Salazar announces oil shale lease round, addenda inquiry

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Oct. 21 -- US Interior Secretary Ken Salazar announced a second round of federal oil shale leases on Oct. 20 with substantially different terms than the first round. He also said he will ask his department’s inspector general to investigate favorable addenda offered to holders of existing leases 5 days before the end of the previous administration.

“If we are to succeed in unlocking oil shale’s great potential, we must first answer fundamental questions about water use, power use, and environmental and social impacts of commercial development,” Salazar said at a press conference. “With this new round of [research, development, and demonstration] leases, we hope to move closer to responsibly and sustainably developing our oil shale resources.” An estimated 800 billion bbl of shale oil is believed to exist on federal land in Colorado, Utah, and Wyoming.

Applicants will have 60 days after publication of the lease sale’s notice in the Federal Register to submit nominations of up to 160 acres each to the US Bureau of Land Management. Salazar said that an interdisciplinary team of BLM professionals and representatives from Colorado, Utah, and Wyoming (as appropriate) and the Defense and Energy departments will evaluate the nominations.

Like the first round, the latest leases will be 160 acres each. They will run for 10 years. And nominations will be evaluated according to their potential to advance technologies, their economic viability, and their environmental impacts.

But they also will have a smaller preference right area (480 acres instead of 4,960 acres), a higher application fee ($6,500 instead of $2,000), and additional questions concerning water use, energy use, water quality impacts, socioeconomic impacts, and other factors.

Many questions
Salazar said many oil shale development questions still need to be answered. “How much water would be required for commercial oil shale development and where it would come from is obviously important in Colorado and Utah, which are arid states with limited water supplies and where commercial oil shale development would have major impacts on agriculture and other uses?” he observed.

BLM and the Department of the Interior also will consider whether technologies being developed can become commercial, how much electricity will be needed to pry the kerogen from the rock, and what impacts commercial oil shale development would have on nearby communities, water, wildlife, and climate, Salazar said.

“These are central questions to which answers are needed before we plunge forward in the full-scale endorsement of any commercial oil shale development,” he said. “That’s why it is so essential for us in our reform agenda as we look to developing a comprehensive energy plan, that we have honest straightforward answers to these central questions.”

New oil shale leases also will contain diligence milestones that were not a part of the first round in 2007, Salazar said. These will include submitting a development plan within the first 9 months. Once BLM approves that plan, lessees will be required to obtain state and local permits within 18 months and deploy infrastructure within 24 months, as well as submit quarterly progress reports.

If an RD&D lease’s conversion to commercial status is approved, a minimum of 10,000 b/d of commercial production would be required, and the royalty rate would be determined by either the secretary or new regulations. Salazar said that the changes reflect specific parts of a broader reform effort which are aimed directly at the nation’s oil shale resource.

Addenda inquiry
The secretary also said he will ask Mary L. Kendall, DOI’s acting inspector general, to invest a set of lease addenda that the administration of President George W. Bush entered into with holders of the six existing oil shale RD&D leases on Jan. 15—just 5 days before its tenure ended.

BLM issued these Colorado and Utah leases in January 2007. On Jan. 15 of this year, it granted the leaseholders the right, at the time of conversion to commercial development, to elect to have their leases government by a set of favorable conditions and low royalty rates, including an initial royalty rate of 5% which Salazar considered premature.

“There are serious questions about whether those lease addenda in fact are legal or whether or not they should be rescinded. I have decided that before taking final action on those lease addenda that it’s important for me as secretary of Interior to get to the facts about the circumstances surrounding the issuance of those lease addenda,” he said.

Salazar withdrew the Bush administration’s proposal to expand offerings in a second oil shale leasing round on Feb. 25 because he said that it made the parcels four times the size of the earlier leases and locked in low royalty rates and a premature regulatory framework. “I said then and I still will say today that I think there is a question about how those royalty rates could actually be set when these very important fundamental questions have not yet been answered,” he told reporters on Oct. 20.

Responding to his announcement, the American Petroleum Institute said in a statement that it considered Salazar’s decision to proceed with a second oil shale leasing round a positive step. It also expressed concern over some of the new terms, particularly the 87% reduction in total commercial lease size. “Slashing the size of the potential commercial lease diminishes the incentives for investment and ignores the enormous up-front costs and risks undertaken to develop these technologically complex resources,” API said.

Contact Nick Snow at

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected