Oil shale decisions could affect Garfield County

RIFLE, Colorado — The Bureau of Land Management released final commercial oil shale regulations on Monday, a move that some Democrats in Colorado’s congressional delegation recently sought to block.

A U.S. Department of Interior official also signed a record of decision on Monday that opened up about 2 million acres across Colorado, Utah and Wyoming to commercial oil shale development.

Those two actions will largely clear the way for the eventual leasing of 360,000 acres of the Piceance Basin, which stretches across portions of Garfield, Rio Blanco and Mesa counties and is home to one of the richest oil shale deposits in the world.

But leasing won’t come immediately, said Tracy Boyd, a spokesman for Shell Exploration and Production, which has three experimental federal oil shale leases in the Piceance Basin.

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, Boyd said.

“There are people who say, ‘There goes the BLM and the Bush administration on their drive to do a fire sale of commercial oil shale regulations before the end of the administration,” Boyd said. “There is nothing further from the truth. The regulations do not authorize leasing. It also doesn’t set anything in motion that will lead to leasing. They just define the parameters under which eventual leasing will occur.”

The BLM actions on Monday set off a wave of protests among many environmental groups and state officials. Some environmentalists called the BLM’s release of final regulations and signing of the record of decision a “gift” to the oil industry. That’s because those actions did not leave any avenue for a person or group to file an administrative appeal, they say.

The final regulations will become effective on Jan. 17, according to the Federal Register.

“The Bush administration is maintaining an unlawful position by amending these resource management plans without providing the public with an opportunity to have their decisions administratively appealed,” said Melissa Thrailkill, a staff attorney for the Center for Biological Diversity. “We are considering all our options. That includes legal action in federal court.”

Many in Colorado’s congressional delegation also criticized the BLM’s actions on Monday, especially the release of final regulations.

“Rather than completing the necessary research and development, the Bush administration is rushing ahead with rules for a development process they know little about,” said U.S. Sen. Ken Salazar, D-Colo., faced strong Republican criticism this year for his efforts to block the issuance of final regulations. “I am immediately concerned about the royalty rates that it has established. The administration is setting up Colorado to be sold short.”

But BLM Director James Caswell said oil shale is a “strategically important domestic energy source that should be developed to reduce the nation’s growing dependence on oil from politically and economically unstable foreign sources.”

Oil shale facts What is oil shale? It is a fine-grained sedimentary rock containing organic matter from which oil may be produced. It is estimated that there are close to 1 trillion barrels of oil locked up in oil shale deposits in Garfield, Mesa and Rio Blanco counties, according to a 2005 RAND report. How would it be developed: Most research into oil shale recovery in Colorado is focusing on in-situ processing, which means extracting hydrocarbons without having to mine oil shale. When the oil shale industry was operating in Western Colorado before the bust of the early 1980s, the shale was mined out of the ground and then heated above the surface to make oil. Several companies are pursuing different strategies for recovering oil from the shale in Colorado. However, many in the area recognize Shell as the leader in that effort. Source: The Bureau of Land Management and previous Glenwood Springs Post Independent reports.

Rate of return

The BLM’s oil shale regulations call for a royalty rate of 5 percent for the first five years of commercial production. It will rise 1 percent each year until it reaches 12.5 percent, according to the BLM. Colorado will receive 49 percent of any revenues generated from oil shale development in the state.

That rate is much lower than the 12.5 percent to 18.8 percent the government collects from companies harvesting conventional oil and gas on public lands.

Salazar called the 5 percent rate a “pittance.” But Boyd, of Shell, said it was too high.

“That is not what we were hoping for, nor what we had proposed,” Boyd said of the royalty rate. “We were hoping for a lower rate that would be more conducive to get a startup industry off the ground.”

Boyd said the federal royalty is one of the key parameters to consider as it continues to invest in oil shale research.

“How could you assess the viability of a project if you do not know what your taxes will be?” he said.

‘Serious questions’

In the wake of the BLM’s actions on Monday, Harris Sherman, executive director of the Colorado Department of Natural Resources, said state officials intend to review the new regulations with President-elect Barack Obama’s new administration. He said oil shale may hold great promise to meet the country’s energy needs, but added that Coloradans don’t have answers to “serious questions” about its development.

Those questions include what technologies will be utilized, what is the cost of extraction, what are the likely environmental impacts and how they can be mitigated, Sherman said. But one of the largest looming questions about oil shale development would be its impacts on the state’s water, he said.

Sherman also said the royalty rates set in the regulations could potentially shortchange Colorado and federal government of billions of dollars in revenues.

The Associated Press contributed to this report.

Contact Phillip Yates: 384-9117

pyates@postindependent.com



Post Independent, Glenwood Springs, Colorado CO