Back in earlier February, in one of his first actions on taking office, Interior Secretary Ken Salazar announced that the cancellation of oil and gas leases on more than 100,000 acres of public land in Utah, the first indication that Salazar might pleasantly surprise us. He's continuing in that vein.
Yesterday, he called for an investigation a last-minute regulatory change by the Bush administration, asking the department's IG for a review. The Bush action was a lease addenda, opening up an additional 50,000 acres to six companies in what was essentially a massive give-away to industry.
Last November, Interior officials finalized regulations and royalties, which the companies would pay the government, as a way to guide that commercial production. The agency set royalty rates that started at 5% of production revenue, well below the federal average for oil and gas royalties. A coalition of environmental groups complained that the regulations did not address the likely environmental impacts of shale production, including greenhouse gas emissions and extensive water use in an arid region, and they sued to overturn the regulations.
As the clock was running out on the Bush administration, Interior employees say, an edict came down from top Interior officials to amend the original oil-shale leases to explicitly give the leaseholders the ability to abide by the Bush-era royalty rates and rules. One senior former Interior Department official said that the amendments were in keeping with the Bush administration's push to make oil-shale research and development as attractive as possible in the face of high costs and uncertain payoffs.
That official, speaking on the condition of anonymity given the confidential policy deliberations, also said that there was a sense of urgency to push through the amendments, because the incoming administration was already advocating a shift from fossil fuels to renewable energy sources.
The LA Times has also obtained a series of e-mails between Bush Interior officials and Royal Dutch Shell PLC attempting to coordinate against blowback when word got out, and in strategizing for how to deal with an incoming administration that had already signaled that it would end the sweetheart deals on public lands. In the thick of it was none other than Gale Norton.
One of the suggestions for approaching Salazar came from Gale Norton, who joined Shell as an attorney in its oil-shale division nine months after she resigned as Bush's Interior secretary. The Justice Department is investigating her for possible conflicts of interest involving her handling of Shell leases while she was Interior secretary.
In a Jan. 15 e-mail to colleagues, Norton suggested that environmentalists' legal challenge to Interior's shale plans "provides an external reason for locking in change as opposed to [the previous administration] being motivated by fears of how a new administration might alter" the regulations. Salazar, she reasoned, might be persuaded that the department needed to defend its own contracts in court.
She reasoned incorrectly, with Salazar willing to cancel contracts and to institute much tighter controls on future leases. Salazar also announced the issuance of new research and development oil shale leases. That's not a hugely popular move with the entire environmental community, who question both the viability and the potential impact of these leases. The good news for them is that these leases cover a much smaller acreage and have much stricter controls than under the Bush administration.
Companies may nominate up to 160 acres of federal land for their projects. Up to 480 additional acres could be added for commercial development if the research is successful. That’s down from some 5,000 acres before. Leases would be subject to a review by an interdisciplinary team including BLM and state officials who would weigh its potential against impacts to land, water and communities.
The new round asks companies to address how their projects will impact water and energy uses and socio-economic impacts on communities that could be inundated by a rush of energy workers. It also sets a series of milestones that didn’t exist in the previous round, including a development plan with nine months and quarterly reports detailing progress. Companies must have state and local permits within 18 months and and infrastructure in place within two years.
“This is definitely a step in the right direction,” said Frank Smith, energy organizer for the environmental group Western Colorado Congress, but he said he would have preferred no further leases. “It all comes back to environmental risk and taxpayer liabilities.”
Whereas the Bush administration gave away public lands, Salazar is going to make the oil companies work for it and be held accountable for their actions. Oil shale is still a highly controversial, and as of yet unproven, development scheme with tremendous potential to poison already dwindling water supplies in Utah and Colorado. Salazar's cautious approach on the issue thus far is being received by environmental groups with the same sense of guarded optimism as Smith's. It's also possible that the hopps required to jump through will make this development a much lower priority for industry.