Salazar orders fresh look at first round of oil shale leases

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Feb. 16 -- The US Bureau of Land Management will take a fresh look at commercial oil shale rules and plans that the Bush administration issued in 2008 to determine if they need to be updated to reflect the latest research and technologies, to account for expected water demands in the arid US West, and to ensure they provide a fair return to the taxpayer, said US Interior Sec. Ken Salazar.

Salazar said the US Geological Survey also will analyze baseline water resource conditions in the Colorado River basin where an estimated 2 trillion bbl of oil equivalent is locked in massive western Colorado, eastern Utah, and southern Wyoming formations. The purpose will be to improve the understanding of groundwater and surface water systems which could be affected by commercial-scale oil shale development, as the US Government Accountability Office recommended in a November report, the secretary said.

“I think water has to be a part of the dialogue,” he maintained during a Feb. 15 teleconference with reporters. “We’re looking at limited water resources, and from everything we’ve seen, there are significant questions about how much water will need to be used to commercially produce oil shale.”

BLM Director Robert V. Abbey, who also participated, said the agency, which recently solicited and received a second round of nominations for research, development, and demonstration (RD&D) leases for oil shale on public land in Colorado and Utah, is committed to helping companies develop their technologies to determine if they are viable commercially, to determine what their water and power needs might be, and to ascertain their potential environmental impacts.

‘Window to consider’
“As companies apply their bench-scale technologies on those RD&D leases, we need to ensure that our commercial oil shale regulations and plans keep pace with the latest information,” Abbey said. “With commercial development of oil shale several years down the road, we have a window in which to consider how we might improve the 2008 regulations and plans for commercial development.”

Both officials emphasized that the US Department of the Interior is committed to eventual development of the oil shale resources in the three states, but added that it must take place with a full understanding of conditions ranging from water availability and environmental consequences to the necessary economics and best technologies.

“Our country needs to move forward and build a successful oil shale development program,” Salazar said. “We need to know if technologies are being developed which work on a commercial shale. We need to understand impacts on western watersheds and land. We need to understand the economics of development. We need to know how much water will be required for commercial oil shale production. These basic questions are why we need to support a robust RD&D program. It also shows why we have to be cautious.”

Water is a particularly crucial question since it has become increasingly apparent that allocations to the seven states which signed the Colorado River Compact in the 1930s were overly optimistic, he continued. “Anyone who has visited Lake Mead in the last year, as I have, and seen the water levels there can see there’s a problem,” Salazar said. “Another issue which has to be on the table is that the change in weather patterns due to climate change could reduce the amount of water available in the region by as much as 20%.”

2008 actions
Abbey said the Bush administration amended eight of BLM’s land use programs in Colorado, Utah, and Wyoming in November 2008 to make public land available for commercial oil shale development, and two other land use plans to expand acreage available for tar sands development in Utah. These actions made nearly 2 million acres available for potential development, he noted.

BLM also issued regulations at that time which set the oil shale royalty rate at 5% for the first 5 years of commercial production, and raised it 1%/year thereafter until it reached a maximum 12.5%, he said.

“BLM’s RD&D program has laid the foundation for companies to begin research, demonstration and development projects on public land, and to help determine how and whether their technologies might be viable on a commercial scale,” Abbey said.

The public will have the opportunity over the coming months to comment as DOI considers whether the royalty rates should be fixed after more is known about emerging oil shale technologies, whether future applications to lease should include specified resource protection plans, and whether aspects of the existing regulations should be clarified, he indicated. BLM also has resolved two lawsuits which were filed in federal court after the 2008 actions were taken, Abbey said.

Contact Nick Snow at nicks@pennwell.com.



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