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The Bureau of Land Management's proposed regulations, which cannot be finalized until a congressional moratorium is lifted in October, would establish a commercial oil shale program that could yield 800 billion barrels of recoverable oil from Wyoming, Colorado and Utah -- an amount three times the recoverable reserves of Saudi Arabia, Interior Secretary Dirk Kempthorne said.

Oil shale is a fine-grained sedimentary rock containing organic matter that can be converted to fuel. But the extraction and conversion process is costly and difficult, despite the material's abundance. The western United States holds more than half the world's 2.6 trillion barrels of reserves, with more than 72 percent of those reserves on federal lands, according to the U.S. Geological Survey.

The hydrocarbon source has gained recent attention as energy prices skyrocket and foreign imports become scarcer with declining production and increased national control of reserves. BLM's proposed regulations on lease sizes, acreage limitations and royalty rates would allow production from U.S. oil shales, though production is at least seven or eight years away, Assistant Secretary of the Interior Stephen Allred said.

"For many years, the high cost of extraction exceeded the benefit [of oil shales]. Today that calculus is changing," Kempthorne said. "While the cost of extraction is more than traditional production, it is also less than the current market price of oil, which makes it a highly promising resource."

Interior cannot issue final regulations until Congress lifts a one-year moratorium on oil shale development in October. In appropriations proceedings for the current fiscal year, Congress prohibited the agency from using 2008 money to prepare or publish final regulations, though President Bush has called on Congress to lift the ban.

But it is likely that Congress will extend the moratorium into fiscal 2009 with a new administration (Greenwire, July 21). Until then, the proposed rules will undergo a 60-day public comment period. Kempthorne said he hopes to have final regulations in place before the end of the year.

Development still years away

Even if the proposed regulations are finalized in the fall, leasing and commercial development will not occur for several years, Interior officials said. Before leases are issued, site-specific National Environmental Policy Act analyses would have to be completed, and lessees would have to obtain proper state, local and federal permits.

And the technology required to extract the fuel is not developed enough to support commercial operations, corporate industry officials said. Such technology could be at least a decade away, some say. Those technological limitations prompted Congress last year to issue the moratorium, which President Bush approved. Still, six pilot research and development projects are under way in Utah and Colorado to test various technologies of extracting usable fuel from oil shales.

Environmentalists remain concerned about the progress toward commercial development of oil shale resources in the West. The development of the hydrocarbon poses threats to landscapes and water resources, they say. Burning the fuels derived from oil shales would result in more than five times the greenhouse gas emissions of conventional oil and gasoline, according to the Wilderness Society. And commercial oil shale production would require as much water as almost 1.5 million people use in a year, according to the Natural Resources Defense Council.

"Today's announcement is designed to give the American people the false impression that oil shale has some hope of lowering gasoline prices," Chase Huntley, energy policy adviser for the Wilderness Society, said in a statement. "But practical and technological impediments cannot be overcome by fiat. Instead of gambling our resources on unproven fuel sources, such as oil shale, we should invest in proven options that will reduce prices such as higher fuel economy standards, energy efficiency and renewable generation technologies."

And Amy Mall, the Natural Resources Defense Council's senior policy analyst, agreed. "Our addiction to oil has gotten so bad that the Bush administration is considering cooking rocks as an energy solution," she said. "By putting out long-term oil shale production regulations, they are proposing that we swap oil for water in the Rockies. There is a better way. We can use the resources we already have more efficiently, such as doubling the fuel economy performance of our vehicles, which would be the same as cutting gas prices in half."

Kempthorne likewise said the United States should diversify its energy portfolio, but he stressed that in the short term, development of domestic hydrocarbon resources was necessary to meet energy needs and sustain the U.S. economy.

"Oil shale ... is one such domestic energy resource with tremendous potential," he said.

Click here to read the proposed regulations.

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