U.S. Interior scraps Bush research oil shale leases

WASHINGTON (Reuters) - A Bush administration plan for more research, development and demonstration oil shale leases will be scrapped because the proposal is flawed and royalties to the government are too low, Interior Secretary Ken Salazar said on Wednesday.

"If oil shale technology proves to be viable on a commercial scale, taxpayers should get a fair rate of return from their resource," he said.

Salazar also took issue with the size of the oil shale leases offered in January, which covered areas four times larger than six parcels currently leased for research.

The department will allow the public to comment on the research oil shale leasing issue for 90 days starting Friday. After closing the comment period, the department will offer a second round of research leases in Colorado and Utah "based on sound policy and public input," Salazar said.

Oil shale is a fine-grained sedimentary rock containing organic matter from which oil may be produced. Environmentalists have opposed oil shale development because it consumes large amounts of water and power, and releases more greenhouse gases than traditional fuels.

(Additional reporting by Tom Doggett; Editing by David Gregorio)