U.S. Interior Secretary Ken Salazar on Tuesday called on his department’s inspector general to investigate so-called midnight oil shale leasing regulations issued in the waning days of the Bush administration.
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.
