Possible oil shale compromise emerges in energy bill markup

Amendments to strike portions of the energy reform bill proposed by US House Energy and Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) headed for apparent defeat as the committee tried to complete the measure's markup on June 7.

Jun 8th, 2007

Nick Snow
Washington Correspondent

WASHINGTON, DC, June 8 -- Amendments to strike portions of the energy reform bill proposed by US House Energy and Natural Resources Committee Chairman Nick J. Rahall's (D-W.Va.) headed for apparent defeat as the committee tried to complete the measure's markup on June 7. There were signs, however, that the oil shale development part of the bill could be modified before the June 13 final votes on major amendments.

Rahall was adamant that several of HR 2337's key provisions stand or not be changed beyond his own amendment. These include reimposing drilling permit processing fees, limiting categorical exclusions from the National Environmental Policy Act, regulating produced water disposal, limiting oil royalty in-kind payments to refilling the Strategic Petroleum Reserve, requiring the US Minerals Management to conduct at least 550 audits yearly by 2009, significantly increasing surface landholders' rights and compensation in split-estate situations on federal leases, and raising onshore oil and gas reclamation fees and bonds.

Section 104 of HR 2337, which would repeal the 2005 Energy Policy Act's (EPACT) provision setting a deadline for completing a programmatic environmental impact statement for commercial oil shale and tar sands leasing, also seemed likely to survive. Members opposing Section 104 warned that it effectively would stop research and development. "Its whole point is to slow down the process, when we should be removing impediments so we can determine if the technology works," said Chris Cannon (R-Utah), who offered an amendment to strike the section.

Rahall said Section 104 was a response to testimony from Rand Corp. and other witnesses at an April 17 hearing, where it was discussed that oil shale and tar sand developments could have potentially negative impacts. "The technology is at least a decade away. Even Shell Oil Co. says it's a long time away. It's common sense to take the time to do it right," he said.

Delay reevaluation
Stevan Pearce (R-NM), who led opposition to HR 2337, said if a delay is necessary, it should occur later in the process so regulations can be developed. "If the chairman truly wants to move ahead with oil shale, let the research move ahead and the regulations be developed, but cap the number of acres that can be leased," he said. "That way, you get the research dollars because people are sure of what the regulations will be and how much development they'll get for their investment before reevaluation takes place."

He also questioned Rahall's assertion that oil shale and tar sand leasing and development is moving ahead too quickly under EPACT. "The reality is that we're almost a year behind in the evaluation process for oil shale. The majority may say they're not stopping oil shale development, but that essentially is what it's doing. Shale is what gives us real status in the world energy market in the long-term future. Along with coal, it gives us a chance to shut off oil imports from countries that don't like us," Pearce said.

Cannon and another Utahn on the committee, Republican Rob Bishop, joined Pearce in arguing that oil shale technology has come a long way since the western Colorado boom-and-bust in the early 1980s. "In the case of Shell, it is developing a technology that is massively capital-intensive with a small project that is decades out," Bishop said. "But we have other technologies that have developed already. Companies are producing oil from shale around the world from less efficient technologies."

Cannon said Oil Shale Exploration Co. LLC of Mobile, Ala., is committing millions of dollars to ship 20,000 tons of oil shale mined from its eastern Utah lease to Canada to see if a process there works on it. If it does, OSEC plans to expand its 25,000-acre holding and use the process locally, the lawmaker said. "It is not Shell that we need to protect here, but the entrepreneurial types who are investing dollars for technologies that could work much sooner," he said.

He and Bishop said the US Department of the Interior has several decades of experience leasing federal resources while Canadians and other countries have nearly as many years under their belts developing oil shale and tar sands. "We have environmental laws in effect. If there are problems, there are already ways to solve them," Cannon said.

Democrats' responses
Some Democrats seemed ready to consider modifying the bill's oil shale provision. "I'm sympathetic to the sense of the amendment, but frankly I'm not certain about the level of technology," said Jim Costa of California, who chairs the committee's Energy and Mineral Resources Subcommittee. "Frankly, I'm not hearing concern from the folks who are developing the technology about the provision in the bill. Maybe there should be some way for us to revisit it, but no one has indicated that this language will prevent investments of billions of dollars."

Another Californian, Grace F. Napolitano, who chairs the Water and Power Subcommittee, added, "Alberta has been working on oil shale development. Its representatives have been bringing samples into my office for years."

Earlier in the day, the committee adopted a separate amendment proposed by Mark Udall (D-Colo.) that would establish a fund to allocate money from bonus bids for oil shale leases after all environmental analyses were completed. Money from the fund would go to counties and communities directly affected by the leasing for roads and other public services.

Udall said the fund would not affect the existing system of allocating mineral development royalties to states to address the impacts of such development, but would augment that system by relaying supplemental funds from the bonus bids directly to the counties and communities.

"This amendment recognizes that while commercial oil shale has the potential to benefit the entire country, its development can bring substantial problems for the most immediately affected communities," Udall said. "That happened in Colorado in the 1980s, when we went through our last bout of 'oil shale fever.' My amendment recognizes that it can happen again, and that we should learn from that experience and be ready to help."

Cannon said if the committee adopts his amendment to strike HR 2337's Section 104, it would not affect Udall's oil shale fund proposal.

Split estates
The committee also adopted a second amendment proposed by Udall that would expand Section 221 in the bill, requiring notification of the surface landholder in a spilt-estate situation, to include owners of conservation easements and holders of special permits prior to leasing. "We need to make sure that all owners of surface property rights are involved in leasing decisions and can help address impacts," Udall said.

The bill's split estates provision has drawn fire not only from producers but also from Deputy Sec. of the Interior P. Lynn Scarlet. "Given the differences of how counties and local governments manage and maintain property records, this would prove to be a time-consuming and onerous task to implement in a short time frame," she said in a June 5 letter to Rahall. "While we support the goal [in the relevant subsections], we believe it would be prudent to first create a pilot project, or to phase in the concept, so it can be tested on a smaller scale before attempting across-the-board adoption."

Scarlet's 14-page letter, which also went to Rep. Don Young (R-Alas.), the committee's chief minority member, called for deletions of most of Title I and parts of Title II in the bill. Rep. Bill Sali (R-Idaho) went farther and introduced an amendment to strike both titles if the US Energy secretary determines they would increase energy prices.

"It seems that this bill would reduce domestic energy production and increase dependence on imports," Sali said. "Americans want clean and efficient energy and are demanding more of it. Oil and natural gas from our federal lands helps meet that demand. This bill will decrease supplies in the face of increasing demand," he said.

Rahall said the amendment would set an impossible standard since world markets determine oil prices. "Oil operators should be able to pay small fees," he said, referring to HR 2337's provision requiring producers to pay BLM to process each onshore drilling permit application.

"The fiscally responsible part of the bill, where operators would be asked to pay a fee, is actually minor," Pearce responded. "The repeal of the categorical exclusions, changes in oil shale and tar sands leasing, and repeal of the BLM pilot office projects are more significant. The last was particularly successful since people could go to one office and get answers to all their questions from a variety of agencies."

Pearce said, "The amendment simply says let's be cautious and not drive the price of energy up while we facilitate development of renewable resources in the future." It apparently was headed for defeat as Rahall scheduled full votes on it and other efforts to substantially change the bill when the full committee reconvenes on June 13.

Contact Nick Snow at nsnow@cox.net.

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