on private land in western Colorado and that it is now going to break ground on oil shale development on BLM land. The world’s most extensive deposits are in the Green River Formation, which underlies western Colorado, eastern Utah, and southwestern Wyoming.

“The history of oil shale is, quite simply, a recurring period of hype followed by bust. Interspersed amongst these cycles, and fueling dreams of striking it rich, are a litany of politicians, speculators, and news stories playing up oil shale’s great promise,” reads the Western Resource Advocates report.

The report draws comparisons between one company’s recent claim that by 2025 in Utah it will be producing 50,000 barrels of oil per day. In 1980, Exxon claimed that by 2010 it would be producing 10 million barrels of oil per day from oil shale. Exxon’s project went bust two years later.

Western Resource Advocates also notes that oil shale production — one of the dirtier forms of energy — would hinder goals to curb carbon emissions. The group says that water in the Colorado River Basin is projected to decrease anywhere from 5 percent to 20 percent by 2050 because of climate change. Sucking more water out of the rivers for energy production will pit industry versus communities, and threaten the survival of fish such as the Colorado pikeminnow, humpback chub, bonytail, and razorback sucker, the group said.

“Already, because of fossil fuel development, certain rural areas of Colorado, Utah, and Wyoming have worse air quality than Los Angeles,” the report states. “The oil shale debate must, likewise, evaluate the potential impacts on our climate. As explained in this report, oil shale is projected to produce roughly 25 percent to 75 percent more greenhouse gases than comparable quantities of conventional crude oil. Colorado has adopted the vitally important goal of reducing its greenhouse gas emissions by 80 percent by 2050. Other states are advancing similar goals. Large-scale production of oil shale would likely undermine these important goals.”

Residents of Routt County in northern Colorado – an area not known for its oil and gas development — are gearing up for a major natural gas boom in the Niobrara Shale Formation. Activists are seeking guidance from more heavily drilled parts of the state as Shell and other companies eye gas extraction in the scenic Yampa River Valley.

“There are some new proposals for oil and gas development in the Niobrara Shale Formation around Steamboat, and they want to get themselves caught up [on regulations] and not be caught with their pants down the way other jurisdictions have been,” former Garfield County oil and gas liaison Judy Jordan told the Colorado Independent.

Former Garfield County oil and gas liaison Judy Jordan.

The Community Alliance of the Yampa Valley hosted a forum on oil and gas development late last month, inviting Jordan and members of Colorado’s conservation community to speak about their experiences in other more intensively drilled parts of the state.

“The audience was interested in hearing about any lessons learned from across the state, including proactive mitigation strategies, public health analyses, water quality and quantity protections, and public comment opportunity,” said Frank Smith, director of organizing for Western Colorado Congress.

“Also, the county was encouraged to consider applying its 1041 authorities to better protect the Yampa River system, since that water is vital to many stakeholders and it’s being targeted by thirsty entities — upstream and down.”

Jordan was on staff when Garfield County rejected a request by attorneys for Battlement Concerned Citizens to invoke 1041 powers that have been used successfully in the past by counties seeking to acquire more local control from the state over major infrastructure projects such as water diversions and power lines.

La Plata County weighed using 1041 powers in the 1990s but opted instead for its own set of oil and gas drilling regulations. Now El Paso County has imposed a drilling moratorium in order to consider a set of local regulations – a move reportedly opposed by state regulators and oil and gas industry officials.

Jordan also was on staff in Garfield County – one of the top two most drilled counties in the state – when the commissioners decided not to finalize a University of Colorado Health Impact Assessment that showed the potential for significant public health problems in the face of increased natural gas production. She recommended to Routt County residents that they push for advance baseline sampling of domestic water supplies.

“Most of the contamination we found was naturally occurring. It’s methane; it’s created naturally,” Jordan said. “The question is whether the methane contamination that we see in domestic wells would have arrived if there hadn’t been oil and gas development. I think it’s unlikely that it would have, but it’s difficult to make the case because basically you’d have to go in and examine different [gas] wells and no one would ever give us access to that kind of information.”

State regulatory officials disagreed with an independent consultant hired by Garfield County who found elevated levels of methane in groundwater supplies in areas where drilling had increased dramatically.

Jordan was fired by Garfield County in July – she says because of industry pressure.

Shell has long had interests in northern Colorado, aggressively pursuing water rights in the Yampa River Valley. But in the past the company has been primarily focused on its oil shale research and development in Rio Blanco County.

A Shell official last month told the Colorado Independent the company will consult community members as it moves forward with any natural gas drilling proposals in Routt County.

“Any future operations there will adhere to our global onshore operating principles, including those around footprint, community consultation, water, air, and overall safety,” Shell’s Kelly op de Weegh said.

Follow David O. Williams on Twitter. ]]> http://coloradoindependent.com/101583/routt-county-residents-leery-of-gas-boom-tap-experts-from-gas-patches-around-colorado/feed 1 http://coloradoindependent.com/88375/congressional-report-cutting-oil-company-tax-breaks-is-unlikely-to-affect-consumers http://coloradoindependent.com/88375/congressional-report-cutting-oil-company-tax-breaks-is-unlikely-to-affect-consumers#comments Wed, 18 May 2011 11:23:24 +0000 Eartha Jane Melzer http://coloradoindependent.com/?p=88375 Opponents of ending tax breaks for big oil companies argue that closing tax loopholes will result in higher prices at the pump, but a report from the non-partisan Congressional Research Service finds that ending the tax breaks is unlikely to cause a rise in prices.]]>

Opponents of ending tax breaks for big oil companies argue that closing tax loopholes would result in higher prices at the pump, but a report from the non-partisan Congressional Research Service finds that ending the tax breaks is unlikely to cause a rise in prices.

Senate Democrats were successful in pushing for a vote Tuesday on the Close Big Oil Tax Loopholes Act of 2011, a bill to cut tax subsidies for Exxon Mobil, BP, ConocoPhillips, Shell and Chevron.

The measure, which needed 60 percent to pass, failed with a slim majority.

The money saved by closing these loopholes — estimated at $21 billion over 10 years — would be used to pay down the deficit.

“At a time when families are feeling the pain at the pump and our deficit keeps growing at an alarming rate, we simply can’t afford to keep giving away billions in taxpayer handouts to oil companies that are doing nothing to help lower prices,” said bill sponsor Sen. Robert Menendez (D-N.J.) “The ‘Close Big Oil Tax Loopholes Act’ is based on a simple premise: we need everyone to do their share to lower the deficit, not just working families and the elderly.”

The bill would have eliminated five special oil company exemptions.

In a Senate committee hearing last week, the leaders of Exxon Mobil, BP, ConocoPhillips, Shell and Chevron called the proposal anti-completive and discriminatory and warned that it would threaten American jobs and harm innovation.

But with gas prices over $4 per gallon in much of the country, many Americans are most concerned with high fuel costs.

A report prepared for Sen. Harry Reid (D-Nev.) by the Congressional Research Service says that eliminating tax breaks for large oil companies is unlikely to have much affect on gasoline prices, because crude oil is the largest factor in the price of gas, and the price of crude oil is set by world market.

The tax changes are unlikely to affect oil output, the price of oil and, consequently, the price of gas, CRS found in an analysis of five breaks targeted by Democrats.

The Domestic Manufacturing Deduction

Oil companies get a 6 percent deduction in net income for domestic production.

Ending this would be equivalent to an increase on the tax on corporate profit, CRS said.

It is widely accepted that a proportional change in taxes on profit affects neither the firm’s incremental costs or revenues, and therefore does not change its behavior with respect to output. Since output does not change, there is little reason to believe that the price of oil, or gasoline, consumers face will increase.

The price of oil is high enough to provide incentive for continued production in the U.S, CRS said.

With current oil prices at, or near, $100 per barrel in the United States, it is unlikely that firms will slow production, or close wells as the result of the loss of the Section 199 deduction.

Intangible Drilling Costs

For nearly a century, oil and gas companies have been allowed to take immediate deductions for costs associated with exploring for oil. This was designed to enhance investment returns for financing risky exploration activities. But with oil prices high, companies don’t need incentives to explore. CRS:

Repeal of the immediate expensing of intangible drilling costs provision and replacement with a form of cost amortization more consistent with depreciation methods common in other industries likely will have no effect on current U.S. oil production, and hence no effect on current gasoline prices.

Dual Capacity Rules

Since the 1950s oil companies have been allowed to deduct the tax payments they make to other countries.

These tax payments are broadly defined, and, according to the Center for American Progress, companies have been allowed to claim credits for payments in countries that have little or no business tax.

CRS said that since elimination of this break amounts to a tax on profit it should have no effect on output or pricing decisions, and therefore no effect on the price of gasoline.

“The incidence of the tax would appear to be on shareholders.”

Oil companies are allowed to deduct a flat percentage of revenues from a well. This break is called “percentage depletion.” CRS says that it has been eliminated for most companies and should not be a factor in investment and pricing decisions by the five major oil companies.

The companies are also allowed to deduct the cost of tertiary injectants used in drilling. CRS found that the cost of ending this tax break would be very small for industry.

“[T]he five major oil companies, to which repeal would apply, earned over $32 billion in net income in the first quarter of 2011. Repeal of the [tertiary injectant] deduction for the industry is estimated by the Obama administration to yield only $6 million in revenue in 2012.”

The tax revenue generated by ending these five exemptions is expected to be 5 percent of the earnings of the largest oil companies, the report found.

Observers of the century-long quest to extract oil from the shale rocks of Colorado’s Western Slope are fond of saying “oil shale is the fuel of the future … and always will be.” Never commercially viable because of the costs and resources needed to heat and extract the kerogen trapped in the rocks, an estimated 2 trillion barrels of shale oil remains locked up – perhaps forever.

But why then has Shell spent an estimated $200 million so far on research, development and demonstration (RD&D) at its Mahogany Research Project in western Colorado? And at what point will gas prices rise so high that the cost of producing shale oil suddenly makes sense?

Dr. Jeremy Boak

“With [oil] prices going back up through the roof again,” Boak said, “[companies have] an awful lot of things to spend their money on and some of them more near-term than oil shale. The big budgets tend to move toward things that are a little closer in.” Still, Boak maintains the state and federal governments should be doing far more to encourage oil shale production than the current administrations.

The OPEC oil embargo during the Yom Kippur War saw gas prices in the United States spike from 38 cents a gallon in 1973 to 55 cents a gallon in 1974, in part prompting an oil shale boom in Colorado that culminated in the “Black Sunday” crash of 1982. Exxon literally pulled up stakes overnight and turned communities like Parachute, Rifle and Battlement Mesa into ghost towns.

Exxon is one of the companies pursuing a more scaled-back RD&D lease being offered by the Obama administration, which announced in February it was taking a “fresh look” at the Bush administration’s so-called “midnight regulations” in 2008 that established a royalty structure and opened up 2 million acres of U.S. Bureau of Land Management land in Colorado, Utah and Wyoming for potential oil shale leasing.

“The previous 2008 regulations made critical decisions such as royalty rate before the RD&D program had a chance to deliver information and answers,” U.S. Interior Secretary and former Colorado Sen. Ken Salazar said in February. “They put the cart before the horse, and in so doing they heightened the risk of speculation and bad decisions and yet another oil shale bust.”

But Exxon officials say they’re keenly aware of past mistakes and determined not to repeat them.

“It sounds to me like there was a lot more hype back then, but it’s always hard to tell where the hype came from,” Boak said. “Was it really the companies that were hyping it or was it the people out there who thought they could buy 5,000 acres and make a killing? Land speculators. Was it the large corporations or was it the Bernie Madoffs of their era that were really trying to cash in on this?”

Ramped up in the late 70s with the embargo fresh in everyone’s minds, oil shale crashed once Middle East oil began flowing freely and the labor-intensive process of surface mining and retorting oil shale was no longer cost-effective. But 30 years later oil prices are skyrocketing again in the wake of ongoing political upheaval in the Middle East and Northern Africa.

The U.S. Energy Information Administration on Monday put the average price for a gallon of regular gasoline at $3.79, closing in on the peak of $4.11 a gallon set on July 17, 2008. In Europe, gasoline broke the $8.60 a gallon barrier this spring as events unfolded in Tunisia, Egypt and Libya.

But even at those prices, commercial oil shale production is of limited interest to Europeans. While still part of the Soviet Union, Estonia developed a commercial oil shale industry, but there have been growing environmental concerns since that nation became part of the European Union.

Boak says companies in Estonia, Brazil and China continue to blaze the oil shale trail, with one Estonian firm “hunting for properties” appropriate for oil shale development in the United States. Still, none of the foreign firms have been able to produce much more than a few thousand barrels of oil a day – a drop in the bucket in terms of global demand. And now the European Union is considering banning oil shale and tar sands development because of studies showing higher greenhouse gas emissions than from conventional fuels.

Meanwhile, Republican members of Colorado’s congressional delegation continue to beat the oil shale drum. Just last month in a guest column in the Grand Junction Daily Sentinel, 3rd Congressional District Rep. Scott Tipton wrote: “The development of [oil shale] resources would lead to tens of thousands of good paying jobs and help stabilize our energy supply – putting an end to spikes in gas prices.”

Juxtapose that statement with what Tom Yelverton of ExxonMobil told the Daily Sentinel late last year: “At best, commercial production is a decade away and most likely more.”

Rep. Doug Lamborn of Colorado’s 4th Congressional District is a big backer of stepping up domestic oil and gas production, including oil shale, on the state’s Western Slope.

“It is all well and good to propose measures that may pay off decades in the future, such as alternative energy research and higher CAFÉ standards for vehicles,” Lamborn states on his website. “The most urgent and immediate solution though is to ramp up domestic production of oil and gas right now.”

Even the companies deeply involved on oil shale research say it’s years from becoming a commercial reality: “In fact, it could take up to 10 to 12 years of additional research, environmental analysis and permitting before a company could develop a federal oil shale lease,” Tracy Boyd of Shell told the Glenwood Post Independent in late 2008.

Editor’s note: This is the second in a two-part series on the future of oil shale in Colorado in the wake of rising gas prices and mounting unrest in the Middle East and North Africa. Click here for part one.

Prop 23, as I’ve blogged previously and Think Progress has enumerated in even greater detail, is an initiative sponsored by Texas independent oil refiners Valero and Tesoro. It has also received a gift of $1 million from Koch Industries. Its goal is to repeal California’s landmark law, AB 32, which seeks to limit greenhouse gas emissions in the state. Now the Wall Street Journal is reporting that both sides of the fight on Prop. 23 are upping their game:

On Tuesday, the president of the National Petrochemical and Refiners Association solicited financial support for Prop. 23 from the group’s members. “I am pleading with each of you—for our nation’s best interest and for your company’s own self-interest,” wrote Charles Drevna in an email that was reviewed by The Wall Street Journal. [...]

Meanwhile, a loose coalition of environmental groups and individuals, including clean-technology investors, has geared up to oppose Prop. 23.

Former Secretary of State George Shultz plans this weekend to hold a fund-raising event to fight Prop. 23 at his home near Stanford University. California Gov. Arnold Schwarzenegger, a vocal opponent of Prop. 23, is expected to attend.

Tom Steyer, a San Francisco hedge-fund manager, has contributed $2.5 million to the opposition campaign, while the National Resources Defense Council has given nearly $1 million. Silicon Valley venture capitalist John Doerr has given $500,000, according to filings.

No matter how you slice it, the environmental groups will be out-financed, but it looks like they have popular opinion among Californians on their side, for now. Meanwhile, WSJ notes that, at least so far, oil companies are divided as to whether they should pour money into the race:

Several big oil companies have steered clear of supporting Prop. 23. Royal Dutch Shell PLC opposes the measure, while Exxon Mobil Corp., BP PLC and Chevron Corp. remain neutral. Unlike Valero and Tesoro, these oil giants have broader operations, such as finding and pumping oil, in addition to refining and marketing it. AB 32 primarily affects oil refiners, because refining emits far more greenhouse gases than the extraction of oil.

“From the standpoint of the major oil companies, they could benefit if the independents [such as Valero and Tesoro] go out of business,” said Ann Kohler, an energy analyst at Caris & Co. “There’s a sort of chess game going on.”

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Issued as amendments to six existing research and development leases on public lands (five in Colorado and one in Utah), the 11th-hour Bush regulations set the ground rules for moving forward with commercial oil shale production if and when oil and gas companies arrive at viable technologies capable of affordably squeezing kerogen from shale rock and sand in western Colorado, eastern Utah and southwestern Wyoming.

Some estimates place oil shale reserves in the region’s Green River Formation at up to 1 trillion barrels of oil that could then be refined into petroleum. Kerogen is the organic material trapped in the shale that can be extracted at extremely high temperatures.

But the process remains highly speculative, and environmentalists who have legally challenged the Bush rules say the current technology requires far too much water for arid western lands to support, too much electricity that would further exacerbate global warming and that the process degrades sensitive Rocky Mountain landscapes with adverse impacts on wildlife and tourism.

“We want to avoid the booms and busts of the past,” said Salazar, a former U.S. senator from Colorado, referring to a devastating oil shale bust on the Western Slope in the 1980s. “We want to ensure the potential development is done in a way that is environmentally appropriate, and we want to assure that the American taxpayers get a fair return for the potential development of America’s public lands.”

The Bush rules called for a royalty rate starting at 5 percent to be paid by oil and gas companies to the federal government for the use of public lands. Critics claim that rate is far too low.

“There is a question about how those royalty rates could actually be set when these very important fundamental questions [about technology, water and power] have not been answered,” Salazar said, adding the 11th-hour process was done without public scrutiny and was too favorable to a handful of companies currently holding leases.

“These lease addenda conveyed lucrative benefits to the leaseholders to the exclusion of others,” he said, reading from a letter he sent to the inspector general today. “Further, the addenda were executed at the very end of the last administration and were issued in contrast to the underlying leases without any opportunity for public review or comment.”

Royal Dutch Shell holds three of the Colorado R&D leases and is currently part of an ongoing investigation by the Justice Department of former Bush Interior Secretary Gale Norton, who later accepted a job with Shell. The DOJ is investigating whether Norton, a former Colorado attorney general, gave favorable treatment to Shell in exchange for a position with the company.

“There are serious questions about whether those lease addenda are legal or whether they should be rescinded,” Salazar said, although he said he’ll reserve judgment until the inspector general’s report is completed. At that point he said Interior will either defend the rules, modify them or rescind them.

Salazar also announced the Bureau of Land Management will begin accepting an unlimited number of applications for a new round of R&D leases of up to 640 acres, or approximately one square mile. Energy companies have up to 60 days to apply for those leases, which will be managed under a new set of guidelines.

Besides being smaller than the existing leases, which are for more than 5,000 acres each, companies issued a new lease would have to submit a plan of development within nine months, and once approved by the BLM, would then have to get all state and local permits for development within 16 months.

The development plans, Salazar said, will have to address key concerns about water and power consumption and environmental impacts on wildlife, air and water quality and local communities. Water, he stressed, especially in the Colorado River Basin, is a key concern.

“This is an obviously important question in Colorado and Utah, which are arid states with limited water supplies where commercial oil shale development would have major impacts on agriculture and other uses,” Salazar said.

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Meeting Schedule:

Meeker: Tuesday, Feb. 20, 5-6:30pm at the Fairfield Community Center

Rangely: Wednesday, Feb. 21, 9-10:30 am at the Colorado Northwestern Community College

Grand Junction: Wednesday, 6-7:30 pm at the Doubletree Hotel

Rifle: Thursday, Feb. 22, 9-10:30, Garfield County Fairgrounds