On Nov. 17, the United States Bureau of Land Management published the final regulations to establish a commercial oil shale program that the federal agency indicates could result in the addition of up to 800 billion barrels of recoverable oil.
Keeping with the Energy Policy Act of 2005 and the Mineral Leasing Act of 1920, the BLM's final regulations will 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 at locations in the western U.S.
"The U.S. needs all types of energy resources, both conventional and renewable, in order to meet our future needs," pointed out Stephen Allred, interior department assistant secretary of land and and minerals management. "Production from domestic resources makes us more secure and less vulnerable to future energy crisis 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 petroleum may be produced, explained the federal agency. The regulations provide for at phased approach to development on public lands in the west, including Castle Valley and Utah. Commercial development of oil shale will not start until 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 investments necessary for the industry to develop technologies to extract the resource in an environmentally sound manner. The investments could exceed $1 billion.
Before oil shale leases are issued, additional site-specific National Environmental Policy Act analysis would be completed on the proposed development, continued the federal agency. Once a lease is issued, the developer will have to obtain all required permits from state and local authorities under the respective established processes before any operations can begin. Another round of NEPA analysis would be conducted before any site-specific plans of development are approved.
The regulations incorporate provisions of federal statutes relating to maximum oil shale lease size, maximum acreage limitations, rental and diligence, noted the agency. The guidelines also establish a royalty rate based on a time-adjusted rate, beginning at 5 percent during the first five years of commercial production and increasing 1 percent per year until the rate reaches 12.5 percent. Forty-nine percent of the royalties are shared with the states within which the leases are found.
The regulations address energy act provisions establishing work requirements and milestones to ensure diligent development of leases, noted the federal agency. Standard components of a BLM program, including lease administration and operations, are outlined in the rule as well as additional NEPA documentation requirements for applicants.
According to the U.S. Geological Survey, the nation contains more than one-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 Utah, Colorado 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 James Caswell, BLM director. "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, indicated the federal agency.
For instance, the site-specific NEPA analysis will include the opportunities for public involvement and comment that are part of the Programmatic environmental impact statement process, noted the federal agency.
The regulations are one of several steps designed to harness the nation's 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.
On Nov. 17, the assistant U.S. Department of the Interior secretary also signed the record of decision on a programmatic environmental impact statement amending several resource management plans to open lands for application for potential oil shale leasing in the future. In the PEIS, 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 will have to be completed before leasing or development occurs, concluded the federal agency.