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November 30, 2012
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Watchdog group opposes oil shale research subsidy

GLENWOOD SPRINGS, Colorado - A national government watchdog organization wants to put an end to subsidies for research and development of U.S. oil shale reserves, according to a new report.Most immediately, the Taxpayers for Common Sense (TCS) group, based in Washington, D.C., is objecting to a proposal by U.S. Rep. Ralph Hall, R-Texas.Hall's plan to spend $50 million in taxpayer money - $10 million a year for five years - for research into oil shale development, is a waste of public money, according to TCS co-founder Jill Lancelot of Denver."We're not against the industry, but let them do it themselves," she told the Post Independent on Thursday. She contends the industry should pay its own way in terms of research and development costs.Lancelot's views were backed up by Jim Spehar, a former Mesa County commissioner, Grand Junction city council member and a believer in the future of oil shale."We're going off a fiscal cliff, and don't need to be doing subsidies. I've never heard of anybody in industry even asking for subsidies. They're priding themselves on doing it on their own," Spehar said.Glenn Vawter, director of the National Oil Shale Association in Glenwood Springs, said the proposed legislation is a way to do what taxpayers want."This has come out, in large part, because those that oppose oil shale have said there's not enough information out there" about the prospects for a commercially viable industry, Vawter said."It's just an R&D effort, funding for government agencies to get more information," he said. "I think it's the kind of thing that people in the country would like to see the government do."Spehar, however, pointed out that Shell's third-quarter profits last year were $7.2 billion. "Does that sound like somebody who doesn't have enough money to do this?" he asked.Vawter conceded that the industry does receive some federal subsidies, such as relatively low-cost leases for federal lands."But they're paying for that," he said, in bonus payments attached to lease agreements, some of which is channeled to cities and counties impacted by oil shale development activities.For instance, he said, energy companies in 1974 paid out $450 million in bonus payments for the C-a and C-b oil shale tracts in the Piceance Basin.The last federal cash subsidy for an oil shale operation, Vawter said, was for Unocal in the early 1990s, for its oil shale mine and processing operation on Parachute Creek.Unocal closed down its operation in 1991, one of the last to do so in the wake of the oil shale bust of 1982. The bust was precipitated by the closing of the Exxon Corp.'s Colony II Oil Shale Project in May of that year.Lancelot, Spehar and Vawter all agreed that massive, direct subsidies for the industry, of the type that happened in the 1970s and early 1980s when the most recent oil shale boom blew through the Western Slope of Colorado, do not make sense."Today, the commercial developers are not seeking that," Vawter said. Things were different decades ago, he said, "when the government was throwing so much money at it" and the industry simply accepted it.A statement issued by the TCS states, "The federal government made $3.2 billion in loan guarantees and $3.7 billion in price guarantees - all taxpayer dollars - available to oil companies to commercialize oil shale in the 1980s. The returns on those investments included devastated local economies, abandoned projects and a failed oil shale industry."As part of the group's campaign to discourage future subsidies, Spehar and Lancelot argued that the U.S. Bureau of Land Management should hold off in setting royalty rates for future oil shale production.The agency, at congressional direction, had set the royalty rate at 5 percent under the 2005 Energy Policy Act, according to TCS.Spehar and Lancelot each said that rate is less than half the rate required for oil and gas development on government lands, currently at 12.5 percent.The BLM is working on new regulations governing oil shale development, and both Lancelot and Spehar believe the work is unnecessary given that most observers say a viable commercial oil shale extraction industry is decades away and the value of the resource remains unknown.In speaking publicly against Rep. Hall's bill, and against oil shale subsidies in general, Lancelot said, "We hope that somebody is going to listen."To the industry, she said rhetorically, "If you think this is a good investment, invest your money. Don't invest my money."jcolson@postindependent.com


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The Post Independent Updated Nov 30, 2012 01:35AM Published Nov 30, 2012 01:34AM Copyright 2012 The Post Independent. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.