Interior Department Drafts New Oil Shale Rules

Published October 9, 2008

The U.S. Department of the Interior has published proposed regulations for the production of oil from shale deposits on federal lands, bringing the nation one step closer to accessing oil reserves three times as big as those of oil giant Saudi Arabia.

If the proposed regulations take effect, the only obstacle thwarting the production of the vast oil reserves will be a congressional moratorium on oil shale development that was put into effect in 2007.

The Energy Policy Act of 2005 established oil shale production as a national goal by directing the U.S. Department of Interior (DOI) to issue final regulations on the commercial leasing and production of oil shale found on federal lands. However, in 2007 Congress attached to an appropriations bill a rider prohibiting DOI from completing the task it was assigned two years earlier.

The proposed new regulations were published July 22 and are open for comment until September 21.

Gas Prices Rising

The congressional moratorium has been under heavy political pressure this year as gasoline prices soared under the pressure of domestic supply constraints. The moratorium barely survived on May 15 when a Democrat majority in the Senate Appropriations Committee—by a 15-14, party-line vote—defeated an amendment by Sen. Wayne Allard (R-CO) to lift the moratorium.

Since the defeat of the Allard amendment in mid-May, the price of gas at the pump rose above $4 a gallon and has remained well above $3.50 per gallon.

Allard, who is retiring at the end of the year, has vowed to continue his fight on the floor of the Senate to lift the moratorium.

“If we are really serious about reducing pain at the pump,” Allard told the Rocky Mountain News for a May 15 story, “this is a vote that would make a difference in people’s lives.”

Technological Advances

The Senate’s leading opponent of oil shale production is Allard’s fellow Coloradan, Democrat Ken Salazar.

Citing several unsuccessful efforts to develop oil shale in the twentieth century, Salazar, writing in the Washington Post on July 15, accused the Bush administration of orchestrating a “fire sale” of leases on federal land. That, he said, “will not lower gas prices. It will not accelerate the development of commercial oil shale technology.”

But Salazar acknowledges current technology for extracting oil from shale is superior to what existed a quarter-century ago. And no one seriously doubts the enormous potential of what lies beneath the West’s Green River Formation. According to a 2005 Rand Corporation study, “Oil Shale Development in the United States: Prospects and Policy Issues,” the area contains between 1.5 and 1.8 trillion barrels of oil, of which 800 billion barrels are considered commercially recoverable. That’s triple the oil reserves of Saudi Arabia.

Environmental Safety

Environmental impacts would be minimal, says Daniel Kish, vice president of the Institute for Energy Research.

“If people are concerned about the possible environmental impacts of oil shale leasing, they can rest easy,” said Kish. “The United States has the strictest environmental standards in the world, and the use of our best-in-the-world technology is expected to answer any challenges that may occur during production.

“Oil shale may hold the key to keeping a strong manufacturing base dynamic and thriving in the United States while providing affordable energy for generations to come,” Kish added.

Would Cut Prices

Oil shale development would dramatically ease energy supply constraints and reduce our dependence on foreign oil, Kish said.

“Oil shale may prove to be America’s greatest liquid fuel resource, which would increase domestic production and add new supplies to parched Americans,” Kish said. “Our supplies of shale are the greatest in the world, and the supplies under government-owned lands are the best of those. … [It] is enough oil—by itself—to supply all U.S. oil demand for over 100 years.”

However, Kish added, “Because of government policies, it is currently illegal for the Department of Interior to lease any of these lands for commercial development of these potential energy supplies. That ’embargo’ on American oil shale production is much like the 26-year-old embargo on drilling for oil and natural gas on our Outer Continental Shelf.”

Other Nations Advancing

While the United States sits on its abundant reserves and in fact holds most of the world’s oil shale, other nations with far less abundant resources are taking the lead in oil shale production, Kish says.

“Brazil and Estonia are producing energy from their oil shale, and the Chinese are actively pursuing its development on their lands,” Kish said. “The Kingdom of Jordan recently announced a program that seeks to develop their shale resources as well.”

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research in Washington, DC.