Energy policy — oil shale: Secretary of Interior Salazar requests probe of 11th hour oil shale leases

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From the Houston Chronicle (Jennifer A. Dlouhy):

Salazar, a former Democratic senator from Colorado, said there were “serious questions” surrounding the abrupt changes made to six oil shale research, demonstration and development leases on Jan. 15, five days before former President George W. Bush left office. The changes governed the terms of any future commercial oil shale production on six leased tracts of federal land. Salazar said the questionable changes included the locking in of a potentially “lucrative” 5 percent royalty rate that energy companies pay to the federal government. That rate is well below the double-digit percentage commanded on other public lands. Salazar formally asked Mary Kendall, the Interior Department’s inspector general, to launch an investigation.

The six existing leases that Salazar wants scrutinized include three held by Shell Oil Co. that are already being reviewed as part of a Justice Department probe of former Interior Secretary Gale Norton. Investigators are examining whether Norton illegally steered the oil shale leases to Shell while negotiating with the company for her current job there.

The secretary made his call for a probe public even as he moved to open up new public lands in the West for new oil shale development. Companies will have 60 days to apply for the second round of oil shale research, development and demonstration projects on new tracts in Colorado, Utah and Wyoming. These projects will be limited initially to 160 acres. If energy companies prove they can commercially produce shale oil from the lands, the leases could eventually be expanded to 660 acres — a fraction of the 5,120 acres that would be allowed for commercial production under the initial six contracts.

More coverage from the Colorado Independent (David O. Williams):

But the process remains highly speculative, and environmentalists who have legally challenged the Bush rules say the current technology requires far too much water for arid western lands to support, too much electricity that would further exacerbate global warming and that the process degrades sensitive Rocky Mountain landscapes with adverse impacts on wildlife and tourism. “We want to avoid the booms and busts of the past,” said Salazar, a former U.S. senator from Colorado, referring to a devastating oil shale bust on the Western Slope in the 1980s. “We want to ensure the potential development is done in a way that is environmentally appropriate, and we want to assure that the American taxpayers get a fair return for the potential development of America’s public lands.” The Bush rules called for a royalty rate starting at 5 percent to be paid by oil and gas companies to the federal government for the use of public lands. Critics claim that rate is far too low. “There is a question about how those royalty rates could actually be set when these very important fundamental questions [about technology, water and power] have not been answered,” Salazar said, adding the 11th-hour process was done without public scrutiny and was too favorable to a handful of companies currently holding leases.

From the Colorado Independent (David O. Williams):

The opposition has politicized the debate, Jeremy Boak, head of the Center for Oil Shale Technology and Research at the Colorado School of Mines, told the AP. Boak said Salazar’s decision to limit new RD&D leases and more closely monitor their progress will inhibit research. “I feel like the arguments are highly political arguments, not technical ones,” Boak said.

But Gov. Bill Ritter Tuesday issued a statement supporting Salazar’s new rules for the next round of RD&D leases, as well as his decision to pursue an Interior Department investigation of amendments made to previous leases during the waning days of the Bush administration.

More oil shale coverage here and here.

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