OIL

Obama proposes rollback of shale plans for Rocky Mountain West

The Interior Department today announced plans to significantly downsize a George W. Bush administration plan to develop oil shale in the West, a move likely to spark fury among Capitol Hill Republicans.

The proposal -- which is backed by conservationists, agricultural groups, some local officials and Democrats -- would scale back research and development of a fuel that has tantalized industry and policymakers for more than a century in the West.

And it comes days after House Republicans advanced a pro-oil shale bill by Rep. Doug Lamborn (R-Colo.) that would turn the Bush plan into law (Greenwire, Feb. 1).

The Bureau of Land Management's proposal would reduce available lands for oil shale development in Colorado, Wyoming and Utah by more than 75 percent. In addition, it would only allow research on the leases until industry demonstrates that commercial development is technically viable and environmentally safe.

"The preferred alternative continues our commitment to encouraging research, development and demonstration projects so that companies can develop technologies that can lead to economic and commercial viability," BLM Director Bob Abbey said. "Because there are still many unanswered questions about the technology, water use and impacts of potential commercial-scale oil shale development, we are proposing a prudent and orderly approach that could facilitate significant improvements to technology needed for commercial-scale activity."

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Under the BLM proposal, lands with wilderness characteristics, areas of critical environmental concern, core habitat for the sage grouse and Wyoming's Adobe Town would be removed from the 2 million acres originally allowed under the the Bush administration's 2008 plan.

The plan leaves 461,965 acres for research and development of oil shale, including 35,308 acres in Colorado, 252,181 acres in Utah and 174,476 acres in Wyoming. In addition, nearly 100,000 acres would be made available in eastern Utah for development of tar sands, a type of hydrocarbon-wet sedimentary deposit.

Interior said the U.S. Geological Survey is evaluating baseline water resources to better gauge how groundwater and surface water could be affected by commercial-scale oil shale development.

Oil shale, not to be confused with the shale oil being produced in places such as North Dakota's Bakken formation, is yet to be developed at commercial scale because it must be heated to extremely high temperatures before it can be refined, a process many fear will deplete scarce water resources.

The government has issued a handful of research and development leases in the West, but none appear close to reaching commercial scale.

The economic and geopolitical stakes could be huge, supporters say. USGS believes the United States holds the equivalent of 2 trillion barrels of oil, about half of the world's oil shale reserves.

Reactions

The American Petroleum Institute blasted today's announcement, arguing it creates uncertainty for industry over whether to invest in a costly but potentially lucrative fuel source.

"Delaying and restricting development is not conducive to producing the energy that American's rely on," said Reid Porter, a spokesman for the group. "The administration is continuing actions that send negative signals to industry and capital markets at exactly the wrong time for the American public."

Rep. Rob Bishop (R-Utah), who chairs the Subcommittee on National Parks, Forests and Public Lands, yesterday said the decision could be a sticking point when Interior officials meet with his office in the coming weeks to discuss the administration's 2013 budget.

"Once again, the Obama administration caved in to their liberal environmentalist allies and said no to creating jobs and lowering energy costs for Utahns," said Sen. Orrin Hatch (R-Utah), in a statement. "The Energy Department says there's nearly a trillion barrels of recoverable oil in the three-state region from oil shale, and 90 percent of that is on federal lands."

Interior Secretary Ken Salazar has long advocated a cautious approach to oil shale, saying last February that the department needs to do it "in a wise way" that addresses impacts to water and earns a fair return for taxpayers.

As a Democratic senator for Colorado in 2008, Salazar criticized BLM's oil shale review, saying "the [Bush] administration seems bent on tuning out the voices of Coloradans, ignoring the BLM's own conclusions about oil shale and rushing ahead with a last-minute fire sale of commercial oil shale leases at any cost."

Today's announcement drew early support in Colorado from Bill Midcap, director of renewable energy for the Rocky Mountain Farmers Union.

"We already face a water shortage in the West that threatens farmers and ranchers," he said in an emailed statement. "We simply cannot gamble away our water on oil shale speculation and risk losing the farming and ranching economy that we depend upon for our food and fiber."

Midcap said existing research and development projects should help determine how much water will be needed before commercial leasing begins.

The state of Colorado last year said it, too, has concerns about the impact oil shale development could have on its economy and natural resources.

In comments to BLM last spring, state officials said commercial oil shale development "would likely constitute the largest industrial development in the state's history, with enormous implications for all of northwest Colorado and for the state."

The governor's office did not respond to a request for comment in time for publication.

Legal settlement

According to BLM, oil shale contains solid bituminous materials called kerogen, an organic substance derived mainly from aquatic organisms that is a precursor to crude oil. It must be heated to temperatures exceeding 750 degrees in order to ready for refinement.

Interior's announcement today comes one year after it struck a settlement with environmental groups that successfully challenged the 2008 Bush plan for oil shale (E&ENews PM, Feb. 15, 2011). The agency is also evaluating whether to change royalty rates for oil shale set by the Bush administration that aim to entice investors.

Oil shale supporters last year blasted the Obama administration for settling with the environmental groups.

"This is the classic case of a 'Sue me, and I'll roll' approach to government," said Dan Kish, senior vice president for policy at the Institute for Energy Research, at the time. "Congress should investigate."

"Secretary Salazar continues his personal crusade against an energy source that could change the world, and one which other countries including China are pursuing aggressively," Kish added this morning. "His announcement that he will hold an offshore wind lease sale for wind that is not economic at two and a half times the cost of other energy shows that his excuse that oil shale is not economic is a lie."

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