The Bureau of Land Management on Tuesday published for public comment its proposed "rules of the road" for commercial development of up to 800 billion barrels of recoverable oil currently locked within shale under land in Utah and other Western states.
Interior Secretary Dirk Kempthorne said in a teleconference with media that more needs to be done to develop energy sources closer to home, where a gallon of gas costs over $4. One resource, he said, is oil shale, which he noted isn't expected to be commercially developed for several years.
"The enormity of this potential cannot be overstated," Kempthorne said.
Although oil shale was center stage Tuesday, Kempthorne said it's part of a portfolio being developed that includes alternative sources such as geothermal, wind and solar. "We're moving all of them aggressively," he said.
The proposed BLM regulations are intended to help private investors decide whether to fund future oil shale projects on public lands. Kempthorne said any delay in finalizing the regulations may discourage those investors.
But the BLM's final regulations can't be published until Congress lifts a 2008 ban on funding the finalizing of oil shale program regulations. President Bush has asked Congress to remove the ban, which is scheduled to expire Oct. 1. The ban was put in place by the Consolidated Appropriations Act for Fiscal Year 2008. The fear is that any delays in passing a new spending bill will prolong the ban.
Members of Utah's congressional delegation have previously expressed their support for developing oil shale resources.
"We hope to persuade Congress to end the prohibition," said Kempthorne, who is encouraged by bipartisan discussions among lawmakers who agree that "something needs to be done."
With the ban out of the way soon, it's predicted that the first leases would be struck by about 2012, with the potential for "significant" oil production from shale by 2015 or 2016. Leases must include agreements on what Assistant Interior Secretary Stephen Allred called "full restoration" of impacted lands and bonding amounts that ensure the federal government can, if needed, step in and take over reclaiming the land.
Kempthorne said environmental standards in lease proposals will not be "subpar" in order to make the numbers work. "It has to meet the highest standards or the American public is going to say, 'That's unacceptable,"' he said.
The 16,000-square mile Green River formation alone, located in Colorado, Utah and Wyoming, is thought to hold about 800 billion recoverable barrels of recoverable oil, most located under federal lands.
Since 2006 there have been five test projects going on in Colorado and one in Utah that include drawing oil from shale while it's in the ground without removing ore, and, in Utah, mining ore, crushing it, then heating it to extract the oil.
"They are designed for specific kinds of deposits," Allred said. One method of extraction, he noted, might not work where others will.
Once commercial development actually begins and infrastructure is needed to get things going, it's not "anticipated" that any federal subsidies will be used to defray startup costs for private industries.
Even before the phone conference with Kempthorne, several environmental and conservation groups issued a statement saying the Interior Secretary's announcement gives a "false impression" that oil shale offers hope of lowering the price of gas, at least any time soon. Those groups say the industry is still years away from having technologies that offer the technical, economic and environmental viability to get oil from shale.
"Instead of gambling our resources on unproven fuel sources, such as oil shale, we should invest in proven options that will reduce prices such as higher fuel economy standards, energy efficiency and renewable generation technologies," said Chase Huntley, energy policy adviser for The Wilderness Society.
Also on Tuesday in its draft rules, the Interior Department proposed lowering the royalty rates for the extraction of oil from shale on 2 million acres of public property in Colorado, Utah and Wyoming.
Those rates would be less for a time than what the government collects from companies producing oil on other federal lands, including off-shore in the Gulf of Mexico and Alaska."It is basically recognition that in the beginning there has to be a lower royalty to recognize the pioneering nature of this business," said Glenn Vawter, executive director of the National Oil Shale Association.
Contributing: Associated Press E-mail: [email protected]
E-mail: [email protected]