Wednesday, October 21, 2009

Interior resumes oil-shale research, probes last-minute Bush-era decision to freeze low royalties

Interior Department Secretary Ken Salazar said Tuesday the department is investigating a decision by the last administration, just five days before former President Bush left office, that locked in royalty prices for oil-shale development in the West. Salazar expressed "serious concerns" about the changes made without public comment to existing oil-shale lease agreements, Jad Mouwad of The New York Times reports.

The decision locked in royalty rates, which are paid to the government for the right to drill on federal land, for 30,000 acres of existing oil-shale leases at 5 percent. The government is paid 16.7 percent royalty for oil in the Gulf of Mexico, Mouwad notes. News of the investigation came as Salazar also announced he would resume research programs for shale development in Colorado, Utah and Wyoming. He froze the research weeks after his appointment in February.

"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," Salazar told reporters. "We must reform our nation’s oil shale program." Oil shale deposits in the Green River formation are believed to hold 800 million barrels of potential resources, more than three times the known reserves in Saudi Arabia, Mouwad reports, with more than 70 percent of the resource on federal land. (Read more)

Preferences for the new research leases will be given to companies with "proposals that help to answer the questions of how much energy and water shale development will need and its impact on the environment," Mark Jaffe writes for The Denver Post. The American Petroleum Institute said in a statement: "Secretary Salazar's decision to resume the second round of research and development leases is a positive step." (Read more)

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