Western US commercial oil shale leasing still years away

Even with most forecast showing growing energy needs in the world, leasing of US federal controlled land in Colorado, Utah, and Wyoming for commercial oil shale development may still be many years away.

Guntis Moritis
Production Editor

GOLDEN, COLO., Oct. 14 -- Even with most forecast showing growing energy needs in the world, leasing of US federal controlled land in Colorado, Utah, and Wyoming for commercial oil shale development may still be many years away, as discussed Oct. 13 at the 28th Oil Shale Symposium at the Colorado School of Mines in Golden, Colo.

Terry O'Conner, with Shell Unconventional Oil, Denver, explained the current progress in leasing oil shale lands administered by the US Bureau of Land Management. He said federal law and regulations have two separate paths for leasing these lands. One path is with research, development, and demonstration (RD&D) leases with the right to expand into a preference right lease (PRL). The other path is commercial leasing.

He said BLM initiated RD&D process in early 2005 and it was ratified and supported by Congress in the Energy Policy Act of 2005 (EPACT 2005, Section 2005, 369 (c)). The process allows for converting 160 acre RD&D leases to preference rights leases (PRIs) of 5,120 acres subject to:

-- Demonstrating commercial capability and producing in commercial quantities in accordance with a plan of development (POD)

-- Preparing site specific environment impact statements (EISs) and payment of a conversion fee. O'Conner said the conversion fee has not been set and could range from thousands to millions of dollars.

BLM has issued six RD&D leases, five in Colorado and one in Utah. Shell obtained three of these leases. O'Conner said Shell plans to demonstrate three different types of technologies on these leases but will not start work on them until it obtains results from its Mahogany pilot that is on a private lease possibly by yearend 2009 or in 2010.

On the Mahogany project Shell uses a situ conversion process that relies on a freeze curtain to prevent ground water contamination.

Regarding commercial leasing, O'Conner explained that the process is guided by Section 369 (d) and (c) and includes multiple steps that precedes the lease sale. This has taken much longer than anticipated by EPACT 2005, he said.

For instance a PEIS proposed in December 2007 to be completed in February was completed in July with the public comment period closed on Sept. 22.

The PEIS allows for an initial lease size of 160 acres that a company could increase to 5,760 acres.

He also said the EPACT 2005 contemplated the PEIS to support regulations and competitive leasing program but as written it supported changes to 12 resource management plans, with multiple, sequential EISs to follow. This could lead to finalizing the regulations in 5-10 years with leasing starting toward the end of the next decade, O'Conner said.

Contact Guntis Moritis at guntism@ogjonline.com.

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