Salazar Reforms U.S. Oil Shale Program


Offers New RD&D Leases; Asks IG to Investigate 11th Hour Lease Addenda


10/19/2009

Contact: Frank Quimby (DOI) (202) 208-6416
Matt Spangler (BLM) (202) 912-7414

WASHINGTON, D.C. – Secretary of the Interior Ken Salazar today took steps to help the country develop technologies that could potentially unlock the nation’s oil shale reserves while protecting taxpayers, water resources, the environment, and local communities.

Pledging to reform the nation’s oil shale program, Salazar announced that the Department of the Interior is offering additional opportunities for energy companies to conduct oil shale research, development and demonstration (RD&D) projects on public lands in Colorado, Utah, and Wyoming. In addition, Salazar has asked the Department’s Inspector General to investigate a set of lease addenda that the previous administration entered into with the holders of six existing RD&D leases on January 15, 2009.

“For the last century, Americans have been working to find the keys to the vast kerogen reserves that are locked up in Western shale,” said Secretary Salazar. “If we are to succeed in unlocking oil shale’s great potential, we must first answer fundamental questions about water use, power use, and environmental and social impacts of commercial-scale development. With this new round of RD&D leases, we hope to move closer to responsibly and sustainably developing our oil shale resources.”

Energy companies will have 60 days after publication of a Federal Register notice to submit applications for the second round of RD&D leases that Secretary Salazar announced today. Potential lessees may nominate up to 160 acres for RD&D. If the lessees demonstrate the ability to commercially produce oil equivalent derived from shale, up to 480 additional contiguous acres could be added to the lease for commercial-scale development. The RD&D nominations will be reviewed by an interdisciplinary team of BLM professionals and representatives from the State of Colorado, Utah, and Wyoming, as appropriate, and the Departments of Defense and Energy. The interdisciplinary team will consider the potential of each proposal to advance knowledge of effective technology, economic viability, and the impacts of oil shale development. A Federal Register notice soliciting nominations will be published in the coming days.

Secretary Salazar has also asked Interior’s Inspector General to investigate a set of favorable conditions and low royalty rates that were offered on January 15, 2009 – five days before the end of the previous administration – to energy companies holding existing RD&D leases. Secretary Salazar determined that the timing and circumstances of the previous administration’s modifications of existing RD&D leases – called lease addenda – merit additional review.

“Taxpayers deserve answers to serious questions about why these lease addenda were granted at the eleventh hour, under what circumstances, and at what potential expense to the federal treasury,” said Salazar. “We must reform our nation’s oil shale program and ensure that the American people have the promise of a fair return from their resources.”

In 2006 and 2007, the Bureau of Land Management (BLM) issued six RD&D oil shale leases on lands in Colorado and Utah for the purpose of developing new oil shale recovery technologies. The existing leases limit the total initial RD&D land area to a maximum of 160 acres, but if a lessee demonstrates the ability to produce commercial quantities of synthetic petroleum derived from shale, the lessee may develop an area of up to 5,120 contiguous acres. On January 15, 2009, the Department granted the holders of the six oil shale RD&D the right, at the time of conversion to commercial development, to elect to have their leases governed by a set of favorable conditions and low royalty rates. The previous administration established an initial royalty rate of five percent for commercial oil shale production, an action that Secretary Salazar has described as “premature.”

Oil shale is a sedimentary rock that, when heated, releases petroleum-like liquids. More than 70 percent of American oil shale — including the thickest and richest deposits — lies on federal land, primarily in Colorado, Utah, and Wyoming.

For a link to Secretary Salazar’s letter to Interior’s Inspector General, click here. For a fact sheet on the second round of RD&D leases, click here.