Bush Administration Proposes Rules for Developing Oil Shale

WASHINGTON (Dow Jones Newswires), July 22, 2008

As a debate over energy legislation in the U.S. Senate stalls over increased domestic oil and gas production, the Bush administration Tuesday proposed new rules for commercial oil-shale development that it says could yield 800 billion barrels of oil.

The U.S. Department of the Interior's Bureau of Land Management said the proposed regulations are critical for private investors to determine whether to invest in the sector.

Although technically possible to extract, oil-shale development has so far been economically unfeasible and encountered strong environmental opposition. But high crude prices and the lure of resources multiple times those of Saudi Arabia's have drawn renewed interest from oil companies and lawmakers.

"As Americans pay more than $4 for a gallon of gasoline and watch energy prices continue to climb higher and higher, we need to be doing more to develop our own energy here at home, through resources such as oil shale," said Secretary of the Interior Dirk Kempthorne. "Instead, I find it ironic that we are asking countries halfway around the world to produce more for us," he said.

John Engler, president of the National Association of Manufacturers, welcomed the proposed rules. "This country is facing an energy crisis ... [and] we must take every opportunity to tap America's own abundant energy resources to lower prices and reduce our dependence on foreign oil."

"The executive branch has again demonstrated its commitment to increasing domestic energy supply with today's oil shale proposal, following last week's lifting of the presidential moratorium on offshore drilling in the Outer Continental Shelf. Now it's Congress' turn to take action by repealing its ban and allowing final leasing rules to be issued, granting access to much needed domestic resources," Engler said.

But environmental organizations, such as the Natural Resources Defense Council, or NRDC, said developing the oil shale would come at "enourmouse" environmental costs. "The technological hurdles to actually cook oil out of rock are enormous," said senior NRDC policy analyst Amy Mall. "We have limited understanding of the long-term impacts of this process, aside from destroying some of America's great landscapes and sucking up the most valuable commodity in the West: water," she said.

Congress last year put a one-year moratorium on the Interior Department issuing final regulations for commercial development of oil shale, which is primarily located in the Western states, that expires at the end of September.

Publishing the proposed rules now would ostensibly give the administration the legal time necessary for publishing final rules in October.

If Congress wants to add an additional moratorium, it would have to allow votes on the Interior appropriations bill that could conceivably allow additional domestic oil and gas drilling. The House Appropriations Committee chairman has withheld a vote on the appropriations bill because several representatives have said they would try to add amendments that would expand drilling access.

Royal Dutch Shell (RDSA) has been conducting research and development of oil-shale resources.

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