Interior Takes Early Step Toward Commercial Shale Leasing Plan

The Interior Department is seeking comment on plans to spur commercial production of a massive domestic resource with a checkered past: oil shales.

Interior's Bureau of Land Management today issued an "advance notice of proposed rulemaking" for establishing a commercial leasing program for shale oil. BLM is seeking comment on how to craft a royalty system, a lease bidding system, minimum production requirements and other issues.

Areas in Colorado, Wyoming and Utah contain huge deposits of shale. The Green River Formation that covers parts of all three states is thought to contain 1.2 trillion barrels worth of oil, according to BLM, although certainly not all of it is considered recoverable.

The majority of it -- more than 70 percent -- sits under federally owned and managed lands, according to information made available by BLM as part of efforts to write a related "programmatic" environmental impact statement (PEIS) for a commercial leasing program.

Last year's energy bill requires the PEIS, and then completion of rules to govern commercial leasing six months after it is complete. Interior plans to sign-off on a final impact statement next summer. But despite the rulemaking and analysis, significant commercial-scale production is believed to be years away if companies move forward. Federal officials are also creating a research and development leasing program for oil shales. Companies including Royal Dutch/Shell Group and Chevron Corp. are participating.

Shale development creates costly challenges. Efforts to produce Western shale collapsed in the early 1980s when oil prices tumbled. But high oil prices and energy security concerns have reignited interest in tapping oil shales.

Oil companies are now experimenting with an underground, or "in-situ", process to separate the hydrocarbons from the rock, rather than the mining and above-ground retort methods of the past. This process can generate more yields from less area -- and at less cost -- than the mining and above-ground retort, according to the Energy Information Administration.

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