BLM releases oil shale rules

Posted by egable on November 17th, 2008 filed in Energy development, Public lands

The Bureau of Land Management published final regulations today to establish a commercial oil shale program that could result in the addition of up to 800 billion barrels of recoverable oil from lands in the Western United States.

Oil shale is a fine-grained sedimentary rock containing organic matter from which oil may be produced.

The regulations provide for a phased approach to oil shale development on public lands in the West, although commercial development is not expected for several years. BLM says the regulations will provide a basis for decisions, as “rules of the road” for the large investment that will be necessary for industry to develop technologies to extract the resource. Those investments could exceed $1 billion.

Before any oil shale leases are issued, additional site-specific National Environmental Policy Act (NEPA) analysis would be completed on the proposed development. Once a lease is issued, the lessee will also have to obtain all required permits from state and local authorities, under their respective permitting processes, before any operations can begin. Another round of NEPA analysis would be conducted before any site-specific plans of development are approved.

The rule also establishes a royalty rate based on a time-adjusted rate, beginning at 5 percent during the first 5 years of commercial production, and then rising 1 percent every year thereafter until the rate reaches 12.5 percent, the current rate for conventional oil and gas development. Forty-nine percent of the royalties are shared with the states within which the leases are found.

According to the U.S. Geological Survey, the United States holds more than half of the world’s oil shale resources. The largest known deposits of oil shale are located in a 16,000-square mile area in the Green River formation in Colorado, Utah and Wyoming. Federal lands comprise 72 percent of the total surface of oil shale acreage in the Green River formation.

The regulations are just one of several steps designed to harness these vast energy resources. The BLM has also issued research, development and demonstration leases for five oil shale projects in Colorado’s Piceance Basin and one in Utah.

In addition, C. Stephen Allred, the Interior Department’s assistant secretary for land and minerals management, signed the record of decision today on a programmatic environmental impact statement (EIS) that would amend several resource management plans to open lands for application for potential oil shale leasing in the future. In the EIS, the BLM amended land-use plans in Utah, Colorado, and Wyoming to set aside approximately 1.9 million acres of public lands for potential commercial oil shale development. Additional site-specific NEPA analysis would have to be completed before leasing or development occurs.

Sen. Ken Salazar (D-Colo.) called the regulations “premature and flawed” in a statement today, noting that BLM has not addressed how much water and electricity would be needed for commercial development of oil shale or where it would come from. “A royalty rate of 5 percent, of which Colorado would receive half, is a pittance,” Salazar added. “The administration is setting up Colorado to be sold short.”