Interior Dept sets rules for oil shale program
WASHINGTON (Reuters) - The U.S. Interior Department on Monday released the final regulations creating a commercial oil shale program that could produce up to 800 billion barrels of recoverable oil the western United States.
The department proposed rules for the oil shale program in July, but until recently shale development has been banned by lawmakers for environmental reasons. Democratic lawmakers allowed the prohibition to expire at the end of September, however, as they faced an intense showdown with Republicans over increasing domestic energy production.
"In the short run, the U.S. economy will continue to rely on oil and that means we need to increase supply, particularly here at home," Assistant Secretary of Land and Minerals Management Stephen Allred told reporters.
Allred said U.S. oil shale resources could meet current U.S. oil needs for 110 years and help supplant foreign fuel imports.
Oil shale is a fine-grained sedimentary rock containing organic matter from which oil may be produced. The United States holds more than half the world's oil shale resources, with the largest known deposits located in a 16,000-square mile (10.2 million acres/4.1 million hectares) area in the Green River formation in Colorado, Utah, and Wyoming.
Although the rules have been finalized, it would likely be five to 10 years before the department begins any lease sales, because the department would have to ensure that there was enough demand for oil shale development and also prepare a National Environmental Policy Act report for any proposed leases.
Commercial oil shale production is still several years away as it is not technologically viable.
Allred said it was important to establish these rules even though no commercial oil shale development currently exists.
"The companies involved here are going to spend hundreds of millions of dollars, they need ... a set rules of the road by which they can judge whether those activities are properly taking place," he said.
The rules outlined by the department include establishing the maximum size of oil shale leases, setting timetables to ensure diligent development of leases and setting the royalty rates lease holders will pay.
Environmentalists have opposed oil shale production because it consumes large amounts of water and power, both of which are scarce in the West. Shale rock is heated with steam to extract the oil.
"Cooking rocks and scorching earth is not a solution to our energy crisis," Amy Mall, senior policy analyst for the Natural Resources Defense Council, said in a statement. "This is just another government giveaway to Big Oil, which doesn't make sense when we have better, cleaner energy sources available now."
It is possible Democrats, who have picked up seats in Congress, would attempt to restore the ban on oil shale production when Congress reconvenes. It's not clear that Democratic President-Elect Barack Obama would support such a move.
During the campaign Obama said he supported expanding offshore drilling as a part of a larger energy package.
Recently an aide to Obama said he would likely reverse an executive order by President George W. Bush that allowed drilling in fragile lands in Utah.
(Reporting by Ayesha Rascoe; Editing by Marguerita Choy)
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