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Grand Junction Sentinel (Colorado): Lawmakers rush to slow oil-shale push

EXTRACT: Black Sunday made Shell’s stakeholders realize it’s best to keep the government out of its business interests, Shell spokeswoman Jill Davis said.

By BOBBY MAGILL The Daily Sentinel
Tuesday, May 01, 2007

When energy company executives gather in a room and start talking about trillions of barrels of oil, most of it locked within oil shale conveniently located near the junction of Colorado, Wyoming and Utah, they appear overcome with a firm sense of optimism, as they did in April at the Utah Energy Summit.

The Piceance Basin, Utah’s Uinta Basin and Wyoming’s Green River Basin, they say, could be a one-stop shop for answers to America’s energy independence.

“There’s enough oil reserves in the United States (primarily those in the Green River Valley) to satisfy us at present energy demands for the next 400 years,” Dan Elcan, chief executive of Oil Shale Exploration Co., or OSEC, said at the summit.

OSEC is expected to soon receive the sixth and final Bureau of Land Management oil shale research and development lease for the Piceance and Uinta basins. The company’s plans to reopen the long-defunct White River oil shale mine were approved by the BLM on Monday. The mine is on a 160-acre lease in Utah about 20 miles west of Rangely.

Oil shale could “shake the world,” and free the nation from dependency on foreign oil within 15 years, Sen. Pete Domenici, R-N.M., said at the U.S. Senate Energy and Natural Resources Committee hearing in Grand Junction last year.

But as seismic as oil shale may be politically, technologically and environmentally, it isn’t so simple.

Even if massive hurdles blocking the way to commercial oil shale development are overcome, there won’t be appreciable shale oil production in Colorado until 2025, Anton Dammer, Director of Naval Petroleum and Oil Shale Reserves at the U.S. Department of Energy, said Friday.

Before oil shale can be developed commercially, Dammer said, issues with water availability, infrastructure, oil shale’s effects on the region’s socioeconomics and regulations governing shale oil production must be solved.

“If you cannot get enough water to do these projects in Colorado, you cannot do these projects,” he said. “If you can’t manage the carbon from these projects out in the West, you cannot do these projects. If you cannot get the people and the resources to build and maintain these projects, you cannot do the project. These are all big-ticket items.”

And they all present big questions that Gov. Bill Ritter’s administration is scrambling to answer.

One hundred days into Ritter’s first term, he and his staff are trying to grasp the full impact of commercial oil-shale development within a congressionally mandated time frame the Ritter administration sees as far too narrow.

“Right now the time schedule appears to be unrealistic, and the governor has asked for additional time in a recent letter to the secretary of Interior to undertake the evaluation,” Colorado Department of Natural Resources Director Harris Sherman said Friday.

In the Energy Policy Act of 2005, Congress required the Interior Department to complete an environmental impact statement on a commercial oil shale leasing program in 2007. The commercial program is separate from the research and development program, for which five leases have been issued in Colorado. One of those leases was issued to EGL Resources, another to Chevron and three to Royal Dutch Shell.

A draft environmental impact statement for the commercial program is due this summer followed by a decision on a final version expected sometime in 2008.

After the environmental impact statement is approved, the BLM will create a final regulation for the commercial oil shale program. Then, according to the Energy Policy Act, the secretary of Interior has six months — possibly sometime in late 2008 or 2009 if all goes as scheduled — to consult with states to find out if there is enough support in each state for the BLM to issue commercial oil shale leases, BLM spokeswoman Heather Feeney said.

If there is enough support, the secretary “may” conduct a lease sale in that state, the Energy Policy Act says.

Only after the states have been consulted and after the BLM creates its commercial oil shale program from scratch can leasing begin. Most likely, Feeney said, that will be 2009 or 2010 at a “minimum.”

“We don’t know what additional time will be made available at all to the states to review these documents,” Sherman said.

A change in the Energy Policy Act may be needed just for the state to get a handle on what full-scale commercial oil shale production might mean for Colorado, he said.

The Ritter administration will soon begin discussions with the Interior Department and the state’s congressional delegation to try to buy the state more time to understand the impacts of oil shale production before it goes commercial in Colorado, Sherman said.

Sen. Ken Salazar, D-Colo., said Friday he may be willing to revisit the Energy Policy Act to try to make more reasonable the amount of time the state has to respond to the Department of Interior.

But oil shale isn’t exactly on Congress’ radar screen, Salazar said.

“The sense is that there was a program that was created in the 2005 Energy Policy Act that was a good one,” he said.

Ritter takes the potential impact of oil shale development seriously, but it’s too soon for his administration to have formulated even its basic opinions about it, Sherman said.

The Ritter administration has serious concerns about oil shale production’s impact on wildlife, local economies, air quality and groundwater and surface-water quality. And, the state wants to try to prevent boom and bust cycles, he said, by ensuring the oil shale industry is self-sustaining.

The state’s message: Take oil shale slowly and carefully.

Environmentalists and even some oil shale boosters also urge the federal government to take it slow, particularly because oil shale would be exploited during a time of global climate change.

“Burning barrels of oil from any source is wreaking havoc on the planet,” Wilderness Society Assistant Regional Director Steve Smith said. “We should be careful and slow about even using it as a fuel.”

Of equal gravity, he said, is that oil shale companies have shown it takes many years to develop their technology, so there’s no reason to rush headlong into commercial oil shale leasing.

“We’re concerned Congress put into place a fast-tracked process that would” commence commercial leasing before the technology is proven to be viable, Colorado Environmental Coalition Executive Director Elise Jones said. “Go slowly and make sure the level of impacts are acceptable before Colorado says yes to this.”

Dammer said all the rhetoric about stopping some head-long rush into commercial development is nonsense.

“Where are we rushing?” Dammer said. “I look at it just the opposite. Let’s get out there and look at the issue and start preparing for something.”

If people keep saying, “It’s too soon,” he said, “we’re pushing a 2025, 2030 deadline away. That just doesn’t make any sense to me.”

Regulations for a commercial program, he said, must be developed as soon as possible because energy companies will be reluctant to invest in a fuel for which regulations have yet to be defined.

“The regulatory impediment is just the length of the process,” he said.

Nonetheless, going slowly may be the key to making oil shale the sure thing its proponents hope it will be, said James T. Bartis, senior policy researcher for the RAND Corp., whose 2005 report on oil shale development prospects says the future of oil shale remains uncertain, but the West’s vast reserves should not be ignored.

Bartis, who testified April 17 before the U.S. House Committee on Natural Resources Subcommittee on Energy and Mineral Resources, recommended to Congress that it halt the commercial oil shale leasing program now in the development stages in favor of an incremental program that would give companies time to develop their technology before commercial leases are issued.

It’s “absolutely absurd” to think oil shale should be headed for commercial development when companies aren’t ready, Bartis said Thursday.

“We’re talking billions and billions of dollars,” he said. “My take is: The best way to screw up here is to go too fast. It’s that ‘too fast’ that gets you to the same situation we got to before where we get to a dead end. We end up with another Black Sunday, another boom-bust cycle.”

In his testimony, Bartis said Congress should cancel the commercial environmental impact statement, rescind the requirement that the BLM develop regulations six months after the statement is signed, conduct a second round of oil shale research and development leasing and commit to a full-scale research program on the environmental impacts of commercial oil shale development.

Such environmental studies are key, he said.

“Most process concepts for producing liquid fuels from oil shale cause carbon dioxide emissions in excess of those associated with refining conventional crude oils,” he said in his congressional testimony, adding later that carbon sequestration is going to be vital.

If elected officials are smart enough to force oil shale production to go forward slowly, the Wilderness Society’s Smith said, “those people will be visionaries if it comes to pass.”

The Senate may be listening.

Senate Energy and Natural Resources Committee Chairman Sen. Jeff Bingaman, D-N.M., said in a statement that Congress is closely monitoring the BLM oil shale programs.

Because oil shale is an enormous resource, Bingaman said, Congress must ensure it is developed in a measured manner and with substantial state and local input.

“Commercial leasing should not take place until the technology is proven,” he said.

Salazar added, “Let’s be thoughtful and deliberate about it.”

Domenici, now in the minority on the committee, could not be reached for comment.

Meanwhile, lawmakers await a report from the federal Strategic Unconventional Fuels Task Force, which was created by the Energy Policy Act to recommend to Congress and the president how the government can expedite exploitation of oil shale and other unconventional energy sources.

Dammer, who heads the task force, said the report is in the “final throes” of approval and should be sent to President George W. Bush soon.

Mesa County Commissioner Craig Meis, who sits on the task force, said the energy industry and the government are learning from the mistakes of the past to try to prevent another Black Sunday from hitting the Western Slope.

He said Shell’s in situ process is promising, and he’s “cautiously optimistic” oil shale production here can be a success partially because private money is being invested in Shell’s research and development projects instead of being subsidized by the government.

Black Sunday made Shell’s stakeholders realize it’s best to keep the government out of its business interests, Shell spokeswoman Jill Davis said.

The problem, she said, was “the speculation that was created by federal endorsement and the federal leg up that was offered to oil shale back then. In our community meetings, we’ve stressed the fact that Shell’s going this alone and has been for years. This isn’t just something we’re doing for the short term.”

Bobby Magill can be reached via e-mail at [email protected].

 

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