Story last updated at 11/25/2008 - 4:35 pm
WASHINGTON, D.C. - As part of its ongoing effort to increase and diversify America's energy supply, the Department of the Interior's Bureau of Land Management published final regulations on Nov. 17 to establish a commercial oil shale program that could result in the addition of up to 800 billion barrels of recoverable oil from the Western United States.
In keeping with the Energy Policy Act of 2005 and the Mineral Leasing Act of 1920, the BLM final regulations provide the critical "rules of the road" on which private investors will rely in determining whether to make future financial commitments to prospective oil shale projects.
"The U.S. needs all types of energy resources, both conventional and renewable, in order to meet our future needs," said Assistant Secretary of Land and Minerals Management at Interior C. Stephen Allred. "Production from domestic resources makes us more secure and less vulnerable to future energy crises, and increases our security and economic well-being. The tremendous oil shale resources that we have in the U.S., containing several times the oil reserves of Saudi Arabia, can be a vital component of that secure future."
Oil shale is a fine-grained sedimentary rock containing organic matter from which oil may be produced. The regulations provide for a thoughtful, phased approach to oil shale development on public lands in the West. Commercial development of oil shale will not begin until it is technologically viable, which is not expected for several years. 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 in an environmentally sound manner. 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 leasing regulations incorporate provisions of the Energy Policy Act and the Mineral Leasing Act relating to: maximum oil shale lease size; maximum acreage limitations; rental; and lease diligence. 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% every year thereafter until the rate reaches 12.5%. Forty-nine percent of the royalties are shared with the states within which the leases are found.
The regulations address provisions of the Energy Policy Act that establish work requirements and milestones to ensure diligent development of leases. Standard components of a BLM leasing program ? including lease administration and operations ? are included, as well as additional NEPA documentation requirements for lease applicants.
According to the U.S. Geological Survey, the U.S. 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.
"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," said BLM Director James Caswell. "The BLM is taking extraordinary steps to improve our domestic energy security, including the establishment of regulatory regimes designed to boost geothermal, solar and wind development and protect our public land resources."
Throughout the process, the BLM will collaborate and consult with affected states, tribes and local governments to ensure that their interests and concerns surrounding the oil shale program continue to be addressed. For instance, the site-specific NEPA analyses would include the same opportunities for public involvement and comment that are part of the Programmatic Environmental Impact Statement process.
The regulations are just one of several steps designed to harness these vast energy resources. The BLM has also issued research, development and demonstration (RD&D) leases for five oil shale projects in Colorado's Piceance Basin and one in Utah.