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Colorado GOP lawmakers to sponsor oil shale bills

Source:  Copyright 2009, Associated Press
Date:  January 5, 2009
Original URL: Status DEAD


No commercial oil shale development is expected in Colorado for several years, but some Republican legislators want to start laying the groundwork to manage the resource that some estimates put at more than 1 trillion barrels of oil.

Sen.-elect Al White, R-Hayden, said he plans to propose a bill in the legislative session that starts Wednesday to create a task force to craft rules for oil shale production.

Rep. Kevin Lundberg, R-Berthoud, plans a bill to provide incentives for oil shale production by cutting the state's severance tax on the fuel.

"(It's) an incentive by discounting the oil shale severance taxes through the year 2020 if any company will start to develop a commercial program by 2012," Lundberg said.

Glenn Vawter, executive director of the National Oil Shale Association, said it is good to see lawmakers gearing up for the future.

"I think any encouragement at the state is helpful," Vawter said. "I think right now with oil prices the way they are there's a lot of people thinking Utah is a better place to do business, shall we say."

Shale deposits in northwest Colorado, Wyoming and Utah are thought to hold more than 1 trillion barrels of oil, of which about 800 billion barrels are believed to be recoverable. But the technology to squeeze the oil out of the rock is still experimental, and commercial production is likely at least a decade off.

That hasn't stopped the federal government from proceeding with a management plan and rules for commercial production. The government has identified about 2 million acres of federal land in the three states as available for commercial oil shale development.

Final rules approved by the Interior Department in November set such limits as royalty rates and lease sizes. The 5 percent royalty rate during the first five years is meant to spur production. It is much lower than the 12.5 percent to 18.8 percent rates on conventional oil and gas on public lands.

Utah Gov. Jon Huntsman, a Republican, urged the Bush administration to finalize the rules before a new administration took over.

Colorado Gov. Bill Ritter, a Democrat, has called the rules and plan "greatly deficient" and asked the Interior Department to delay action for further research and development.

The federal government has granted research and development leases in Utah and Colorado.

Sen. Ken Salazar, and Sen.-elect Mark Udall, both Colorado Democrats, have accused the administration of rushing through rules without adequate environmental and economic analysis. They have noted that many Coloradans want to move cautiously because of the industry's history in the state.

Colorado's last oil shale boom went bust when oil prices dropped and government subsidies dried up. People still refer to "Black Sunday," May 2, 1982, when Exxon shut down a $5 billion project near the West Slope town of Parachute, throwing 2,200 people out of work.

Salazar's opinions are sure to carry some weight. President-elect Barack Obama has nominated him to head the Interior Department.

Industry officials have said having rules and royalty rates in place will help them determine the economic feasibility of producing oil shale.

White acknowledged some might see his and others' efforts as premature, but it is better to be proactive rather than reactive after a boom.

"Why wait until the problems arise?" White said. "Let's see if we can anticipate them."

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