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44–640 PDF 2008

S. HRG. 110–515 

OIL SHALE RESOURCES 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

TO

RECEIVE TESTIMONY ON DEVELOPMENT OF OIL SHALE RESOURCES 

MAY 15, 2008 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

JEFF BINGAMAN, New Mexico, Chairman 

DANIEL K. AKAKA, Hawaii 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

MARIA CANTWELL, Washington 

KEN SALAZAR, Colorado 

ROBERT MENENDEZ, New Jersey 

BLANCHE L. LINCOLN, Arkansas 

BERNARD SANDERS, Vermont 

JON TESTER, Montana 

PETE V. DOMENICI, New Mexico 

LARRY E. CRAIG, Idaho 

LISA MURKOWSKI, Alaska 

RICHARD BURR, North Carolina 

JIM DEMINT, South Carolina 

BOB CORKER, Tennessee 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

GORDON H. SMITH, Oregon 

JIM BUNNING, Kentucky 

MEL MARTINEZ, Florida 

ROBERT M. SIMON, Staff Director 

SAM E. FOWLER, Chief Counsel 

FRANK MACCHIAROLA, Republican Staff Director 

JUDITH K. PENSABENE, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Allard, Hon. Wayne, U.S. Senator From Colorado ............................................... 12 

Allred, C. Stephen, Assistant Secretary for Land and Minerals Management, 

Department of the Interior .................................................................................. 23 

Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 

Domenici, Hon. Pete V., U.S. Senator From New Mexico .................................... 2 

Hansen, Jim, Representing Oil Shale Exploration Company, Farmington, UT . 43 

Hatch, Hon. Orrin, U.S. Senator From Utah ........................................................ 4 

O’Connor, Terry, Shell Exploration and Production Company, Denver, CO ...... 55 

Ritter, Hon. Bill, Jr., Governor, State of Colorado ................................................ 16 

Salazar, Hon. Ken, U.S. Senator From Colorado .................................................. 15 

Smith, Steve, The Wilderness Society, Denver, CO .............................................. 48 

APPENDIXES 

APPENDIX I 

Responses to additional questions .......................................................................... 73 

APPENDIX II 

Additional material submitted for the record ........................................................ 81 

(1) 

OIL SHALE RESOURCES 

THURSDAY, MAY 15, 2008 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. 

The committee met, pursuant to notice, at 1:50 p.m. in room SD– 

366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chairman, presiding. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. 

SENATOR FROM NEW MEXICO 

The CHAIRMAN. Ok. Why don’t we go ahead and get started here. 

Senator Domenici is going to have to go on to an Appropriations 

hearing. So we’re starting a little earlier than we had earlier 

planned to. 

Today the committee is receiving testimony on the topic of development of oil shale resources. The Nation has vast oil shale resources. We hold over 50 percent of the world’s oil shale resources 

amounting to over two trillion barrels. Most of this resource is concentrated in Colorado, Utah and Wyoming with much of it occurring on Federal lands that are administered by the Department of 

Interior. 

However, because of the state of the technology and economic 

factors and environmental concerns our oil shale resources have 

not yet been developed. The Department of Interior currently has 

a research development demonstration leasing program which I 

think is an important step. However as part of the EPACT 2005, 

Congress enacted some broad, sweeping, new requirements with respect to commercial leasing of Federal oil shale resources. 

Some have voiced concern that this legislation pushed commercial leasing too far and too fast and is not realistic given the state 

of the technology. Obviously premature leasing could lead to speculation and be counter productive. That was the concern. 

On the other hand we hear that industry needs some additional 

certainty as to the lease terms and other requirements for commercial leasing in order to proceed with developing the technology for 

this research. It seems to me there should be a way forward that 

does not involve premature commercial leasing that protects the interests of the American people to a fair return on their resources 

and that addresses concerns of local citizens and still provides industry with the certainty that it needs. I also hope the committee 

can carefully consider impacts to local economies and to land and 

water resources. 
2 

In this era of soaring prices and increasing dependence on foreign oil, our domestic oil shale resources can potentially play an 

important role. However we must proceed with care as we craft a 

policy leading to its future development. I look forward to working 

with Senator Domenici and Senator Salazar who are two of the 

leaders on this issue here on the committee, as well as other members of the committee on this important matter. 

I thank all the witnesses for being here. Senator Domenici, go 

right ahead. 

STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM 

NEW MEXICO 

Senator DOMENICI. First of all, thank you, Mr. Chairman for calling this hearing. I have a prepared statement. I would ask that you 

make it part of the record. 

[The prepared statement of Senator Domenici follows:] 

PREPARED STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM

NEW MEXICO

Mr. Chairman, I appreciate your willingness to hold this hearing. I have spoken 

extensively over the last few months about the growing threat of our dependence 

on foreign oil. Such dependence threatens our national security and our economic 

security. In short, it threatens our way of life. 

A couple of weeks ago, I introduced legislation that will try to reverse this growing trend by opening vast areas here in America for oil and gas production. I urge 

my colleagues to rethink their positions in light of the ever changing fact of higher 

prices and greater foreign dependence. We can not keep asking OPEC for the very 

thing that we have here in America. I also believe strongly that oil shale development will help our efforts to strengthen this nation’s energy security. And, I am 

pleased that we will be examining this issue in detail today. 

I have now been a member of the Senate for more than 35 years. During that 

time, America’s oil imports have grown from 6 million to 12 million barrels per 

day—from 35 percent of our supply to nearly 60 percent. At the same time, domestic 

oil production has fallen sharply. Last year, we produced roughly half of what we 

produced in 1970. 

We confront the sobering realities of this arrangement every day. As demand for 

energy increases, prices continue to rise. But because we have chosen not to develop 

our own resources, we will ship nearly half a trillion dollars overseas to import oil 

this year alone. 

We simply must re-exam our energy production policies and take steps to dramatically increase the use of our own resources to meet our own needs. The comparatively lower price of oil had a bearing on oil shale development in the 1970s, 

but as crude oil prices continue to rise above $120 a barrel, development of our nation’s vast oil shale deposits shows a greater promise than ever before. Oil shale 

must play a part in the effort to reduce our growing dependence on foreign oil. 

Our oil shale reserves can provide an important source of strategically located, reliable, affordable and secure oil. Oil shale production here in the United States 

could directly offset much of the loss of OPEC production, and hold down both world 

oil prices and the prices consumers pay for gasoline and other fuels. 

More than 70 percent of the oil shale in the U.S. is located on federally owned 

and managed lands. Some 1.9 million acres of federal lands across the Green River 

Basin in Colorado, Utah and Wyoming contain 1.2 to 1.8 trillion barrels of potentially-recoverable oil. On an energy-equivalent basis, those deposits contain three 

times as much energy as the proven oil reserves of Saudi Arabia. 

In 2005, we passed the Energy Policy Act which contained a provision to facilitate 

development of this terrific source of domestic oil. This bill promoted the improvement of technologies needed to recover petroleum from oil shale on public lands. It 

also directed the Bureau of Land Management to issue final regulations for commercial leasing by the end of 2008. 

Unfortunately, last year—without the benefit of full debate and conference like we 

had in the Energy bill in 2005—Congress placed a one-year moratorium on preparing and publishing the final regulations for a commercial leasing program. This 

undid the good, bipartisan work of 2005. The moratorium strips the agreed-upon 
3 

timeline to publish final regulations for no apparent reason other than to slow down 

development. I hope we can fix that, as I proposed in the American Energy Production Act. 

Everyone understands that commercialization is still a few years away, but BLM 

needs to be able to move forward with final regulations. We need to establish the 

lay of the land and create some regulatory stability, including diligence requirements, royalty rates to conversion fees, and operating and environmental standards. 

Any delays in finalizing the regulations may discourage private investment in research and development. There is no question in my mind—whenever it is economically and environmentally possible—that we must seek to produce energy here at 

home. We cannot talk from both sides of our mouths—on the one hand setting up 

programs to promote energy production, while slapping on onerous restrictions that 

harm development. 

I understand that attempts to develop oil shale have failed in the past. But that 

was decades ago without the promise we now see from innovative production technologies and without the unprecedented price of oil and level of importation that we 

face today. I am confident that this country, known for its science and ingenuity, 

can make it work. We already have companies willing to invest upwards of $5 billion dollars in advanced technologies that will help realize the potential of oil shale. 

We need to do all we can to support these efforts. 

I want to extend a special welcome to our colleagues, Senator Hatch and Senator 

Allard, who are here to speak about the importance of this resource to their respective states. 

I also want to thank our panel of witnesses for joining us today. Your testimony 

will be important as we examine the great opportunities associated with oil shale 

development. I look forward to your testimony. 

The CHAIRMAN. Glad to do that. 

Senator DOMENICI. I just want to state after thanking everybody 

that’s come here to today to just talk a minute on the record. This 

committee and its counterparts in the U.S. House produced a national energy policy about 4 years ago, called EPACT. We were 

careful in that to do many things bipartisan. That’s why the bill 

was such a success. 

Mr. Chairman, one of the things we did bipartisan was to determine that oil shale might have a future in terms of the mix for 

American crude oil development and that it might be part of diminishing our enormous dependence upon foreign oil. In that bill that 

we passed together, we provided that the Department of Interior 

would issue final regulations by the end of 2008. 

I think that that was well thought out. Because that did not 

mean that we were going to proceed ahead of the environmental 

concerns, ahead of the community concerns. What it meant was 

that final regulations would be issued so that industry and the private sector would have some stability justifying enormous investments. 

Without something like this, clearly, you’re operating without 

knowing what the rules are and spending enormous amounts of 

money without the rules being determined. So I was quite surprised, if not shocked, to find that apparently from the area those 

who thought otherwise than what the committee that you and I 

served on thought, went to the Interior Appropriations committee 

last year and put a moratorium on the issuance of these final regulations. 

Let me repeat. I was quite shocked. Because I didn’t think that 

we had done anything other than that which was appropriate in 

the act which we passed unanimously and bipartisan. 

I think both Senators who are waiting to testify agree with what 

I said and helped us with the bill. I thought you agreed, Mr. Chairman. You worked and helped with the bill. 
4 

I very much appreciate your statement. I listened carefully. I believe that I would agree with everything in your statement because 

you recognize the value of shale. 

You recognize that it could be part of America’s energy production. Your concern is that the development be done appropriately 

in terms of the environment and otherwise. I feel the same way. 

But I believe that something like final rules, final regulations, 

have to be part of this development and part of what the Department of Interior does to stabilize and assure the big investments 

that have to occur, that there is a time line. There is—they are 

going somewhere. It’s not just in limbo. 

I note there are some people from the area. I heard the Governor’s testimony. I’m not sure if he is one of them, that he might 

be concerned that we’re moving too fast. I hope I get a chance to 

talk with him about this. Because I don’t think we’re advocating 

moving fast just because some of us want regulations that industry 

can look at. 

We will also hear from industry today. Some will be shocked to 

find out how much of a commitment is already being made by companies like Shell Oil Company. A huge number of millions of dollars have been committed to experiment and research in this area. 

I believe if we just made one step toward indicating that we were 

going to move and we were going to convert, even if it was small 

quantities, that said we were going to find out how. I think it 

would have a tremendous impact on oil prices in the world. If those 

who were holding us hostage knew that there is a chance that they 

can’t hold us hostage, I think it would have a very big impact. 

So, I think this is a serious problem that we ought to address 

with a very serious eye and not be disposed or dispelled by those 

who harken back to 25, 30 years ago. Remember when it was tried 

before, Mr. Chairman, I put this just on the record, the price of oil 

was not $120 a barrel. I couldn’t find the price and the date. But 

I would be surprised if it was more than $10 a barrel, $15, something like that when we were last playing in this field. Think of 

the difference in terms of what can be spent on the environment, 

on clean up, on all kinds of things and still make a profit and get 

ourselves out of this dependency problem. 

Thank you, Mr. Chairman. Again, I apologize when I leave, you 

know about it. It’s not because I’m lacking interest. 

I have to go to Appropriations. They called it at the same time. 

I’ll go there and come back as soon as I can. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. We have two of our distinguished colleagues here, Senator Hatch and Senator Allard. We 

welcome both of you and are ready to hear any statements you’d 

like to make. 

Senator Hatch, why don’t you go ahead? 

STATEMENT OF HON. ORRIN HATCH, U.S. SENATOR 

FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. I may be just a little 

bit longer than 5 minutes, if I can here. 

The CHAIRMAN. Take as long as you want. 
5 

* See Appendix II. 

Senator HATCH. Thank you very much. I appreciate it. I want to 

thank you for holding this hearing today and for the opportunity 

of giving the two of us, Senator Allard and me and a whole raft 

of others, to add our testimony. 

As you know, working closely with members of this committee 

and with Senators Pete Domenici, Wayne Allard, Robert Bennett 

and Ken Salazar, I introduced the Oil Shale and Tar Sands Development Act which is used as basis for Section 369 of the Energy 

Policy Act of 2005. Now I’ve heard from press reports that Senator 

Salazar has a new proposal which according to the reports, sink 

some more thoughtful approach to oil shale development. I’ve not 

seen it yet. 

But to be honest, Mr. Chairman, I would argue that the road 

we’re on has been pretty darn thoughtful. In fact Section 369 specifically allows Governors and other officials in relevant states to 

decide how quickly or slowly to move forward on oil shale production in their respective states. Apparently, Mr. Chairman, my colleagues on the other side of the aisle prefer a different approach, 

or at least some of them, when it comes to Utah. They would rather not give our Governor the same courtesy and instead would prefer to control the timing of the decision themselves. 

Now let me be frank, Mr. Chairman. It’s an offense to me that 

this decision is being withheld from Utah’s Governor and other 

elected officials in my State. The fact that there are efforts to delay 

the decision even further only deepens the offense. 

I have a copy of a letter from Governor John Huntsman Jr. of 

Utah to the Senate Appropriations Subcommittee on Interior and 

Related Agencies. He asked the committee to rescind the moratorium on implementing Section 369. 

In his letter Governor Huntsman states, ‘‘I recommend lifting 

these restrictions. Utah is home not only to substantial oil shale reserves, but also to businesses willing to develop oil shale using new 

technology that will make extraction cleaner and more efficient. We 

have State and Federal regulators who are capable of ensuring that 

this resource is developed in an environmentally, responsible manner.’’ 

I would ask that the Governor’s letter be included in the record 

at this point.* 

The CHAIRMAN. We’ll be glad to include it. 

Senator HATCH. Thank you, Mr. Chairman. Let me just take a 

minute to lay out what our current law on unconventional oil actually does. First it sets up a research and development leasing program on BLM lands. That program is now underway. I believe the 

Federal Government has shown a great deal of thoughtfulness and 

caution with regard to how these R and D leases were granted. 

Next the law calls for a multi-State programmatic environmental 

impact statement to consider the larger environmental issues associated with the development of oil shale in tar sands. Section 369 

pushed for a vigorous timeframe for the completion of the PEIS. 

The BLM responded to that direction by denying an extension to 

an earlier comment period request by the State of Colorado. 
6 

Admittedly that was a regrettable outcome of the tight schedule 

given to the BLM. I was pleased, however, that the BLM did provide an extra month to the comment period to the draft PEIS giving a full 4 months for the public to comment on the study. After 

the release of the final PEIS, Section 369 directs the Interior Secretary to consult with the Governors of states, interested Indian 

tribes and other interested persons to determine the level of support and interest in the states in the development of tar sands and 

oil shale resources. If the Secretary finds sufficient support and interest exists in a State, the Secretary may conduct a lease sale in 

that State under the commercial leasing program regulations.’’ 

Now in my view, no further impediment is needed to ensure that 

a thoughtful approach is pursued and controlled by State and local 

officials. 

Finally, Section 369 establishes a task force on strategic unconventional fuels which includes the Governors and local officials of 

the relevant states to consider the relevant issues surrounding unconventional oil production. A report by the task force is available 

to the public. It addresses many of the questions regarding oil 

shale development and gives voice to the concerns held by some 

participants of the task force. 

Those concerns need to be heard and addressed. That is the purpose of the PEIS and of the requirement that the Secretary consult 

with decisionmakers in each State. In the final analysis if the decision is to move forward it will then be up to members of industry 

and their investors to determine when the technology is ready for 

commercial operation. 

It will be a business decision that no governmental official is well 

equipped to make. But there are a number of very legitimate questions and concerns that government officials and the public do have 

a role in raising. Let’s take a look at some of those. 

In the late 1970s the government invested very heavily in a 

major effort to develop oil from oil shale in Western Colorado. 

When OPEC dropped the price of oil down to $10 a barrel, a dramatic boom turned into a devastating bust in the blink of an eye. 

At that price even conventional oil production was not profitable. 

That is an event that is well remembered by those who lived 

through it. I sympathize with some of their negative views associated with oil shale production. However that was a quarter of a 

century ago. 

Today is a very different world than in the late 1970s and early 

1980s. 

First of all there is no huge governmental corporation spending 

big government dollars on oil shale development. 

Second, OPEC no longer has anywhere near the spare capacity 

necessary to flood the world market. In fact, due to the meteoric 

rise in global demand for oil, I doubt OPEC has the capacity to 

cause even a significant drop in the price of oil. 

Third, technology and regulatory protections in every aspect of 

oil, gas and mining have matured impressively since the early 

1980s. Those advances not only make oil shale development much 

more viable. But they also ensure much better protections for the 

environment. 
7 

Some critics of oil shale and tar sands production have raised air 

quality concerns. Let’s be clear. There’s no aspect of Section 369 

which would exempt industry from any Federal or State air quality 

laws or regulations. 

In fact these industry members plan to comply and even exceed 

air quality requirements. They also express a readiness to address 

climate change questions on the same schedule that other industries may be required to control carbon emissions. One Utah company, called Cre Energy, is now building a pilot plant to demonstrate their ability to produce upgraded syn crude from oil shale 

with little or no carbon emissions. 

Another concern is the acreage and wildlife habitat that would 

be disturbed by oil shale development. It’s a sobering fact that with 

every new home, ski cabin, road and hotel that we build in this 

country, we’re destroying wildlife habitat. Why is it that such new 

activities occur daily in all of our states, but we only raise our eyebrows at the acreages used for oil production? 

Mr. Chairman, I’m a fan of ethanol production. I was the sponsor 

of the Clear Act which provides the current tax incentives for E85 

infrastructure and E85 fuel when sold for vehicle use at retail. But 

I’m also aware that it takes a full acre of corn to produce about five 

barrels of equivalent ethanol. 

Mr. Chairman, do you know how many barrels of oil would come 

from one acre of oil shale? On the low end, one acre of oil shale 

will produce about 100,000 barrels of oil. On the high end, one acre 

of oil shale will produce one million barrels of oil. 

Now let me make sure everyone in this room heard me correctly. 

That’s about five barrels of ethanol for each acre of corn and between 100,000 and one million barrels of oil for each acre of oil 

shale. A typical acre of oil shale will produce ten times more oil 

than a typical acre of conventional oil. 

There is no other hydrocarbon resource on earth that is this concentrated in terms of a yield per acre basis. So I hope the members 

of this committee are able to contain themselves when opponents 

express their ‘‘concern’’ for land disturbance and wildlife habitat related to oil shale development. Unlike construction projects we accept everyday, oil shale companies are present on the land only 

temporarily and are and will, restore the land to nature when they 

are finished. 

Another very legitimate question often raised with regard to oil 

shale development is water availability in the West. No doubt 

water is always a concern in the States of Colorado, Wyoming and 

Utah, which Utah being the second driest State of the Union. So 

I have to say I was initially surprised that not one company interested in oil shale development that I have talked to, considers 

water availability to be a significant constraint. 

Is that because they are ignorant of water constraints in the 

West? Actually the opposite is the case. They are very well aware 

of water constraints and have each developed technology that requires moderate amounts of water, or even no water, for oil shale 

production. 

Let’s go back to ethanol for a moment. I want to emphasize that 

while I oppose Federal mandates for ethanol production, I’m a 

strong supporter of ethanol incentives. But one barrel of ethanol re-
8 

quires somewhere between 800 and 1,700 barrels of water just to 

grow the corn. 

I’m happy to report that so far, most corn for ethanol receives 

this amount almost exclusively from rainfall. However as corn is 

grown in some of the drier states, it requires approximately 785 

barrels of irrigated water for every barrel of ethanol produced. 

Then the processing of ethanol fuel takes an additional two to four 

barrels of water for each barrel of ethanol. 

The Department of Energy has calculated that with respect to oil 

shale production, the water needed for dust control, mining, processing, upgrading and land reclamation would combine for approximately three barrels of oil or for each barrel of upgraded syn crude. 

A favorite approach by opponents of oil shale production is to the 

oil shale production being planned in the United States to all the 

alleged negative aspects of oil sands production in Alberta, Canada 

and then to completely ignore any comparison to the gigantic and 

economic and energy supply successes that Canada has enjoyed by 

developing unconventional resources. 

From the standpoint of water and natural gas used. 

Senator DOMENICI. Mr. Chairman, I wish you would ask the senior senator to reduce his remarks. The three of us must go to Appropriations and we would like to be able to be here for part of our 

hearing. We would like to hear Senator Hatch, but we would like 

to hear others also. 

Senator HATCH. I’ll be happy to wind this up. I have a number 

of other remarks to say so I would ask that my full remarks be 

placed—— 

The CHAIRMAN. Why don’t you go ahead and summarize the remainder of your remarks and we’ll put the rest in the record and 

hear from Senator Allard. 

Senator HATCH. I would say this. That from the standpoint of 

water and natural gas, you understand there’s not that much comparison to be made between the processes being used and considered in the two countries. I think we need to evaluate all oil shale 

and oil sands production in the United States based upon the actual processes being developed by companies in the United States. 

Now there are a lot of other things that I have in this particular 

set of remarks that I think go to how important it is that we follow 

up on this, that we compete with—and one last point I’d really like 

to make. We are sending approximately $600 billion a year offshore 

for offshore oil. A lot of that money is going to Venezuela, to Russia, to other countries that really do not in many respects have the 

United States best interest at heart. 

We need to keep that $600 billion here in this country to utilize 

for our people, for our needs, for our compassionate needs and of 

course, for our development of energy that we have the capacity to 

develop. Right now I think the least you could say is that we’re not 

doing it. Frankly to lose $600 billion a year is bad. 

Now it’s estimated that three trillion barrels of oil in the States 

of Colorado, Wyoming and Utah and much of it in oil shale. About 

1.2 billion barrels of oil is recoverable according to—and I would 

like to basically have that be considered recoverable oil which is 

where it should be. I believe that’s the smart thing to do. 
9 

I think we ought to wake up in this country. We ought to go full 

boar in developing this oil and keeping our economy going and 

making us less dependent on the rest of the world and saving that 

$600 billion for our country rather than for many who are enemies 

throughout the world. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

[The prepared statement of Senator Hatch follows:] 

PREPARED STATEMENT OF HON. ORRIN G. HATCH, U.S. SENATOR FROM UTAH

Mr. Chairman, I thank you for holding this hearing today and for the opportunity 

you have given me to add my testimony. As you know, working closely with members of this committee and with Senators Pete Domenici, Wayne Allard, Robert Bennett and Ken Salazar, I introduced the Oil Shale and Tar Sands Development Act, 

which was used as a basis for Section 369 of the Energy Policy Act of 2005. 

I have heard, from press reports, that Senator Salazar has a new proposal, which, 

according to the reports seeks a more thoughtful approach to oil shale development. 

I have not seen it yet, but to be honest, Mr. Chairman, I would argue that the road 

we are on has been pretty darn thoughtful. In fact, Sec. 369 specifically allows governors and other officials in relevant states decide to how quickly or slowly to move 

forward on oil shale production in their respective states. Apparently, Mr. Chairman, my colleagues on the other side of the aisle prefer a different approach when 

it comes to Utah. They would rather not give our governor the same courtesy, and 

instead would prefer to control the timing of that decision themselves. 

Let me be frank, Mr. Chairman, it’s an offense to me that this decision is being 

withheld from Utah’s governor and other elected officials in my state, and the fact 

that there are efforts to delay the decision even further only deepens the offense. 

I have a copy of a letter from Governor Jon Huntsman, Jr., of Utah to the Senate 

Appropriations Subcommittee on Interior and Related Agencies. He asks the committee to rescind the moratorium on implementing Sec. 369. In his letter, Governor 

Huntsman states, 

I recommend lifting those restrictions. Utah is home not only to substantial oil shale reserves...but also to businesses willing to develop oil shale 

using new technology that will make extraction cleaner and more efficient. 

We have...state and federal regulators who are capable of ensuring that this 

resource is developed in an environmentally responsible manner. 

I ask that the governor’s letter be included in the record. Thank you Mr. Chairman. 

Let me take just a minute to lay out what our current law on unconventional oil, 

actually does. First, it sets up a Research and Development Leasing program on 

BLM lands. That program is now underway, and I believe the federal government 

has shown a great deal of thoughtfulness and caution with regard to how those 

R&D leases were granted. Next, the law calls for a multi-state Programmatic Environmental Impact Statement to consider the larger environmental issues associated 

with the development of oil shale and tar sands. Sec. 369 pushed for a vigorous time 

frame for the completion of the P.E.I.S., and the BLM responded to that direction 

by denying an extension to an earlier comment period request by the state of Colorado. Admittedly, that was a regrettable outcome of the tight schedule given to the 

BLM. I was pleased, however, that the BLM did provide an extra month to the comment period for the Draft PEIS, giving a full four months for the public to comment 

on the study. After the release of the Final PEIS, Sec. 369 directs the Interior Secretary to, 

Consult with the Governors of States, interested Indian tribes, and other 

interested persons, to determine the level of support and interest in the 

States in the development of tar sands and oil shale resources. If the Secretary finds sufficient support and interest exists in a State, the Secretary 

may conduct a lease sale in that state under the commercial leasing program 

regulations. 

In my view, no further impediment is needed to ensure that a thoughtful approach is pursued and controlled by state and state and local officials. 

Finally, Sec. 369 establishes a Task Force on Strategic Unconventional Fuels, 

which includes the governors and local officials of the relevant states to consider the 

relevant issues surrounding unconventional oil production. A report by the task 

force is available to the public. It addresses many of the questions regarding oil 
10 

shale development and gives voice to the concerns held by some participants of the 

task force. Those concerns need to be heard and addressed. That is the purpose of 

the PEIS and of the requirement that the Secretary consult with decision makers 

in each state. 

In the final analysis, if the decision is to move forward, it will then be up to members of industry and their investors to determine when the technology is ready for 

commercial operation. It will be a business decision that no government official is 

well equipped to make. 

But there are a number of very legitimate questions and concerns that government officials and the public do have a role in raising. Let’s take a look at some 

of those. 

In the late 1970’s, the government invested very heavily in a major effort to develop oil from oil shale in western Colorado. When OPEC dropped the price of oil 

down to $10 a barrel, a dramatic boom turned into a devastating bust in the blink 

of an eye. At that price, even conventional oil production was not profitable. That 

is an event that is well remembered by those who lived through it, and I sympathize 

with some of their negative views associated with oil shale production. 

However, that was a quarter of a century ago. Today is a very different world 

than in the late 1970’s and early 80’s: First of all, there is no huge government corporation spending big government dollars on oil shale development. 

Second, OPEC no longer has anywhere near the spare capacity necessary to flood 

the world market. In fact, due to the meteoric rise in global demand for oil, I doubt 

OPEC has the capacity to cause even a significant drop in the price of oil. 

Thirdly, technology and regulatory protections in every aspect of oil, gas, and mining have matured impressively since the early 1980’s. Those advances not only 

make oil shale development much more viable, but they also ensure much better 

protections for the environment. 

Some critics of oil shale and tar sands production have raised air quality concerns. 

Let’s be clear, there is no aspect of Sec. 369 which would exempt industry from any 

federal or state air quality laws or regulations. In fact, these industry members plan 

to comply and even exceed air quality requirements. And they also express a readiness to address climate change questions on the same schedule that other industries 

may be required control carbon emissions. 

One Utah company called CRE Energy is now building a pilot plant to demostrate 

their ability to produce upgraded syncrude from oil shale with little or no carbon 

emissions. 

Another concern is the acreage and wildlife habitat that would be disturbed by 

oil shale development. It’s a sobering fact that with every new home, ski cabin, road, 

and hotel we build in this country, we are destroying wildlife habitat. Why is it that 

such new activities occur daily in all of our states, but we only raise our eyebrows 

if the acreage is used for oil production? 

Mr. Chairman, I’m a fan of ethanol production. I was the sponsor of the CLEAR 

Act which provides the current tax incentives for E-85 infrastructure and E-85 fuel 

when sold for vehicle use at retail. But I’m also aware that it takes a full acre of 

corn to produce about five barrels of oil equivalent ethanol. 

Mr. Chairman, do you know how many barrels of oil would come from one acre 

of oil shale? On the low end, one acre of oil shale will produce about 100,000 barrels 

of oil. On the high end, one acre of oil shale will produce one million barrels of oil. 

Let me make sure everyone in this room heard me correctly: that’s about five barrels of ethanol for each acre of corn and between 100,000 and one million barrels 

of oil for each acre of oil shale. 

A typical acre of oil shale will produce ten times more oil than a typical acre of 

conventional oil. There is no other hydrocarbon resource on Earth that is this concentrated in terms of yield per-acre basis. 

So I hope the members of this committee are able to contain themselves when opponents express their ‘‘concern’’ for land disturbance and wildlife habitat related to 

oil shale development. Unlike construction projects we accept every day, oil shale 

companies are present on the land only temporarily and are will restore the land 

to nature when they are finished. 

Another very legitimate question often raised with regard to oil shale development is water availability in the West. No doubt, water is always a concern in Colorado and Utah, which is the second driest state in the Union. So I have to say I 

was initially surprised that not one company interested in oil shale development 

that I have talked to considers water availability to be a significant constraint. 

Is that because they are ignorant of water constraints in the West? Actually the 

opposite is the case. They are very well aware of water constraints and have each 

developed technology that requires moderate amounts or even no water for oil shale 

production. 
11 

Let’s go back to ethanol for a moment. And I want to emphasize that while I oppose federal mandates for ethanol production, I’m a strong supporter of ethanol incentives. But one barrel of ethanol requires somewhere between 800 and 1,700 barrels of water just to grow the corn. I am happy to report that, so far, most corn 

for ethanol receives this amount of water almost exclusively from rainfall. However, 

as corn is grown in some of the drier states, it requires approximately 785 barrels 

of irrigated water for every barrel of ethanol produced. Then, the processing of ethanol fuel takes an additional two to four barrels of water for each barrel of ethanol. 

The Department of Energy has calculated that with regard to oil shale production, 

the water needed for dust control, mining, processing, upgrading, and land reclamation would combine for approximately three barrels of water for each barrel of upgraded syncrude. 

A favorite approach by opponents of oil shale production is to tie oil shale production being planned in the U.S. to all the alleged negative aspects of oil sands production in Alberta, Canada, and then to completely ignore any comparison to the 

gigantic economic and energy supply successes that Canada has enjoyed by developing unconventional resources. 

From the standpoint of water and natural gas use, there is not that much comparison to be made between the processes being used and considered in the two 

countries. Mr. Chairman, might I suggest that we evaluate oil shale and oils sands 

production in the United States based on the actual processes being developed by 

companies in the U.S. 

With regard to oil sands, Mr. Chairman, of the two oil sands companies I’m aware 

of in Utah, both have developed separate methods that use water-based, environmentally benign solutions that effectively drop the sand right out of the bitumen 

at room temperature and then the water solution is recycled back into the process. 

Their energy inputs are basically the electricity to run the water pump. Rather than 

pretending to evaluate dirty phantom technologies that would never be used. Let’s 

look at what U.S. companies are actually pursuing. 

For the most part, the very legitimate questions surrounding oil shale development have very good answers. But I’ve come to the conclusion that some opponents 

of oil shale would rather ignore the legitimate answers to their concerns, and when 

that’s the case it tells me that their concerns are smokescreens for a hidden agenda. 

There are a number of environmental groups that have made it clear by their actions that they just plain oppose oil production and are especially afraid of any new 

sources of oil, such as from oil shale or from tar sands. 

The question for you, Mr. Chairman, and for the members of this committee, and 

I should add, for the Democratic leadership of Congress, is whether you will adopt 

the anti-oil agenda of the environmental movement as an element of your own energy policy. So far, I have heard of proposals to tax successful energy production, 

to investigate the oil futures markets, to ban Canadian oil imports in favor of oil 

from Venezuela, Russia, and the Middle East, and to call for delay after delay in 

the commercial production of oil shale. At times, it almost appears that the antioil agenda is the ONLY element of the energy policy of some members of Congress. 

These policies would not produce one drop of oil. In fact, they are sure to achieve 

the opposite effect. Last time I checked, less oil meant higher prices and economic 

harm, and more oil meant lower prices and economic benefits. 

Mr. Chairman, I’m being frank, because I know that you and the members of this 

committee, for the most part, are not anti-oil. Rather, I believe that members of this 

committee on both sides understand energy. You understand that liquid fuels are 

produced and sold in a global market, that global demand is outstripping global supply, and that no combination of alternative fuels can match the scale of the global 

oil deficit coming our way. 

The total proven oil reserves in the world are approximately 1.6 trillion barrels 

of oil. Current proven reserves in the U.S. are a mere 22 billion barrels. 

It is a well-established fact that oil shale resources in Utah and Colorado hold 

somewhere between 800 billion and two trillion barrels of recoverable oil. Can we 

get it out tomorrow? No. Can we begin to develop it in a few years? Yes. Is it economic at $40 a barrel or less? Yes. 

I would like to read a statement by one of our nation’s foremost experts on oil 

shale, Dr. James Bunger. He states: 

By proving the commercial viability of a suite of technologies for different 

resource characteristics, Canada was able to book 174 billion barrels of oil 

sands as proven, making them the second largest holder of proven reserves 

in the World, second only to Saudi Arabia at 260 billion barrels. It should 

be the goal of the private sector and the United States government to prove 

technologies that will allow oil shale ... to be reclassified from its current 
12 

status of in-place resource, to ‘‘proven reserves.’’ Achieving a goal of reclassifying 400 billion barrels as proven is well within our capabilities and the 

characteristics of the resource and, if achieved would make the US the 

holder of the largest oil reserve in the World. 

Mr. Chairman, I ask that Dr. Bunger’s full statement be made part of the record. 

Thank you Mr. Chairman. 

It would be nice to pretend we’re not dependent on oil; that we can skip immediately to some yet-to-be identified alternative, 30 years down the line. But we can’t. 

Truckers and farmers need diesel today. Mom’s need to get to soccer and ballet practice tonight, Americans want to visit their national parks this summer. 

Because we have made domestic oil production so difficult in this nation, we now 

send $600 billion each year to our foreign competitors for oil, and they’re laughing 

all the way to the bank. This is a huge and constant stream of money leaving our 

nation once and for all. We are funding the rise of our international competitors and 

causing our own decline. It is a fact largely ignored by the media, by the current 

presidential candidates, and by the current Congressional leadership. But it’s a 

trend this committee cannot ignore. 

Mr. Chairman, we must pursue alternative sources of energy, but in the meantime, there is no room in our energy policy for an anti-oil or -oil-shale attitude. 

If leaders in Colorado and Wyoming wish to slow down oil shale and sands production in their states, then I congratulate them, because that power was given to 

them years ago in Sec. 369. But it is not right to artificially slow shale development 

down in areas that are prepared to meet the challenges of supplying our nation with 

domestic oil. It’s not right for my state and it’s not right for Americans who are 

sending their money to our competitors oversees. 

Thank you, Mr. Chairman. 

Senator Allard. 

STATEMENT OF HON. WAYNE ALLARD, U.S. SENATOR 

FROM COLORADO 

Senator ALLARD. Thank you, Mr. Chairman. First of all I’d like 

to commend you for holding this hearing along with Ranking Member Senator Domenici and I see that my colleague is here from Colorado. It’s good to see him. 

I’d like to also congratulate Senator Hatch for a very complete 

and thorough statement that he’s made on oil shale. He has reviewed some very important facts that pertain to the development 

of oil shale. I hope the committee carefully reviews his statement. 

I’d also like to commend the Department of Interior, especially 

Assistant Secretary Stephen Allred and the BLM on the positive 

working relationship that have been established with the affected 

states. This is an extremely important issue, not only to the State 

of Colorado, but to the Nation. 

The Green River Basin of Northwestern Colorado, Eastern Utah 

and Southwestern Wyoming contains the largest, most concentrated quantities of potentially recoverable oil shale in the 

world. This basin has a considerable amount of oil reserves in it 

as was mentioned by Senator Hatch. There has been much discussion about proceeding and the thoughtful and deliberate manner. 

I believe that is just what we have been doing. 

Section 369 of the Energy Policy Act of 2005 outlined a deliberate 

and thoughtful process for approaching the research and eventual 

commercial development of oil shale. This committee held a field 

hearing in Colorado in June 2006. Discussions, research, investments were ongoing for several years before either of these actions 

took place. We’re in the midst of a multi year, thoughtful and deliberate approach. 
13 

The 2007 issuance of research development demonstration leases 

and the December release of the programmatic environmental impact statements were important steps. While it may take many 

years of research to establish whether commercial leasing is viable. 

It is essential that commercialization regulations be released so 

that companies interested in oil shale development know the ‘‘rules 

of the road.’’ 

I want to stress the fact that the release of commercialization 

regulations does not equal offering commercial leases. There’s a difference. Commercialization regulations will simply include provisions like what the link, the oil shale leases, the royalty rate and 

site reclamation requirements. 

This is the type of information that companies need to make 

sound investment decisions about whether commercialization will 

ever work for them. It is bad business policy to spend millions of 

billions of millions of dollars building up the commercialization of 

a product if you have no idea what the environment in which you 

will be able to commercialize will be. Governments simply must 

provide a more certain operating environment or oil shale development will never be a reality. Businesses cannot operate in an uncertain regulatory environment. 

I’d like to say that I’m pleased that our colleagues and Senator 

Hatch has also provided that testimony today. We keep talking 

about technology that is years from producing oil from shale. In 

Colorado, that is true. But it is my understanding there are companies in Utah that have technology that is ready to go this year. 

These companies, especially, have a very real need for commercialization regulations. 

I will say it again. Business cannot operate in an uncertain, regulatory environment. Without these regs the opportunity to unlock 

the oil trapped in the ground in Utah could slip away. 

If we allow the opportunity to develop this resource slip away it 

would be a real disservice to the citizens of this country, considering there is well over one trillion barrels of oil locked in the shale 

beneath Colorado, Utah and Wyoming. This is not an inconsequential amount of energy. One trillion barrels of oil would provide for 

the current consumption levels at 20 million barrels a day for over 

136 years. 

I’m hard pressed to understand how some find that that fact is 

so easy to dismiss. At a time when oil prices remain over $120 a 

barrel, we should not be placing unnecessary road blocks in the 

way of developing additional resources. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Thank you both very much for your 

very good statements. We appreciate your presence here at the 

hearing. 

Let me also mention Congressman Mark Udall has also submitted a statement that he’s asked be included in the record. We’re 

glad to do that. 

[The prepared statement of Mr. Udall follows:] 

PREPARED STATEMENT OF HON. MARK UDALL, U.S. REPRESENTATIVE

FROM COLORADO

Thank you, Chairman Bingaman and Senator Domenici, for holding this hearing. 

I appreciate having the opportunity to provide this statement for the hearing record. 
14 

* Document has been retained in committee files. 

Oil shale has great potential as an energy source, so it’s an important part of our 

energy policy. And it’s important to the taxpayers, who own most of it. They have 

an interest in what return they will get for this resource. But it’s particularly important for Colorado because our state has some of the most important deposits of oil 

shale, and Coloradans—particularly those on the Western Slope—will be directly affected by its development. 

Back in 2005, a report from the RAND Corporation spelled out the great benefits 

that can come from developing oil shale. But it also made clear it’s important for 

the development to happen in the right way. 

The report said oil shale development will have significant effects, not just on the 

land but also on air quality and on both the quality and quantity of our very limited 

water supplies. 

And it said what Coloradans knew already—large-scale oil shale development will 

bring significant population growth and is likely to put stress on the ability of local 

communities to provide needed services. 

In short, the report reminded us how much Colorado and our neighbors had at 

stake when Congress debated the oil shale provisions of the 2005 Energy Policy Act. 

The current law appropriately requires the Interior Department to prepare a programmatic environmental impact statement (PEIS) on oil shale. The draft version 

of that PEIS has been released, and many Coloradans have responded with comments. I think the comments of our Governor, Bill Ritter, are particularly pertinent 

and well-founded and I encourage all members of the Committee to pay careful attention to them. 

But the 2005 law also includes several oil shale provisions that I think are seriously flawed. 

In particular, the law requires BLM to proceed promptly toward commercial leasing, regardless of what the PEIS says—and, even before we know the outcome of 

the ongoing research and development work that Shell Oil and others are doing on 

R&D leases. 

I have been concerned that this risks a rush to commercial development before 

the Interior Department knows enough to do it right and before Colorado’s communities have a chance to prepare for what will follow. 

My concern on that point was heightened last year, when the House’s Committee 

on Natural Resources held a hearing at which a witness from the RAND Corporation testified that ‘‘the economic, technical, and environmental feasibility of oil shale 

development is not adequate to support the formulation of a commercial leasing program on the timescale mandated’’ by the 2005 law and that ‘‘the fundamental approach the Department of the Interior is currently taking may be counterproductive 

if the goal is to keep open the option for a sustainable domestic oil shale industry.’’ 

I am attaching the full testimony,* for the information of the Committee. 

In response, I worked with the other Members of the Natural Resources Committee to develop revisions to the oil shale provisions of the 2005 law. Those revisions were included in the energy bill (H.R. 3221) passed by the House of Representatives in August of last year. Their purpose was to make it more likely that any 

commercial development of oil shale occurs in an orderly way that takes full advantage of the important research and development work now underway. 

If the House-passed bill had been enacted, the BLM would not be faced with an 

unrealistic deadline for finishing the programmatic environmental impact statement, and after it was completed they would have a year—not just six months, as 

under current law—to prepare commercial leasing regulations. And, under the 

House-passed bill, the requirement would be for BLM to issue proposed—not final 

regulations, with at least 120 days for people in Colorado—and everyone else—to 

review and comment on them. 

The House-passed bill also called for developing an overall strategy for sustainable and publicly acceptable large-scale development of oil shale in Colorado, Utah, 

and Wyoming, and it retained the current law’s requirement for consultations with 

the Governors of Colorado, Utah, and Wyoming before any commercial leases are 

issued. 

I think BLM’s analysis, as set forth in the draft PEIS, can help us understand 

what will be involved in any commercial leasing program, even though it cannot and 

will not answer all the questions. But I believe that revising the oil shale provisions 

of the 2005 law along the lines of the corresponding provisions of the House-passed 

bill would be a better way to proceed and one more likely to yield a good result. 

The House-passed bill also included a provision I added in the Natural Resources 

Committee to establish a fund to help local governments pay for infrastructure and 

services made necessary by future commercial oil shale development. This provision 
15 

reflected my concern about what large-scale commercial development of oil shale can 

mean for Colorado’s Western Slope and the problems it could bring to that mostly 

rural part of our state. Coloradans remember the seriously disruptive economic impacts on our communities from previous oil shale development efforts. I think the 

federal government—if it is going to promote development of this resource again— 

should also learn from that experience and help mitigate any potential impacts from 

an oil shale program. That’s what this provision was designed to accomplish. 

Regrettably, these provisions of the House-passed bill were dropped from the 

version of last year’s energy legislation that was finally sent to President Bush for 

signing into law. But I still think they would have been a great improvement over 

the current oil shale provisions in the 2005 Energy Policy Act. 

Because of the same concerns that prompted my efforts to amend the 2005 law— 

and to free BLM from some of that law’s oil shale mandates while I worked to 

amend it—I offered an amendment to the Interior Department’s fiscal 2008 appropriations bill to bar BLM from issuing final regulations for commercial oil shale 

leasing and from issuing commercial oil shale leases prior to October 1st of this 

year. As you know, the House of Representatives adopted that amendment, which 

was ultimately enacted and is now in effect. And while some have raised objections 

to that moratorium, I think it was and remains well-founded. 

In conclusion, Mr. Chairman, I commend to your attention Governor Ritter’s comments on BLM’s draft PEIS for a commercial oil shale program—and in particular 

his statement that ‘‘Colorado supports the research and development approach and 

continues its continued support of that effort. Once data is available from the research and development projects, it is possible that land allocation decisions can be 

made and regulatory requirements can be developed. But making land available or 

promulgating regulations in the absence of underlying data from the research and 

development projects is reckless and will lead to long-term significant impacts on 

Colorado.’’ 

I completely agree, and I urge this Committee and the Senate to free BLM from 

the current law’s requirement of pursuing such a course. 

The CHAIRMAN. Why don’t we call the first panel forward. The 

first panel consists of Governor Bill Ritter from the State of Colorado and the Honorable Stephen Allred who is the Assistant Secretary for Land and Minerals Management in the Department of 

Interior. 

Yes, let me call on Senator Salazar to go ahead and make some 

statements here in welcome of Governor Ritter. 

STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR 

FROM COLORADO 

Senator SALAZAR. Let me just at the outset say this is a very, 

very important hearing for the State of Colorado because we know 

that that is where 80 percent of the world’s oil shale reserves are 

located. So it is important for us to hear from the Chief Executive 

of Colorado, Bill Ritter. 

Bill Ritter has been the Governor of Colorado now for the last 

several years. He’s been a champion of moving forward in a 

thoughtful way in the development of our natural resources in the 

State of Colorado including oil and gas. At the same time making 

sure that what we’re doing is protecting the sustainability of Colorado’s precious environment, its land and its water. 

So his appearance here before the U.S. Senate Energy and Natural Resources Committee, Mr. Chairman, is very important. We 

very much are looking forward to your comments. 

The CHAIRMAN. Governor, we’re pleased to have you here. We 

know you’ve come a long way to speak to us. Please, if you could 

take 6 or 8 minutes and summarize the main points you think we 

need to understand. Obviously we’ll include your entire statement 

in the hearing record. 

[The prepared statement of Senator Salazar follows:] 
16 

PREPARED STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR FROM COLORADO

I want to thank Chairman Bingaman, Ranking Member Domenici, and the Committee Staff for working so hard to put together today’s hearing, which is on a topic 

that is very important to my state: the development of oil shale resources. I would 

also like to thank our witnesses for taking the time to share their expertise with 

us today, particularly Governor Ritter and our other Colorado witnesses. 

There is no doubt that oil shale offers staggering potential for our energy future. 

Oil shale deposits in Colorado, Wyoming, and Utah amount to somewhere between 

500 billion and 1.1 trillion barrels of oil. That is more than double the proven reserves of oil in Saudi Arabia. 

According to the U.S. Geological Survey, 80% of the Nation’s oil shale lies within 

150 miles of Grand Junction, Colorado. My state is blessed to have these resources. 

But we in the West are also highly aware of the challenges that oil shale poses. 

We remember how the energy crisis of the 1970’s stirred an oil shale mania, and 

when this oil shale speculation busted on ‘‘Black Sunday’’ in 1982, devastating 

Western Colorado. 

Today, with oil above $120 a barrel and gas over $4.00 a gallon, some people— 

including some of my colleagues—are once again looking to oil shale as the cureall for our energy woes. However, it is not clear why commercial leasing of federal 

lands is even necessary, since industry is not developing the nearly 200,000 acres 

of oil shale rich lands that they already own or control. 

The reality is that we in the West have been working to find an economical and 

responsible way to develop oil shale for well over a hundred years. There’s even a 

saying in Western Colorado that says: ‘‘Oil shale has a bright future—always has 

had and always will.’’ 

However, I do think that some day we will find an economical and safe way to 

develop our oil shale reserves. Today’s hearing is critical in helping us understand 

the potential of this development and will help us understand the important factors 

that we must consider in approaching this development. 

There are several important issues that I hope our witnesses will be able to address. First, we must determine the economic feasibility of oil shale development. 

Industry leaders estimate that commercial oil shale production will not even commence before 2015. Second, we need to ensure the protection of our land and water. 

Furthermore, we must better understand how much water is needed for oil shale 

production. Lastly, we need to better understand the impact of this development on 

the hunting, fishing, and recreational resources that these lands have to offer. 

Rather than rushing ahead with a commercial leasing program, we need a framework for developing such a program in a sensible way. In addition, if an oil shale 

process is commercialized, federal assets will be worth far more than today’s proposed lease prices. 

For this reason, I introduced legislation this week that will allow the voices and 

expertise of Western communities, scientists, and Congress to shape our country’s 

commercial oil shale leasing program. Specifically, my bill will give the BLM one 

year after completion of the PEIS to develop a commercial leasing program and proposed regulations, it will require the Department of the Interior to analyze and report to Congress on RD&D programs and technologies, and require compliance with 

NEPA to name a few provisions. I look forward to working with my colleagues to 

ensure the passage of this legislation. 

We in the West have over a century of experience with the challenges and perils 

of oil shale development. It is not the quick-fix for our energy problems that some 

of my colleagues dream of. It is not without impacts to our water supply and our 

land. And it is not yet ready for commercial development. I hope today’s hearing 

will help us understand the best way to address this important issue. 

Thank you. 

STATEMENT OF HON. BILL RITTER, JR., GOVERNOR, STATE 

OF COLORADO 

Govenor RITTER. Thank you, Mr. Chairman. Thank you, Senator 

Salazar and members of the committee. It is both an honor and a 

privilege for me to appear here today. I appreciate the invitation 

to testify. 

I would ask also that the written version of my remarks be entered into the record, Mr. Chairman. 

The CHAIRMAN. Will be. 
17 

Govenor RITTER. I’d like to offer special thanks to Senator 

Salazar for his introduction and as well his leadership on energy 

and natural resource issues. As I’ll discuss I support the provisions 

of the bill he introduced this week, the Oil Shale and Tar Sands 

Leasing Act of 2008. 

My State, the State of Colorado is home to extraordinary oil 

shale resources, among the richest in the world. The area’s estimated to hold nearly 500 billion barrels of proven oil shale reserves. That’s more than double the proven reserves of Saudi Arabia. 

Successful development could provide a substantial new source of 

domestic oil for the United States of America. But past efforts to 

develop Colorado’s oil shale, quite frankly failed, due to technical, 

economical and environmental challenges. These challenges remain. 

Certainly Colorado is ready and able to help this country meet 

its future energy needs. But at the same time we must be thoughtful and responsible about our approach, especially in light of the 

magnitude of such development and the potential for significant 

impacts. I have serious concerns about the pace of Federal efforts 

to develop a commercial oil shale leasing program before public and 

private research efforts are completed before we fully understand 

what the impacts to air, to water, to wildlife and to the Western 

Slope communities will be. 

Potential impacts to the water supplies are an important area for 

us. We don’t know how much water will be needed for large oil 

shale industry or how those water demands will affect other water 

users in Colorado. There are questions about environmental impacts on both surface water and ground water quality due to extraction operations particularly when considering its experimental 

institute technologies. 

Regarding wildlife the Piceance Basin contains unique and irreplaceable habitats for a variety of species. Oil shale development 

could cause significant habitat loss and fragmentation. We do not 

know the amount of energy that will be needed to process shale oil, 

the sources or locations of necessary power plants, the impacts of 

such energy production on air quality and visibility or the greenhouse gas implications. 

We also must be concerned about our communities. Where do we 

house the work force needed to develop our oil shale resources. 

How do we pay for it? Is it or is our transportation system capable 

of handling such an influx of workers. Those are just some of the 

questions that need answering before we move ahead. 

Colorado oil shale reserves are located in Northwest Colorado 

where we’re blessed with exceptional resources and a vibrant, diversified economy. The region holds clean coal reserves that are 

being produced at record levels, a significant oil field that has produced for decades and trillions of cubic feet of natural gas which 

is being developed at an unprecedented rate. There are currently 

twice as many drilling rigs and 40 percent more active oil and gas 

wells in Colorado than there were just 5 years ago. We now have 

35,000 active wells across the State. 

In 2007 the State issued a record 6,368 oil and gas drilling permits over half of which were in Colorado’s Northwest Piceance 
18 

Basin. The Bureau of Land Management proposes amending management plans to allow up to 17,000 new gas wells to be drilled in 

this region over the next 20 years. So I have a particular concern 

about the potential for significant, cumulative impact when oil 

shale developments placed on top of the current boom in oil and 

gas development. 

The region of Colorado also boasts a remarkably diversified economy in which agriculture, tourism, recreation, hunting and fishing, 

natural gas and mineral development, retirement communities and 

their economic drivers co-exist now in a relatively balanced and 

supportive way. This economic diversity grew in large part out of 

the last energy bust. The current energy boom should not diminish 

the businesses and culture that emerged from that diversity. 

Northwest Colorado is a vitally important to Colorado’s future. 

Everything State and Federal policymakers do with regard to this 

region must protect the resources, values and diverse economies. 

Colorado is committed to working with the Federal Government 

and with industry on oil shale efforts going forward. But it requires 

a thoughtful approach rather than a rush to premature leasing and 

regulatory decisions that will create legal rights and expectations 

before we have any understanding of the full impact. 

My written testimony addresses two pieces of pending Federal 

legislation regarding oil shale resources. I want to just touch on 

them briefly here. First the American Energy Production Act of 

2008 would eliminate the current restrictions on the use of Federal 

funds to publish final commercial leasing regulations or to conduct 

commercial lease sale. 

I want to make it clear that I support the restrictions contained 

in the 2008 Consolidated Appropriations Act. It will not stop the 

BLM from finalizing the programmatic EIS or preparing draft rules 

for oil shale leasing. Nor does it slow or prevent activities on Federal research and development leases. Again, I support a thoughtful, measured approach to oil shale. That means letting research 

and development activities yield meaningful results before irreparably locking up Federal resources through commercial leasing. 

Second, the Oil Shale and Tar Sands Leasing Act of 2008 that 

I referred to earlier in my testimony. This would eliminate some 

of the unreasonable timing requirements of the Energy Policy Act 

of 2005. It would also expand opportunities for me and other Governors from other oil shale states and the public to comment on environmental reviews, the proposed oil shale regulations setting out 

a more responsible and realistic time line in legislation is consistent with sound policy. Giving Governors, local officials and the 

public greater opportunity to comment will be valuable for the entire process. 

The legislation also calls for an oil shale status report from the 

Interior Department regarding Federal R and D leaders and for a 

National Academy of Science Study. I strongly support these provisions. It would do nothing to slow current research and development activities yet they would yield vital information that is now 

missing from the public debate. 

In conclusion I am consistently encouraged by the ingenuity displayed by the companies seeking to develop new oil shale development technologies. However, I am concerned by Federal efforts to 
19 

fast track decisions about commercial oil shale leasing including 

promulgation of leasing regulations. I continue to believe that the 

prudent course of action is to see the research and development 

program called for in the Energy Policy Act through so that accurate information be forthcoming about the likely costs, about the 

risks and the impacts of commercial development activities. 

Then and only then might the Federal Government be assured 

that its rules and regulations can both encourage oil shale development while ensuring a fair rate of return for Federal oil shale resources, protecting the environment and communities of Colorado. 

On behalf of the people of Colorado, I appreciate the opportunity 

to speak with you today. I would be happy to answer any questions, Mr. Chairman. Thank you. 

[The prepared statement of Govenor Ritter follows:] 

PREPARED STATEMENT OF HON. BILL RITTER, JR., GOVERNOR, STATE OF COLORADO

Mr. Chairman, thank you for this opportunity to provide the State of Colorado’s 

perspective on oil shale resources. Oil shale development creates significant opportunities and challenges for Coloradans, and all Americans, with respect to energy supplies, environmental protection, water resources, socioeconomic impacts, and national security. From this perspective, I thank the Committee for the time and 

thoughtful consideration you are giving to reviewing these issues. 

Northwest Colorado is home to extraordinary oil shale resources, among the richest in the world, yielding 25 gallons of oil or more per ton of rock. The area is estimated to hold nearly 500 billion barrels of proven oil shale reserves, which is more 

than double the proven reserves of Saudi Arabia. Successful development of this resource could provide a substantial new source of domestic oil for the United States, 

which would have positive implications for our national energy policy and national 

security. 

Even though Colorado’s oil shale resources are remarkable, they have remained 

in the ground since their discovery over a hundred years ago. Past development attempts have failed due to a number of challenges—technical, economic, and environmental—that have yet to be overcome, notwithstanding billions of dollars invested 

by both government and industry. Just as it was 30 years ago during the last push 

for oil shale development, the State of Colorado is ready to do its part to help the 

country meet its energy needs. At the same time, we need to be thoughtful about 

our approach, especially in light of the magnitude of such development. In fact, if 

the Department of the Interior were to authorize a commercial oil shale industry 

in Colorado, the development would constitute the largest industrial development in 

the State’s history—with enormous implications for all of Northwest Colorado and 

for the State itself. 

Since coming into office nearly 18 months ago, I have followed with keen interest 

federal efforts to jump-start a domestic oil shale program. I have strongly supported 

continuation of the Research Development and Demonstration (RD&D) process, and 

look forward to continuing to work with the Administration, Congress, and the private sector to make that possible. Once we understand the results from this federal 

RD&D process and the other efforts that are being pursued on private land holdings, and once we have a clear understanding of viable technologies and the steps 

necessary to manage and mitigate the environmental and socioeconomic impacts of 

such technologies, thoughtful and meaningful regulations can be developed and a 

commercial federal leasing program can be put in place. Establishing a leasing program prior to understanding what technologies are viable and the implications of 

these technologies would be a dangerous course, with enormous risk of unintended 

consequences. Such a course of action would not be in the best interest of the nation 

and certainly not in the interest of Colorado. 

This position is consistent with Colorado’s previous administration which appeared before this very committee three years ago to urge caution with respect to 

oil shale development and noted that ‘‘oil shale technology development is still 

fraught with uncertainty’’. I would like to emphasize that the same is true today. 

Similarly, I have heard from many local mayors, county commissioners and citizens 

who support a thoughtful and measured approach to oil shale development. In addition, the Western Governor’s Association has expressed in a letter to this Congress 

that they are ‘‘very concerned about the accelerated timetable mandated in the [Energy Policy Act] for the development of a commercial scale oil shale industry.’’ As 
20 

1See Reasonable Foreseeable Development Scenario for Oil and Gas Activities in the BLM 

White River Field Office: Rio Blanco, Moffat, and Garfield Counties, Colorado, Executive Summary at 3, available at http://www.blm.gov/rmp/co/whiteriver/documents/RFD—Executuve— 

Sumnmary.pdf. 

* Attachments have been retained in committee files. 

the Governor of Colorado, I will continue to emphasize the need to be responsible 

and thoughtful when it comes to oil shale development. 

BACKGROUND PRINCIPLES

Colorado will play an active role in any development of the nation’s unconventional fossil fuels, particularly oil shale, and has consistently articulated a desire to 

move forward in a thoughtful and measured manner with regard to shale. We must 

ensure that projects are fiscally and environmentally responsible, and that our communities are protected from any harmful boom and bust cycle such as we saw in 

the 1980s. As the epicenter of the oil shale resource in the United States, Colorado 

has the most to gain if the resource is developed responsibly and the most to lose 

if the risks are not managed appropriately. While a reliable, sustainable domestic 

oil-based resource is increasingly important, equally important, from Colorado’s perspective, is the protection of the State’s exceptional environment, including our 

water supplies, our clean air, our mountains, and our wildlife. Colorado’s oil shale 

country also boasts a remarkably diversified economy in which agriculture, tourism, 

recreation, hunting and fishing, natural gas and mineral development, retirement 

communities, and their economic drivers co-exist in a relatively balanced and supportive way. This economic diversity grew in part out of the last energy bust, and 

the current energy boom should not diminish the businesses and culture that 

emerged from that adversity. 

For Colorado, then, there is much at stake in the outcome of any federal oil shale 

program, including the need for thoughtful development of a commercial leasing 

program through leasing regulations. That is why I am here today: I am concerned 

that federal efforts to develop a commercial oil shale leasing program are moving 

forward too quickly, before public and private research efforts are completed, with 

necessary testing and monitoring to ensure that the impacts to air, water, wildlife, 

and communities are fully understood. 

My testimony today will provide the Committee with background on the area of 

Northwest Colorado containing the nation’s richest oil shale deposits—the Piceance 

Basin. I will also discuss the status of the federal research and development program, and provide my perspective on pending legislation concerning federal oil shale 

resources and appropriate steps forward. 

COLORADO’S OIL SHALE COUNTRY

Northwest Colorado is truly blessed with diverse, exceptional natural resources 

and a vibrant, diversified economy. While being the epicenter of oil shale country, 

the Piceance Basin is also home to other world-class hydrocarbon resources. Natural 

gas, oil, and coal—all vital components of a national energy strategy—are commingled in this same geographic region. This area holds centuries of clean coal reserves 

that are being produced at record levels, a significant oil field that has produced 

for decades, and trillions of cubic feet of clean-burning natural gas which are currently undergoing an unprecedented boom in development. There are currently 

twice as many drilling rigs operating in Colorado as there were just five years ago, 

and the number of active oil and gas wells statewide has increased 40 percent during this period to top 35,000 wells. In 2007, the State issued a record 6,368 oil and 

natural gas drilling permits—over half of which were located in the oil shale country 

of Northwest Colorado’s Piceance Basin—and the Bureau of Land Management 

(BLM) proposes amending management plans to allow up to 17,000 new gas wells 

to be drilled in this region over the next twenty years.1 In 2006, natural gas and 

other energy-related development accounted for 15 percent of direct and secondary 

employment in the region. Attached is a recent comprehensive economic study of 

Northwest Colorado forecasting that population in the region will double in the next 

30 years due to the boom in natural gas drilling, and that an additional 50,000 people could move into the region if oil shale development were to occur.* 

This hydrocarbon-rich area also supports incredible wildlife resources. The 

Piceance Basin is home to the largest migratory mule deer herd in North America, 

a robust migratory elk population, one of only six greater sage-grouse populations 

in Colorado, populations of Colorado River cutthroat trout, and a host of other wildlife species. These wildlife resources have been built up over millennia, are part of 

active recovery programs, and are of long-term statewide and national economic, ec-
21 

ological, and aesthetic importance. Colorado’s future is reliant on these resources remaining strong and healthy. 

In the last twenty years, the region has developed a growing tourism industry as 

well as a vigorous hunting and fishing economy. In 2006, approximately 17,000 jobs 

were supported by the tourism industry for the region including Moffat, Rio Blanco, 

Garfield, and Mesa counties—representing about 15 percent of the jobs in the area. 

About 20 percent of the tourism jobs in Northwest Colorado are in the outdoor 

recreation segment—or about 3,400 jobs. 

The region also sustains a healthy agriculture industry, a vibrant and long-standing ranching tradition, and growing retirement communities. Employment in the agriculture and ranching industry—a 16 billion dollar industry in Colorado—contributes between 6 percent and 15 percent of all base jobs in the counties in this region. 

Retirees comprise 13 percent of the population in the region, and their spending 

supports 11 percent of the basic jobs. 

As a result of its abundance of natural resources, particularly the growth of the 

natural gas industry, Northwest Colorado is experiencing extraordinary changes in 

population and associated challenges. Housing affordability is a significant challenge 

to these local communities, and the capacity of local communities to absorb growth 

is already largely consumed. Many workers are housed in hotels and motels rather 

than conventional housing. Much of the transportation infrastructure in these communities is in disrepair and is being severely stressed by growth. The costs to repair 

infrastructure will require up-front financing, before revenues become available 

from traditional sources such as severance taxes, property taxes, sales taxes, and 

federal royalties. 

This region is vitally important to Colorado’s future. Everything state and federal 

policy makers do with regard to Northwest Colorado must protect the resources, values, and diverse economies and interests that have been embodied there for decades. 

We cannot simply think of this region as an area where development of one resource 

can supplant protection of other social, economic, and natural resources. 

MOVING FORWARD WISELY ON OIL SHALE

In 2005, the Congress considered various pieces of legislation related to oil shale 

resources and ultimately enacted oil shale measures in Section 369 of August 2005’s 

Energy Policy Act. Among other things, the Energy Policy Act called for a research 

and development leasing program for federal oil shale resources; a regional study 

of federal oil shale resources and the likely impacts of commercial leasing in Colorado, Utah, and Wyoming; and the adoption of final regulations establishing a commercial leasing program for federal oil shale resources. 

Given the significant oil shale resource and exigent national energy interests, Colorado is committed to seeing ongoing oil shale research and development move forward. For example, Shell Exploration and Production has been a collaborative corporate leader in its efforts to develop successful in-situ development technologies 

and we support their efforts to move forward. State officials also assisted the Department of the Interior in reviewing and narrowing the applications for these federal RD&D leases. The State is currently home to five 160-acre RD&D leases that 

were issued in 2006. If successful, these research and development projects could 

set the foundation of a subsequent commercial oil shale industry. 

Construction has not yet begun on the federal RD&D leases, and none of the companies looking at Colorado’s oil shale are talking about commercial development any 

time in the next decade. I believe that the projects on federal RD&D leases are critical in showing that new proposed technologies work, that they can be utilized economically, that they will not have unacceptable impacts on Colorado’s environment, 

and that the resulting communities are sustainable. Colorado has consistently maintained that development of the information that will allow us to address historic 

challenges to development of the resource is a prerequisite to federal oil shale leasing, regulation, and development. 

In March of this year, I submitted comments to the BLM on the agency’s draft 

Programmatic Environmental Impact Statement for Oil Shale and Tar Sands Resources in Colorado, Utah, and Wyoming. That document proposes to make nearly 

2 million acres of federal lands in the three states—including nearly 360,000 acres 

in Colorado—available for application for commercial oil shale leases. 

Today, I reiterate the conclusion I reached after reviewing the BLM’s draft document: the approach put forward by the BLM is unwise. The agency proposes to open 

nearly 2 million acres of federal oil shale resources to potential oil shale development, yet it lacks information about the technologies that would be used or their 

impacts on the environment. One is a logical consequence of the other—and we have 
22 

neither at this time. The prospect of oil shale development raises a number of significant questions that must be answered before large-scale leasing goes forward: 

• We do not know how much water will be needed for a large oil shale industry 

or how those water demands will affect other water users. The State is rapidly 

approaching full allocation of its Colorado River entitlements and will soon 

enter a new period of trading and sharing water between different users. • We do not know what the environmental impacts will be on both surface water 

and ground water quality due to extraction operations, particularly when considering experimental in-situ technologies. • We do not know the scope of potential impacts on wildlife. The Piceance Basin 

contains unique and irreplaceable habitats for a variety of species, and oil shale 

development could cause significant habitat loss and fragmentation that would 

damage important wildlife populations, including greater sage-grouse and big 

game species. • We do not know the amount of energy that will be needed to process shale oil 

, the sources or locations of necessary power plants, the impacts such energy 

production would have on regional air quality and visibility, or the greenhouse 

gas implications. • We do not know how the infrastructure needed to house the incoming workforce 

will be developed, financed and managed. • We do not know whether the cumulative environmental and economic carrying 

capacities of the region have been exceeded, in light of the current natural gas 

development boom. 

Given the information missing from the BLM’s analysis, a decision to make 

360,000 acres of federal land in Colorado available for oil shale leasing at this time 

is ill-advised. The State of Colorado, therefore, recommended selection of Alternative 

A, which would allow activities on federal RD&D leases to continue and potentially 

expand to commercial leases on over 25,000 acres of federal lands for which the 

RD&D lessees have preference rights. I am attaching a copy of my comments on the 

BLM’s environmental review for the Committee’s use. 

For the same reasons that it is inappropriate for the BLM to make land use decisions without results from the federal RD&D leases, it is likewise inappropriate for 

the BLM to move forward to finalize commercial leasing regulations at this time. 

The BLM lacks the information necessary to finalize any comprehensive set of rules 

and regulations for oil shale development. These regulations will establish environmental-protection standards, set royalty rates and address bonding, establish standards for diligent development, determine the allowable size of leases, and make myriad other important decisions that will directly and significantly and irreversibly affect how oil shale development proceeds. Until the basic answers are derived from 

the RD&D program, establishing the rules for commercial leasing is premature. Promulgating regulations in the absence of the data from the RD&D projects will likely 

create an illusion of ‘‘regulatory certainty’’ rather than a comprehensive set of regulations that will be viable for commercial leasing and development. 

Colorado is committed to working with the federal government and industry on 

oil shale efforts going forward. But this requires a thoughtful approach rather than 

a rush to premature leasing and regulatory decisions that will create legal rights 

and expectations before we fully understand the economic, environmental, and social 

implications. 

COLORADO PERSPECTIVES ON PENDING OIL SHALE LEGISLATIVE PROPOSALS

Finally, I would like to offer my perspective on two pieces of legislation concerning 

federal oil shale resources. 

AMERICAN ENERGY PRODUCTION ACT, S. 2958

Section 433 of the Consolidated Appropriation Act, 2008 provides that none of the 

funds made available by that Act can be used to prepare or publish final commercial 

leasing regulations or to conduct a commercial lease sale for federal oil shale resources. I support this restriction, and recently sent a letter to Congress expressing 

my desire that this funding limitation continue. 

A provision in the American Energy Production Act would eliminate this restriction on Department of the Interior expenditures. I oppose this provision. 

The oil shale funding limitation contained in the 2008 Consolidated Appropriation 

Act will not prevent the BLM from finalizing the Programmatic Environmental Impact Statement or preparing draft rules for oil shale leasing. Importantly, it will 

also not slow or prevent activities on the federal research and development leases. 

As I have made clear, I support a thoughtful, measured approach to oil shale, which 
23 

means letting research and development activities yield meaningful results before 

irreparably locking up federal resources with an uncertain fate through commercial 

leasing. 

OIL SHALE AND TAR SANDS LEASING ACT OF 2008, S. 221

This legislation would eliminate some of the timing requirements of the Energy 

Policy Act and expand opportunities for me and other Governors from oil shale 

states, as well as the public, to comment on environmental reviews and proposed 

oil shale regulations. I support these provisions. The Energy Policy Act of 2005 sets 

out unreasonably ambitious deadlines for preparing regional environmental analyses and adopting leasing regulations. It should be noted that these deadlines have 

passed. Setting out a more responsible and realistic timeline in legislation is consistent with sound public policy. 

The legislation would also direct the Department of the Interior to submit to the 

Congress a report on the status of activities on federal research and development 

leases as well as various policy issues surrounding a potential commercial leasing 

program. It would also call for a study by the National Academy of Sciences concerning oil shale resources, research activities, timing of commercial development 

activities, and positive and negative implications of such development on the environment and various resources. I strongly support these provisions. They would do 

nothing to slow current research and development activities, yet they would yield 

vital information that is now missing from the public debate about commercialization of federal oil shale resources. 

Finally, the legislation would provide me and the Governors of other affected 

states, as well as executives of affected local governments, the opportunity to submit 

recommendations regarding the size, timing, or location of any proposed oil shale 

lease sales or with respect to any proposed development or production plans. I support these provisions as well. The State of Colorado and local governments have 

much at stake in commercial leasing decisions, and I support provisions giving expanded voice to their concerns. 

CONCLUSION

The State of Colorado supports a thoughtful approach to oil shale development. 

I am encouraged by the ingenuity displayed by the companies seeking to develop 

new oil shale development technologies, but I am concerned by federal efforts to 

fast-track decisions about commercial oil shale leasing, including promulgation of 

leasing regulations. I continue to believe that the prudent course of action is to see 

the research and development program called for in the Energy Policy Act through 

so that accurate information might be forthcoming about the likely costs, risks, and 

impacts of commercial shale development activities. Then, and only then, might the 

federal government be assured that its rules and regulations can both encourage oil 

shale development while ensuring a fair rate of return for federal oil shale resources 

and protecting the environment and communities of Colorado. 

Thank you for this opportunity to offer the State of Colorado’s perspective on oil 

shale development. 

The CHAIRMAN. Thank you very much. Mr. Allred, why don’t you 

go right ahead with your testimony? 

STATEMENT OF C. STEPHEN ALLRED, ASSISTANT SECRETARY 

FOR LAND AND MINERALS MANAGEMENT, DEPARTMENT OF 

THE INTERIOR 

Mr. ALLRED. Thank you very much, Mr. Chairman, members of 

the committee. It’s a pleasure to be here and to be on the panel 

with the Governor. Even though we have different views we have 

an excellent working relationship as we deal with these issues. 

This hearing comes at a particularly challenging time. As you 

know, oil prices continue to reach record levels almost everyday. 

These energy prices are affecting our Nation and citizens in a very 

profound way. 
24 

* Graphics have been retained in committee files. 

As energy demand continues to rise and you know I have to have 

my charts* at every one of these. But as you can see from the chart 

and I’d be glad to talk about it later in questions. As those continue 

to rise we must focus on the need to provide for future energy supplies. 

The U.S. will continue to be dependent upon oil for the foreseeable future. Oil shale is a domestic resource that if developed, can 

help to meet that demand. Total U.S. energy use will increase 19 

percent while China and India use is doubled. 

Over the next 25 years domestic production of all energy resources oil, gas, coal, unconventional and renewable resources is 

going to be extremely important to our economy. Oil shale holds 

much potential for addressing that challenge because new sources 

of energy take such a great amount of time and private capital to 

develop and to bring online. It is imperative that the Federal Government act now to meet those future demands. 

The U.S. Geological Survey estimates total U.S. oil shale resource in place is some 2.1 trillion, 1.5 trillion of which is located 

in the Green River Basin. That’s with a T, trillion barrels of oil. 

That’s primarily located in Green River Basin and then related 

areas of Colorado, Utah and Wyoming. Even if only a small fraction 

of this resource is ultimately recovered it could represent a significant impact on the Nation’s energy supply. A strategic and conventional task force that’s been referred to previously estimates that 

as much as 800 billion barrels of oil equivalent can be recovered. 

In keeping with the direction that’s contained in Section 369 of 

EPACT and on BLM’s RD and D program we are working in a 

thoughtful, deliberative manner to provide the framework for an 

environmentally sound and economically viable oil shale industry 

to help meet our future needs. We have taken a three pronged approach. With each element building on the other and that is why 

promulgating regulations at this point in time is so important. 

The three elements are first, the oil shale RD and D projects 

which were authorized to ensure that oil shale technologies can develop at economically and environmentally acceptable levels. 

Second was to develop an oil shale programmatic environmental 

impact statement to identify the most geologically promising oil 

shale areas including environmental considerations in the three 

states. 

Third is to develop commercial oil shale regulations that will 

allow companies to make the investment decisions in the RD and 

D efforts that are now so important to develop commercial activities at a later point in time. 

Six RD and D projects are underway using private capital. The 

publication of the PEIS has already occurred. We are finalizing the 

PEIS which incidentally we received over 100,000 comments on 

and are working on the third prong, developing the regulations. 

The proposed regulations are now undergoing administration review and should be ready for publication soon. 

Proposing and publishing the proposed regulations will provide 

an opportunity for the public and the interested parties to remain 

engaged on that important issue. Final regulations which will lay 
25 

out the framework for potential commercial operations are vital to 

both completing the RD and D projects and for industry to agree 

to commit the significant capital investments that are necessary to 

bring this important resource to fruition. The regulations will provide clear rules of the road. You can see some of the things on the 

board that they will include, so that industry will know what will 

be expected of them. 

Based upon my experience in the private sector I strongly believe 

that we need to promulgate these regulations now to help alleviate 

the uncertainty and provide the necessary framework industry 

needs in order to make informed decisions regarding the investment in the oil shale development absolutely assuring the certainty 

of those regulations would bring. The private sector, I believe, will 

not be willing to invest the necessary dollars for the research and 

development that is so important to bring this vast resource to fruition. As you know the 2008 Consolidated Appropriation Act prohibits BLM from spending any funds to publish the final regulations. 

I urge Congress to lift that ban on spending 2008 funds in order 

to allow us to proceed at a pace that will meet the reasonable and 

thoughtful goals that Congress visioned during the development of 

EPACT. Publishing final regulations does not mean that oil shale 

development will take place immediately. In fact, as you’ll see from 

this next slide, this is a long, long process that will take many 

years to complete. But without the development of the regulations 

and the certainty they would bring we do not believe that that 

process can be completed efficiently. 

Much work needs to be done before commercial development will 

take place. As you’ll see from the chart, I believe you have a copy 

of it. The current PEIS is only one of three which will take place. 

The three NEPA processes will take place before there is any commercial development. Those are full public processes that people 

will have the opportunity to be involved in. 

I appreciate the opportunity to visit with you on this subject and 

to identify for you the progress we are making. There are many 

challenges that we will face in completing the program as we go 

forward. I believe that a delay in finalizing these regulations may 

discourage private investment in research and development that 

you and we are so dependent upon. 

The uncertainty of the results from not having rules of the road 

may only affect investments to advance economically viable and environmentally sound oil shale development technology. Thank you 

very much. I’d be most happy to answer questions. 

[The prepared statement of Mr. Allred follows:] 

PREPARED STATEMENT OF C. STEPHEN ALLRED, ASSISTANT SECRETARY FOR LAND AND

MINERALS MANAGEMENT, DEPARTMENT OF THE INTERIOR

Mr. Chairman and members of the Committee, thank you for the opportunity to 

participate in this oversight hearing to discuss the development of oil shale resources on federal lands. 

I understand the key leadership role this Committee played in the development 

of Section 369 of the Energy Policy Act of 2005 (EPAct), directing the Department 

of the Interior to ready itself to meet future requests for the commercial development of oil shale on Federal lands. 

This hearing comes at a particularly challenging time as oil prices are reaching 

record levels, and energy prices are affecting the Nation and our citizens in a num-
26 

ber of profound ways. As energy demand continues to rise, we must focus on the 

need to provide for future energy supplies. The U.S. will continue to be dependent 

on oil for the foreseeable future, and oil shale is a domestic source that, if developed, 

can help to meet this demand. Total U.S. energy use will increase 19 percent and 

demand in China and India will double. Over the next 25 years, domestic production 

of all energy resources, oil, gas, coal and renewable energy, will be important to our 

economy. That is why this hearing is so important today. 

Oil shale holds much potential for helping to address this challenge. It is imperative that the Federal Government act now to meet our future energy needs. New 

sources of energy take a great amount of time and private capital to develop and 

bring on line. With the legislative provisions concerning oil shale in EPAct 2005 Section 369(d)(2) establishing final regulations for commercial oil shale leasing, we can 

provide the framework for the development of an environmentally sound and economically viable oil shale industry to help meet our future energy needs. Accordingly, I would urge Congress to repeal the current prohibition on the finalization 

of the oil shale regulations. 

Section 369 of EPAct, which builds on the oil shale research, development, and 

demonstration (RD&D) leasing program initiated by the Department of the Interior 

(DOI) in 2004, directs the Secretary to develop a Programmatic Environmental Impact Statement (PEIS) and commercial leasing regulations for oil shale. The concept 

is a comprehensive three-pronged approach: 1) Permit oil shale RD&D projects to 

ensure that oil shale technologies can operate at economically and environmentally 

acceptable levels prior to expansion to commercial-scale operations; 2) develop an oil 

shale PEIS to identify the most geologically prospective oil shale areas in Colorado, 

Utah, and Wyoming; and 3) develop commercial oil shale regulations that will allow 

companies to make investment decisions in RD&D efforts now, so that when technologically, commercially, and environmentally feasible, the Federal government is 

prepared to move forward to allow commercial oil shale leasing. Each of these steps 

builds upon the other, and each is executed in an open, public process with full consideration of social and environmental concerns. 

Finalizing oil shale regulations is a critical component in realizing the potential 

of this vast resource. Unfortunately, the Consolidated Appropriations Act for Fiscal 

Year 2008 prohibits the BLM from spending FY 2008 funds to publish final regulations on oil shale. While the prohibition limits the BLM from publishing final regulations, the BLM intends to publish proposed regulations this summer. These regulations will lay out a proposed framework for potential commercial operations. However, absent the certainty that final regulations would bring, the commercial oil 

shale industry may not be willing to invest the necessary dollars for research, and 

this vast domestic resource will remain untapped at a time when our Nation is 

searching for ways to further its energy security. 

OIL SHALE PROGRAMMATIC ENVIRONMENTAL IMPACT STATEMENT

The BLM published and accepted comments on a draft PEIS for the future development of oil shale and tar sands. The draft PEIS is not a leasing document, but 

will serve to inform land allocation decisions by analyzing the most geologically attractive oil shale areas in Colorado, Utah and Wyoming. Decisions that result from 

the PEIS will identify lands that may be open to receive applications for future commercial oil shale and tar sands leasing, and will amend 12 associated land use 

plans. Forest Service and National Park Service lands are not included in the analysis for such development at this time. It is important to note that any future leasing and development will be contingent upon the successful completion of site-and 

project-specific environmental analyses. 

The RD&D projects will identify commercially viable technologies that can provide 

the basis to conduct the appropriate site-specific environmental analysis prior to 

leasing. 

The draft PEIS was developed with the help of 14 cooperating agencies including 

the states of Colorado, Utah, and Wyoming, and several local governments from 

those states. It was published and released to the public in December 2007 for a 

90-day comment period. In response to requests from the State of Colorado and others for more time, an additional 30-day comment period was granted. The public 

comment period ended April 21, 2008, and more than 100,000 comment documents 

were received and are currently being reviewed. A final PEIS is scheduled for completion late this summer, and a record of decision is scheduled for completion by 

the end of this calendar year. It is important to note that no leasing will occur until 

RD&D has produced viable technology and a leasing EIS is completed. 
27 

OIL SHALE REGULATIONS

Section 369 of EPAct also directs the Secretary to develop regulations to establish 

a commercial oil shale leasing program. The regulations are being developed in 

keeping with the overall goal of the Act, that a BLM oil shale program is to promote 

economically viable and environmentally sound oil shale production that augments 

current domestic oil production while addressing the potential effects of development on states and local communities. 

The BLM plans to publish proposed regulations this summer for public review 

and comment that will provide the roadmap for future industry management decisions. They incorporate applicable provisions of EPAct and the Mineral Leasing Act 

of 1920 (MLA) that establish oil shale lease size, maximum acreage limitations, and 

rental rates. The proposed regulations will also address direction in EPAct to establish work requirements and milestones that ensure diligent development of leases. 

In addition, the proposed regulations will address the key comments received in response to the BLM’s August 2006 advance notice of proposed rulemaking. 

Moving forward with these regulations does not mean commercial oil shale production will take place immediately. To the contrary, with thoughtfully developed 

regulations, thoroughly vetted through a public process, we have only set the 

groundwork for the future commercial development of this resource in an environmentally sound manner. With the administrative and regulatory certainty that regulations will provide, energy companies will be encouraged to commit the financial 

resources needed to fund their RD&D projects, and the development of viable technology will continue to advance. Actual commercial development and production will 

be dependent upon the results of the RD&D efforts and more site-specific environmental evaluations. 

As discussed earlier, consistent with the language in the Consolidated Appropriations Act for FY 2008, the BLM is not spending FY 2008 funds to develop and publish final oil shale regulations; however, the agency is moving forward in a thoughtful, deliberative manner to publish proposed regulations on oil shale. These proposed regulations will address much of the input already received. The publication 

of the proposed regulations will provide an additional opportunity for the public and 

interested parties to comment on the proposed regulatory framework and remain 

engaged on this important issue. 

RD&D

The DOI has been a leader in advancing opportunities for oil shale technology 

RD&D on Federal lands. DOI’s Oil Shale Task Force, initiated in 2004, examined 

options for promoting oil shale development on Federal lands, resulting in the 

RD&D leasing program’s initiation in 2005. In 2007, the Bureau of Land Management (BLM), after a competitive process, authorized six oil shale RD&D projects on 

public lands in northwestern Colorado and northeastern Utah. These projects provide industry access to oil shale resources to further their efforts to develop oil shale 

technologies. Despite the potential for significant return, investors face challenges 

in the development of new technologies and uncertainty in the regulatory and administrative arena. Based on my experience in private industry, I strongly believe 

we need to promulgate regulations now to help alleviate some of this uncertainty, 

thus providing the necessary framework the companies need in order to make informed decisions to invest in oil shale development both now and in the future. 

This type of research will require significant private capital, with an uncertain 

return on investment. Part of the wisdom of Section 369 is that it envisions the private sector will lead this investment—not the American taxpayer. However, for this 

to be successful, for these companies to invest the large sums of money, a level playing field and a clear set of regulations or ‘‘rules of the road’’ are required. Developing a regulatory framework now will aid in facilitating a producing program in 

the future. Impeding the Federal Government’s efforts at this stage could significantly impact our ongoing efforts to achieve greater energy security. 

THE CASE FOR OIL SHALE

Declining domestic oil production leaves us vulnerable to rising energy costs. 

Households across America are struggling to deal with these additional costs and 

experts predict that the trend is set to continue. In looking beyond traditional energy resources to unconventional and alternative fuels, the Department of the Interior has a key role to play in the development of oil shale. 

The potential of the U.S. oil shale resource to serve the Nation’s needs is staggering. The U.S. Geological Survey estimates that the total U.S. oil shale resource 

in place is 2.1 trillion barrels—1.5 trillion barrels of which is located in the Green 
28 

River Basin of Colorado, Utah, and Wyoming. Even if only a fraction of this resource 

is ultimately recovered, it could have a significant impact on our Nation’s energy 

supply. The Strategic Unconventional Fuels Task Force has estimated that as much 

as 800 billion barrels of oil equivalent could be recoverable from oil shale resources 

depending on technology and economics, enough to replace the oil we import for 

more than 180 years. 

CONCLUSION

Thank you for the opportunity to testify on the progress we are making, and the 

challenges we face in establishing a program for the commercial development of oil 

shale on federal lands. As I stated earlier, any delay in finalizing these regulations 

may discourage private investment in much needed research and development and 

create a high level of uncertainty that will ultimately affect investments to advance 

economically viable and environmentally sound oil shale development and technology. I urge Congress to lift this ban and allow us to move forward with the public 

process of finalizing regulations for commercial oil shale development on federal 

lands. 

The CHAIRMAN. Thank you. Thank you both, Governor and Secretary Allred for your testimony. Let me ask a few questions and 

then defer to my colleagues here. 

On this chart that you have up there now, Mr. Allred, I notice 

that the actual lease sale is way out on the right hand side of the 

chart there, as I read it at any rate in Phase III. We’re still in 

Phase I somewhere, I believe, in this R and D research and development and demonstration phase. I’m not sure how far through 

that we are, but we’re in there somewhere. 

How long do you see it taking before the BLM would reasonably 

be ready to conduct a commercial lease sale for oil shale? 

Mr. ALLRED. Mr. Chairman, it’s many, many years down the 

road. The first full scale development is—if you look at the chart. 

The first phase is that which is ongoing now, which is to take the 

concepts that have been developed by the companies and for those 

companies to try those out on a very small scale. 

Based upon the results of those efforts, the next phase is to scale 

those up as part of the RD and D project to try them on the preferential leases that we provided in the RD and D program to work 

out all of the operating issues. Assuming that the technology will 

work that will be involved in what the third phase is, which is the 

commercial leasing. One of the difficulties we have is that in addition to answering questions with regard to whether or not they will 

want to provide the financing to continue with the research and development effort is that we are unable to issue the leases, the preferential leases which are included in the RD and D program until 

and unless we have regulations in force. So not having the regulations will stop, at some point in time here, the RD and D program 

from going forward. 

But then you can also see from that chart that—once that occurs, 

we then have to go through additional NEPA analysis as we prepare for any leasing program and that obviously will be based on 

better information then we have now and can give us more information to make that decision on. 

Then once the leasing is done, many years down the road, when 

we get a plan for development from one of the companies, with regard to their specific lease, we also have to undergo another round 

of NEPA analysis to make sure that the specifics that are being 

planned for that particular lease are environmentally acceptable. 

So as you can see there is a tremendous amount of opportunity for 
29 

the public and for the deliberation that needs to take place before 

this becomes commercial. 

The CHAIRMAN. Just sort of following up on that. It would seem 

to me that to make sense that we get whatever results we can from 

this research, development and demonstration activity before we finalize what the terms of these leases are going to be. Am I missing 

something there? 

Is there a reason why we should not be postponing—once we finalize these rules that are the subject of this discussion here. Once 

those rules are finalized, those do create legal rights, as I understand it on the part of potential lessees. Wouldn’t we want to know 

the results of the R and D and demonstration phases before we did 

that? 

Mr. ALLRED. Mr. Chairman, the adoption of the regulations won’t 

create the legal right. What would create the legal right is the 

issuance of the lease. Those leases will not be issued, I cannot 

imagine any circumstances where there would be any leasing these 

companies in the RD and D programs to show us that they have 

a commercially viable operation that can proceed. 

So until that point in time there would be no legal right, other 

than what’s contained in the RD and D program leases. There 

would be no legal rights established until that leasing had occurred. But by definition that leasing could not occur until such 

time as we have the information from the RD and D program. 

However, I don’t think the RD and D program will be completed 

unless there are some rules of the road. 

The CHAIRMAN. Alright. I believe the next person in order of arrival here is Senator Barrasso. 

Senator BARRASSO. Thank you very much, Mr. Chairman. The, 

you know, I think that Congress needs to be particularly cognizant 

of the signals that it sends in terms of energy policy. Congress really needs to offer a clear, declarative policy framework and not stifle 

development through off again, on again signals, policies and incentives. 

By analogy, Mr. Chairman, I would turn to the renewable production tax credit. Today and in the past Congressional policy is 

characterized by on again, off again, incentives for wind, for solar 

and for geothermal energy. While the details matter, jolting government policies are short sighted and lack a predictable vision. 

Mr. Chairman, the Energy Act of 2005, Congress identified and 

clearly articulated a national policy for oil shale and that policy in 

brief bears repeating. We want to reduce the growing dependence 

of the United States on politically and economically unstable 

sources of foreign oil imports. We want to do it in an environmentally sound manner. We want to put emphasis on sustainability. I think the Congress has recognized the promise that oil 

shale offers for energy security and for national security. 

So with that, Mr. Allred, I’m going to just start with some history. As I understand these research development demonstration 

leases they begin with small leased areas, 160 acres or so and then 

in preferred option to expand to another maybe 5,000 acres for full 

commercial development. Are the final leasing regulations required 

to be complete prior to the expansion of these leases? How is that 

going to work? 
30 

Mr. ALLRED. Senator, the way the RD and D program was initiated and has been implemented was that the idea was first to create the small area, 160 acres, where the companies could do their 

proof of concept testing and this is to take their ideas to try them 

out to develop the techniques that they thought would be successful. That is not necessarily proof that they can commercialize it. 

Then we provided additional, about 40—600 acres or so. I’m not 

sure of that acreage, but in that neighborhood where they could 

take that proof of concept and try it out on a commercial scale. It 

would not be commercial operation, but a commercial scale. They 

could sell whatever they could develop. But it would then allow 

them to try the techniques and gather the operating information 

that would be necessary for the full scale development at some 

point in the future. 

The way the program was set up is that they receive the first 

160 acre lease. The next lease is based upon the oil shale regulations that would be adopted under EPACT. So we’re unable to 

issue that next step which is where they take their proof of concept 

and apply it in a more large scale or full scale basis to develop the 

rest of the information that’s necessary. 

So from that standpoint we have to have adopted the regulations 

in order to go to that next step on the RD and D program. 

Senator BARRASSO. Then if the Department publishes final regulations regarding a leasing program for oil shale on public lands 

are there future BLM reviews that would be conducted. You know, 

future opportunities for public input. How does that all work? 

Mr. ALLRED. Senator, the—yes, the process provides a number of 

different opportunities. Once we are through with the RD and D 

program. Let me go back to the regulations. 

The regulations will be issued here for public review in the near 

future. There will be the opportunity there for the public and any 

interested party including obviously the states to review those proposed rules and to provide comments. One of the documents that 

I had up before and that you have in front of you, lays out the 

types of things that those regulations would include. They are very 

similar to our other leasing regulations. 

We would then adopt those based upon that public input. At 

which time we would then use them to make the decisions on the 

second portion of the RD and D program. Now once that—and we 

would also have to do an environmental analysis with regard to 

those leases. But that’s a very small amount of land. 

Once we then make a decision that the technology is such that 

it can be commercialized and there is interest in proceeding further 

on the part of the companies who will be involved, and this would 

be an open competition, we then have to do another set of NEPA 

analysis. 

That NEPA analysis would inform us with regard to leasing decisions and leasing areas based upon those specific areas. One of the 

problems right now is you’re dealing with two million acres it’s 

hard to get very specific. But when we make specific decisions with 

regard to leasing, we then can go in and do the NEPA analysis on 

that specific area and that informs us on how we go about what 

the requirements are in those leasing documents. 
31 

Once we have issued a lease which is the first place the ‘‘rights’’ 

are established. Then the companies have to come forward to us 

with specific plans of development on how they are going to do the 

exact things that they propose to us to do. The regulations will include diligent development milestones. 

At that point in time we have to do another NEPA analysis 

based on that specific plan. Then that is used to inform us as to 

whether we ought to, not to, approve that plan. So a number of opportunities way down the road for continued public input on those 

decisions. 

Senator BARRASSO. Thank you, Mr. Chairman. My time’s expired. 

Thank you. 

Senator SALAZAR [presiding]. Thank you very much, Senator 

Barrasso. Let me ask a question to the Governor Ritter. What I 

have behind me here is a map of the Piceance Basin that essentially shows the level of oil and gas activity that is already underway in the State of Colorado. 

Some people have said, you know, we’re not contributing enough 

to the supply end of the oil and gas challenges that we face. This 

chart demonstrates in the black, all of the wells that have already 

been constructed, those that are going to be permitted. I think between 2008 where we are now to 2015 there’s going to be, as I understand it, 50,000 to 60,000 wells in this whole area of the State. 

So my question to you, Governor Ritter, is how is the State already making a contribution to meeting the oil and gas and energy 

needs of the country in this area? 

Govenor RITTER. Thank you, Mr. Chairman. I think in my testimony I addressed just last years permitting. It was over 6,200 and 

some permits that were allowed. 

We have seen, just in a 5-year period, just an extreme increase 

in the development of both oil and gas resources with significant 

impacts to the Western Slope. Impacts that we’re doing all we can 

to guard against that involve both air quality concerns and water 

quality concerns, but as well, wildlife impacts. There’s the largest 

mule deer population in the United States of America is in that 

Basin right there in Northwestern Colorado. There’s a large elk 

population as well. 

So all of those play into the present activity and we’re being, I 

think, if you look at just the increase in activity. So much of it 

around gas production but as well around oil production, I think 

that the State is doing a significant amount to contribute to the demands placed upon this country, the increased energy demands 

placed upon this country and that’s just if you think about that 

Basin and really just about oil and gas. 

We’re doing a host of very aggressive things around the production of renewable resources as well around wind and solar and 

those kinds of resources that are available as renewable. But we 

consider this an important industry to the State of Colorado. It’s 

a $23 billion industry in the State of Colorado. 

So we understand its role that it plays in our economic vibrancy. 

But at the same time we believe that it is important that we not 

build out the industry and this includes really with respect to oil 

shale, in a way where we cause irreversible impacts on water and 
32 

air quality. I think among our concerns that those would be the 

greatest. 

Senator SALAZAR. Let me ask you another question, Governor 

and that is relating to water. You know, for us who are from the 

West as Senator Barrasso knows we say, water is for fighting, 

whiskey is for drinking and so we know the importance of water 

in the West and how water is so much the life blood of our communities. 

In terms of the water use with respect to oil shale development 

and the kinds of quantities that are being talked about. Is there 

a concern about whether or not the water supply is in fact there 

and available for the oil shale development? 

Govenor RITTER. There’s a great concern and if you think about 

the Colorado River Basin that most significantly feeds the Piceance 

Basin. The Colorado River is fully appropriated for Colorado uses. 

But it is a part of an Interstate Compact. That Interstate Compact has been the subject of great debate in terms of our ability as 

an Upper Basin State to provide the adequate amounts under a 

1922 treaty to the Lower Basin States and an International treaty 

that involves the United States and Mexico. So because the Colorado River is such an important Basin River for Upper Basin, 

Lower Basin and for Mexico, we have to be very careful about 

water usage and extended water usage. 

I know that Shell which is one of the companies that’s involved 

in the RD and D process and really furthest along in terms of Colorado RD and D projects. That is has purchased water rights. 

There’s a great concern on the part of the Front Range which takes 

some of the Colorado River across to the Front Range, concerns 

about water availability. 

But certainly significant concerns on the part of communities and 

other kinds of uses on the Western Slope if in fact oil shale development goes forward and it turns out to consume as much water 

as we suspect to estimate. This is one of the real concerns, Senator, 

is that we don’t know. That’s one of the reasons that we come to 

this place of asking not to do commercial—to write the commercial 

regulations is because we can’t sit here today and say when we 

take this industry to scale this is what the water consumption will 

be. 

Without knowing that in a place that arid, where you have fully 

appropriated water rights already over extending the Basin, it is 

of a great concern to me as the Governor of the State and to many, 

many people and interests in the Western Slope and other parts of 

the State. 

Senator SALAZAR. Thank you, Governor. My time is up. So I will 

then call on, let me see who is next. It is Senator Murkowski. 

Senator MURKOWSKI. Thank you. I’m announcing to you all that 

in my State of Alaska we are the first State, I understand, to top 

the four dollar mark in terms of the statewide average for the price 

of oil. In a lot of our remote communities, you know, they’ve been 

at four bucks and over for years. 

So for us in the State, we’re looking at anything that will help 

to alleviate the price of gas at the pump and the price of home 

heating fuel. When I look at what we have with the potential here 

in this country for oil shale knowing that the United States has 50 
33 

percent of the world’s oil shale potential for 2.1 trillion barrels. I’m 

just—it’s amazing to me. I’m used to looking at big numbers when 

it comes to oil and gas. 

In looking at the chart, this is Senator Craig’s chart. He had to 

go to a mark up and wasn’t able to be here. But we were talking 

about it before the committee and to recognize that between the 

four states here, or three states, Wyoming, Colorado and Utah to 

have the equivalent of 1.5 trillion barrels is really nothing short of 

phenomenal. I think we need to appreciate the value of this resource. 

Then when you factor in what our technology allows us to do 

with development of a resource. We’ve seen up in Prudhoe Bay how 

the technology has allowed us to move forward with a level of development reducing the footprint, going underground with directional drilling, really being smart in our technology. Governor, I applaud you for what you are doing in Colorado. When Senator 

Salazar asks you to point out Colorado’s contribution to the Nation 

in terms of energy source and supply, I think it is to be recognized. 

I hear your concerns. You always want to try to find that balance 

between the development of the resource which is so greatly needed, providing jobs for your constituents while at the same time allowing for care to the environment. It’s a tough challenge. But I am 

convinced that we are smart people in this country. We can do it 

if we put our minds to it and commit to doing it right. 

Secretary Allred, I want to ask you about your Phase I, Phase 

II, and Phase III. Between Senator Bingaman’s comments or questions and Senator Barrasso’s, I think you probably answered my 

question. We’ve got a process in place, proposed anyway, that really 

is going to take a number of years before we can get to the point 

of commercial leasing. 

Did I understand you correctly though to say that if we fail to 

put the regulations into place that the RD and D stops or has the 

potential to stop so that we can’t even advance that aspect of oil 

shale development? I just want to make sure that I’m understanding exactly how we phase through this process. 

Mr. ALLRED. Senator Murkowski, that’s right probably from two 

standpoints. The first is the legal standpoint and that in order to 

go to the what’s the second phase we have to have regulations to 

issue those preference leases so they can go to the full phase. 

The second one is that my fear. I think you’ll hear more from 

this or have the opportunity to ask the companies as this as well. 

But my fear is that without some assurance and certainty that 

comes from having the rules of the road which would be provided 

by the regulations, these companies will not continue to invest the 

kind of money that it’s going to take to do the research and the developments necessary. 

Senator MURKOWSKI. So they—So you’re saying that they want 

that regulatory certainty before they make that commitment to 

capital? 

Mr. ALLRED. That would be my belief, Senator. 

Senator MURKOWSKI. One last question, very quickly. In terms of 

the known resource up in Alaska for oil shale, we’re kind of on the 

map and it just says, large. Do we know how large, large is? 
34 

Mr. ALLRED. Senator, I do not. Obviously there’s a lot we don’t 

know about Alaska. Alaska has huge resources. I think we need to 

understand more as well up there as well as elsewhere around the 

United States. 

Senator MURKOWSKI. Thank you. Appreciate it. Both of you, 

thank you. 

Senator SALAZAR. Senator Sessions. 

Senator SESSIONS. Thank you very much. Gentlemen, you know 

we’re not independent actors here. Governor, I know you know we 

have an ultimate Board of Directors and that’s the people that elect 

us. When I travel about people say they want us to do something 

now. 

So we say nuclear power has potential to help us, but we’ve 

killed off the nuclear power industry. It will be at least 10 years 

before we can get a new plant online. We’ve got bills that would 

open up some more of our Outer Continental Shelf or give an option to, not really open it up and that may be years before we pass 

it. We presume that we prefer to import oil from Venezuela than 

produce it here. 

We see the potential for several trillion barrels of shale oil and 

that’s, Senator Hatch said, a 140 years. But I’m confident if we had 

70 or 80 years worth of oil that we could produce out of that oil 

shale that would transition us into a non carbon age. 

You know, I think we’re doing the work that will eventually 

break the back of carbon as the thing that’s controlling us. All of 

which I’m coming around to say that I think we need to do some 

things now. Mr. Allred, let’s say that based on current circumstances assuming no dramatic problems were to occur. 

I am told that oil shale oil can be produced far cheaper than we 

can buy it on the world market. Is that correct? Your best judgment? 

I know that you think it happened if we start infecting the water 

supply, Governor. You cannot allow that to happen or other things 

that might happen. But I don’t think the companies that are investing hundreds and millions of dollars are unaware that if they 

make those kinds of mistakes they’ll be shut down and in a hurry. 

They must think there’s a realistic possibility of producing large 

amounts of oil below the current world price. Is that fair, Mr. 

Allred? 

Mr. ALLRED. Senator, I don’t think we know what the costs are 

yet for oil shale development. That’s one of the things that we’ll 

find out with the RD and D programs if they go forward. There are 

two benefits, I think, from additional energy supplies, oil supplies. 

If you look at the price of oil, it’s—and I’m really going to simplify this. I mean from the standpoint that it’s not nearly as simple 

as I’m going to relate it is. But there really are two components 

with regard to the oil price, the international oil price. 

The first has to do with cost of producing oil. You can get different opinions on that. But for just discussion purposes it might 

be in the neighborhood of $60 to $80 a barrel. Then there is—— 

Senator SESSIONS. The oil shale. 

Mr. ALLRED. Of all oil, oil shale. 

Senator SESSIONS. It’s less than $10 I understand in Saudi Arabia, per barrel? 
35 

Mr. ALLRED. It is. No, what I’m talking about is a general overall 

average in the world. Yes, sometimes, in fact I believe there are 

some places in the United States it may be even less than $10 on 

some of the old fields. 

But if you look at that price, that initial cost of production is 

someplace maybe half the current price. The next one is what I 

refer to as the risk or the opportunity cost. That really is determined by the perception of those people buying oil is to how much 

they can plan on the oil being there. 

So there’s two ways to affect the price of oil. One of them is develop new oil. That takes a long time, including oil shale. The second one is try to convince people that it’s going to be developed. 

That has a much quicker impact perhaps on oil. 

So as you look at what you do, I think you have both those components so that you could—— 

Senator SESSIONS. My time is about up. I would just say from 

what I hear, from the industry spokespersons, they believe they 

can produce oil in oil shale for less than $60 a barrel. So that says 

to me that well, why don’t we—if you’re talking to my constituents, 

they’d say well, why don’t you guys get together and figure out 

some regulations. So we can find out if there’s environmentally efficient and safe way to produce this oil. Get busy. 

I mean that’s what it is. That’s what I’m hearing. People and I— 

it’s not an answer to say well, this regulation and this year and 

next year and 10 years we might know whether or not we can 

produce oil shale. We ought to know now. If we can’t do it we might 

as well find out now. 

I would also add, Mr. Chairman, it does produce, I understand, 

a distillate that’s favorable to diesel fuel which gets about a 30 percent, at least, better gas mileage. The Europeans now have 50 percent of their cars diesel. Our diesel prices, unlike Europe, are more 

expensive than gasoline. 

So this could help us also to reduce dependence on foreign oil. 

So you get oil here that we don’t have to spend our wealth all 

abroad, if it can be made safely. We get a better quality that could 

allow us to knock down the number of gallons by 30 percent because we’re getting more efficiency. It means we could end this spending $500 billion a year of American wealth every year to importing. So I guess, I’ll submit some 

questions for the record. 

I’ve got a critical hearing I’ve got to attend. I would just want 

us to think that the American people don’t want business as usual. 

They want us to try and move forward with something that will 

make a difference. Thank you. 

Senator SALAZAR. I thank you for having been a part of our Set 

America Free Coalition. Looking at renewables and efficiency and 

a whole host of other things that really show how on the energy 

agenda we can bring together republicans and democrats, conservatives and progressives to try to solve the problems that we face. 

I will say only one thing to my colleagues here that the problem 

that we have with oil shale is that this has been a dream of people 

from way, way back. 

It was included in the 1920 Mineral Leasing Act as one of the 

natural resources that could be leased. Then boom and bust includ-
36 

ing in the 1980s that left the catastrophe in the Western Slope of 

Colorado. Because of the fact that 80 percent of the oil shale reserves are located in my State I think the way we move forward 

in exploring the possibilities of this resources is very, very important. 

The research and development efforts that are already moving 

forward with Shell really being the leader in the industry is showing that those R and D efforts are moving forward. So I think 

there’s way in which we can find a way of moving forward. But at 

the same time allowing this research and development effort underway could be way to be able to provide us with answers to some 

of the very central questions that we have. 

So I want to ask a couple of questions to Secretary Allred. First, 

I look at your chart on oil shale development on public lands. You 

have at some point on that chart this little brown dot that says, 

project completion, Phase III commercial. When do you think that 

will happen? What year? 

Mr. ALLRED. Senator, it’s hard to predict that because—— 

Senator SALAZAR. 2011? 

Mr. ALLRED. No, I think—— 

Senator SALAZAR. 2016? 

Mr. ALLRED. Probably in the later half of say, 2015 and beyond. 

Senator SALAZAR. Ok. So between 2008 and 2015 whatever happens here will not have any impact of adding additional supply to 

the oil markets of America? Is that correct? 

Mr. ALLRED. Not physical supplies, that’s correct. 

Senator SALAZAR. Ok. Let me ask you about water availability. 

Under the Colorado River Compact, as the Governor described, 

there’s a significant share of water of the Colorado River between 

all of the seven states, Upper Basin, Lower Basin. We had a share 

of water within Colorado that we are entitled under the Compacts 

to consume for Colorado water users. 

Do you know today how much of that water consumption under 

those compacts would be required to be able to implement a commercial oil shale leasing program? 

Mr. ALLRED. Senator, we do not. That’s part of the purpose of the 

RD and D leases, to try and determine that. Let me point out 

though that that will be a State decision. 

Senator SALAZAR. Let me ask you because of the limited amount 

of time. I’m going to try to go through some of these questions. Ok. 

We do not know how much water is going to be required for oil 

shale development in Colorado. Because of the fact we don’t know 

whether or not the technology is there to be able to develop the oil 

shale or what kind of technology is going to be used. That is specifically the purpose for the research and development projects that 

are underway is for us to be able to develop that kind of information. 

Now to do an adequate environmental impact statement on oil 

shale development wouldn’t it be necessary for you to understand, 

as your developing this program, how much water is actually going 

to be consumed in the development of that oil shale? 

Mr. ALLRED. Senator before there’s any decision to do leasing or 

development we will have that information. There will be a full 

NEPA analysis with that available information. 
37 

Senator SALAZAR. Ok. But we do not have that information now 

to be able to include it in the programmatic environmental impact 

statement. You, as the Assistant Secretary of the Department of 

the Interior, overseeing the BLM, do not have the information to 

be able to analyze in your programmatic environmental impact 

statement with respect to how much water will be consumed in the 

development of oil shale. 

Mr. ALLRED. Senator, we do not. But I don’t believe that was the 

reason for the PEIS as defined by the legislation. 

Senator SALAZAR. Ok. Let me ask you a couple of other quick 

questions because I know Senator Barrasso also has some questions. National Parks. The Department of Interior is responsible for 

the crown jewels of America, the crown jewels that we have in Colorado including units of the National Park system. 

According to the draft PEIS of that was issued, the National 

Park Service has identified eight units. This is from your Department where they say, ‘‘have a very high potential for being adversely affected by cross boundary or direct impacts from exploration and development activities and what the PEIS calls a region 

of influence. They include the Arches, the Black Canyon of the 

Gunnison, the Canyon Lands, the Capitol Reef National Parks, Colorado Dinosaur and Fossil National Monuments and Glen Canyon 

Recreation Area.’’ 

What is your position in terms of the oil shale development that 

you foresee occurring and the impact that it would ultimately have 

on these units of the National Park system? 

Mr. ALLRED. Senator, one of the things you have to know in 

order to do that analysis is what specific proposal for the development will be. So if we have an oil shale project by definition under 

the Clean Air Act, it cannot affect those monuments. 

Senator SALAZAR. Ok. I will have some more questions for you. 

But I think your answers to those two questions just on water 

and on the National Park system demonstrate the point that I’m 

trying to make here. That is that I think we have a long ways to 

go before we are ready with the knowledge in hand to move forward with creating the legal set of regulations for commercial leasing of oil shale. 

What we were trying to do in the legislation that I introduced 

this week was to come up with an orderly process that would allow 

us to provide answers to these questions and would allow the companies, like Shell which has done a tremendously positive job in 

moving forward in a responsible way, do to the research and development to be able to provide us with the answers to many of these 

questions that we have. 

Senator Barrasso. 

Senator BARRASSO. Thank you, Mr. Chairman. I do have a complete statement I’d like to submit for the record, if possible. 

[The prepared statement of Senator Barrasso follows:] 

PREPARED STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR FROM WYOMING

• Thank you, Mr. Chairman. 

• The development of oil shale holds great promise. 

• Resources in Colorado, Utah, and Wyoming are estimated to translate into approximately 1.8 trillion barrels of oil. 
38 

• Just considering the 800 billion barrels of recoverable oil, this translates into 

enough oil to meet U.S. demand at current levels for more than 100 years. 

• The development of the economically recoverable shale resources hinges on several factors. 

• Two of the primary factors include: 

—The economic competitiveness of oil shale when compared to petroleum-based 

oil and 

—Government policy. 

• The benefits to the states of Wyoming, Utah, and Colorado and nation are many 

and varied: 

—American jobs; 

—Tax revenue at the state, local, and federal level; 

—Royalties for the federal government and the impacted states; 

—Long-term relief for American consumers coping with high prices at the pump 

and in the form of a hidden, inflationary tax in the goods and services we 

all consume. 

• In the Energy Act of 2005, Congress identified and clearly articulated a national 

policy for oil shale. 

• That policy bears repeating: 

1) ‘‘United States oil shale, tar sands and other unconventional fuels are strategically important domestic resources that should be developed to reduce the 

growing dependence of the United States on politically and economically unstable sources of foreign oil imports; 

2) the development of oil shale, tar sands, and other strategic unconventional 

fuels, for research and commercial development, should be conducted in an environmentally sound manner, using practices that minimize impacts; and 

3) development of those strategic unconventional fuels should occur, with an 

emphasis on sustainability, to benefit the United States while taking into account affected States and communities.’’ 

• Congress has recognized the promise oil shale offers for energy security and national security. 

• With an appropriate regulatory framework and if the price of oil shale is competitive to that of petroleum-based crude oil, then oil shale will achieve prominence in America’s energy mix. 

• Oil shale can provide an important contribution to: 

—Reducing America’s reliance on foreign oil and 

—Meeting the growing energy demands of America. 

• If and when it becomes economically and technically viable to develop oil shale, 

it must be done with utmost care and protection of the environment. 

• It must be developed in a sensible, rationale manner. 

• Politicians, conservationists, and industry are all expressing similar concerns. 

• Those concerns are over uncertainty, such as the timing and content of regulatory frameworks. 

• Congress should be particularly cognizant of the signals it sends in terms of energy policy. 

• Congress should offer a clear, declarative policy framework and not chill development through on-again/off-again signals, policies, or incentives. 

• By analogy, I would turn to the renewable production tax credit or P-T-C. 

• Today, and in the past, congressional policy is characterized by on-again, offagain incentives for wind, solar, and geothermal energy. 

• While the details matter, jolting government policies are shortsighted and lack 

a predictable vision. 

• Policies governing the development of oil shale deserve the same certainty—certainty for producers, certainty for states, and certainty for affected communities. 

• Communities on both sides of Wyoming are coping with substantial energy development. 

• On the western side of Wyoming, the community of Pinedale has experienced 

extraordinary challenges due to recent natural gas exploration and development. 

• On the eastern side of Wyoming, the community of Douglas is conducting community assessments in advance of a dramatic and developing interest in both 

uranium and wind energy. 
39 

• County officials representing Pinedale have raised concerns over socioeconomic 

impacts with folks throughout the Department of Interior, including Stephen 

Allred, here today. 

• I believe there is clearly room for improvement when it comes to planning. 

• Part of that obligation rests with Congress. 

• Congress should provide a rationale expectation to affected communities. 

• This includes insisting on an appropriate and timely regulatory framework. 

• Government’s role should be characterized by: 

—assistance in meeting challenges; 

—assistance in finding solutions; and 

—assistance in meeting its obligations within the context of a predictable, rationale framework. 

• Thank you, Mr. Chairman. 

Senator BARRASSO. One quick question. I think, Governor Ritter, 

I heard you say that the regulations are not needed now until the 

research is complete because things may change. Did I hear that 

correct? 

Govenor RITTER. I think what I hoped to communicate is that establishing the legal framework at this point in terms of writing 

regulations around commercial leasing seems premature and partly 

I addressed it in response to the Senator’s question regarding 

water consumption and the fact that we do not know. We do not 

know the technology that will go forward nor what water will be 

consumed at all. 

So, Senator, we really don’t know the power generation necessary 

to really mine the shale. We don’t know the source of that power. 

If in fact, we get to a place where we understand the amount of 

power necessary to mine the resource. We don’t know what it’s— 

how that will be produced and what its impact will be on greenhouse gas emissions. 

So it’s all of those things that are really off in the world of the 

unknown that cause me to say, it is premature to establish a legal 

framework through the regulatory process and write commercial 

leasing rules. 

Senator BARRASSO. Mr. Allred, if I could just ask you your 

thoughts on that answer and what your thoughts are on regulations now. 

Mr. ALLRED. Senator, it’s kind of like the chicken or the egg, the 

question. But the problem is that we cannot develop the information that’s necessary to answer these questions unless we have, we 

believe, the rules of the road in place by which we would do that. 

Senator BARRASSO. Thank you. Mr. Chairman, no further questions. Thank you. 

Senator SALAZAR. Thank you, Senator Barrasso. I will point out 

to Senator Barrasso that I supported his leadership in this committee in a hearing that we had last week in his efforts to carry 

out a vision for Senator Craig Thomas in connection with the Wyoming Range. In that particular circumstance what Senator 

Barrasso was trying to do was to find a balance between development and the protection of what makes the Wyoming Range such 

a wonderful and beautiful place. 

In that same way, Senator, this is what we are trying to do in 

Colorado. Recognizing that we have this level of development 

where you see all these black dots in this area of Northwestern 

Colorado where you are seeing a huge amount of oil and gas devel-
40 

opment which is going to increase 12 fold between today and the 

year 2015. Then placing on top of that this potential for oil shale 

development drives me and the Governor to conclude that what we 

want to do is to move forward in a thoughtful way. So that we 

don’t jeopardize the sustainability of what makes places like Colorado and the Western Slope or places like the Wyoming Range such 

a spectacular place. 

Let me ask some—a few more questions if I may of you, Secretary Allred. In terms of air and water quality, as you move forward in putting together your programmatic and environmental 

impact statement how have you addressed the air and water quality concerns which were addressed in the Governor’s written testimony as well as in his oral testimony here before? 

Mr. ALLRED. Senator, the regulations will, as with all the rest of 

ours, depend upon regulations already adopted by the Environmental Protection Agency or by the states. The companies who develop with regard to the oil shale as elsewhere will have to comply 

with those regulations or they will not be able to operate. 

Senator SALAZAR. Let me—one of the things that has been said 

is that the companies that are interested in oil shale development 

need to move very quickly in their view beyond the research and 

development leases. Which have already been issued which were 

authorized under the 2005 Energy Policy Act, which I worked on 

in this committee for a long time. Are you familiar with the following numbers? 

Exxon Mobil owns already 50,000 acres of oil shale lands in Rio 

Blanco and Garfield Counties. Red Leaf Resources controls 16,500 

county acres in Utah State. A whole bunch. I can keep giving you 

a number for a bunch of companies, Royal Dutch Shell, 36,000 

acres of oil shale lands in Rio Blanco and Garfield Counties. 

With that amount of acreage that’s already in control of the oil 

companies that already has an abundant amount, those acres contain an abundant amount of oil shale reserves. Why is, from your 

point of view, it necessary for us to move quickly to develop the 

commercial oil shale regulations and then to issue commercial 

leases for significant additional acreages to this land in an expedited way? 

Mr. ALLRED. Senator, that’s probably a better question to ask 

companies that are, I understand some will be here. I have asked 

that same question. What my understanding is is that the reserves 

that are on that private land are not the type of reserves that are 

conducive to the in situ development that are currently being researched in the RD and D programs. 

Obviously under EPACT what I deal with are, as you directed, 

as the committee directed, are Federal lands. I have no authority 

over what happens on those non-Federal lands, certainly the State 

does. But that’s my understanding. That’s the answer I get when 

I ask that question. 

Senator SALAZAR. Ok. Secretary Allred, are you aware that the 

2005 Energy Policy Act that was signed by the President was very 

different with respect to oil shale development than the bill that 

was part of that which passed out of the Senate in 2005? 

Mr. ALLRED. Senator, I’m not aware. At that point in time I was 

in retirement and not worrying very much about this stuff. 
41 

[Laughter.] 

Mr. ALLRED. So, I am not aware of it. 

Senator SALAZAR. Just for your information. I would ask you and 

the Department of Interior and the BLM to go back and take a look 

at that legislative history we put together. I’m proud of the three 

energy bills that I’ve worked on in this committee, the 2005 Energy 

Policy Act, the 2006 Energy Act that opened up Lease Sale 181 and 

last year’s 2005 Energy Efficiency Act. 

Good pieces of legislation. Worked closely with your Department 

and others in getting that legislation done. I would ask you to go 

back and to look at the 2005 legislative history because in that legislation we essentially put together the concepts for oil shale development in Colorado which are mirrored today in the legislation 

that I introduced, Senate 3019. 

The legislation which we passed out of the Senate back in 2005, 

passed with a significant bipartisan support and majority here. 

That legislation went over to the House of Representatives. Many 

of the protections that we had put in there were simply taken out. 

It had been our view back then in 2005 that the way to move 

forward in the development of oil shale in Colorado and Wyoming 

and Utah was to move through a process that would take us 

through a phase where we would do leasing for research and development. Then at a subsequent time, once we knew what the technologies were going to be that could be used for oil shale development to then move forward with the finalization of the program. 

In those dark days of 2005 someone over in the House of Representatives, I understand his name was Pombo and some other 

people decided they were going to strip out protections that we had 

put in here in the Senate. 

So my legislation, S. 2016 is simply a way of going back to approaching oil shale development in a thoughtful way. I know you’ve 

had a great working relationship with Governor Ritter and the 

State of Colorado. We do so much with all of the branches of the 

Department of Interior including the BLM in our State. 

You own as I understand, I think it’s 33 percent of the State of 

Colorado. You’re our biggest landlord. So we have to have a good 

and positive relationship with you. I would simply ask you as the 

Assistant Secretary of Interior to take another look at what we 

were trying to do back in 2005 and that we now are trying to correct with S. 3019. 

Let me at this point, let me give just a few minutes to close up 

this section of the hearing before we call up the next panel. So why 

don’t we have Secretary Allred, you give us a two to 3 minute closing statement on what you have heard here this morning. Then 

we’ll have the Governor have the last word here. 

Mr. ALLRED. Thank you very much. Again it’s a pleasure to be 

here to visit with you. We are trying to do a right both for the people of the United States to preserve things for the Federal Government and for the people of Colorado and Utah and Wyoming. We 

have a deliberative process. Those are very difficult, as you know 

in the public policy area. 

Our goal is not to do things without being fully informed as to 

what steps we should take. So we’re going to do the best job we 

can. We’re going to follow the law. 
42 

We appreciate very much the opportunity to talk about this in 

a hearing and all of the relationships as we go forward with this 

committee and individual Senators. Again, I appreciate very much 

the working relationship we have with Colorado. And even though 

at times that’s portrayed differently than the Governor and I believe it is. It is a good working relationship as it is with all of the 

delegations that are here. 

Senator SALAZAR. Thank you very much, Mr. Secretary. 

Governor Ritter. 

Govenor RITTER. Thank you, Senator Salazar. Again thanks for 

your leadership on this issue. I want to echo what the Undersecretary has said in terms of our working relationship. 

We found ourselves in different places over the past year and a 

quarter. But he and I have been able to communicate with each 

other in a respectful way. Actually there’s far more that we agree 

upon than we disagree upon. 

Today I think the disagreement is really a question of timing 

around establishing the legal framework for commercial leasing. 

There’s a reason we disagree upon it. I won’t speak for him. He’s 

done that quite well himself. 

But I will just say from the perspective of the State that has the 

lion share of the oil shale resources and a history with this industry having gone from boom to bust and having a dramatic impact 

on the communities in the Western Slope of Colorado I think we 

have a perspective that needs to be heard and that is that we believe establishing that legal framework should come only after we 

have more certainty ourselves. In terms of the issues that I’ve 

talked about today that relate to water consumption, that relate to 

impact on water quality, that relate to the need for energy to 

produce this valuable energy resource and the source that provides 

that energy that we don’t know that. 

Because we’re at a place where the technology we’re looking at 

is very energy consumptive. Again Shell’s technology which I’ll believe they’ll speak to involves a great deal of energy consumption, 

electron consumption to heat the shale in the ground and get it to 

a place where you can extract a fluid, or a crude oil from it. We 

don’t know how much it takes. Also ultimately if we utilize for instance a traditional coal fired furnace, what the impact will be on 

greenhouse gases. 

This comes at a time where the State of Colorado as well as the 

country is looking for ways to reduce the emissions of greenhouse 

gases. This is right now a technology that could take us in the opposite direction. It’s not that we don’t want to develop oil shale. 

We’re supportive of the idea. But this is an important resource for 

the United States of America, for the State of Colorado. But we believe that it is important that we answer these presently unanswered questions before we go forward in establishing the legal 

framework. 

I visited Canada in November of last year. In Canada in the 

province of Alberta they’re rewriting the rules right now around 

the royalties for oil and gas development and that rewriting of the 

rules has caused a great deal of uncertainty in investments that 

were already made. 
43 

Our notion is providing certainty is important but it’s providing 

certainty once we know the kinds of impacts that will flow from the 

technology that becomes the technology for which we utilize to go 

forward on oil shale development. So I think that’s the perspective 

that you and I probably share, Senator. It is certainly my perspective as the Governor of the State that there is so much in the way 

of present uncertainty on impact that we need to know before we 

establish the legal framework. That’s really the plea today from me 

as the Governor of the State. 

So thank you again for the opportunity to speak. Thank you, Secretary Allred for just such a thoughtful discussion and really for 

the relationship that we’ve been able to maintain. So thank you. 

Senator SALAZAR. Thank you, Governor Ritter and thank you, 

Secretary Allred. The next—you will be excused and the next panel 

if they’ll come up are Jim Hansen from the Oil Shale Exploration 

Company. Terry O’Connor from Shell Exploration and Steve Smith 

from The Wilderness Society. 

As you are coming up and taking your seats I’m going to take 

about a four, 5 minute break. I’ll be right back. 

[Recessed] 

Senator SALAZAR [presiding]. Let’s reconvene the Energy Committee and hear from our second panel of witnesses. Again this is 

the U.S. Senate Committee on Energy and Natural Resources. The 

purpose of this oversight hearing is to receive testimony on the development of oil shale resources. 

The second panel is made of Jim Hansen. Jim Hansen is representing Oil Shale Exploration Company of Farmington, Utah. 

Steve Smith, who is with The Wilderness Society out of Denver, 

Colorado. Terry O’Connor who last time I had from him he was 

Vice President, some high level person with Shell Exploration and 

Production Company also out of Denver, Colorado. 

So why don’t we begin with you, Mr. Hansen. We’ll just go across 

the board. And if each of you could take up to 5 minutes to summarize your written testimony and all of your written testimony will 

be made a part of the record. 

Mr. Hansen. 

STATEMENT OF JIM HANSEN, REPRESENTING OIL SHALE 

EXPLORATION COMPANY, FARMINGTON, UT 

Mr. HANSEN. Thank you, Mr. Chairman. I appreciate the opportunity of being here. Prior to doing this my last job in Congress I 

was Chairman of the Committee of Resources in the House. That 

was before Mr. Pombo, I want to make that point to you right now. 

Anyway prior to that I did serve 22 years on that committee and 

spent an awful lot of time working on oil and especially in Alaska 

and a few other states which was a desirable thing. Right now I 

am working with Oil Shale Exploration Company, as you mentioned. In 2007 this company was granted a BLM RD and D lease 

on the 160 acres known as the White River Mine Site. 

The White River Mine Site was one that was very productive 

where they worked very diligently in the 1970s. That was really 

composed of Phillips, Sun Oil, Sohio. They came up with a figure. 

I remember I was Speaker of the House at the time. They came 

in to talk to me and Governor Matteson. 
44 

They pointed out that they felt they could do oil for $38 a barrel. 

At that point, at that time I should say, the oil was going for $12 

a barrel. So it wasn’t feasible for them to do it. That sat idle for 

some time until Oil Shale Exploration Company received this RD 

and D leases they have at this particular time. 

I think it’s been said many times here today and I won’t repeat 

it about how much oil shale there is in the United States. I guess 

we could debate about how much is in Colorado, Utah and Wyoming. But there’s a lot of recoverable oil shale. 

The richest deposits in the Green River formation basically is 1.5 

trillion barrels. If you could recover just 800 billion barrels of that, 

that would supply us for over 100 years. Basically I think what we 

are is we’re the Saudi Arabia of oil shale happens to be in those 

three states. 

Let me point out that as far as we’re concerned in Utah and I 

can’t speak for your State or for the State of Wyoming, but as far 

as we’re concerned this isn’t a science project. We have a provable 

technology that we have proven. It is working. 

That technology is called the ATC technology that comes out of 

Canada. It’s basically an offshoot of what was done on tar sands 

in those particular areas. We have proven that. We are in the process of using this horizontal re-torque which basically right now 

could probably come up with around 3,500 barrels a day. 

You brought up the question of oil, or excuse me, of water concerning what you have in the State of Colorado. That is not an 

issue with us as we have the White River Mine Site and it’s really 

a negligible amount of water that would be used on this technology. 

That’s the technology we’re working on. 

People always ask well, is that the best one? We think it is right 

now. Of course, just like maybe we’re in the tin lizzie of this type 

of time. There will be better ones. As better things comes along I 

think it’s only important that all of the companies who are looking 

at look for some other kind. 

Some people have said it would take 12 coal fired generating 

plants to do it. Not the one, not this crocker, not this technology. 

It is self generating. Once you start it you take no electricity. 

So we feel that it would be a good technology for what we have 

over in our area. I think people should be cognizant of what happened in Canada. About the time when I was telling you back in 

the late 1970s when these people were working on the White River 

Mine Site, the people up in Canada received—had gotten in a big 

fight with some of the environmental community. They said we’ll 

do it our way on tar sands. 

At Fort McMurray they did. I’ve had the privilege of spending 

time talking to the people up there and especially the Mayor. They 

now have an extremely, extremely productive oil process. In fact 40 

percent of the oil that we get in your State, my State and a few 

others comes from that particular area. 

What bothers me is the folks in China want that oil as bad as 

we do. As I understand as we talk there’s negotiations going on to 

try and buy all of that oil with a pipeline that would go from Fort 

McMurray to the Pacific Ocean. At that point, again, we will be in 

a little more trouble. 
45 

But it’s a great analogy because they stayed with it. They had 

the courage to stay with their program. We backed off. I think if 

America had stayed on it in the late 1970s we would have an extremely productive oil shale program going at this particular time. 

A lot of people try to bring up the idea that oil shale is a new 

idea. It’s not, as you alluded to. In the First World War they used 

that. In fact in Estonia now, and as a Chairman of that committee 

I took a CODEL over there and I can tell you that they totally rely 

on oil shale. 

They use a vertical re-torque. I think it’s kind of an antiquated 

idea compared to what we’re using. But it seems to work. That 

seems the one their using. 

Probably the Nation that coming on better than any is Brazil, 

they’re using oil shale on a regular basis. Also you have some other 

nations that are already involved in that. For example, China is 

starting to do it. Russia is working on it and producing oil shale. 

So it’s not a new idea. It’s not something well let’s try it and see 

if it’s going to work. It’s not like we’re all in high school and college 

working on these things. It’s a provable thing that will work. 

Actually the question always comes up on environment. I totally 

agree that you should be environmentally friendly, have no argument with that. That makes a lot of sense. 

On the other side of the coin, if you look at most of this area and 

I invite people on a regular basis, come on out and look at it. What 

is there in the State of Utah where we’re looking? It’s called sage 

brush and more and more sage brush. It’s kind of like, if I may respectfully say this without getting clobbered here, would be the 

Grand Staircase Escalante which is 95 percent sage brush. 

But anyway, maybe that’s beautiful to the eyes of some. I guess 

beauty is to the eye of the beholder. But in this instance, that’s 

what we have there is sage brush. 

Will there be some disturbance? Of course there’s disturbance. 

Just like every time you build a road. Every time you put in a 

bridge. Every time you build something there’s some disturbance. 

Senator SALAZAR. Will you take another 30 seconds and wrap up? 

Mr. HANSEN. I’ll wrap up. But in this particular case, that refuse 

can be used. In China they make bricks out of it. We’ve talked to 

people about using road base. I think road base would make a good 

idea. 

I appreciate your giving us an opportunity to speak. I worry 

sometimes. I can’t speak for the industry, but just for myself as a 

past Congressman and past Speaker of the House and someone 

who is extremely interested in energy development. It bothers me 

that it seems that some way sometimes we find Congress and some 

other people opposing these things. 

I think it should be done correctly. I agree with that. But still 

on the other hand I would hope that the people in America would 

say this is a valuable source. It’s something that will help solve the 

energy problem of America which in my mind is extremely critical 

at this time. I thank you, Mr. Chairman. 

[The prepared statement of Mr. Hansen follows:] 
46 

PREPARED STATEMENT OF JIM HANSEN, REPRESENTING OIL SHALE EXPLORATION

COMPANY, FARMINGTON, UT 

Mr. Chairman, Members of the Committee, my name is Jim Hansen and I am 

testifying on behalf of the Oil Shale Exploration Company, more commonly known 

as OSEC. I appreciate the opportunity to testify before this Committee to discuss 

the most critical energy source for our nation’s future, oil shale. 

US OIL SHALE RESOURCE

The United States is blessed with many natural resources and still has huge, untapped energy resources in its oil shale deposits. Over 70% of the world’s oil shale 

resources occur in the United States and the richest deposits are in the Green River 

Formation in Colorado, Utah and Wyoming. These deposits contain over 1.5 trillion 

barrels of shale oil. If only 800 billion of this can be recovered, that alone would 

supply all of our current domestic petroleum needs for the next 100 years or more. 

ELSEWHERE WORLDWIDE

Oil shale deposits are found in at least 15 other countries worldwide and some 

countries rely on the production of these domestic resources to meet some or all of 

their needs. Currently shale production is taking place in Brazil, China, Estonia and 

Russia and development efforts are underway in Israel, Jordan, Australia, and Morocco, as well as elsewhere. 

PAST US EFFORTS

The presence of oil shale in both the western and eastern states has been known 

for over 100 years. Early oil shale operations in the eastern US were terminated 

when natural oil wells were developed in Pennsylvania in 1859. The discovery of 

rich oil shale in the western United States drew attention during World War I as 

the shortage of oil prompted exploration for unconventional fuels; there was a rush 

to develop these western oil shale resources and the country looked to oil shale as 

its future fuel supply. In 1920 the Mineral Leasing Act was passed to allow the government to lease its oil shale land at a manageable pace. Then, shortly thereafter, 

the vast oil deposits in west Texas and Oklahoma were discovered and oil shale lost 

its attraction. 

During World War II, oil shale was again looked upon as the answer to our military needs and the government established an oil shale research center at Anvil 

Points, Colorado managed by the Bureau of Mines. Following the war, interest 

again waned and the Alaska oil fields and imports seemed sufficient to meet the 

nation’s needs. 

The OPEC oil embargo in 1973 again forced the nation to look at its domestic oil 

supplies and the government issued its first ever oil shale leases in Colorado and 

Utah in 1974. The Synthetic Fuels Corporation was established by the Carter administration in 1980 and it finally looked as though the nation was going to do 

something to diminish its reliance on imported oil. Then, the world oil prices declined in the 1980s and all of the government programs were abolished and the 

dozen major oil shale projects were terminated by 1985. 

Between 1985 and 2005 the nation had no concerted effort to develop its major 

unconventional fuels, including oil shale. During this same period, Canada was developing its oil sands resources and today is producing well over one million barrels/ 

day, much of it exported to the US. The oil sands industry of Canada is a tremendous success story and production continues to increase. If the US had maintained 

its oil shale program after 1985, we would be producing shale oil in this country 

today. 

Again, between 1985 and 2005, there was no federal oil shale program, no significant budget, no policy and no leasing of federal oil shale resources. Finally, the 2005 

Energy Security Act offered industry an opportunity to lease federal research parcels of 160 acres each. Congress decided once again that it was time to consider oil 

shale, especially since the government controls over 80% of the western resource 

and nothing was going to happen unless the government made federal land available. 

CURRENT US PROGRAMS

The 2005 Energy Security Act demonstrated that the US government might finally encourage the development of these valuable oil shale resources. The nation’s 

production of crude oil has been declining since the 1970s while its demand has continued to increase, making the country increasingly dependent on imported oil and 

much of the foreign supply is controlled by nations unfriendly to the US. Oil shale 
47 

is the largest untapped domestic resource with the greatest potential to decrease our 

dependence on foreign oil. 

Recent reports completed by DOE and by the Unconventional Fuels Task Force, 

working with DOE, DOD and DOI, clearly document the value of the US oil shale 

resources and show that the nation, under the right government programs and leadership, could be producing up to two million barrels of shale oil by 2030. 

However, there are lingering questions about our ability to produce shale oil in 

this country. Most of these questions center on key issues such as: (1) is the technology available and will it work on a large scale?; (2) can shale oil be produced 

profitably?; (3) can shale oil be produced in an environmentally responsible manner?; and (4) what are the socio-economic impacts going to be on the local regions 

where these developments occur? 

The 2005 Energy Security Act set out to answer these questions and industry has 

stepped forward to cooperate. The plan is to go slow and answer those questions 

during an interim research program that precedes huge commercial development efforts. There were six research, development and demonstration leases signed in 

2007; five of these in Colorado (three to Shell, one to Chevron and one to EGL Resources) and one in Utah (Oil Shale Exploration Company). Each of these companies 

has active programs underway. There are other companies working on private and 

state lands. Each of these projects is working to answer the same crucial questions, 

although their technical approaches might differ. Commercial development will not 

occur until investors are convinced that the risks are manageable and that the government is supportive. 

So, oil shale is again garnering some attention but not nearly at the level justified. Industry is anxious to ramp up its research programs but it needs the assurance that the federal government is a willing, cooperative partner. Oil shale requires an expensive, high-risk, long-lead time development program and the federal 

government controls most of the resource and will ultimately determine whether or 

not shale oil is ever produced at a level sufficient to improve our economic and national security. 

Industry was burned in the past when federal oil shale programs were discontinued and proposed leasing programs were terminated. We can’t continue to start 

and stop these programs. The nation can’t afford to delay any longer; it is time to 

make a national long-term commitment to oil shale and other unconventional fuels. 

OSEC AS AN EXAMPLE

In 2007 Oil Shale Exploration Company (OSEC) was granted a BLM RD&D lease 

on the 160 acres surrounding the idle White River Mine site in Uintah County, 

Utah. The mine had been developed by Sun, Phillips and Sohio on the BLM commercial prototype oil shale leases Ua and Ub granted in 1974; when the price of 

oil dropped and the federal oil shale programs were abandoned in the early 1980s, 

the companies relinquished the leases in 1985 and the mine reverted back to the 

government. It has sat idle for over 20 years! 

OSEC has initiated an aggressive research program at the site. Its approach is 

to use conventional underground mining and surface processing of the oil shale 

through a retort plant. This is in contrast to the in-situ technologies being researched by some of the other projects in Colorado. 

In September 2007 OSEC tested 300 tons of Utah oil shale in a retort pilot plant 

in Calgary, Canada. The test program was very successful and OSEC is currently 

securing permits to reopen the White River Mine and continue its technology demonstration program, which is focused on answering remaining questions on the technology, economics and environment. 

As the OSEC project matures, future expenditures will be in the hundreds of millions of dollars for research and demonstration prior to the final decision on whether 

or not to build a commercial plant at a scale of 50,000 barrels per day or more. As 

the level of the expenditures and the risks increase, OSEC, like other oil shale development groups, is asking itself where the federal government stands on oil shale. 

The DOE has essentially no oil shale program at this time, even though oil shale 

produces excellent transportation fuels, including crucial jet fuels and diesel fuel important to the military. DOD is very interested in fuels from shale oil but is getting 

little direction or funding. The BLM is being told to slow down the proposed commercial leasing program and delay issuing regulations. 

Before OSEC can justify more expensive research on the federal RD&D lease, it 

would like to know the terms of the preferential lease it might secure if its research 

is successful, as it believes it will be. The terms of that future commercial lease will 

depend on the leasing regulations, now delayed. 
48 

NEED FOR A FEDERAL OIL SHALE PROGRAM

From industry perspective, it appears as though the federal government is opposed to developing oil shale. While federal programs have assisted research and development programs for solar, wind, biomass, ethanol, coal bed methane, clean coal 

and so on, there is currently very little being done with the unconventional fuels 

(oil shale, heavy oil, tar sands, and coal-to-liquids) which have the most potential 

to increase our domestic supplies and improve our national and economic security. 

The world oil supplies are decreasing and world demand is increasing as countries 

industrialize and populations grow. The US global leadership position is jeopardized 

by the growing power of the OPEC countries that control the world’s oil supply; 

many of these countries are adversarial. Their control of the world oil supply and 

prices threatens our standard of living and our national security. We cannot afford 

to further delay efforts to develop our domestic oil shale resources. We have already 

lost the past 20 years and cannot afford to continue putting off this decision. 

While we need to consider all energy supplies, including an aggressive energy conservation program, most of these will have only minor impacts on our fuels shortfall, 

while costing huge amounts of money and demanding extensive resources that 

might be better directed elsewhere. It is time to consider the 800 pound gorilla that 

we have been neglecting all too long, oil shale. 

DOMENICI BILL

We appreciate the fact that Senator Domenici and his co-sponsors recognize the 

problem and are willing to address it head on. These are dire times and will only 

get worse if the US doesn’t address the energy issue. The world is watching as the 

US fumbles and squanders opportunities. It is time for bi-partisan leadership to 

come forth and co-sponsor a program that will get us on the course to a meaningful 

domestic energy program that is more than fancy, feel-good window dressing. This 

bill can get us started in the right direction and we are prepared to offer further 

suggestions and assistance. It will take many years of dedicated, cooperative effort 

between government and industry. Industry is willing to do its part if it is assured 

that the government is committed and will stay the course. 

Senator SALAZAR. Thank you, Mr. Hansen. 

Mr. Smith. 

STATEMENT OF STEVE SMITH, THE WILDERNESS SOCIETY, 

DENVER, CO 

Mr. SMITH. Thank you, Mr. Chairman and members of the committee for this opportunity to highlight some key environmental 

issues that must be addressed as Congress and Federal land managers consider the possible development of oil shale resources in 

sensitive arid Western states. My name is Steve Smith. I live in 

Glenwood Springs, Colorado, 30 miles from one of the richer deposits of oil shale and within 100 miles of what is projected to half of 

the world’s supply of oil shale. 

Over the past 19 years living there I’ve watched the local people, 

communities and economies slowly recover from what was the disaster of the last oil shale experiments in our county. That disaster 

was a result of Federal attempts to move oil shale too quickly with 

artificial acceleration and unsustainable subsidies. It is essential 

that Congress learn both from the mistakes of that past experience 

and from currently evolving research to cautiously craft and implement oil shale policy. 

I am also Assistant Regional Director for The Wilderness Society 

in Colorado and Utah. I encourage you to carefully consider four 

basic facts. No technology or company is anywhere near being 

ready to develop oil shale at commercial scale. 

Research into the technical and environmental feasibility of various oil shale technologies is barely begun on Federal lands already 

leased for that research with tangible results seven to fifteen years 
49 

away. Oil shale companies have long owned or had access to extensive amounts of oil shale rich lands. Yet no commercial oil shale 

production is taking place there. 

Finally the production and consumption of oil shale would result 

in immense amounts of energy consumption with corresponding 

huge increases in greenhouse gas emissions with significant negative impacts on the global climate. The oil shale research and policy sequence outlined in the Energy Policy Act of 2005 is a logical 

one. The Act however, is forcing that sequence into an unwise, accelerated pace and schedule. 

Commercial leasing should be considered only if and when technical difficulties of oil shale production are solved. When negative 

environmental and social effects of commercial development including climate effects are fully understood and avoided or mitigated. 

I’m particularly concerned with Mr. Allred’s reading of the Energy 

Policy Act to say that leasing on the preferential research parcel 

that was 5,000 acre chunks could proceed immediately on completion of these commercial oil shale leasing regulations. 

I’m also concerned under the same logic or his same reading of 

that Act that those regulations put in place for what he called 

Phase II of the research would be held over and applied to the 

much larger scale commercial leasing program later without the 

benefit of learning from that Phase II and therefore adjusting the 

regulations before going to a larger scale operation. As I noted extensive undeveloped oil shale resources, perhaps as much as three 

million acres are already controlled by oil shale companies and 

have been for over two decades. 

Even so no commercial production has occurred on those lands. 

I think it’s prudent for Congress to ask the companies with those 

holdings how it is that they are seeking access to additional Federal lands while they haven’t yet seen it to be useful to develop 

commercially on the lands they already have. For all the energy potential oil shale has it must be taken considered in the context of 

the other features and benefits of the land’s communities that are 

near where that resource lies. 

Particularly we have a concern about the inputs of energy and 

water, as you’ve highlighted, Mr. Chairman, that are needed for oil 

shale production and the effects that those inputs would have on 

the local landscape and on the global climate. According to the 

Rand Corporation report on conventional fuels, oil shale production 

of 100,000 barrels per day would require 1.2 gigawatts of dedicated 

electric generating capacity equal to the largest coal fired power 

plant now operating in Colorado. Such a plant would cost $3 billion 

to build, consume five million tons of coal a year and produce ten 

million tons of greenhouse gases. The off touted 500,000 barrels per 

day production level would obviously have even larger effects. 

Recently regional water agencies have estimated that 500,000 

barrels per day oil shale industry itself, just the production would 

require 25,000 acre feet of water annually. Either from new sources 

or diverting from existing ones which in this region in this part of 

Colorado at least, is primarily from agriculture and the laws of 

crop lands and other soil covering—the benefits of irrigated agriculture in that would be a significant difficulty as well. 
50 

Each of these factors exacerbates impacts on global climate in a 

spiraling inter related cycle. As you produce more energy to 

produce the oil shale you add greenhouse gases which adds demand 

for further energy. To respond to it domestically you reduce the 

supply of water as the climate begins to heat up and change even 

as this industry is needing more water. 

To sum up I think it’s essential that all of these factors be thoroughly and thoughtfully analyzed in depending final programmatic 

EIS and in other analysis before any decisions are made about 

leasing of Federal lands for commercial oil shale production. Oil 

shale holds a potential contribution to our energy supply if carefully considered in the important context of communities, the natural environment and the climate itself. Thank you very much, Mr. 

Chairman for this opportunity to offer some remarks. 

[The prepared statement of Mr. Smith follows:] 

PREPARED STATEMENT OF STEVE SMITH, THE WILDERNESS SOCIETY, DENVER, CO 

Thank you, Mr. Chairman, and members of the committee, for this opportunity 

to highlight some key environmental issues that must be addressed as Congress and 

federal land managers consider the possible development of oil shale resources in 

sensitive and arid western states. 

My name is Steve Smith. I live in Glenwood Springs, Colorado, 30 miles from one 

of America’s richer deposits of oil shale and within 100 miles of what is projected 

to be half the world’s supply of oil shale. Over the past nineteen years living there, 

I have watched the local people, communities, and economy slowly recover and revive from what was the disaster of the last oil shale experiment in our county. 

That boom-bust disaster was the result of attempts to move oil shale too quickly 

with artificial acceleration and unsustainable subsidies. It is essential that Congress 

and federal land managers learn both from the mistakes of that past and from currently evolving innovations when—cautiously—crafting or implementing oil shale 

policy and activities. 

BASIC FACTS

I encourage to carefully consider three basic facts: 

• Oil shale production technology still is slowly evolving. No technology—or company—is anywhere near being ready to develop oil shale at commercial scale; 

• Research into the technical and environmental feasibility of various oil shale 

technologies is barely begun on federal lands already leased for that research; 

• Companies with interest in oil shale already own or have access to extensive 

amounts of land containing oil shale ore; and 

• The climate impacts of oil shale development—both from the use of produced 

fuel and from the immense amount of energy needed just to produce it—are serious concerns that must be addressed before proceeding with anything approaching commercial scale production. 

OIL SHALE, AN IMPORTANT POTENTIAL RESOURCE

This possible source of fuels warrants careful consideration, both of its potential 

contribution and of its potential effects on other important values and resources. As 

you know, various provisions of the Energy Policy Act of 2005 direct the Bureau of 

Land Management: 

• to make federal lands selectively available for research and development activities for oil shale and tar sands resources; several such leases have been awarded; 

• to analyze, through a programmatic environmental impact statement, the environmental, economic, and social impacts of potential commercial oil shale and 

tar sands development in three western states; preparation of that PEIS continues; and 

• to adopt new regulations for commercial leasing of oil shale and tar sands, and 

if there is sufficient local interest and support, potentially lease federal public 

lands for commercial oil shale production. 
51 

That is a logical sequence—to research carefully whether public lands should be 

opened to oil shale development and, if so, how. The pace of that sequence, as imposed by the 2005 Act, is now proving too ambitious and too hasty. 

None of the research intended on federal lands leased for that purpose have 

begun. Indeed, at least two of the research leasing companies with research leases 

have announced their intention to rewrite their original research leasing proposals 

or to revise their research plans. 

Meanwhile, the PEIS process is moving deliberately but slowly, which is appropriate, considering the large amount of land and water potentially affected and the 

significant amount of key information that just is not known. 

It just makes sense to take all the time needed for a thoughtful review of the research results from the preliminary research leasing program before considering any 

public lands leasing for commercial oil shale production—and before attempting to 

craft commercial leasing regulations. 

Federal managers, local citizens and their leaders, and the industry itself need 

additional time to evaluate whether and how well the new oil shale extraction technologies work and how they could affect local economies, communities, and the natural environment so key to both. 

Commercial leasing should begin, if it begins at all, only if and when technical 

difficulties of oil shale production are solved and when negative environmental and 

social effects of commercial development—including climate effects—are fully understood and then avoided or mitigated. 

CAREFUL RESEARCH BEFORE CONSIDERING COMMERCIAL DEVELOPMENT

Even recent innovations in oil shale production include many very new ideas and 

accompanying unknowns. The BLM is currently evaluating five in-situ oil shale research and development proposals in Colorado, each using technology that is the 

first of its kind. Nowhere on the planet has large-scale oil shale development occurred using the in-situ techniques being considered in Colorado’s Piceance Basin. 

For all the effort and investment it has expended, the oil shale industry is in its 

infancy, and each of these is a one-of-a-kind operation. 

The BLM should let companies conduct extensive—and long-term—research and 

development activities—and carefully evaluate the results of that research—before 

it considers holding a commercial lease sale. 

Interim production.—This sound, cautious approach to—indeed, strategic postponement of—commercial oil shale leasing on public lands does not mean foregoing 

oil shale energy production. In fact, the potential resource recovery from the BLM 

research-anddevelopment leases themselves is very large. According to the Plans of 

Operations submitted with the research lease nominations, the estimated in-place 

oil shale resources for the 160-acre Colorado tracts are 284 million barrels, 280 million barrels, 300 million barrels, 274 million barrels, and 356 million barrels, respectively. Thus the total resource to be conveyed in the research-and-development leasing program alone is approximately 1.5 billion barrels in place. 

We note that this number does not represent the amount of oil that would be recovered, but rather the ‘‘resource in place’’. Because we do not yet know the potential recovery rate for the development methods proposed by research lessees, it is 

difficult to estimate the number of barrels that could actually be recovered. At a 

70% recovery rate, which might be possible with the newer in situ processes, these 
52 

research leases stand to deliver over 1 billion barrels of oil over their life, which 

would represent a substantial domestic supply. 

In addition, the companies holding research leases have already nominated 4,960 

acres of federal land preference rights adjacent to each of the research lease tracts. 

Once they demonstrate the viability of their technology, the BLM can confer the additional acres for development. Until and unless experimental leases can definitively 

demonstrate high rates of recovery and effective environmental protections, larger 

tracts should not be offered for what would be speculative commercial leasing. 

Commercial leases offered later in time also will be likely to generate greater returns to the federal treasury. This view was supported by the Congressional Budget 

Office (CBO) when it evaluated legislative proposals to mandate large-scale oil shale 

and tar sand leasing in the next five years. The CBO found that because the technology to successfully develop shale has not yet been developed, bonus bids for commercial leases would be insignificant over the next five years. 

In addition, CBO found that any increased receipts from early lease sales would 

be offset by forgone receipts from sales that would otherwise occur later, when the 

technology has been developed, as well as by administrative costs. Leases will simply be more valuable when potential lessees know what they will be able to do on 

them. 

Extensive undeveloped oil shale resources are already in private hands.—If oil 

shale and tar sands were a commercially viable resource to substitute for more traditional fossil fuels, surely some of the extensive oil shale and tar sands resources 

already in private hands would be under commercial development. They are not. 

Oil shale and tar sands resources in private hands are extensive within the Green 

River Formation. For example, according to an April, 2006 Department of Energy 

Report, approximately 3,000,000 acres of oil shale and tar sands resources are in 

non-federal ownership in Colorado, Utah and Wyoming, and hold in-place reserves 

of approximately 360 billion barrels of oil equivalent (DOE, Office of Naval Petroleum and Oil Shale Reserves, ‘‘National Strategic Unconventional Resource Model,’’ 

April, 2006, p. 6). 

Several prominent companies either own outright or control large oil shale or tar 

sands resources, according to both federal government and industry sources. For example, 

• ExxonMobil owns 50,000 acres of oil shale lands in Colorado’s Rio Blanco and 

Garfield counties alone; • Red Leaf Resources controls oil shale leases of about 16,500 acres on Utah state 

lands; • Great Western Energy, LLC owns or controls oil shale leases on 16,500 acres 

of state lands in Uintah County, Utah; • Millennium Synfuels, LLC controls approximately 34,000 acres of oil shale 

leases in Utah; 

• Royal Dutch Shell owns 36,000 acres of oil shale lands in Rio Blanco and Garfield counties Colorado ; 

• The Oil Shale Exploration Company controls over 45,000 acres of oil shale lands 

in Colorado. 

These six companies control over 200,000 acres of oil shale and tar sands resources, but none of these companies have moved forward with any plans to commercially exploit the resources under their control. 

Moreover, at least some of the oil shale resources in private hands have been 

characterized by the United State Geological Survey as among the richest in the 

Piceance Basin in terms of barrels of oil equivalent per acre. For instance, at a hearing before the Senate Subcommittee on Mineral Resources Development and Production of the Committee on Energy and Natural Resources held on October 16, 1987, 

regarding the patenting of 82,000 acres of old oil shale claims, testimony was presented regarding USGS estimates that 42 billion barrels of recoverable oil equivalent were present within the 82,000 acres patented. Royal Dutch Shell, though not 

an original patentee, acquired a substantial proportion of those 82,000 acres of patented oil shale claims, which apparently comprise the lion’s share of its holdings in 

the Piceance Basin. Shell, though carrying out a robust research program, has not 

moved to commercial production of these resources. According to the same hearing 

record, between 1920 and 1980 the federal government issued patents on over 

345,000 acres of oil shale claims in Colorado, Utah, and Wyoming. None of these 

claims are in commercial production. 

It seems to us that before the Congress lifts the current moratorium on commercial oil shale and tar sands leasing—which could result in the imprudent transfer 

of additional tens of thousands of acres of oil shale and tar sands resources into the 

hands of companies that already posses large inventories of these resources—it 
53 

should find out more about the status and nature of the extensive oil shale and tar 

sands resources already in private hands. The USGS likely has information in its 

possession describing the nature of these resources, since much of it apparently derived from patents issued prior to the late 1980s. It would be prudent for Congress 

to find out from the companies holding these extensive private resources why they 

are pressing to acquire more federal resources, when they have not found it opportune to develop that which they already possess. 

PROTECTING THE ENVIRONMENT AND CLIMATE

Even as technological improvements advance, however, researchers and policymakers must fully consider and integrate into the oil shale equation the protection 

of our communities, our water, our wildlife, our clean air, and the scenic beauty of 

this region, as well as a better understanding and avoidance of climate impacts from 

this potential industry. 

The public lands in question, in northwest Colorado, northeast Utah, and southwest Wyoming, certainly have large energy potential. Those lands already are producing unprecedented volumes of oil, natural gas, and coal for regional and national 

energy needs, and they contain a very large theoretical volume of additional energy 

from oil shale. 

Those same public lands also include integrated and critical wildlife habitat, popular hunting and other recreation opportunities, water supplies for local agriculture 

and communities, and astounding scenic wonders. For all its energy potential, the 

oil shale country must be considered in the larger context of natural and public values. Correspondingly, any energy policies affecting those lands must protect those 

other, more enduring and more complex values and the region’s tourist-and recreation-dependent communities that relay on those natural features. 

Energy inputs.—The amount of energy needed, as an input, to make oil shale production work is immense. Traditional, above-ground retorts must heat mined and 

pulverized oil shale to 900 degrees Fahrenheit, consuming 40% of the energy value 

produced from the shale itself. Even in the new in-situ heating technique, underground electric heaters must bring the ore to 700 degrees Fahrenheit and hold there 

for up to four years! 

The Rand Corporation’s report, Oil Shale Development in the United States, Prospects and Policy Issues, prepared for the U.S. Department of Energy last year, notes 

that oil shale production of 100,000 barrels per day (less than one half of 1% of U.S. 

daily oil consumption), using the so-far most advanced in-situ underground heating 

retort technique, would require 1.2 gigawatts of dedicated electric generating capacity. That equates to construction of a dedicated power plant equal in size to the largest coal-fired plant now operating in Colorado. Such a plant cost of about $3 billion 

to build and would consume five million tons of coal each year, producing ten million tons of green house gases. 

A 500,000 barrels-per-day industry—the scale projected by some oil shale enthusiasts—would require five such plants, 6 gigawatts of new electric power, an amount 

equal to that generated from all of Colorado’s existing coal-fired power plants. 

Although some small amount of that electric generation might be fueled by natural gas, a by-product of the in-situ process, most of it likely would be fueled by 

the abundant coal supplies in the vicinity, prompting additional technological challenges in providing carbon sequestration and particulate air pollution control. 

Water.—The region underlain by oil shale is notably arid, with relatively low annual rainfall, and existing over-commitment of existing water supplies and facilities. 

Against that dry backdrop, the Rand report cites the Office of Technology Assessment’s projection that traditional oil shale operations require between 2.1 and 5.2 

barrels of water to produce one barrel of shale oil product. While the new in-situ 

processes may require relatively less water, the Rand report notes that ‘‘considerable volumes of water may be required for oil and natural gas extraction, post-extraction cooling, products upgrading and refining, environmental control systems, 

and power production.’’ 

The BLM projected in 1996 that oil shale (by traditional methods) would reduce 

the annual flow of the White River by up to 8.2 percent and ‘‘would result in the 

permanent loss or severe degradation of nearly 50% of BLM stream fisheries.’’ 

More recently, local water agencies have estimated that a 500,000 barrels-per-day 

oil shale industry itself would require 25,000 acre-feet of water annually, either 

from new sources or diverted from existing uses, noting that such supplies of water 

adequate for the newer oil shale extraction technologies might not be available and, 

even if they are, might not remain available in a changing global climate. 

Additional water would be needed for domestic and municipal uses in response 

to significant growth in population centers near the oil shale production areas. 
54 

All of these water factors should be—and are not—thoroughly analyzed in the 

PEIS and other comprehensive reviews to provide information essential to decisions 

about the possibility and timing of commercial-scale oil shale leasing and development. 

Air quality.—The Rand report notes that there were no publicly available analyses regarding how modern pollution control systems could be incorporated into oil 

shale production facilities, and that further studies would be needed to determine 

the extent to which nonpoint-source air emissions (i.e. dust and off-gassing) from 

both surface and in-situ operations could be prevented or controlled. Rand also 

found that no studies of the cumulative impacts of oil shale development on air 

quality had been reported since the 1980s. Because so much has changed in terms 

of air-quality regulations, mining and process technologies, and pollution-control 

techniques, the earlier air quality analyses were found to be no longer relevant. 

Rand characterized available studies on air quality effects of oil shale development 

as ‘‘so out of date, it is not possible to provide an analytically based estimate of the 

extent to which air quality considerations will constrain the technology profile, pace 

of development, and ultimate size of an oil shale industry.’’ 

Additional air quality study and modeling must be completed before making decisions about commercial oil shale production. 

Climate impacts.—Each of these factors—energy inputs, water use, air pollution— 

exacerbate impacts on the global climate in a spiraling, interrelated cycle. 

As energy production increases to power oil shale development, corresponding significant releases of greenhouse gases would contribute to a reduction in water supplies, either reducing the amount of water available for oil shale production and energy generation or requiring diversion of even more water from other uses. 

As agriculture is by far the largest user of water in northwest Colorado, loss of 

irrigated cropland and soil cover may contribute further to the climate change cycle. 

Increasing global temperatures would increase demand for domestic electricity 

consumption, either competing with power production for oil shale or requiring still 

more power generation, with still more greenhouse gas emissions, etc. 

These dynamics stack on top of the direct climate impacts that would result from 

the burning of oil shale fuels themselves. 

As noted, the energy required to extract oil from shale will likely result in the 

generation of huge quantities of green house gas emissions. The 6 new gigawatts 

of electricity needed to power that 500,000 barrels production level could generate 

up to 60 million additional tons of carbon dioxide per year—according to EPA data, 

that would be a 45% increase in the carbon dioxide emitted by all existing electric 

utility generating units in 2005 in Colorado, Wyoming, and Utah combined. 

Due to the required energy inputs, the fuels derived from oil shale would have 

a carbon footprint that is substantially higher than conventional fuels. Researchers 

at the University of California reviewed the global warming contribution of the leading oil shale extraction technologies, as well as the emissions released when the fuel 

is burned, and found that the fuels derived from shale would lead to substantially 

greater carbon emissions than from conventional fuels. For example, the Alberta 

Tackuk Processor, an above-ground extraction technique now being pursued by Oil 

Sands Exploration Company (OSEC) on a federal research and development lease, 

produces between 37.5 and 40.8 grams of carbon equivalent per unit of delivered 

energy, compared to an average of 25 grams of carbon equivalent for conventional 

fuels. 

None of these climate impact factors—primary or secondary—are adequately addressed in the current PEIS process, if addressed at all. More complete analysis of 

these factors must be completed before informed decisions about commercial-scale 

oil shale leasing or production can be honestly or effectively contemplated. 

All of these factors must be thoroughly and thoughtfully analyzed in the pending 

programmatic EIS and used as the basis for decisions about where oil shale activities will be allowed, and where they would not be appropriate and so will not be 

allowed, and at what pace development should proceed. 

CONCLUSION: GO SLOW, GO CAREFULLY

Oil shale holds a potential contribution to our energy supply. Researched carefully, developed prudently, and considered in the important contexts of communities, 

recreation, and the beauty and natural environment of these wondrous states, it 

might be able to make that contribution without destroying longer-term resources 

and values. We do not know enough at present, however, to conclude that it can 

be done safely or efficiently. 
55 

Congress and federal land managers should, in careful consultation with states 

and local communities, learn from the oil shale research leasing program before beginning any commercial leasing or commercial production on public lands. 

The oil shale will be there when we are ready to develop it in a truly sustainable 

and environmentally sound manner. We should not venture too fast until we are. 

I invite your questions on that document, on my comments today, and on any 

other opportunity that we may have to help with your work and consideration. 

Thank you again for this opportunity to address the committee. 

Senator SALAZAR. Thank you, Mr. Smith. 

Mr. O’Connor. 

STATEMENT OF TERRY O’CONNOR, SHELL EXPLORATION AND 

PRODUCTION COMPANY, DENVER, CO 

Mr. O’CONNOR. Yes, thank you, Senator. I’m delighted to be here 

today for a number of reasons. Not the least of which is—I guess 

I should turn that on shouldn’t I? 

That you and I have always considered ourselves friends as we’ve 

known each other for many years prior to each of our present positions. So I’m delighted and honored to appear before you today and 

talk about Shell’s activities. In so far as our 27 years of development of in situ conversion process technology on oil shale is concerned. 

In 1981 Shell commenced development in our laboratories and in 

some of our lands in Houston on a radically different type of a technology. Unlike any that has been tested in the past on oil shale 

anywhere else in the world by any other company in the world 

called the in situ conversion technology. Unlike prior technologies 

which involved the development of mining operations bringing the 

rock to the surface where it was crushed and cooked and re-torque. 

Our technology involves literally drilling lots of holes into the 

ground and dropping down electric heaters. Slowly heating the rock 

over a period of a few years up to certain temperatures at which 

we’re able to see a remarkable break down of some of the hydrocarbon molecules. That allows us to recover a very light end liquid 

that’s relatively easily processed into diesel jet fuel and naphtha 

which is used for gasoline as well as a substantial amount of natural gas that can be used for a multitude of different purposes. 

We commenced our research as I said in 1981. In 1996 we went 

on to some of our lands that we owned that have been referred to 

earlier in this hearing. I hope one of you will ask the question 

about why we’re not looking at developing those commercially. But 

I’d like to get on the rest of my testimony before we get into that. 

We have developed five separate R and D field projects. We’ve 

now completed each of those five that were developed sequentially. 

Through the course of that 10-year period from 1996 to 2007 we’ve 

been able to demonstrate that at least on a small scale this ICP 

technology absolutely does work. 

We’re able to model and predict and then produce the type of 

product under the time constraints, the type of mixture and the 

quantities that we had previously predicted. Our challenge now is 

to determine whether or not we can do this on a large commercial 

scale and do it in an economically feasible, environmentally acceptable and socially sustainable manner. 

That’s where I’d like to talk for the remaining minutes this afternoon. We’re currently involved in a very large and complex freeze 
56 

wall test. We’ve got a picture of the freeze wall test in the back of 

my testimony today as well as a couple of other pictures. 

We won’t be completed with that until late in 2009 or well into 

2010 perhaps. But that technology in just a few words, is designed 

to protect our activities from Colorado’s precious ground water. I 

will say today and I don’t know how to say this any more forcefully, 

that unless we can clearly demonstrate both to our Royal Dutch 

Shell Board of Directors as well as to the various Federal and State 

regulatory authorities that we can and will protect the precious 

ground waters of Colorado, we will not proceed at commercialization. That’s what this freeze wall test is all about to make that 

demonstration. 

It also, before we proceed into our RD and D three pilot projects 

we want to see preliminary results from this. That is a large part 

of the reason why we’re waiting for another year or so before we 

proceed into those R and Ds. The research and development program that was originally proposed by BLM and sanctioned and endorsed in the Energy Policy Act of 2005, we believe is the right way 

to start out in a slow and methodical manner to proceed with testing untested procedures such as what we’re looking at. 

We thank BLM and Congress for enabling that. We also want to 

thank the Department of Energy and its unconventional fuels task 

force some of its very good strategic work. That’s looked at in terms 

of looking at the impacts of oil shale development from a strategic 

domestic energy standpoint. 

In sum we’d like to—I’d like to comment very quickly on two 

issues that are really of concern to us. One you’ve already heard 

a fair amount about is whether or not regulations should be developed. We’re frequently asked, well, you don’t really need regulations now if you’re not going to make a commercial decision until 

the middle part of the next decade or perhaps later. Our answer 

is that yes, we need them. We desperately need them now. 

It’s no coincidence that no one has ever developed a large scale 

commercial project on oil shale anywhere in the world. The reason 

why in the past is because yes, the technologies have been perhaps, 

not where they should be. But in addition this is a very steep, difficult hill to climb. 

If we don’t have regulations that can at least give us a sense of 

destination in terms of what needs to be done. Not just on regulations but operating rules and environmental rules. It makes that 

hill very, very steep to the point where there’s a serious question 

whether we’re not really even be able to proceed with our R and 

D projects in the future. We think that there are opportunities for 

us to resolve these problems and we’d like to have discussions 

around those in the coming days. 

One final point just to touch on before I conclude is another provision in the Energy Policy bill, Section 526 prohibits the use by 

any Federal department or agency of the use of any fuels that are 

produced from unconventional or alternative fuels. There’s not 

much legislative history on that. But it would seem to be geared 

perhaps at some of the oil sands in Canada, perhaps oil shale. We 

don’t know. 

But we do know this. That Canada is now the largest provider 

of oil into the United States and to the extent that creates a bar-
57 

rier for the importation of fuels from our friends to the North. We 

think that is very bad public policy. We think both of those provisions need to be eliminated, amended or dealt with in some positive 

fashion. 

In closing I’d like to note that the two above mentioned policies, 

we’ve learned a lot, undeniably, drive the United States to greater 

dependence on imported sources of domestic oil or imported sources 

of fossil fuels. As our domestic energy demands grows as it will in 

the coming decades so does our reliance on imports. Shell well understands our need to balance our needs for reducing greenhouse 

gas emissions and dealing with the plethora of environmental 

issues that need to be dealt with and to balance those with our domestic energy needs. 

Shell is investing heavily in renewable technologies with the 

view that in the latter part of this century that we hope we will 

be largely a renewable society. But for much of this century the oil 

shale can and should be a critically important bridge to our renewable energy future. Thank you very much and I can take questions. 

[The prepared statement of Mr. O’Connor follows:] 

PREPARED STATEMENT OF TERRY O’CONNOR, SHELL EXPLORATION AND PRODUCTION

COMPANY, DENVER, CO 

Chairman Bingaman, Ranking Member Domenici, and Members of the Committee: I am pleased to have this opportunity to speak with you today on the topic 

of oil shale development in the United States. 

Let me begin by discussing the broader global energy challenge that we face 

today. Shell believes, and our Chief Executive Officer Jeroen Van der Veer has stated, that there are three hard truths about our global energy future: 

First, the global demand for energy is accelerating . . . not just growing, 

but accelerating. The reason is that China and India in particular are entering the energy-intensive phase of their development. 

Second, the growth rate of supplies of ‘easy oil’ will struggle to keep up 

with growing energy demand. 

And, third, increased use of coal, plus the overall dominance of fossil 

fuels, will cause higher CO2 emissions, possibly to levels we deem unacceptable. More energy means more CO2 emitted at a time when climate change 

looms as a critical global issue. Even though it is predicted that fossil fuels 

will still be a major part of the energy mix by mid-century, Shell is committed to CO2 reduction through effective and stable regulatory frameworks. These measures should also serve to enhance energy efficiency and 

promote alternative energy. 

(Quoted from Jeroen van der Veer Speech—The Resources Trilemma between Efficiency, Social Justice and Security—St. Gallen, May 31, 2007) 

The recent National Petroleum Council study on ‘‘Hard Truths’’ noted most of the 

same issues that Shell sees in our future and recommended a series of necessary 

actions, including: 

Expand and diversify production from clean coal, nuclear, biomass, other 

renewables, and unconventional oil and natural gas; moderate the decline 

of conventional domestic oil and natural gas production; and increase access 

for development of new resources. 

Oil shale is America’s most concentrated fossil fuel resource and one of the largest 

oil resource deposits in the world. There are also oil shale deposits in Australia, 

China, Estonia, Jordan, Morocco and other nations. The Green River Formation covers portions of Colorado, Utah and Wyoming. According to the Rand Corporation, 

Estimates of the oil resource in place within the Green River Formation 

range from 1.5 to 1.8 trillion barrels,’’ of which between 500 billion and 1.1 

trillion barrels is recoverable. They continued, ‘‘the midpoint in our estimate range, 800 billion barrels, is more than triple the proven oil reserves 

of Saudi Arabia. Present U.S. demand for petroleum products is about 20 
58 

million barrels per day. If oil shale could be used to meet a quarter of that 

demand, 800 billion barrels of recoverable resources would last for more 

than 400 years. 

As of today, U.S. demand has passed 21 million barrels per day, on the way to 

22 million barrels per day. And demand is increasing. 

Clearly, this resource represents a significant strategic advantage for the United 

States and, if developed, would increase U.S. energy security. 

Oil shale is a marlstone containing kerogen, an immature hydrocarbon laid down 

millions of years ago as plants and animals died and drifted to the bottom of an 

ancient lake that then covered large parts of Colorado, Utah and Wyoming. Left in 

current form, kerogen would slowly form into liquid oil and natural gas through increasing temperature and pressure over millions of years. 

In the late 1970s and early 1980s, large energy companies joined forces with the 

U.S. government in an attempt to develop this resource in an era of significant global energy stress. The initial attempts to develop oil shale required mining the ore 

and heating the shale to temperatures near 1000 degrees Fahrenheit in large surface kilns called retorts. When global energy prices collapsed in the 1980s, the expensive energy and water intensive surface retorting projects were abandoned, leaving western Colorado in an economic downturn that persisted for many years. While 

other energy companies exited their oil shale research, Shell stayed on, although 

with a radically different technology. 

From 1981 to today, Shell has pursued a deliberate but cautious approach to the 

research of new oil shale extraction technologies. Over the course of the past quarter 

century and more, and without seeking any financial subsidies from the U.S. government, Shell has pursued the development of a very different and unique method 

called In-Situ Conversion Process (ICP) technology for oil shale recovery on our privately-owned Mahogany property in Northwest Colorado. The process involves inserting heaters directly into the underground shale formation and heating the rock 

to roughly 700 degrees Fahrenheit. This heating causes the kerogen molecules to 

crack, transforming them into lighter-end hydrocarbons that then can be produced 

using conventional means. The heavier end of the carbon chain molecules is left behind in a solid and immobile state. We have determined that the product produced 

is roughly one-third gas and two-thirds light transportation liquids, with an API 

gravity of 36 or better. 

Shell has pursued this research on our private Colorado land since 1981. We have 

developed and completed five complicated field tests of various heater and groundwater protection technologies. In 2005, Shell conducted its most recent field test, 

called the Mahogany Demonstration Project South. This field test, which followed 

our predicted production models very accurately, produced approximately 1800 barrels of light liquid and gas. This particular test has convinced Shell that our ICP 

technology indeed works. Now our challenge is to determine if it can work on a longterm, sustainable commercial basis. 

Our current research efforts are focused on groundwater protection research, as 

Shell is committed to developing oil shale in an environmentally responsible manner. The Shell private property Freeze Wall Test (FWT) will build, dewater, stress, 

break and then heal an impermeable wall of groundwater ice. Although Shell’s application to oil shale development is unique, freeze wall technology is not new and 

has been used effectively for many years in the mining and construction business. 

We drilled closely spaced wells to a depth of approximately 1700 feet around an 

area the size of a football field and circulated a super-cooled liquid through a closed 

pipe network down those wells to remove the heat and eventually freeze the groundwater in place creating a ‘‘wall of ice’’ that prevents communication of water between the heated area and lands outside the freeze wall. Then we pump out water 

from the inside of the ice canister we have created. As an analogy, imagine an 

empty barrel standing in a river. 

It is not our intention to perform any heating activities inside this particular 

freeze wall at the current time. Rather, we will test the durability of the freeze wall 

and prepare the concept for deployment on our Research Development and Demonstration (RD&D) leases. The freeze wall test is absolutely critical to future Shell 

oil shale development plans because, unless we can clearly demonstrate both to our 

Board of Directors and to the various federal and state regulatory authorities that 

we can and will protect the precious ground waters of Colorado, we will not proceed 

to commercialization. You may ask, ‘‘How can Shell expect to surround an area that 

will reach 700 degrees Fahrenheit with a wall of ice?’’ The answer is that the shale 

is not a particularly good conductor of heat. Therefore, a small buffer zone is created 

around both the area to be heated and the freeze wall to prevent heat communication between the separated areas. 
59 

As our research moves forward, we are grateful to have the opportunity to perform needed tests on BLM land through the Research Development and Demonstration program created by BLM and sanctioned by Congress in Section 369 of the Energy Policy Act of 2005. The U.S. government’s support for cautious and careful oil 

shale development in Colorado is particularly critical inasmuch as approximately 75 

percent of the oil shale-rich Piceance Basin of northwest Colorado is owned by the 

U.S. government and managed by BLM. We thank Congress and the BLM for the 

creation and implementation of the RD&D program. Shell believes that the opportunity to test new technologies in the most geographically prospective areas is a 

smart path to a sound and sustainable oil shale development policy for the future. 

In late 2006, Shell applied for and received three 160-acre RD&D leases in the 

Piceance Basin. Our applications proposed to test a new, energy-saving heater-type 

on the northern lease, to test oil shale and nahcolite recovery together on the southeastern lease, and to perform a field test simulating commercial conditions of the 

ICP technology on the third lease. According to the leases, each 160-acre research 

test pilot is surrounded by a roughly 5000-acre-sized Preference Right Lease area. 

If the lessee can show that it is capable of producing ‘‘commercial quantities of shale 

oil from the lease,’’ the lessee will earn the right to expand the surrounding Preference Right Lease area, subject to the payment of an undetermined conversion fee 

(presumably to be established by regulation). 

Shell hopes to perform separate pilot projects on each of the three RD&D lease 

areas, to evaluate differing commercial variants of the ICP technology and then to 

apply to convert these leases to commercial-scale oil shale development projects 

sometime in the middle part of the next decade. 

We also thank the Department of Energy and its Unconventional Fuels Task 

Force. This group has conducted a number of valuable studies on the feasibility of 

creating an oil shale industry here in the United States. Its findings have been interesting and, in some cases, quite enlightening. If you have not had an opportunity 

to review these DOE studies, I encourage you to do so. We very much appreciate 

the assistance and encouragement of the Department of Energy and the Department 

of Interior and their respective divisions and agencies dedicated to responsible oil 

shale development. At Shell, we will live up to their charge (which is also our 

charge) to develop this tremendous domestic resource in an economically viable, environmentally responsible and socially sustainable way. 

The BLM recently closed the comment period on the draft Programmatic Environmental Impact Statement for Oil Shale and Tar Sands. Shell submitted significant 

and detailed comments on the PEIS. We believe that the final PEIS and the future 

regulatory structure of oil shale development are critical keys to both corporate investment in research projects and the eventual development of this vast U.S. energy 

resource. The draft PEIS delineates the significant safeguards to both the land and 

the people of the Rocky Mountain west. The number of NEPA procedural tollgates 

set forth in the PEIS will ensure that development of oil shale takes place is a cautious and environmentally sound manner. 

In sum, I would like to comment on two issues of concern to Shell and other companies involved in research and development of new technologies to develop oil 

shale. 

First, in December 2007, Congress passed and the President signed a spending 

bill that included a provision that states: 

None of the funds made available by this Act shall be used to prepare 

or publish final regulations regarding a commercial leasing program for oil 

shale resources on public lands pursuant to section 369(d) of the Energy 

Policy Act of 2005 (Public Law 109-58) or to conduct an oil shale lease sale 

pursuant to subsection 369(e) 8 of such Act. 

It appears that such a moratorium may likely remain through the next fiscal 

year, leading us to believe that the moratorium on potential future development of 

America’s vast oil shale resource may be intended to become permanent in nature. 

The extension of this moratorium may well have a chilling effect on our efforts to 

develop this resource in the future. Ironically, preventing BLM from issuing regulations around any oil shale regulations also could have the unfortunate effect of undermining our efforts to develop carbon minimization solutions, as they would relate 

to oil shale development. Major commercial scale decisions for development take 

years to research, design and analyze. Although we are still in the research phase 

of our development activities, we would be helped greatly by regulatory stability on 

everything from diligence requirements and royalty rates to conversion fees and operating and environmental standards in order to make informed decisions, even in 

the RD&D stage that will lead to responsible development. 
60 

Shell has always pursued a thoughtful and cautious approach to oil shale development in order to prevent a repeat of the past oil shale boom and bust cycle. We expect to invest substantial capital in each of our three small but rather complex 

RD&D projects to demonstrate that our ICP technology is economically viable, environmentally responsible and socially sustainable. The long history of unsuccessful 

attempts to responsibly and economically develop oil shale illustrates the significant 

risks for investors in research in oil shale. Lack of clarity about the economic and 

environmental regulations governing a potential commercial development of oil 

shale will add significant additional risk to our potential research investment. Shell 

urges Congress to allow the BLM to create such a regulatory framework. 

Second, the 2007 Energy Bill contained a provision (Section 526) that prevents 

federal agencies from contracting to purchase fuels produced from alternative fuels 

if the carbon footprint of those fuels may exceed certain limits. Such a provision is 

not only harmful to U.S. energy security, as we already receive significant oil supply 

from Canadian oil sands, but also will be extremely difficult to administer as gasoline and diesel fuels are mixed from various sources in refineries. And let us not 

forget that our friends to the north now provide more oil to the United States than 

any other country on Earth. Congress should act to repeal this provision. 

Shell understands that the Governor and the Colorado delegation believe that oil 

shale should be developed in an economically viable, environmentally responsible 

and socially sustainable way. At Shell, we share this desire. However, preventing 

the BLM from completing needed regulations or preventing the government from 

contracting for unconventional fuels is not the way to achieve this end. The BLM 

has placed a series of safeguards in the draft PEIS on oil shale to prevent uncontrolled leasing and development, including several required NEPA actions before a 

project can be approved. These federal safeguards are in addition to a host of stringent county, state and federal permits required from 47 separate regulatory agencies to assure protection of the environment. It is time for us to work together to 

make this tremendous American resource a reality of our energy security. 

In closing, I would like to note that the two above-mentioned U.S. government 

policies will undeniably drive the United States to greater dependence on foreign 

sources of energy. As our domestic energy demand grows, so does our reliance on 

imports. It does not have to be this way. Shell understands the global energy and 

climate challenge. We also understand that the use of fossil-fuel-based energy will 

be with us for many decades into the future. Shell invests heavily in renewable energy technologies and we are committed to growing our portfolio over time, but for 

much of this century, oil shale can and should be a critically important bridge to 

a renewable energy future. 

Thank you again for the opportunity to speak with you today. 

Senator SALAZAR. Thank you, Mr. O’Connor. Let me start out 

with you, Mr. Hansen. You describe a technology which is different 

from the institute technology that Shell is using at the Mahogany 

Project. Can you—and you say your technology is ready to go? It’s 

not science. It’s up and running? 

Describe to us how—what kind of water use—describe your process to us, the ATC technology that you currently are using in Utah. 

Mr. HANSEN. It is a horizontal re-torque. I’m not an engineer or 

technol, but it takes very little water. It does take some electricity 

to get it going. And then it generates itself. 

It can handle about 25,000 tons a day. And we had legislators 

from—— 

Senator SALAZAR. How far along—— 

Mr. HANSEN. I’m sorry. Excuse me. 

Senator SALAZAR. How far along are you in terms of developing 

the technology? 

Mr. HANSEN. Of course, the one that I’m referring to has been 

built and it’s in Canada as we speak. So we took some people up 

to look at it from the State Legislature in Utah. Out of it came 

sweet crude at the end. They were very impressed when they came. 

We intend to take that and take it down to the White River Mine 

Site. Now the White River Mine Site which a lot of folks don’t un-
61 

derstand is underground. It is not above ground. It’s not a strip 

mining type of operation. 

Senator SALAZAR. Let me just ask you because of limited time 

here. The ATC technology which your company currently uses, 

you’re adopting that from Canada. Are the oil shale or tar sands 

that are being used to develop the fuel in Canada similar to the 

oil shales that you would find in Utah? 

Mr. HANSEN. The process, I couldn’t explain their process. But 

they are the ones—this people developed this particular horizontal 

re-torque that we’re taking down to Utah. Yes. 

Senator SALAZAR. I’m not trying to be unfriendly. I’m trying to 

find out what is happening with the horizontal re-torque in Utah 

today. Is it a project—— 

Mr. HANSEN. We’re trying to put it in. 

Senator SALAZAR. You’re trying to put it in. 

Mr. HANSEN. The problem we’ve got is what everyone has alluded to is the idea until the regulations go through and I can’t 

speak for Shell or any of these others, but these large companies 

can probably stand the financial problem of waiting for that to 

come on. 

Oil Shale Exploration Company has got some people in it that 

they’re well healed, I’m sure. But we’re a little company. We’re the 

little guys. That’s why we would be the first. We would be the first 

to start. 

Actually if we could ever get this regulation thing worked out. I 

would think in this year or next year we’ll be developing on the 

first re-torque that we’ll put in there. Then the possibility is always 

there which we intend to do is to put more re-torques on that particular property that I’m referring to which is called the White 

River Mine Site. 

Senator SALAZAR. Mr. Smith, can you comment from your perspective on the issue of water supply that might be used with respect to oil shale development and if you were to use the technology like the one that Mr. Hansen described, which from his testimony indicates it would use very little water. Why would oil shale 

development from your point of view in Colorado or Wyoming or 

Utah create a water supply problem? 

Mr. SMITH. Thank you, Senator Salazar. Certainly what little we 

do know about the water requirements for each of these very different technologies is that it consumes some. The old traditional 

room and pillar mining and surface re-torque from 25 years ago 

consumed three to four barrels of water for each barrel of oil equivalent produced. 

The projections for the in situ technique that according to the 

Rand Corporation may be less than that, but still is, as the Colorado River district suggested may require 25,000 acre feet of new 

water storage or diversion from other uses. I don’t—certainly any 

technology that doesn’t require water input would be of interest in 

an arid State, but the ones that we’ve seen get the most attention 

still require significant water supplies. 

Senator SALAZAR. Mr. O’Connor, one, another oil company by the 

name of Chevron wrote a letter very recently that where they said 

this, ‘‘Chevron believes that a full scale commercial leasing program should not proceed at this time without clear demonstration 
62 

of commercial technologies.’’ What’s your response to their point of 

view? 

Mr. O’CONNOR. I have two responses to that question. One is 

that we believe under the draft programmatic environmental impact statement that’s been proposed by the Department of Interior. 

That it essentially mandates a multiple sequential EIS process that 

if one can’t stop the timeframes to do these, even assuming they’re 

not litigated and that’s probably an optimistic assumption in this 

litigious world today is probably going to essentially assure that 

there would not be any new leases on a competitive commercial 

basis issued until well into the middle part of the next decade. So 

I think that there’s sort of a fail safe there that assures that there 

won’t be. 

A second point is that as you are well aware, we’ve secured three 

research development and demonstration leases that give us a preferential right if we prove up the technologies to convert those to 

commercial size leases. That’s the direction which we, Shell, have 

cast our lots in terms of securing oil shale acreage. 

Senator SALAZAR. Senator Murkowski. 

Senator MURKOWSKI. Thank you. Mr. O’Connor, you were practically begging for the question to be asked that Mr. Smith has 

raised. So I will pose it to you. Why over a couple of decades with 

the leases that you have, have you not moved to development? 

Mr. O’CONNOR. You’re such a nice Senator. Thank you very much 

for asking that question. 

Senator MURKOWSKI. I’m dying to know the answer. 

Mr. O’CONNOR. Yes. Shell basically has three quite large blocks 

of lands that we own in a two county area in Northwestern Colorado. One the Mahogany properties where we have engaged in our 

five different R and D tests so far and two other properties in 

which we’ve really done nothing. They’re down in Garfield County 

to the South on the West flank of the Royal Plateau. 

First addressing those two, and those two are each about 10,000 

acres plus or minus. Shell secured one of those about 40 years ago 

at a time when at that time, like all the other oil companies, Shell 

had these perhaps naI ̈ve aspirations of developing re-torque technologies up in that area. We no longer have those plans. So we 

don’t have any plans for that one block that we’ve now had for 

many decades as I indicated. 

The other block of land as I recall relates to an acquisition on 

the third block that we made up in Rio Blanco County. I think we 

acquired both of those at about the same time from a couple of 

families and that second block in Garfield County, we don’t have 

any plans for it either because it’s more a re-torque capable than 

in situ capable. So if anybody is interested in a good deal, come and 

talk to me after the hearing. 

On the third block where we have actually done our R and D 

testing, we’ve known all along that it is not conducive to first generation or maybe even second generation oil shale development. 

The oil shale there is while close to the surface, is a rather low 

grade of oil shale. The terrain is not very good for our in situ technologies. But it was ideal for us to engage in these tiny little R and 

D tests that we have engaged in because it was easy to get to the 
63 

oil shale. But as I said it’s low grade and it’s not commercial capable. 

Our ICP technology really needs to go into an area where the oil 

shale is very rich and very thick where the terrain is relatively 

modest and flat. We’ve shown you a picture of that general terrain 

that’s on the back of our testimony. None of our Mahogany properties really meet that test or those tests. Thank you. 

Senator MURKOWSKI. Let me ask you about this freeze wall test. 

How you’re coming with that because you’ve stated pretty clearly 

here today that you’re not going to move toward commercialization 

unless you can find some, I guess, satisfaction, or some assurance 

that the issues with water are resolved. The freeze wall is a process that we’ve seen before that you’re saying that this is the first 

time that it has been utilized or tested then with the oil shale technology. 

How far along are you into this particular R and D project? 

Mr. O’CONNOR. Yes, thank you. That’s a very appropriate and 

good question. We actually built a small freeze wall that was about 

50 feet in diameter and went down about 1,200 feet into the subsurface 3 years ago. We’re able to demonstrate that at least in that 

location and going to 1,200 feet this is the technology that does 

seem to work pretty well in terms of being able to isolate the 

ground water system from what we’re doing. 

We’ve now moved into a larger, much more expensive, much 

more complex test in which we have, we’re in the process of freezing a large freeze wall that’s about 15 acres in size, about the size 

of a football field that’s going down about 1,700 feet. We started 

development on this about a year and a half ago. We’re in the latter stages of freezing. We hope we’ll have it completed in the latter 

part of this year. 

At the completion of freezing it then we will pump out of the 

water of the inside of this canister that we have created. We’re not 

going to put any heaters so this is purely an environmental protection test. After we pump the water out of the inside of this ice canister that we have created, we will then deliberately fracture that 

freeze wall in a number of places. Because we need to be able to 

demonstrate to ourselves, to regulators, to our Board, to concerned 

citizens and to everyone alike that this is a technology that if something goes wrong that we have the capability to repair the freeze 

wall. 

So we’re going to engage in a number of resealing techniques 

from the standpoint of those of us including yourself, Senator, who 

come from a cold State. We know that if water doesn’t flow very 

fast in a stream it will freeze. But if it flows pretty fast it may not. 

We don’t know what it will take where it would freeze on its 

own. What if we had an earthquake and it cracked and it starts 

to—water starts to rush in. Actually would it reseal on itself? What 

if it doesn’t? 

We need to be able to demonstrate that whether it’s through 

grouting or pumping to slow down that water input or actually the 

construction of a second freeze wall in that particular area. What 

can we use as belt and suspenders to absolutely assure everyone 

that this is a technology that if everything goes wrong we can still 

protect Colorado’s precious ground water? 
64 

Senator MURKOWSKI. I appreciate your response. My time is up. 

But I would ask the indulgence very quickly. With this particular 

project with this freeze wall test that you’re doing with the three 

or four different projects that you have underway. 

If we were to not put in place the regulations that we’re speaking 

about earlier does it affect your ability to move forward with these 

research projects? 

Mr. O’CONNOR. Yes, it does. Yes. I can’t give you assurances of 

what the result is. But just to give you one very clear example. 

Under our RD and D leases that we have secured if we demonstrate that we can produce in commercial quantities we earn an 

exclusive non-competitive right to convert the small leases to large 

leases. 

So we have this legal right that we have secured if we meet the 

obligations. On the other hand if there are not regulations BLM 

will be unable to issue those very leases for the reason that there 

won’t be any lease terms. So we’re heading toward a legal train 

wreck. Now the question one might ask is well that won’t happen 

for a number of years. Can’t we wait to issue regulations until the 

latter days into the next decade? The answer is no because we 

right now, don’t have any really definitive guidelines in terms of 

environmental standards, of operating standards, of lease boundaries, of diligent development or any of the things that we’re going 

to need to do many with respect to the RD and D leases. 

As I alluded to generally if we can’t go forward with the RD and 

D leases, you know, because we’re already climbing a very, very 

steep technology hill that nobody’s ever climbed before. If we have 

blindfolds that are put on us it puts a great question in terms of 

whether we’re going to be able to climb that hill or not. An unfortunate irony is that a major part and parcel of our RD and D efforts 

involve developing and implementing technologies to reduce our 

CO2 footprint. If we can’t go forward with the RD and D leases because of the absence of regulations it has the unfortunate byproduct effect of slowing down our CO2 minimization research also. 

Senator SALAZAR. Thank you. 

Senator Sessions. 

Senator SESSIONS. Thank you, Senator Salazar. Mr. O’Connor, do 

you have an estimate of what kind of CO2 footprint there is to reduce shale oil from shale? Is that something you can give us an estimate on now? 

Mr. O’CONNOR. No, I do not today because we don’t know what 

a commercial operation is going to look like. I will answer that we 

are abundantly aware that while this ICP technology has a huge 

range of advantages. One of its large challenges is that it’s an energy intensive technology. It requires a substantial amount of electrical generation in order to do so. 

We’re looking at a whole range of options. Some of our range of 

options go to the question of what should be the feed stock for 

power generation and where we haven’t discounted any option at 

this point in time. We’re looking at a full range of everything from 

coal to gas. When we say gas we will produce a lot of our own gas. 

That’s an option. 

We’re looking at what opportunities we can engage in with regard to renewables, particularly wind energy. There’s nothing 
65 

that’s off the table. As we get deeper into our research we’ll certainly be landing on some specific ranges. 

But even aside from that we’re looking at a number of other 

technologies within the operation itself to reduce the CO2 footprint. 

One of those I would mention that’s one of the great advantages 

of this technology is really the fact that because we just bring out 

the light end product and we leave the heavy product in the 

ground. In a way that’s the smartest type of carbon capture and 

sequestration because we’re leaving that carbon in a solid state in 

the ground. We’re not bringing it to the surface and then re-injecting it in the form of gas. So it’s a smart sequestration. 

Senator SESSIONS. I mentioned earlier that the product that you 

produce would be good for diesel fuel. I think you mentioned that. 

Mr. O’CONNOR. Yes, sir. 

Senator SESSIONS. Diesel I’ve come to realize is far superior to 

gasoline in mileage and in CO2 emissions and we are short apparently in diesel in the United States. We certainly are. It’s more expensive and we’re not using it very much. 

Is that a compensating factor for an evaluation of CO2 emissions 

to produce fuel that would produce less CO2 than gasoline would? 

Mr. O’CONNOR. Yes. I’m going to qualify myself just a tad here 

because I’m not a surface processing engineer. So my field of 

knowledge is somewhat limited here. But as I understand it we’ve 

got some flexibility in the processing to control how much of the 

mix is diesel, how much of it is jet fuel and how much of it is gasoline. That option will exist and will probably be augmented as we 

go further into our research. 

Senator SESSIONS. But jet fuel is not important. We heard from 

an aircraft company executive who said that it has doubled his 

cost. That’s really, really important that we have a larger source, 

I think, of that. 

Let me just ask both of you this. This is a fundamental question 

I have. I think we, as policymakers have to work on. That is that 

it’s not enough to say well, we’re working on something that may 

be 10 or 15 years down the road. 

If that’s all we can do, that’s all we can tell our constituents. 

That’s all we can tell them. Mr. Hansen, you’ve been an elected official. I would just, would say that we need to be able to tell them 

with authority that we haven’t created unnecessary bureaucratic 

hurdles to prompt evaluation and production of a domestic American source of energy, if we can produce it. 

So let me just briefly ask you, Mr. Hansen. Just summarize just 

briefly because I think I have a minute left. Both of you, how would 

a smart, fair, protect the environment and public Congress or government deal with the problem of oil shale. Can we do it faster and 

still protect the public? 

Mr. HANSEN. Senator, it would be very difficult for me to outline 

and articulate exactly what type of legislation I think would work. 

I think everybody here will be working on one, trying to come up 

with one. I would think basically it would be well if you kind of 

realized the goal is to come up with an energy solution and one 

that would be relatively safe. I honestly—— 

Senator SESSIONS. Could I just ask you this? 

Mr. HANSEN. Can I just ask one quick thing? 
66 

Senator SESSIONS. Yes. 

Mr. HANSEN. I honestly feel oil shale is kind of picked on. I mean 

I don’t see the same things happening to biomass. I don’t think it 

happening to ethanol. I don’t see it happening to wind turbines or 

any of those things. I just wonder who’s got it in for oil shale. 

Oil shale seems like it is a whipping boy in this particular instance. Whatever it is I think it ought to be equitable and fair to 

everybody concerned in this business. 

Senator SESSIONS. Mr. O’Connor, you talk about investing maybe 

billions of dollars. Are there things that we can do as Congress to 

help bring it to the point where we will know whether it’s a feasible or not and environmentally safe or not, quicker than we now 

are on track to do? 

Mr. O’CONNOR. I hope so. 

Senator SESSIONS. Any suggestions in general terms? 

Mr. O’CONNOR. In general I’ve identified the two specific issues 

that are a grave concern to us right now, the embargo on BLM 

from issuing regulations and the section 526 issue. 

Senator SESSIONS. If the embargo were lifted you could go to 

some oil shale areas that are perfectly configured for your technology and you could get a better test of how effective they would 

be? Because you’ve got some oil shale now you could test. 

Mr. O’CONNOR. Yes. We’d certainly test. We’ve, you know, completed five separate field tests on this freeze wall test we’re engaging on on our own property. But we’re at a point where to go further we need to go into an area where the oil shale is optimally 

configured for our ICP technology and that means Federal land. 

So we need this access to Federal land. We think the RD and D 

program is an elegant way to do it. Our problem is that we see a 

potential of road block that we’re going to run into that may—— 

Senator SESSIONS. That’s what was slipped in to one of these 

bills in the dead of night without a hearing. Would you want to use 

that phrase? I’ll use that phrase. 

Mr. O’CONNOR. At this point in time my—— 

Senator SESSIONS. There was slipped in some legislation without 

a real discussion of it, I got to tell you. After we had full debate 

had put it in. Thank you, Mr. Chairman. 

Senator SALAZAR. Thank you, Senator Sessions. I’m going to ask 

a question of you, Mr. O’Connor. We look at what I hear you telling 

us. We really are not going to know whether the freeze wall technology for oil shale development is going to work for many years 

to come. We may not be able to commercially develop oil shale. We 

don’t know that answer yet. 

You’re optimistic, obviously. Your company has invested significant resources in there. But even under the most optimistic of scenarios we really are looking at going into commercial scale development, oil shale, probably even middle of the next decade or beyond, 

but probably no sooner than 2015 from everything that I’ve heard 

to everything that I know. 

So for my edification tell me again why it is that it is important 

that the Department of Interior and Bureau of Land Management 

move forward with the issuance of final regulations for commercial 

scale leasing of oil shale instead of just moving forward with the 

research and development efforts which are already underway. 
67 

Mr. O’CONNOR. Yes. First a slight qualification or slight clarification from something you said and that is that we hope it’s not 

going to be quite a number of years before we see the results of 

our freeze wall test. We hope that we will have learned by the end 

of next year or by early 2010 enough to be able to make the next 

steps into our final stage RD and D efforts. 

So it’s maybe, you know, a year and a half or 2 years away, not 

quite a number of years. But as an international oil company that 

has a suite of business opportunities here and in other places 

around the world that all have to compete for capital before they’re 

authorized. We have to go to our Board of Directors to compete for 

substantial amounts of capital. 

While these three pilot projects, and we need to develop three of 

these, three separate projects, each of which test variants of the 

ICP technology. While they’re small, they’re very complex and 

they’re going to be quite expensive. These are not little tinker toy 

activities. 

If we’re not able to demonstrate to our Board of Directors what 

a success case looks like it raises a real question about whether our 

Board is going to grant us the money to be able to develop these 

RD and D projects themselves because we won’t know what the 

royalties are. Existing guidelines talk about some huge buffer zones 

that would literally take away a third of the resource. That’s going 

to have an impact on, as we have to stay great distances from the 

boundary lines. That will have economic impacts in terms of what 

we’re going to do. 

There are just a host of operating uncertainties that we’re not 

going to be able to demonstrate and even talk intelligently about 

to our Board of Directors 

Senator SALAZAR. With—— 

Mr. O’CONNOR. In terms of these RD and D projects and their 

preference right to leases that follow on. 

Senator SALAZAR. Mr. O’Connor, because of those unknowns that 

are out there, Shell at this point in time and probably any of the 

other companies that have received the RD and D leases cannot 

today in 2008 say that we have uncovered the technology that’s 

going to allow us to develop oil shale. Am I correct in making that 

statement? 

Mr. O’CONNOR. We are very confident that this technology works, 

at least on a small scale. We’ve demonstrated that. The what we 

don’t know is will it work in a much more complex environment. 

Senator SALAZAR. In a much more complex and larger environment. 

Mr. O’CONNOR. That’s right. 

Senator SALAZAR. Where you have to bring it up to commercial 

scales so that your Board of Directors at Shell will invest in the 

projects. We don’t know the answer to that yet, which is why you’re 

moving forward with these pilot RD and D projects. Is that correct? 

Mr. O’CONNOR. Yes, that’s right. 

Senator SALAZAR. We’re not going to know for sure whether or 

not the Institute Process Technology that you’re using is going to 

be commercially viable for at least several years. 

Mr. O’CONNOR. That is true. 
68 

Senator SALAZAR. Ok. Would you, at Shell, be supportive of 

more—of a different approach which would be to provide more limited regulations with respect to the research and development 

leases that would allow the conversion of those leases to the 5,120 

acres that was contemplated in the 2005 EPACT? 

Mr. O’CONNOR. First of all, we have a right to have those converted if we demonstrate that we have produced in commercial 

quantities. So that’s not, the conversion is not an issue. 

Senator SALAZAR. So let me ask you. 

Mr. O’CONNOR. The issues around that are conversion fees and 

what are going to be the rules of the road. 

Senator SALAZAR. Ok. So if we set up the rules of the road for 

those that conversion leases, those 5,120 acres, would that set of 

regulations be helpful to you as you move forward to continue your 

exploration of the oil shale potential? 

Mr. O’CONNOR. I think that would be helpful on an interim basis. 

We still think that there needs to be a commercial leasing program. 

I might add that we have suggested a couple of compromises to 

deal with this issue recognizing the legitimate concerns that Governor Ritter and you, sir and others have had with early preemptive massive leasing by suggesting that it might make good sense 

to have a statutory provision that says that competitive commercial 

leasing would not occur until sometime, you know, into the next 

decade. 

We don’t have a fixed date. But, you know, we think that’s something that is certainly negotiable and makes sense. As a means of 

absolutely assuring that not only the 47 State, Federal and county 

agencies with whom we will have to get permits and in many 

cases, many permits from each one of those 47. In addition to all 

of those, we have suggested and would be prepared to endorse a 

substantive provision that would mandate that in addition to the 

programmatic environmental impact statement that is underway 

now. 

In addition to the programmatic EIS that we’ll need to support 

the legislations that a site specific EIS be made as a precondition, 

not just a NEPA compliance through an EA, but through a full 

blown site specific EIS be a statutory requirement for any commercial project before it’s approved. 

Senator SALAZAR. Thank you, Mr. O’Connor. 

Senator Barrasso. 

Senator BARRASSO. Thank you very much, Senator Salazar. I was 

just actually in the back room visiting with your Governor who is— 

had a wonderful discussion with him. It sounds like from watching 

on the television screen and all the questions that I had listed that 

I was interested in have already been asked. With that I have no 

further questions. Thank you, Senator. 

Senator SALAZAR. Thank you very much, Senator Barrasso. I 

want to thank the three witnesses for their excellent testimony 

here this afternoon. I would ask each of you to take 2 minutes and 

sum up what it is that you want this committee to know about oil 

shale from your perspective. 

You’ve traveled a long ways here. I appreciate my constituents 

and friends from Colorado, Mr. Smith and Mr. O’Connor partici-
69 

pating in this hearing and so that we’ll start with you, Mr. Hansen 

and move across the board. Two minutes a piece. 

Mr. Hansen. 

Mr. HANSEN. Thank you, Mr. Chairman. I appreciate the opportunity of being here. Let me point out as the issue has come up 

I know that it’s pretty obvious that what’s going on in Colorado is 

extremely interesting to this committee and to yourself. I can well 

understand that. 

Let me point out that when it comes to a small organization, 

when we talk about these regulations. If we have to sit and wait 

for these regulations to come about I don’t know if our company 

really has the financial capacity to do that. I mean, they know 

they’ve got a proven technology. They know it works. 

We’ve got all the work of getting the mine site. Really a lot of 

money, by our standards have been put into it. But you have certain investors that are saying, well, we want to see some results 

on this thing. So, if we have to sit and wait for a commercial thing 

to come along, it’s going to be extremely, extremely difficult to stay 

in business. I personally feel that we’re in a position to produce oil 

shale sooner than anyone that I have heard of at this particular 

point. 

I think it will be productive. I think it will work. I think America 

is in a position where it to be nice to say that we can do all these 

things like drilling in Anwar, like offshore, the coal to gas and all 

of those things. But here we have a technology that I really feel 

is now on the way. It’s had its ups and downs there’s no question. 

In the 1970s it did have a problem. 

But as I’ve seen it, seen the oil come out and see it work and 

it is useable and can be used. It just seems to me that if I was still 

a Member of Congress I would work my head off to try to make 

the regulations or the—yes, I agree with you. We have to protect 

the environment. I have no problem with that. 

But it can be done in a way that we can be environmentally 

friendly, that we can take care of the water. We can take care of 

these problems and still produce something that would be very advantageous to the United States of America. As I see our good 

friends in OPEC who are just doing all they can to help us out. 

I was assigned to work with Saudi Arabia when I was on the 

Armed Services Committee and I say this respectfully, but I don’t 

look at them as a good friend or some others as I may say so. I 

feel that we have a chance—— 

Senator SALAZAR. Thank you, Mr. Hansen. We very much understand the importance energy independence. 

Mr. HANSEN. Yes. Thank you, Mr. Chairman. Thank you for my 

time. 

Senator SALAZAR [continuing]. National security implications. 

Mr. Smith. 

Mr. SMITH. Thank you, Senator Salazar. Two basic points, a primary and very timely theme for the 110th Congress has been the 

issue of global warming, global climate effects of our current policy, 

especially our current energy policy. As we consider a new technology and a new fuel source that has the potential to greatly extend the time in which we use another fossil fuel and have potential climate effects just from the burning add to that, that the en-
70 

ergy input of great intensity for the production of that fuel with 

this climate ramifications. We need to go at this very carefully and 

very slowly. 

The second point that I think relates to that is to build on Secretary Allred’s characterization of their three phase program, the 

current research and development work on small plots. What he 

called a Phase II research on the larger preferential lease plots and 

then a Phase III, a larger, broader potentially commercial scale 

leasing program. If regulations are put in place soon for the sake 

of generating that Phase II and then left in place for what he calls 

Phase III without learning the lessons from Phase I and Phase II, 

without learning what needs to be regulated and how best to do it, 

especially for the climate exacerbating concerns, but also, for all social and environmental concerns. 

Then we’re really getting carts way ahead of horses. There’s got 

to be some way to build on the knowledge that comes through that 

logical sequence that the Energy Policy Act established and not get 

commitments to regulations sooner than we should. 

Senator SALAZAR. Thank you, Mr. Smith. 

Mr. O’Connor. 

Mr. O’CONNOR. Yes, sir. I’ll take less than 2 minutes because I 

took more than my allotted 5 minutes. I thank you for your patience when I was doing my original testimony. 

The only point I would make today in conclusion in addition to 

those that I made earlier is that as I listen to Governor Ritter and 

as we have had discussions with your staff and others, it seems as 

though that in a 99 percent of everything relating to oil shale we 

are in lock step agreement. We absolutely want to prevent another 

boom and bust like what we saw and what we lived through, those 

of us that lived in Colorado at the time. What we saw in the early 

1980s. 

At all costs we’ve got to take steps to prevent that from happening. We’ve got to be careful and cautious about how we proceed 

with this. Golly, you know, there is no track record about what 

large scale oil shale is going to look like because nobody’s ever been 

able to do it in the world before. So we’ve got to be very careful. 

I think that that’s one of the things I most proud of being with 

Shell for. That we’ve taken now 27 years and counting to reach this 

point. We’re still not close to making a commercial decision. 

We’re not trying to do something preemptive. We want to make 

sure that we do it right. Doing it right means protecting the environment, looking at the socioeconomic impacts and dealing with 

those in a proactive basis. But also, certainly, as a matter of sustainability coming up with a mechanisms where we can ultimately 

make a profit over the long term. 

So the remaining 1 percent, we think there’s, you know, there 

must be some solution to this issue of the regulations. We hope 

that with that we’ll be at 100 percent lock step with you and the 

Governor. 

Senator SALAZAR. Thank you, Mr. O’Connor. I also finally here 

will note for the record letters that I will submit for the record 

which include letters in opposition to lifting the moratorium on the 

commercial leasing regulations from the Northern Colorado Water 

Conservancy District, Colorado Springs Utilities, Rural Water 
71 

* See Appendix II. 

Works of Pueblo, Southeastern Colorado Water Conservancy District, Twin Lakes Reservoir and Canal Company, Town of New 

Castle, Garfield County Commissioners, city of Rifle, Town of Silt, 

Pitkin County Board of County Commissioners, Routt County 

Board of County Commissioners, San Miguel County Board of 

County Commissioners, Grand Junction, Rio Blanco County and 

Eagle County. We’ll submit those letters for the record.* 

I thank the witnesses for sharing their testimony here today. 

Look forward to working with all of you as we figure out a way of 

moving forward with oil shale development in Colorado. With that, 

the meeting is adjourned. Thank you. 

[Whereupon, at 4:26 p.m. the hearing was adjourned.] 

(73) 

APPENDIXES 

APPENDIX I 

Responses to Additional Questions 

RESPONSES OF JIM HANSEN TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. When will OSEC make a determination of whether to commercialize 

production? 

Answer. OSEC is proceeding on a fast-track commercial development schedule 

that includes the construction of its first commercial-scale RD&D module (4,000 barrels per day) beginning in 2012. To meet that time table, OSEC will need to spend 

well over $100 million on up-front research, pilot plant tests, engineering, environmental studies, and permitting activities. Before it is willing to incur such costs on 

the BLM RD&D Lease, OSEC needs to know the terms upon which it can obtain 

its Federal BLM Preferential Lease within the first six months of 2009 or the 

project will incur significant delays. 

Question 2. When does OSEC need a commercial lease? 

Answer. OSEC will need to know what it will take to obtain its BLM Preferential 

Lease within the first six months of 2009 or it will need to consider delaying its 

RD&D project or moving the project to private land which will also result in significant delays. OSEC does not intend to invest the $100 million plus on the 160-acre 

BLM RD&D Lease until it knows two things: (a) what regulations will apply to the 

Preferential Lease when it is awarded to OSEC and (b) when will the BLM be authorized to issue the Preferential Lease. 

Question 3. Is OSEC developing oil shale resources on private lands? 

How many acres of mineral rights to oil shale does OSEC own? Where is this located? 

Answer. OSEC has option to purchase or lease over 30,000 acres of private oil 

shale land adjoining its BLM Preferential Lease on the ease. OSEC took these options after being selected to receive the RD&D Lease at the White River Mine, since, 

when combined with the Preferential Lease, these lands form a logical development 

unit and together provide sufficient resource for a large commercial oil shale project. 

OSEC’s research work is currently focused on the BLM RD&D Lease due to the existing mine infrastructure. Although OSEC could move its research to private land 

if the terms and timing of the Preferential Lease are not made known soon, this 

could significantly delay OSEC’s RD&D program and add to its costs. It is in the 

public’s interest to advance the oil shale research program at the White River Mine 

so that the industry-government cooperative research effort can be fulfilled as 

planned under EPACT 2005. 

Question 4. Does the technology use much water? Please provide estimates of the 

amount that would be required for commercial production. What are the other anticipated environmental impacts? 

Answer. None of the surface retorts use water in the process itself. The retorts 

heat the rock and in the process vaporize the small amount of connate water (less 

than 2%) contained in the rock. The resultant steam is condensed and the water 

is used elsewhere on site. Water that is consumed on site is mostly used for cooling 

spent shale and dust control. OSEC’s goal is to get water usage down to less than 

one barrel of water per barrel of shale oil produced. To reach this goal, the hot spent 

shale will be sent through modern heat exchangers to co-generate power. Also, 

OSEC is looking at value-added products from the spent shale and the production 

of these products will reduce the need for water associated with the spent shale disposal. So, OSEC looks at the RD&D phase as an opportunity to consider all options 

for reducing water usage, learn more about the environmental issues, and dem-
74 

onstrate that the technology can produce shale oil commercially. It is too soon to 

know all the answers. Industry needs to conduct its RD&D programs and build 

some commercial-scale units and learn as we go. 

Environmental impacts of OSEC’s proposed White River Mine RD&D project were 

evaluated in a 300-page Environmental Assessment released by BLM in April 2007, 

after a draft of that document had been made available for public comment. OSEC 

is committed to providing environmental protection and will in fact be required to 

do so as it complies with federal and state permitting requirements and the environmental stipulations in the RD&D Lease. 

RESPONSES OF JIM HANSEN TO QUESTIONS FROM SENATOR DOMENICI

Question 1. Your written testimony mentions that OSEC is using a retort technology. Could you please explain how this differs from the in-situ technology? Please 

comment on the advantages and disadvantages of each. 

Answer. Oil shale needs to be heated to pyrolize or retort the contained solid mineral material known as kerogen. In the process, the kerogen converts from a solid 

to a vapor and that vapor is then condensed to produce crude shale oil. The heating 

of the shale rock (retorting) can be done either in the ground (in-situ retorting) or 

in a surface machine known as a retort. When a surface retort is used, the oil shale 

must first be mined from either an underground mine or a surface mine. 

The location and the geology of an oil shale deposit influence which method will 

work best. In Utah OSEC believes underground mining and surface retorting are 

most applicable for its project. Surface retorts have various designs and some types 

have been used in Europe for over 80 years. OSEC initially selected the Alberta 

Taciuk Process (ATP), which is a modified, horizontal, rotary kiln adapted from the 

iron ore and cement industries. OSEC also studied and evaluated other retorts, such 

as vertical shaft furnaces, and has determined there may be significant benefits to 

use of such retorts such as the one used in Brazil for over 30 years. Both horizontal 

and vertical kilns are used worldwide. OSEC will select its preferred retort unit 

based on further testing and feasibility analyses over the next two years and then 

that choice will be enlarged into OSEC’s first commercial-scale module with construction starting in 2012. 

A surface retort has advantages as the rock is removed from underground and it 

is heated rapidly in a surface vessel. This works very well in bedded oil shale deposits where the mining zone is not too thick and where groundwater is not an impediment. The spent shale, essentially devoid of residual hydrocarbons, is a non-hazardous material that can be placed back underground in the mine void spaces or 

used for landfill on surface. Spent shale has natural cementing properties and 

OSEC is looking at it as a feedstock for construction building materials. The underground mine and surface retort scheme proposed by OSEC has a small surface footprint. 

Question 2. What is OSEC doing to ensure that the environment is protected as 

you move forward with oil shale development? 

Answer. OSEC is committed to complying with all environmental regulations and, 

in fact, will be required to do so as conditions of the permits issued by the state 

and federal governments and due to the numerous environmental stipulations in the 

BLM RD&D Lease. OSEC’s RD&D program will provide many answers to the crucial environmental questions. Until we as a nation build and operate a few pilot 

plants and demonstration plants, we won’t have all the answers. That’s why they 

call it research, development and demonstration. OSEC will not and cannot expect 

to build a commercial plant if it cannot comply with the environmental regulations 

and secure the permits. There are already enough safeguards in place to assure that 

that will not happen. Existing State and Federal laws and regulations provide excellent protection of environmental resources. 

Question 3. How many acres of surface disturbance will occur with your re-tort 

technology? How much water will use? And will there be any disturbance to wildlife? 

Answer. OSEC’s first commercial-scale RD&D project producing 4,000 barrels per 

day can be constructed on the 160-acre RD&D lease but it will be very tight. OSEC 

will not build it there unless there is assurance that that the regulations are in 

place for the Preferential Lease and OSEC has the assurance it will get the added 

acreage in the Preferential Lease. It is simply too large an investment and too risky 

if those unknowns are still present. 

A commercial 50,000 barrel per day plant (underground mine & surface retorts) 

will occupy over 640 acres. However, a large plant like this needs the assurance that 

it will have adequate oil shale resource to continue operating for over 25 years, 

which is why a large, contiguous land and resource position is crucial. 
75 

Water usage is addressed above. OSEC’s goal is to get net water usage to less 

than one barrel of water per barrel of oil produced. 

Naturally, there will be some disturbance to wildlife. Fortunately, OSEC’s project 

is not in a prime wildlife area. It is arid and only gets about 12 inches of moisture 

per year. It is not prime mule deer or elk habitat and is not a principal wintering 

grounds for either. 

Question 4. Are the local communities in Utah supportive of commercial development of oil shale? 

Answer. From what OSEC has seen and heard, the Utah communities and county 

governments are supportive of oil shale development, especially the approach being 

proposed by OSEC. OSEC’s RD&D program is designed to answer questions that 

are important to the area residents. These questions include the following: Does the 

technology work? Can shale oil be produced and sold profitably? What are the potential environmental impacts on the region? What sort of socioeconomic impacts will 

occur in the region? OSEC realizes it must answer these questions before it commits 

to investing in a huge commercial plant. But, more importantly, OSEC realizes it 

must have the answers before it ever expects to get the permits for a commercial 

plant. OSEC has been open with citizens of the region. They realize the oil shale 

resource is huge and the nation cannot continue to put off development; they just 

want us to work with them to be sure it is done right. 

RESPONSE OF JIM HANSEN TO QUESTION FROM SENATOR SALAZAR

AVAILABLE RESOURCES

Question 1. Mr. Hansen, I understand your company already possesses the rights 

to 41,000 aces of private oil shale lands in Utah, containing some 2.3 billion barrels 

of oil equivalent. May I ask why you think your company needs additional federal 

oil shale resources, when your company already has so much oil shale in its possession, which the company is not developing at a commercial scale? 

Answer. OSEC selected the White River Mine site as the choice for the BLM 

Lease specifically because it has a preexisting mine and infrastructure which has 

been dormant for over 20 years. OSEC is willing to do the work to restore the mine 

and infrastructure to operating condition. OSEC believes this will significantly benefit the RD&D program in several ways. First, this oil shale research facility can 

supply oil shale rock to multiple research groups and, in so doing, advance the nation’s knowledge of oil shale and its potential to meet our domestic energy needs. 

Second, it will enable OSEC to complete its RD&D work faster and achieve commercial production sooner. Third, development of the federal lands, of course, results in 

royalties and other revenues for the treasury. 

Although OSEC has options to lease or purchase over 30,000 acres of private land 

that adjoin its nominated Preferential Lease, these lands do not have the advantage 

of the White River Mine, which, when employed, accelerates OSEC’s RD&D program to the benefit of both the government and industry. Moving to private land 

would simply delay OSEC’s program and preclude the government-industry cooperative research program envisioned by EPACT2005. OSEC secured the RD&D Lease 

as its initial research center to be used by OSEC and others as a source of oil shale 

for pilot plant tests, mine research, spent shale studies, etc. As noted earlier, the 

White River Mine site sat idle forover 20 years while the federal government had 

no oil shale research program. The site is an ideal research center and, under 

OSEC’s management, it will benefit the entire industry and the nation. 

Also, OSEC’s long-term, underground mine development plan utilizes the existing 

White River Mine to access the oil shale within the Preferential Lease lands to insure that the federal lands are developed in a prudent manner. The mine expansion 

would then move to the private lands or other neighboring federal lands. 

OSEC now needs assurance that the federal government is a willing and cooperative partner in the development of this important resource. When the leasing regulations are finalized, OSEC will know the terms and expenses associated with the 

Preferential Lease. This is crucial to OSEC’s immediate planning and decision making. In 2005 when OSEC competed for the White River Mine RD&D Lease, it understood the regulations, as stated in EPACT 2005, would be forthcoming in 2007. 

These regulations were to then be the guiding principals of OSEC’s Preferential 

Lease. With the current delay, OSEC is in a quandary as to whether or not to continue investing at the White River Mine site. The uncertainty is difficult when so 

much is at stake in terms of timing and capital investment. 
76 

RESPONSES OF STEVE SMITH TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. What impacts do you anticipate to our land and water resources and 

on local economies from oil shale development? 

Answer. Our understanding of potential land and water impacts from oil shale development derives from four primary sources: 

• Portions of research results released by Shell Exploration and Production, based 

on research work at its private-land research facility in Rio Blanco County, Colorado; 

• The draft programmatic environmental impact statement published by the Bureau of Land Management; 

• The Rand Corporation’s report and corresponding comments on the draft PEIS; 

and 

• The Office of Technology Assessment’s 1980 publication ‘‘An Assessment of Oil 

Shale Technologies.’’ 

Those results and projections, respectively, suggest that the primary impacts of 

commercial-scale development would include: 

• 100% surface disturbance of large expanses of sage and pinon-juniper land— 

elimination of all vegetation, removal of topsoil, potential soil erosion and surface water contamination; 

• Diversion of water supplies—now primarily dedicated to agriculture or important to wildlife and scenic values—to oil shale production and, more significantly, to greatly expanding electricity production; 

• Impact on groundwater movement, quantity, and quality from potentially extensive underground heating and freezing; 

• Compounding carbon emissions, and corresponding increase in global warming, 

from drilling operations, gas processing, transportation, and burning of produced fuels; and 

• Even more significant carbon emissions from dramatic increase in local electricity production apparently needed for heating oil shale in situ. 

Perhaps the more important response to this question is that we don’t really know 

the full extent and detail of impacts from oil shale development, at any scale. That 

is why it will be so important to complete the anticipated research & development 

program, then thoroughly analyze and assimilate the knowledge and information obtained from those research results, before finalizing a commercial leasing program 

or considering leasing or production at a commercial scale. 

Question 2. What information do you have on the development of oil shale on private lands in Colorado? 

Answer. According to the U.S. Department of Energy, Office of Petroleum Reserves, 3,135,000 acres of oil shale resource are currently held by non-federal entities in Colorado, Utah, and Wyoming. This is in addition to 960 acres of federal land 

recently leased to private companies for oil shale research & development, along 

with 29,760 adjoining acres of preferential leasing areas for those same companies. 

In spite of this extent of private holdings, no successful commercial development of 

oil shale has ever occurred on any of these lands. 

RESPONSES OF STEVE SMITH TO QUESTIONS FROM SENATOR DOMENICI

Question 1. In your written testimony you have provided a litany of issues that 

need analysis before a decision is made on commercialization of oil shale. Do you 

think that the wilderness society can support an oil shale program on public lands 

if these issues can be adequately addressed? 

Answer. Yes. That is a very high threshold, however. Overcoming the impacts on 

greenhouse gas emissions just from burning the large amount of fuel that is projected from oil shale is difficult to imagine. Meanwhile, the extensive direct impacts 

of 100% surface disturbance, alterations to groundwater movement and quality, loss 

of agricultural and municipal water supplies, impacts from more localized air quality impacts, and the need for (and impacts from) greatly expanded local electricity 

production, are factors that must be fully understood and addressed before commercial scale production can even be considered. 

Question 2. In your perspective, what areas are suitable for some type of oil shale 

development? 

Answer. We can support a meaningful oil shale research and development program within the Piceance Basin, so long as it is carefully managed, minimizes impacts to the environment, and produces useful information that can potentially form 

the basis for decisions about a possible larger oil shale program. 
77 

Question 3. Comment on the necessity of four NEPA analyses before future development. How can we ensure that duplicative environmental work does not delay and 

hinder much needed domestic resources? 

Answer. We agree that analyses should be coordinated, efficient, and timely. It 

is very important that those analyses be based on complete and tangible information. That is why, for example, it is so important to complete work on the oil shale 

research & development lease tracts, and to thorough analyze and extrapolate from 

those research results, before considering commercial scale leasing or production. 

Moreover, our concern is not that we will have too much information regarding 

the impacts of oil shale development to the environment. Our concern instead is 

that we would move forward with a commercial oil shale program in the absence 

of sufficient information about the impacts of the extraction and development of this 

resource on the environment. 

RESPONSES OF TERRY O’CONNOR TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. When will Shell make a determination of whether to commercialize 

production? 

Answer. We expect to make a commercial decision sometime in the middle part 

of the next decade. However, we should note that any delay in issuing oil shale regulations will likely slow down and put at risk our research and development program. Globally, Shell is interested in research projects that have a future hope of 

commercialization. We need to completely understand royalty rates, diligence requirements, holding fees, operating provisions, environmental compliance requirements and many other regulatory areas in order to contemplate a potential future 

commercial development. These factors are crucial to our understanding of the economics, design and planning of any future project. 

Question 2. When does Shell need a commercial lease? 

Answer. We do not currently have a commitment date in mind for obtaining a 

commercial lease; however it is clear that we need federal oil shale regulations 

many years in advance of a move towards a commercial decision. We need time to 

finalize project design, get all necessary permits, construct the project, operate it to 

see how it performs, analyze the results, submit an economic and environmental 

analysis to BLM, and undertake reclamation. We certainly need commercial leases 

sometime in the middle part next decade but need BLM to finalize oil shale regulations many years in advance of actual preference right lease issuance. 

Question 3. Does your technology use much water? Please provide estimates of the 

quantity that would be used in commercial development. 

Answer. The answer to this question is still unknown largely because we have not 

yet designed a commercial scale project. It is important that our research and development projects proceed expeditiously in order to determine water quantity requirements as soon as possible. 

Question 4. Is Shell developing oil shale resources on private lands? 

Answer. Shell has completed five major tests of our In Situ Conversion Process 

technology and is currently running a large-scale groundwater protection Freeze 

Wall Test on private land as well. However, private land development does not have 

the same potential as federal land because of the much richer quality of federal land 

oil shale. 

Questions 5 and 6. How many acres of mineral rights to oil shale does Shell own? 

Where is this located? 

Answer. Shell Frontier Oil & Gas Inc. owns approximately 40,671 net acres of oil 

shale in Rio Blanco and Garfield Counties, Colorado, out of about 42,000 gross acres 

of land where we own oil shale rights. Our largest tracts of land (Mahogany—19,500 

acres, and Pacific—13,300 acres) are properties where Shell owns oil shale and surface only. 

RESPONSES OF TERRY O’CONNOR TO QUESTIONS FROM SENATOR DOMENICI

Question 1. Why is it important for the Department of Interior to publish final 

regulations for commercialization of oil shale? 

Answer. Timely publication of final regulations is important in order to provide 

a reliable framework for making future commercialization decisions. In other words, 

we must understand the rules of the road in some fashion in order to consider our 

research efforts further. To illustrate the point, imagine a pharmaceutical company 

deciding whether to spend huge amounts of research and development dollars for 

a new cancer cure when the company knows in advance that there is no method 

by which the drug can be taken to market. The pharmaceutical company would obviously not make the investment, and so it is with oil shale development. We are 
78 

trying to climb a technology hill that no one has ever been able to climb before. The 

Congress has now made that climb more difficult by putting a regulatory blindfold 

on us. If regulations are not issued soon, we may never be able to reach the top 

of this steep technology hill. 

Question 2. How will the moratorium on final regulations for oil shale commercialization affect Shell’s RD&D projects? 

Answer. The lack of a firm regulatory structure places our research and development efforts at risk, as Shell is less likely to invest in research without an end in 

sight. 

Question 3. Please explain the difference between technology that was used in the 

1970s and 1980s and the current technology for oil shale development? 

Answer. Our In Situ Conversion process is very different from anything ever tried 

before in oil shale development. Instead of bringing the rock to the heat, we are 

bringing the heat to the rock-by increasing the temperature of the oil shale while 

still in place in the ground. We have less surface disturbance than other technologies and have no surface disposal of spent shale. We also believe that recovery 

efficiencies are higher. Plus, the quality of the recovered oil and gas is better than 

with other technologies. Shell has been engaged in researching this technology for 

over 27 years. 

Question 4. What is Shell doing to ensure that the environment is protected as 

you move forward with oil shale development? 

Answer. Over the past 27 years of our oil shale research and development 

projects, Shell has taken unprecedented care to protect the environment. We are 

committed to developing oil shale in an economically viable, environmentally responsible and socially sustainable manner. Our current large scale Freeze Wall Test is 

a testament to that caution as the entire test is designed to help us find the best 

way to protect ground water. 

Question 5. Explain the technologies that Shell will use to reduce the amount of 

water in developing oil shale. How significant will this reduction be? 

Answer. We currently have made no decisions on large-scale projects and so do 

not have a firm answer at this time regarding the quantity of water that will be 

required. Our In Situ Conversion Process actually does make some water. We will 

re-inject water removed from the Freeze Wall canister created in the ground. We 

are considering water storage to collect excess wet year seasonal runoff to use on 

site. We are looking to maximize the use of air-cooling as opposed to water-cooling 

in our surface processing. Shell is actively seeking ways to minimize water usage 

as we move forward. 

One thing is certain—without regulations, the answers to all of these questions 

is further away. The lack of regulations potentially impacts not only oil shale research and development in the US, but also our Carbon Capture and Storage (CCS) 

research in the US insofar as it would relate to minimizing potential oil shale development impacts. 

[Responses to the following questions were not received at the 

time the hearing went to press:] 

QUESTIONS FOR C. STEPHEN ALLRED FROM SENATOR BINGAMAN

Question 1. What is the earliest time that you think BLM could reasonably conduct a commercial lease sale for oil shale? 

When do you think the technology will be ready for commercialization? 

Question 2. How can we guard against the kind of speculation that could result 

from commercial leasing prior to the technology being proven? 

Question 3. Do you have ideas on how the Department could provide certainty for 

the industry without issuing commercial regulations? 

Question 4. Shouldn’t the Department have the benefit of the information gained 

from the RD&D projects before issuing commercial regulations and moving to commercial leasing? 

Question 5. I understand that the Department of the Interior has made two attempts at leasing oil shale. One was during the 1960’s and the other was a Federal 

Prototype Oil Shale Leasing Program established during the 1970’s. 

What can we learn from these past attempts at leasing 

Question 6. Does the Department plan to undertake any further RD&D leasing? 

Question 7. What have you learned about potential impacts to water quantity and 

quality? Please describe. Please provide estimates of the amount of water that 

would be required by commercial development. 
79 

Question 8. How many acres of lands containing oil shale were patented pursuant 

to the Mining Law of 1872? Please provide an estimate by state together with an 

estimate of the barrels of oil equivalent contained in these lands. 

QUESTIONS FOR C. STEPHEN ALLRED FROM SENATOR DOMENICI

Question 1. We hear a lot of talk about BLM’s rush to lease, or that the Administration is rushing to authorize a commercial industry. Will the process we outlined 

in Section 369 of Energy Policy Act of 2005, that you are now implementing, lead 

to an immediate leasing program on Federal Lands? 

Question 2. The argument is being made by some that regulations are not needed 

until the research is complete, and that doing them now is premature. In your opinion, areregulations needed now? And why? 

Question 3. In your testimony, you spoke about public comments, as well as having a number of states and local governments assisting your current efforts. What 

other opportunities for public involvement will be available over time, prior to leasing or authorizing commercial development? 

QUESTIONS FOR C. STEPHEN ALLRED FROM SENATOR SALAZAR

WATER AVAILABILITY

Question 1. Without proven, or even proposed, oil shale extraction and processing 

technologies, how can the water requirements for commercial scale leases be properly assessed? 

Question 2. The State of Colorado has appropriated $1 million ($500,000 awaiting 

Governor Ritter’s signature) to assess Colorado’s remaining water entitlement under 

the Colorado River Compacts. Until that supply assessment is complete, isn’t an assessment of oil shale’s competing demands for Colorado water premature? 

Question 3. The Preliminary Draft EIS does not place oil shale’s related demands 

in the context of the cumulative demands of other energy development and its attendant water demands. Will this be done in the final EIS? 

Question 4. The combined Yampa/White River basin and the mainstem Colorado 

River basin are jointly sponsoring a water demand study related to current and projected energy activity, including oil shale, in northwest Colorado. This study is just 

getting underway. Again, aren’t current commercial leasing deadlines premature 

until this work is completed? (Study results from this energy study and the state’s 

Colorado River water supply availability should be available in 2009-2010.) 

Question 5. How will climate change and the projections of less water and greater 

evaporation in the Colorado River basin be factored into oil shale’s water supply and 

demand provisions? 

Question 6. What, if any, commitment is there for the DOE, BLM, or BOR to work 

with locally affected states and communities to identify water supply projects that 

will provide multiple benefits to the region and its environment? 

Question 7. The optimistic rule of thumb in Colorado is water storage projects require a minimum of 20 years to get from initiation to completion. How can the oil 

shale industry or the federal government shorten that timeframe in order to ensure 

adequate and timely water supplies to the industry and to meet its secondary water 

demands? 

NATIONAL PARKS

In its comments on the draft PEIS, the National Park Service identifies eight 

units that ‘‘have a very high potential for being adversely affected by cross-boundary 

or direct impacts from exploration and development activities in what the PEIS calls 

the Region of Influence : Arches, Black Canyon of the Gunnison, Canyonlands and 

Capitol Reef National Parks; Colorado, Dinosaur and Fossil Butte National Monuments; and Glen Canyon Recreation Area. Numerous additional park units in the 

western United States could be adversely impacted by regional air and water impacts likely to be generated from large scale, industrial activities associated with oil 

shale and tar sands development.’’ National Park Service, page 2 

Question 1. What will BLM and NPS do to guarantee there is no adverse impact 

from oil shale development on the Nation’s Parks? 

AIR AND WATER QUALITY

Likewise, the State of California and even Shell identified GHG emissions as an 

area of concern: 

In sum, the GHG emissions from oil shale and tar sands leasing on almost 2.5 million acres of federal land constitutes a significant cumulative 
80 

impact on the environment. The available data (which was ignored by 

BLM) does not support the agency’s conclusion that the project will not 

have a significant impact on climate change. California Attorney General, 

page 3. 

Section 3.5.1.2, entitled ‘‘Climate Change,’’ should be expanded to encompass a more thorough discussion of the potential impacts of oil shale development on climate change and should provide an explanation of why a 

quantitative analysis is not possible at this time. Shell, page 30. 

Question 1. What will BLM do to address these and other concerns expressed by 

numerous stakeholders with respect to likely impacts from oil shale development on 

air quality, including greenhouse gas emissions, and water quality? 

Question 2. Do the proposed rules include proposed lease terms and conditions related to air quality and water quality? GHG emissions? 

QUESTIONS FOR HON. BILL RITTER, JR., FROM SENATOR DOMENICI

Question 1. Just four years ago, as Congress prepared to begin a policy discussion 

on oil shale, America was facing the prospect of $50 oil. Today the price of oil stands 

at about $125 per barrel. Please comment on how this sharp rise in price, the growing rise in world demand, and production levels that fail to keep pace with this demand impact your views on the importance of developing oil shale here at home. 

Question 2. Understanding that the oil sands resources in Canada differ, but acknowledging that both your state and Canada are rich in non-traditional resources. 

How does Canada’s great success inform your choices in Colorado? 

Question 3. Recently in a CNBC interview you were very positive about the possibilities of oil shale production, but your testimony today seems to differ with that 

statement. Please explain these differing sentiments. 

Question 4. What is your administration doing to foster a responsible oil shale 

program in Colorado? 

Question 5. Why should a royalty rate not be set now and potentially readjusted 

later if necessary? 
(81) 

APPENDIX II 

Additional Material Submitted for the Record 

STATE OF UTAH, 

Office of the Governor, 

Salt Lake City, UT, May 13, 2008. 

Hon. DIANNE FEINSTEIN, 

Chair, 

Hon. WAYNE ALLARD, 

Ranking Republican Member, U.S. Senate Committee on Appropriations, Subcommittee on Interior, Environment, and Related Agencies, SD-131, Dirksen 

Senate Office Building, Washington, DC. 

DEAR SENATOR FEINSTEIN AND SENATOR ALLARD, This letter serves to request 

that the oil shale lease regulation moratorium imposed on the U.S. Bureau of Land 

Management (BLM) by section 433 of the Consolidated Appropriation Act of 2008 

be lifted, and funds be appropriated to implement subsections 369(d) and (e) of Energy Policy Act of 2005 (EPACT). 

EPACT was intended to foster the development of oil shale as an energy resource. 

EPACT provides that the BLM (1) lease several parcels of federal oil-shale land for 

research, development, and demonstration (RD&D), and (2) issue final commercialleasing regulations. These actions would be conducted consistent with the provisions 

of the National Environmental Policy Act (NEPA) and other environmental protection laws. EPACT also specifically directs the BLM to issue the final commercialleasing regulations before the RD&D program is completed. In spite of that clear 

directive, section 433 of the Consolidated Appropriation Act of 2008 directed that 

none of the funding authorized by that Act may be used in connection with the preparation or publication of such final regulations, or upon efforts to conduct any oil 

shale lease sale, pursuant to subsections 369(d) and (e) of EPACT. 

I recommend lifting those restrictions. Utah is home not only to substantial oil 

shale reserves (most of which are located upon BLM lands), but also to businesses 

willing to develop oil shale using new technology that will make extraction cleaner 

and more efficient. We have workers who will benefit from the jobs created by oil 

shale development, and state and federal regulators who are capable of ensuring 

that this resource is developed in an environmentally responsible manner. 

As the price of oil surpasses $120 per barrel and we become increasingly dependent on foreign oil, our national security is in jeopardy. We cannot afford to wait any 

longer to develop this critical energy resource. The opportunity for environmentally 

sound energy development must be supported. 

Therefore, I respectfully request that you lift the moratorium imposed on the 

BLM by section 433 of the Consolidated Appropriation Act of 2008 and appropriate 

funds to implement subsections 369(d) and (e) of EPACT. Thank you for your consideration of this request regarding a matter of great importance to Utah and our 

Nation. 

Sincerely, 

JON M. HUNTSMAN, JR., 

Governor. 

STATEMENT OF JAMES W. BUNGER, PH.D., PRESIDENT, JWBA, INC., 

SALT LAKE CITY, UT 

Good afternoon Chairman Bingaman, Ranking Member Domenici and Members of 

the Energy and Natural Resources Committee: 

My names is James Bunger, President of JWBA, Inc. a Salt Lake City based firm 

specializing in oil shale and tar sand resource and technology development. I hold 
82 

1 J. R. Dyni, Geology and Resources of some World Oil-Shale Deposits, Scientific Investigations Report 2005-5294, USGS, 2006. 2 J. W. Bunger, P. M. Crawford and H.R. Johnson ‘‘Is Oil Shale America’s Answer to Peak 

Oil Challenge?’’ Oil and Gas Journal, Aug. 9, 2004, pp 16—24 (available on-line http://fossil.energy.gov/programs/reserves/publications/Pubs-NPR/40010-373.pdf). 3See isopachs maps available from K. E. Stanfield, et.al. Oil Yields of Sections of Green River 

Oil Shale in Colorado, 1957-63 USBM RI 7051, 1967., K. E. Stanfield, et.al. Oil Yields of Sections of Green River Oil Shale in Utah, 1952-62, USBM RI 6420, 1964., and J. R. Dyni Oilshale resources of the Mahogany Zone in eastern Uinta Basin, Uintah County, Utah OFR 91- 

285, 1991. 4 US DOE Office of Petroleum Reserves—Fact Sheet—Energy Efficiency of Strategic Unconventional Resources—2007. (Available online http://www.unconventionalfuels.org/publications/ 

factsheets/EnergylEfficiencylFactlSheet.pdf). 5DOE Office of Petroleum Reserves—Strategic Unconventional Fuels Fact Sheet: Oil Shale 

Water Resources (available on-line http://www.unconventionalfuels.org/publications/factsheets/ 

OillShalelWaterlRequirements.pdf). 6Similar estimates can be found in the Draft Oil Shale and Tar Sand Programmatic Environmental Impact Statement, US BLM, DOI (available online http://ostseis.anl.gov/documents/dpeis/ 

index.cfm). 7 Culbertson,W.J., and Pitman, J.K., ‘‘Oil Shale’’ in ‘‘US Mineral Resources,’’ USGS Professional Paper 820, Probst and Pratt, eds. pp. 497-503, 1973. Donnell, J.R., ‘‘Geology and Oil-Shale 

Resources of the Green River Formation,’’ Proceedings, First Symposium on Oil Shale, Colorado 

School of Mines, pp. 153-163, 1964. 

a bachelors degree in Chemistry and a Ph.D. in Fuels Engineering. I have had the 

pleasure of working in the field of oil shale and tar sands for 40 years and have 

recently served as special technical advisor to the Strategic Unconventional Fuels 

Task Force. 

My comments summarize the potential for oil shale to become a productive, secure 

source of energy for our Nation. I will summarize what the Government can and 

should do to assure that this resource is developed. I will discuss the current global 

market for liquid fuels and the practical role that fossil resources, including oil 

shale, must play in the development and delivery of liquid fuels. 

ROLE OF OIL SHALE IN GLOBAL MARKETS

To understand the significance of oil shale, I believe it is important to recognize 

what is happening with World energy supply. Energy markets anticipate a future 

shortfall in supply and do not see a plausible solution to the growing disparity between demand and supply. As a consequence, current energy prices have become 

largely uncoupled from their historic cost basis and prices can be expected to rise, 

destroying demand and maintaining a balance between supply and demand. The 

major concern is that worldwide economic recession will be the result. US oil shale, 

measured at 2 trillion barrels1, and the richest and largest accumulation of oil on 

earth, has the potential to change these global energy dynamics and as a consequence have a moderating effect on World oil prices. 

KEY QUALITIES OF THE RESOURCE

There are several characteristics of oil shale and the technologies for recovering 

oil that support the proposition that oil shale development will provide a significant, 

long-term supply. 

• The resource grade is rich—30 gallon per ton (gpt) oil shale is 40% richer than 

Alberta oil sands being produced commercially today.2

• The resource is concentrated—The heart of the deposit will yields more than 1 

million barrels/acre (100 times a typical oil or gas operation). This means low 

surface impact for high economic benefit. Yields of 100,000 barrels/acre or more 

will be common at all prospective sites.3

• Yields high net energy production—about 7 Btu are produced for each Btu consumed. This ratio is similar to Alberta oil sands.4 Oil shale has the potential 

to be completely energy self-sufficient, with no demands for external energy. • Requires limited water consumption—about 10,000—17,000 acre-ft/yr for 

100,000 bbl/day production (this amount also includes reclamation and community water needs).5 6

• The resource is huge—Nearly 800 billion barrels exist at 25 gpt, or greater.7

To put this in perspective, just half of this amount, or 400 billion barrels, would 

be enough to offset imports from OPEC (currently 6 M-bbl/day) for 180 years. 

A NEW ENERGY SUPPLY BUSINESS MODEL

These characteristics are consonant with an emerging business model where economics reward long-term assured production. With oil shale and oil sands, by con-
83 

8http://www.eia.doe.gov/cabs/SaudilArabia/Profile.html, http://www.eia.doe.gov/emeu/international/oilreserves.html, http://www.eia.doe.gov/cabs/Canada/Profile.html 

trast to petroleum, there is no exploration risk, there is no production risk, and 

there is no decline curve. The significance of assured production cannot be overemphasized, because once a first-generation facility is established, the capital for expansion of production can be amortized over a larger production base, greatly improving the economics for growth in the industry. Government tax and royalty policies can be set to favor early payout of capital investment with complete assurance 

that the government will be adequately compensated for its resource over time. 

A STEP-CHANGE IN DOMESTIC PROVEN RESERVES

Oil shale has the potential of making the United States the holder of the largest 

‘proven reserve’ in the World. By proving the commercial viability of a suite of technologies for different resource characteristics, Canada was able to book 174 billion 

barrels of oil sands as ‘proven’, making them the second largest holder of proven 

reserves in the World, second only to Saudi Arabia at 260 billion barrels.8 It should 

be the goal of the private sector and the United States government to prove technologies that will allow oil shale deposits to be reclassified from its current status 

of ‘in-place resource’, to ‘proven reserves’ Achieving a goal of reclassifying 400 billion 

barrels as ‘proven’ is well within our capabilities and the characteristics of the resource and, if achieved, would make the US the holder of the largest oil reserve in 

the World. 

Such an accomplishment would establish a long-term Petroleum Reserve from 

which production could be grown as necessary to complement the current Strategic 

Petroleum Reserve, and that we could count on for a century, or more, of production. 

Once such a goal is achieved, we will have bought ourselves an insurance policy of 

assured, domestic production for the future. Development would strengthen our Nation and would open a range of economic and foreign policy options we do not now 

have. 

Moreover, the United States could immediately affect world oil prices of oil 

through a direct and clear policy to develop this vast and viable resource. If the energy markets came to believe the United States was committed to the delivering liquid fuels to the market by development of its extensive oil shale reserves, a direct 

affect could be realized on World oil prices as this would offer a measure of risk 

to holding long term futures. 

IMPEDIMENTS TO DEVELOPMENT

The biggest impediment to the private sector development of this resource lies in 

the inability to access oil shale deposits until the federal government makes a decision that development of this resource is in the Nation’s interest. Access to federal 

land, consisting of more than 75% of the acreage and about 80% of the resource, 

has been under an effective leasing moratorium since President Hoover’s Executive 

Order 5327 in 1930 withdrawing oil shale from leasing. While that order was lifted 

by President Truman’s Executive Order 10355 in 1948, there has been no general 

oil shale leasing program for more than 70 years. It is imperative that the federal 

government move quickly to reach conclusions about this resources including progressively moving forward with current RD&D programs, creation of commercial 

leasing regulations, and establishment of the critical resource development zones. 

Technologies have been developed and many companies are moving forward to deploy those technologies to deliver meaningful quantities of liquid fuels in manner 

that is both economically and environmentally sustainable. It is clear, however, that 

further deployment requires the promise of a resource base upon which to deploy 

the technology. It is unreasonable to expect large private capital expenditures for 

research, development and scaleup of technology until a resource base is secured. 

Therefore, commercial leasing regulations must be issued before we can expect large 

scale activity in the field. 

The federal government can also play a role in mitigating uncertainty in the areas 

of regulatory standards, permitting timelines, rights-of-way, and fiscal regime. Completion of the Programmatic Environmental Impact Statement will help establish a 

regulatory framework within which the private sector can respond. 

COMMUNITY IMPACTS AND BENEFITS

Oil shale development can deliver sound and stable economic benefits to the communities in which operations develop but there is an immediate need for a mecha-
84 

9http://fossil.energy.gov/programs/reserves/npr/nprloillshalelprogram.htmlCO2 Emissions 

nism that assures that community impact funds are available when required. Prospective avenues are: 

• Remove the Payment Law clause from PILT legislation, thereby allowing current mineral lease funds to flow directly to the impacted communities. • Allow communities to keep 100% of mineral lease bonus payments (as was done 

in the Prototype program of the 70s) • Allow industry to prepay production royalties directly for community impact 

needs. • Fund major infrastructure needs such as highways or water projects from the 

federal portion of the Mineral Lease account, with the confidence those funds 

would be restored many times over in the later years of the project. 

Further significant socioeconomic benefits can be attained by coordinating oil 

shale development with on-going oil and gas development in the Rocky Mountain 

west. By some projections, the region will reach its maximum oil and gas labor activity in the next 5 to 10 years. Planning for significant oil shale growth in the 5 

to 10 year timeframe would dovetail nicely with an anticipated downturn in regional 

oil and gas field drilling activity. If we start now, oil shale production could in-fill 

jobs and maintain on-going production royalties that would otherwise be lost in the 

downturn of labor needs in the conventional oil and gas industries. 

PROGRESS AND STATUS OF THE PLANNING PROCESS

If oil shale is so attractive, why don’t we already have investment? This is the 

question tackled by the Strategic Unconventional Fuels Task Force established by 

Section 369 of the Energy Policy Act of 2005. The Task Force, comprised of the Secretaries of Energy, Interior and Defense, and the Governors and local representatives from five interested States, identified key impediments to investment, including access to federal resources, uncertainty about technology reliability, indefinite 

permitting timelines, fiscal treatment of CO2emissions, and uncertain federal, state 

and local policy. The task force made recommendations to Congress and the Administration for mitigating these impediments. I urge this Committee and other Members of Congress to take a careful look at the findings of this Task Force.9

With respect to CO2 emissions, a topic that is on Congress’ mind; it is tempting 

to impede investment as a means of limiting emission. This does nothing to address 

the supply need. A recommended course of action would be to establish general legislation for all sources of CO2 that is scientifically sound, administratively transparent and economically balanced. Under these conditions oil shale projects, or any 

energy project for that matter, would be able to factor in CO2 mitigation costs, providing greater certainty to investment and give the Nation the best opportunity to 

develop needed energy while simultaneously meeting the goals of improved efficiency and mitigation of environmental impact. 

SUMMARY

In summary, the United States is blessed with a huge, rich resource of fossil energy capable of supplying a large portion of our fuel needs for decades to come. Energy costs are competitive with current petroleum production and projects appear 

permitable under current and anticipated environmental standards and regulations. 

We have the opportunity to bring a huge store of resource into the category of ‘proven reserves’. But each day of indecision, or failure to address the impediments to 

investment, delays the day when this resource is available for our energy needs. I 

believe current global energy cost trends warrant a sense of urgency to resolve those 

issues that only government can resolve. 

I thank you for the opportunity to provide this perspective for your consideration. 

I will be pleased to respond to any questions. 

STATEMENT OF DAVID C. MOORE, MAYOR, TOWN OF SILT, SILT, CO 

Dear Member of Congress: In the FY 08 Appropriations Bill Congress approved 

a funding limitation withholding monies for the Bureau of Land Management’s 

(BLM’s) implementation of commercial leasing regulations for oil shale. The Town 

of Silt requests that the administration consider extending the funding limitation 

into FY 09. The Town of Silt has previously commented on the Draft Programmatic 

Environmental Impact Statement (PEIS) for commercial oil shale development, released to the public on December 21st, with concerns regarding the baseline data 
85 

as well as the estimated commercial production of oil, the power and water needs, 

the impacts of production waste and transient workers, and the increased infrastructure demands resulting from the oil shale industry. The Colorado future consumptive water uses contemplated in the report seem low. Also, there is little discussion of how the significant power demands will be met, and the estimated water 

needed for these demands may be underestimated. 

Before the leasing process progresses, we would like to be part of a collaborative 

process where energy and water supply, waste solutions, employee housing, and increased infrastructure demands are considered so that multiple purposes and objectives can be met while striving for improvements. 

We respectfully request a special review committee be convened, with the proper 

stakeholders from our communities and experts from the BLM and the industry. 

This committee would identify in detail the potential impacts to our communities 

and would propose adequate mitigation strategies prior to any lease agreements. 

Our regional government representatives have built cooperating relationships with 

the industry operators which demonstrates that we are capable of conducting a successful collaborative process. We believe that the extension of the funding limitation 

will give additional emphasis to the needs of our community, locally and regionally, 

and we ask that this leverage be considered. 

SUPPORT FOR COMMERCIAL LEASING MORATORIUM

STATE OF COLORADO

Water Districts 

• The Front Range Water Users Council: 

• Northern Colorado Water Conservancy District 

• Colorado Springs Utilities 

• Aurora Water 

• Board of Water Works of Pueblo 

• Southeastern Colorado Water Conservancy District, 

• Twin Lakes Reservoir and Canal Company 

Towns/Counties 

• City of Rifle 

• Town of Silt 

• Pitkin County Board of County Commissioners 

• Routt County Board of County Commissioners 

• San Miguel County Board of Commissioners 

STATEMENT OF JIM SIMS, PRESIDENT AND CEO, THE WESTERN

BUSINESS ROUNDTABLE

Dear Members of the Committee: On behalf of the CEOs and Western business 

leaders of the Western Business Roundtable, I write express our strong support for 

allowing the Bureau of Land Management (‘‘BLM’’) to continue to develop regulations to allow responsible oil shale development through commercial leasing of federal lands in the West. We urge Congress to not further delay this process. 

We understand that some may urge the Committee to further restrain the BLM’s 

efforts to pursue commercial leasing of the vast oil shale resources in the West. We 

believe this approach is terribly wrong. Ironically, additional delay will hinder the 

development of the very technology many of the proponents of more delay are requesting. It would certainly delay the objective of becoming a more energy independent country in an unstable world, and it will diminish the economic opportunities for jobs in our Western communities. Perhaps most importantly, delay will further pressure the high prices associated with fuel that are already hurting so many 

vulnerable American families. 

Specifically, the Roundtable supports uninterrupted continuation of the BLM regulatory process for the following important reasons. Continued work to access our 

rich oil shale resources: 

• will ultimately lead to greater energy security through domestic production of 

energy for the United States; 

• will foster investment in research and development of technological advancements for the resource and the environment; 

• will offer greater economic opportunities to the citizens of our Western communities; and 
86 

• will allow a responsible means to achieve a balanced and sensitive approach for 

our environment and for our economy. 

Timing is important and further delay could be deadly, particularly for the research and development aspect of oil shale development. Businesses are making 

commercial decisions now about investment in research and development of the 

technology that will be necessary to achieve the many goals we have with regard 

to our energy needs. 

The American West offers the world’s largest deposits of oil shale. The Green 

River formation in Colorado, Utah and Wyoming is estimated to contain 1.2-1.8 trillion barrels of oil. Using even conservative estimates, there are 800 billion barrels 

of recoverable oil from the oil shale in this area. Keep in mind that this is three 

times larger than the proven oil reserves in Saudi Arabia. The federal government 

can significantly and positively impact this domestic opportunity. It controls over 70 

percent of these oil shale reserves. 

Given the potential offered by oil shale resources in the Western United States, 

the business leaders of the West ask you to not further delay the regulatory process 

currently underway, which would certainly jeopardize what are currently solid commitments by the business community to focus on technology commercialization for 

oil shale development. 

STATEMENT OF BRENT C. FRYER, SC.D., ST. GEORGE, UT 

MY CREDENTIALS

When it comes to the development of oil shale I am not operating from a position 

of ignorance. I am the developer of the proprietary above ground Black Box Oil 

Shale Pyrolysis Process I and the underground Process II. I was one of 18 applicants 

for the BLM’s Oil Shale RDD program. I was Exxon USA’s Lead Senior Staff Mechanical Engineer on the Colony Oil Shale Project (a $6 billion dollar effort) TOSCO 

Pyrolysis Unit, and have a Sc.D. from MIT with over 45 years of Experience/Education in Energy/Process Industries and Water Conservation/Utilization. I have been 

retired for 8 years—6 of which have been spent on resurrecting work done 30 years 

ago for optimizing dry cooling towers for electric generation power plants to save 

water, and the development of my proprietary Black Box Oil Shale Pyrolysis I & 

II Processes. I have two goals for oil shale: (1) beat out the competition on the basis 

of the merits of my processes; and (2) participate as a stakeholder in the development of oil shale to insure this national treasure is developed on a sound basis with: 

(a) minimum environmental impact, (b) maximum resource recovery in the form of 

liquid and gaseous fuels; (c) maximum energy efficiency; (d) maximum energy self 

sufficiency; (e) highest economic benefit and profitability; and (f) minimum water 

usage. 

MY COMMENTS ON THIS HEARING AND THE BIGGER PICTURE

What in fact can we learn and conclude from this hearing, previous House and 

Senate Hearings, political influence, political activities of both Republicans and 

Democrats, Energy Policy Act of 2005 and its mandated Task Force, BLM RDD Program, PEIS, the written public comments on the Draft PEIS, the Proposed Rule 

Change for Commercial Leasing, the moratorium on commercial leasing, Senator 

Salazar’s newly introduced bill S 3019, and the state of oil shale technology? As documented in the following, and written up for the public record elsewhere (Prior Senate hearings, BLM RDD lease holder EAs, PEIS, Rule Change, etc.) we can conclude 

the following. 

1. The BLM RDD leasing program has been underway for 3 1⁄2 years but not 

a drop of shale oil has been produced in the USA from this program. In less 

time than this the Manhattan Project produced the first atomic bomb during 

World War II. Meanwhile during this same time period light sweet crude oil has 

increased in price 3 fold, reaching a high in the last few days of over $134/barrel. 

A couple hundred barrels of shale oil from shale mined almost 30 years ago 

at the White Mine in Utah have apparently been produced in Canada by one 

BLM RDD lessee, OSEC, using a small old Taciuk pilot plant. There’s nothing 

new here. The Australian company, SPP, did the same thing decades ago at the 

same pilot plant, later built a commercial scale Taciuk plant, spent hundreds 

of millions of dollars, and went bankrupt about 4 years ago. The BLM’s RDD 

program was supposed to demonstrate the economic viability of ‘‘today’s’’ new 

technologies over a lease period of ten years. If the non economic viability of 
87 

‘‘yesterdays’’ old Taciuk process with a fat Australian subsidy, an easy low overburden mining situation, and raw shale oil low nitrogen content making 

hydrotreating much less expensive than for US shale oil, was demonstrated 

with bankruptcy—what was the credible basis for the selection of a project 

based on this old technology by the DOI/BLM? The financial receivers of the 

Australian SPP project have apparently abandoned that technology and are 

evaluating other technologies, etc. to determine if there is a rational path forward for them. 

2. About a year ago Big foreign oil company, Royal Dutch Shell (RDS), withdrew its Colorado State Licensing Application to proceed with fits first BLM 

RDD tract lease even after RDS’s heavy lobbying, previous House and Senate 

Hearing Testimony, and this Senate Hearing where in they repeated their call 

that they desperately need commercial regulations now. Now in this hearing 

RDS stated that although they had a legal right to the 24 section preference 

right leases, not having commercial leasing Rules/Regulations in place would result in a ‘‘legal train wreck’’ and that the RDS Board of Directors in the Hague, 

Netherlands, would be unwilling to allocate capital to proceed with the BLM 

RDD technology testing. This desperate need for commercialization regulations 

comes after RDS has spent 27 years working on their ICP process on their private land, producing only 1500 barrels of oil, or about 6 gallons/day (.07 cups/ 

minute) and after they have withdrew their state licensing applications to proceed on R&D? During the last 27 years how were they ever going to prove to 

themselves and others that the ICP technology was worthy of financial investment at the commercial scale without the commercial federal regulations in 

place? 

3. OSEC stated that they also desperately need commercial regulations so 

that the preference lease can be viewed as a ‘‘collateral asset’’ to obtain financing—for both continuation of the BLM RDD lease testing and subsequent larger 

scale commercial operation. Without the regulations they cannot obtain financing to go forward with even the RDD effort. The position taken that the preference lease is needed as a ‘‘collateral asset’’ from which to obtain financing for 

both RDD testing and commercial project development is inconsistent with the 

requirements of the BLM RDD program, requirement 13, ‘‘proof of investment 

capacity’’. BLM RDD program applicants who did not have the financial capacity to conduct the RDD activities they proposed to accomplish should not have 

been awarded a lease in the first place. The preference lease was an incentive 

to achieve demonstration of commercialization which the RDD lessee may 

‘‘earn’’. It should not be treated as an ‘‘asset’’ until it is earned; otherwise it promotes speculation—which may have already occurred with the sale of EGL to 

IDT. 

4. BLM RDD leases are now restricted to four organizations, RDS, CVX, EGL 

(now IDT), and OSEC. RDS has 3 leases (including preference lease rights) totaling 24 sections of land, 24 billion barrels of Fischer Assay recoverable oil, 

worth as hydrotreated syncrude of the order of $3.2 trillion—which they captured for a mere $6000 in application fees. Of these the RDS and EGL processes 

have unacceptable energy efficiency, energy self sufficiency, environmental impact, economic benefit, and resource recovery characteristics. These are non 

starters and should be banned as a matter of public policy. The CVX process 

with certain modifications may have some merit. The Taciuk process selected 

by OSEC resulted in bankruptcy in Australia a mere 4 years ago. There are 

other processes out there which have much, much better characteristics—these 

have now been frozen out or excluded from any further BLM RDD leases. My 

processes, Black Box Pyrolysis-I &II, are two of these and access to small BLM 

RDD tracts/leases are needed to demonstrate their viability in a national, merit 

based, cook-off prior to taking on a commercial scale project. An 8 section preference lease right would be nice as an incentive—but it is not needed as a ‘‘collateral asset’’ to obtain financing for either the RDD testing, nor the commercialization of a larger project. Technology that can not stand on its own financially should be excluded from the outset—no tax payer federal subsidies are 

needed or wanted for the Black Box Pyrolysis Processes. 

Chevron stated that they don’t support commercial leasing until there is a 

clear demonstration of the technology. Chevron encourages the BLM to consider 

expanding the RD&D leasing program 

ExxonMobil urges the BLM to recognize in any leasing program that there 

is a need for ongoing opportunities to develop and test new technologies on a 

phased basis to avoid precluding the development of new and potentially better 

ideas for the recovery of shale oil. 
88 

They note that in their specific comments that both the PEIS’s Alternative 

A and Alternative C of the PEIS will, they believe, effectively limit competition 

in the oil shale development sector to the companies that currently have RD&D 

leases. This will preclude development and testing of alternative technologies 

having the potential for improved total resource recovery and minimization of 

other impacts. 

They urge that the DPEIS reflect the high probability of mineral co-development in the future and afford, through the envisioned leasing program, opportunity for these types of technologies to be tested. According to ExxonMobil this 

is best accomplished through further leasing similar in scope and detail to the 

BLM’s previous RD&D leasing action. 

No urgency is expressed on the part of ExxonMobil for commercial leasing 

regulations. 

Redleaf Resources recommends that BLM initiate further RD&D programs 

beyond the five oil shale projects on public lands in Colorado and Utah, stating, 

RD&D should be considered as a fundamental aspect of BLM’s land management options for oil shale. 

The position of the DOI/BLM on future RDD leases is that the current program meets the requirements of EPA2005 and therefore there will be no more 

RDD leases. Not only were the four BLM RDD lessee’s selected behind closed 

doors, without transparent selection criteria or publicly named interdisciplinary 

selection committee members, the elimination of oil shale development competition reeks of anti-trust action and consequences. 

5. The Draft PEIS is not a PEIS as mandated by EPA2005 and is therefore 

in defiance of EPA2005. An actual PEIS is required by the Energy Policy Act 

of 2005 to provide a basis for commercial leasing. Without that commercial leasing cannot go forward 

6. The annual Task Force reports required by EPA2005 are at least a year 

behind and the conclusions and content of the first report are not concurred to 

by key Task Force members—specifically State Governors. 

7. EGL, BLM RDD lessee has been bought by IDT, a non oil/gas or non oil 

shale company. Could this be a sign of land/resource speculation that the DOI/ 

BLM have stated they will prevent? 

8. There has been, and continues to be, unabated undue and unacceptable influence on the part of the foreign big oil company, Royal Dutch Shell, in the 

promulgation of the Energy Policy Act of 2005, modifications to the Minerals 

Leasing Act, the Rule Change, at House and Senate Hearings, and now an 82 

page submittal on the PEIS with demands that substantive issues critical (specifically) to RDS be addressed and revised. This on top of the fact that the PEIS 

was initiated under the stewardship of the previous Secretary of Interior, who 

is now employed by RDS as head legal counsel on oil shale. Was the ex-Secretary the ghost writer for the RDS PEIS written comments? Is the ex-Secretary now trying to revise the document that the ex-Secretary initiated, the 

PEIS, to the benefit of the ex-Secretary’s current employer, RDS? Meanwhile 

RDS continues to be involved in energy business dealings with Iran which is 

prohibited by U.S. law. Why isn’t the State Department conducting additional 

review of RDS’s business dealings with Iran to determine if they should be allowed to continue doing any business in the USA—let alone control the lion’s 

share of US oil shale reserves? 

9. The cost, technology, and hydrogen/natural gas sources need for downstream hydrotreating of the raw shale oil is essentially ignored in the entire 

federal oil shale development program. This could easily be the largest single 

cost component for converting kerogen in the shale to refinery acceptable 

syncrude. Given that fact, why is so little attention provided in the federal program, hearings, etc.? 

10. Technological ignorance and/or incompetence on the part of high level decision makers is at the root cause of all these problems. This is true, not only 

for oil shale, but for all other energy alternatives now in play. Until the decision 

makers come up to speed on the technological issues, they will continue to make 

knee jerk reactions, that result in the above mess, as well as such disasters as 

the corn to ethanol fiasco. 

11. The current battle in Congress going on between the Democrats and the 

Republicans and in the Senate and House Energy committees must stop. Republican acceleration of commercialization at the behest and threats of a big 

foreign oil company’s board of directors (with a technological process that should 

be banned) and others who have no in house experience in oil shale development, is being countered by the Democrats bills to slow down development and 
89 

* Documents have been retained in committee files. 

do more thorough study by high powered scientific groups who have never made 

a drop of oil, are leading this country into disaster. 

In summary we can conclude that the state of development of the federal oil shale 

development program is in a sad state. What can be done to improve this situation? 

First the key decision makers who created this mess must come to a recognition 

that the Federal Oil Shale Development Program is a mess, and how it got there. 

The BLM RDD program was initiated by DOI/BLM months before passage of 

EPA2005, putting the horse before the cart. Second, key factors were either never 

in the EPA2005, or were removed by folks like Pombo, etc. EPA2005 should have 

required and included transparent independent third party reviews and continual 

access to BLM RDD leases. No meaningful, public and transparent, criteria for selection of BLM RDD lessees was used with the result that most of the technological 

processes selected have no merit and should have been banned by public policy. 

RDS has captured 24 sections, while the Minerals Leasing Act in place at initiation 

of the BLM RDD leasing program limited any individual/organization to 8 sections. 

The draft PEIS was mandated to provide a basis for commercial leasing and the 

Rule Change. The draft PEIS is not a PEIS and is therefore in defiance of EPA2005 

and therefore commercial leasing cannot go forward. There has been undue and unacceptable influence on the part of the foreign big oil company, Royal Dutch Shell, 

in the promulgation of the Energy Policy Act of 2005, modifications to the Minerals 

Leasing Act, the Rule Change, and now an 82 page submittal on the PEIS with demands that substantive issues specifically critical to RDS be addressed and revised. 

This on top of the fact that the PEIS was initiated under the stewardship of Gale 

Norton, Secretary of Interior, who is now employed by RDS as head legal counsel 

on oil shale. The BLM RDD program thus far has been nothing more than a big 

land grab, and elimination of future BLM RDD leases has essentially eliminated 

competition. 

By far the three most important improvements needed are: (1) make BLM RDD 

leases/tracts available on a continual basis—without that the USA is stuck with the 

current 4 technologies, none of which may be successful, two of which should have 

banned from the outset, and 1 of which has already failed in Australia; (2) the influence of big foreign oil companies dictating USA energy policy must stop; and (3) Republican and Democrat Congressmen must get educated on the technology, economics, environmental issues and get their act together. 

These conclusions, recommendations and basis thereof can be arrived at by the 

reader on his own by doing his own homework. However, to assist the reader in this, 

the following extractions taken from the PEIS written comments, the recent Senate 

hearing Web cast, and related news article are provided.* The reader is also referred to written public comments made by me and others on Senate/House hearings, BLM RDD lease EA’s, the Rule Change, and the so called PEIS. 

STATEMENT OF H.J. BARRY, MANAGER, DENVER BOARD OF WATER COMMISSIONERS, 

DENVER, CO 

The Front Range Water Users Council (Council)—consisting of Denver Water, 

Northern Colorado Water Conservancy District, Colorado Springs Utilities, Aurora 

Water, Board of Water Works of Pueblo, Southeastern Colorado Water Conservancy 

District, and Twin Lakes Reservoir and Canal Company—formally requests Congress extend Section 433 of the Consolidated Appropriations Act of 2008 which prohibits the Department of the Interior from issuing oil shale and tar sands leasing 

regulations. This moratorium is slated to expire at the end of the current fiscal year. 

The Council members are the largest water suppliers of municipal, commercial, 

industrial and agricultural water needs in the state of Colorado. Approximately one 

half of the population receives water from Council members. 

As stated in our March 20, 2008, comments on the Bureau of Land Management’s 

(BLM) programmatic environmental impact statement for oil shale and tar sands 

development, the Council believes the BLM’s analysis raises significant questions 

that must be fully addressed before anyone can assess the full range of impacts of 

oil shale development. While oil shale would be developed in western Colorado, because of the enormous amount of water needed to process shale and the associated 

energy needs, the impacts would be felt statewide. We are concerned, as we expressed in our comments to the BLM, that the ‘‘development of oil shale in Colorado 

could significantly affect the Council’s ability to serve existing customers and the 

future growth projected for the Front Range of Colorado.’’ 
90 

The research leases Congress authorized in the Energy Policy Act of 2005 are designed to provide meaningful data necessary to make informed decisions. Those 

leases are ongoing, but as the BLM and industry acknowledge, it will be years before new technologies are developed and we will know whether commercial development is possible. Before adopting leasing regulations, federal and state officials 

must first understand critical issues such as process performance, infrastructure demands (especially, water, power, processing facilities, and pipelines), and options for 

protecting and water quality. Without this data informed decisions cannot be made. 

Accordingly, committing to leasing regulations prior to a full and complete evaluation of the results from these research leases puts the cart before the horse. We ask 

that order be restored to the process and that the moratorium be maintained until 

such time that all involved can assess the impacts of oil shale development. 

STATEMENT OF JACK HATFIELD, CHAIRMAN, PITKIN COUNTY BOARD OF COUNTY

COMMISSIONERS, ASPEN, CO 

Dear Members of Congress: We ask you to support extension of the oil shale funding limitation into FY 09: 

In the FY 08 Appropriations Bill, Congress, approved a funding limitation withholding monies for the Bureau of Land Management’s (BLM’s) implementation of 

commercial leasing regulations for oil shale. The funding limitation was approved 

because development technologies remained unproven and the viability of those 

technologies unknown. 

In the past year little has changed. Both industry and the BLM agree that years 

will pass before technology is proven and the feasibility of oil shale development is 

known. The Only notable information gained in the past year is that BLM’s Draft 

Programmatic Environmental Impact Statement (PETS) shows the impacts of commercial oil shale development in western Colorado will likely be significant to the 

clean air, clean water, water supply, wildlife habitat, as well as local economies and 

communities. It could also have substantial global warming impacts. 

Given what little we know about oil shale development, it only makes sense to 

refrain from designing and implementing a regulatory framework for this industry. 

To push ahead would put action before information which would be ill-conceived. 

Importantly, the Energy Policy Act of 2005 does not mandate that the Interior Department hold a commercial lease sale, for oil shale resources. Instead, the law says 

the Department of Interior may hold a commercial lease sale ythe Interior Secretary 

finds sufficient support for such a program among’state governors, Native American 

Tribes and other affected parties, which most certainly includes local municipalities 

who value Colorado’s quality of life. 

We need results from meaningful analysis of oil shale RD&D before we can implement an effective regulatory framework. We need to know What technologies will 

be used and where development will make sense economically. Accordingly, we 

strongly encourage you to support efforts to extend into the FY 09 Interior Appropriations Bill, the current Congressional funding limitation barring the BLM from 

issuing final commercial oil ,shale leasing regulations, or issuing commercial leases 

until we have more information. 

STATEMENT OF KEITH J. LAMBERT

Dear Member of Congress: In the FY 08 Appropriations Bill Congress approved 

a funding limitation withholding monies for the Bureau of Land Management’s 

(BLM’s) implementation of commercial leasing regulations for oil shale. The funding 

limitation was approved because development technologies remained unproven and 

unknown. In the past year nothing has changed. Technologies have not advanced 

significantly. In fact, the only notable change is that BLM’s Draft Programmatic Environmental Impact Statement (PEIS) suggests the impacts of commercial oil shale 

development could be significant on western Colorado. For these reasons we ask 

that the administration extend the funding limitation into FY 09. 

Given what we know, and don’t know, it only makes sense to refrain from designing and implementing a regulatory framework for an industry that may rely on 

unproven and unknown technologies. Simply, to do otherwise would put the cart before the horse. 

It is important to note that Energy Policy Act of 2005 does not mandate that the 

Interior Department hold a commercial lease sale for oil shale resources. Instead, 

the law says the Department of Interior may hold a commercial lease sale if the 

Interior Secretary finds sufficient support for such a program among state gov-
91 

ernors, Native American Tribes and other affected parties, which most certainly includes local municipalities who value Colorado’s quality of life. 

Accordingly, we strongly encourage you to support efforts to extend into the FY 

09 Interior Appropriations Bill the current Congressional funding limitation barring 

the Interior Department from issuing final commercial oil shale leasing regulations, 

or issuing commercial leases, before meaningful analysis of oil shale RD&D projects 

on federal land has been completed. We respectfully request that Congress require 

the BLM to prove oil shale can be not only economically viable, but will not adversely affect the water, wildlife and welfare of local communities before authorizing 

this federal program. 

STATEMENT OF DIANE MITSCH BUSH, CHAIR, ROUTT COUNTY BOARD OF

COUNTY COMMISSIONERS

Dear Members of Congress: We ask you to support extension of the oil shale funding limitation into FY 09. 

In the FY 08 Appropriations Bill, Congress approved a funding limitation withholding monies for the Bureau of Land Management’s (BLM’s) implementation of 

commercial leasing regulations for oil shale. The funding limitation was approved 

because development technologies remained unproven and the viability of those 

technologies unknown. 

In the past year little has changed. Both industry and the BLM agree that years 

will pass before technology is proven and the feasibility of oil shale development is 

known. The only notable information gained in the past year is that BLM’s Draft 

Programmatic Environmental Impact Statement (PETS) shows the impacts of commercial oil shale development in western Colorado will likely be significant to the 

clean air, clean water, water supply, wildlife habitat, as well as local economies and 

communities. It could also have substantial global warming impacts. 

Given what little we know about oil shale development, it only makes sense to 

refrain from designing and implementing a regulatory framework for this industry. 

To push ahead would put action before information which would be ill-conceived. 

Importantly, the Energy Policy Act of 2005 does not mandate that the Interior Department hold a commercial lease sale for oil shale resources. Instead, the law says 

the Department of Interior may hold a commercial lease sale the Interior Secretary 

finds sufficient support for such a program among state governors, Native American 

Tribes and other affected parties, which most certainly includes local municipalities 

and counties who value Colorado’s quality of life. We need results from meaningful 

analysis of oil shale RD&D before we can implement an effective regulatory framework. 

We need to know what technologies will be used and where development will 

make sense economically. Accordingly, we strongly encourage you to support efforts 

to extend into the FY 09 Interior Appropriations Bill, the current Congressional 

funding limitation barring the BLM from issuing final commercial oil shale leasing 

regulations, or issuing commercial leases until we have more information. 

STATEMENT OF JOAN MAY, CHAIR, SAN MIGUEL COUNTY BOARD OF COMMISSIONERS, TELLURIDE, CO 

Dear Members of Congress: We ask you to support extension of the oil shale funding limitation into FY 09. 

In the FY 08 Appropriations Bill, Congress approved a funding limitation withholding monies for the Bureau of Land Management’s (BLM’s) implementation of 

commercial leasing regulations for oil shale. The funding limitation was approved 

because development technologies remained unproven and the viability of those 

technologies unknown. 

In the past year little has changed. Both industry and the BLM agree that years 

will pass before technology is proven and the feasibility of oil shale development is 

known. The only notable information gained in the past year is that BLM’s Draft 

Programmatic Environmental Impact Statement (PEIS) shows the impacts of commercial oil shale development in western Colorado will likely be significant to the 

clean air, clean water, water supply, wildlife habitat, as well as local economies and 

communities. It could also have substantial global warming impacts. 

Given what little we know about oil shale development, it only makes sense to 

refrain from designing and implementing a regulatory framework for this industry. 

To push ahead would put action before information which would be ill-conceived. 

Importantly, the Energy Policy Act of 2005 does not mandate that the Interior Department hold a commercial lease sale for oil shale resources. Instead, the law says 
92 

the Department of Interior may hold a commercial lease sale if the Interior Secretary finds sufficient support for such a program among state governors, Native 

American Tribes and other affected parties, which most certainly includes local municipalities who value Colorado’s quality of life. We need results from meaningful 

analysis of oil shale RD&D before we can implement an effective regulatory framework. 

We need to know what technologies will be used and where development will 

make sense economically. Accordingly, we strongly encourage you to support efforts 

to extend into the FY 09 Interior Appropriations Bill, the current Congressional 

funding limitation barring the BLM from issuing final commercial oil shale leasing 

regulations, or issuing commercial leases until we have more information. 

STATE OF COLORADO, 

OFFICE OF THE GOVERNOR, 

Denver, CO, april 23, 2008. 

Hon. DIANNE FEINSTEIN, 

Chairman [sic], 

Hon. WAYNE ALLARD, 

Ranking Republican Member, Subcommittee on Interior, Environment, and Related 

Agencies, SD-131, Dirksen Senate Office Building, Washington, DC. 

DEAR CHAIRMAN FEINSTEIN AND SENATOR ALLARD: As you know, the Energy Policy Act of 2005 (EPACT) has several provisions intended to foster development of 

oil shale as an energy source. 

The Bureau of Land Management (BLM) has already implemented some of those 

provisions, by leasing several tracts of oil-shale lands for research, development, and 

demonstration (RD&D) projects and by issuing a draft programmatic environmental 

impact statement (PEIS) for a commercial-scale leasing program. 

The draft PEIS indicates that BLM is proposing to make large areas of Northwest 

Colorado available for that purpose while delaying study of the cumulative impacts 

of proposed oil shale projects until BLM receives applications for commercial leases. 

On March 20th, I submitted formal comments on that draft PEIS. 

I pointed out that we have much at stake—because while Colorado recognizes the 

importance of the oil shale resource, we place equal importance on protecting our 

State’s air quality, water quality, vegetation, and soil resources because they are 

vital to the agriculture, hunting and fishing, recreation, and retirement communities which, along with development of energy and mineral resources are key to 

our continued economic vitality. 

I also noted that if BLM were to authorize a commercial oil shale industry in Colorado, the result would likely be the largest industrial development in our State’s 

history, with enormous implications not only for the Western Slope but for all of 

Colorado. 

EPACT requires BLM to proceed with issuance of final commercial-leasing regulations without waiting for completion of the RD&D program. However, section 433 

of the Consolidated Appropriation Act, 2008 provides that none of the funds made 

available by that Act can be used to prepare or publish such final regulations or 

to conduct an oil shale lease sale pursuant to subsection 369(e) of EPACT. 

I support that restriction, because I am convinced that for BLM to prepare regulations for commercial oil shale leasing without the benefit of data from the ongoing 

RD&D projects will mean that the regulations will be premature and not well founded. 

That is why, as I said in my comments on the draft PEIS, Colorado will continue 

to oppose any commercialization plan that calls for commercial leasing, or even the 

promulgation of leasing regulations, prior to a meaningful evaluation of the RD&D 

projects and proper NEPA analysis. 

However, unless Congress acts to extend the restriction it will expire on October 

1, 2008. Accordingly, I request that you actively work to extend it by having a similar restriction included in the Interior, Environment, and Related Agencies appropriations bill for fiscal year 2009. 

Thank you for your consideration of this request regarding a matter of great importance to Colorado. 

Sincerely, 

BILL RITTER, JR., 

Governor. 
93 

STATEMENT OF CHRISTOPHER S. LOLLEY, OIL SHALE MANAGER, CHEVRON, HOUSTON, TX 

Chevron would like to thank you for the opportunity to provide comments on the 

Draft Oil Shale and Tar Sands Resource Management Plan Amendments to Address 

Land Use Allocations in Colorado, Utah, and Wyoming and Programmatic Environmental Impact Statement (PEIS). We appreciate the effort which has gone into this 

work and recognize that this effort included collaboration with other federal, state 

and local agencies. 

Chevron is committed to helping provide the energy the world needs in a way 

which is socially and environmentally responsible. We desire to positively impact 

the communities in which we operate, and our vision with regard to oil shale development, as with all projects we undertake, is to be the company most admired for 

its people, partnership and performance. 

The Energy Policy Act of 2005 declared that oil shale and tar sands development 

are strategically important domestic energy resources that should be developed to 

reduce the nation’s growing dependence on oil from politically and economically unstable foreign sources. Chevron fully supports this declaration and believes that the 

vast oil shale resources in the United States are an important part of this strategy. 

CHEVRON’S VIEW ON COMMERCIAL LEASING PROGRAM

Chevron believes that a full scale commercial leasing program should not proceed 

at this time without clear demonstration of commercial technologies. The BLM’s 

original intent in issuing RD&D leases was to help accomplish this task. The RD&D 

program helps to insure that oil shale technologies can operate at economically sustainable and environmentally responsible levels prior to full-scale commercial leasing. To that end, Chevron encourages the BLM to consider expanding the RD&D 

leasing program. Chevron also feels that the infrastructure and socioeconomic needs 

of local communities need to be addressed as the industry goes from research to 

commercial development. Our efforts are to work in cooperation and partnership 

with pragmatic environmental groups, local communities and government to move 

oil shale development forward in a way that is environmentally responsible, economically sustainable, and proven initially on a small scale. 

Chevron, however, does support discussions on developing a path forward for 

eventual commercial leasing. It is important that discussions take place now to help 

develop the proposed rules and regulations around the eventual issuance of these 

leases. In particular, Chevron would like to see improved regulatory consistency between the BLM, state and local governments. A possible solution would be to establish some sort of joint review process or board with decision making powers. 

CHEVRON AGREES WITH THE BLM’S RECOMMENDED ALTERNATIVE B

Given the three scenarios put forth in the PEIS by the BLM, Chevron agrees with 

the BLM’s recommendation of Alternative B. This scenario is the only one of the 

three which were considered that allow for full and adequate development of the 

vast oil shale resource. Both of the other alternatives are too restrictive. 

Programmatic Alternative A does not allow for the eventual issuance of commercial leases. Chevron recommends clarification on the description of Alternative A. 

This alternative essentially limits development to the existing RD&D leases which 

have been granted. However, according the BLM leases, the lessee ...shall have the 

exclusive right to acquire any or all portions of the preference lease area for inclusion in the commercial lease, up to a total of 5,120 contiguous acres...’’ The BLM 

needs to clarify whether or not their intent was to include the contiguous acres 

which are already part of the approved lease programs. 

Chevron views Alternative C as too restrictive for the eventual commercial development of the vast oil shale resources available. Chevron believes that the spirit of 

the Energy Policy Act of 2005 was not to unnecessarily restrict oil shale development to small isolated parcels of land, but rather to maximize the potential development of this resource for the energy security of the country. 

One alternative which was not considered was a hybrid alternative which would 

represent a middle ground between Alternative B and Alternative C. This might 

provide additional contiguous land for adequate commercial development activity 

while protecting additional land if that is deemed necessary. 

CHEVRON BELIEVES ADEQUATE CHARACTERIZATION OF THE OIL SHALE RESOURCE IS

ESSENTIAL TO UNDERSTAND ITS IMPACT ON DOMESTIC ENERGY RESOURCES

The PEIS represents a significant document which will be reviewed by many in 

the public domain. As such, it is important to accurately quantify the potential oil 
94 

shale resource in the United States. Chevron recognizes that there is uncertainty 

in all resource estimates. We also recognize the resource estimates are dependent 

on the assumptions used for the calculation. There is significant literature in the 

public domain which has attempted to quantify the potential volumes of oil shale 

resources in the United States. Chevron suggests that the BLM consider publishing 

a range of potential resource volumes rather than a single deterministic number as 

shown in Table ES-1. This would adequately communicate to other government, industry and public officials not only the magnitude of this important and vast resource, but also the uncertainty in trying to quantify the volume depending on the 

set of assumptions used. 

Chevron would like to again thank you for the opportunity to comment on the 

Draft Oil Shale and Tar Sands Resource Management Plan Amendments to Address 

Land Use Allocations in Colorado, Utah, and Wyoming and Programmatic Environmental Impact Statement (PEIS). We appreciate the effort which has been put into 

the study and look forward to working with peers in our industry, the BLM, other 

federal, state, and local agencies as well as the public in helping to unlock this vast 

resource. 

Please contact me if you have any questions or need clarification on our comments. 

ROCKY MOUNTAIN FARMERS UNION, 

Greenwood Village, CO, May 14, 2008. 

Hon. DIANE FEINSTEIN, 

Chairman, 

Hon. WAYNE ALLARD, 

Ranking Member, Subcommittee on Interior, Environment, and Related Agencies, 

Committee on Appropriations, SD 131, Dirksen Senate Office Building, Washington, DC. 

DEAR CHAIRMAN FEINSTEIN AND RANKING MEMBER ALLARD, 

Rocky Mountain Farmers Union requests that Congress extend Section 433 of the 

Consolidated Appropriations Act of 2008 which prohibits the Department of the Interior from issuing oil shale and tar sands leasing regulations. This moratorium is 

slated to expire at the end of the current fiscal year, and we feel it is appropriate 

to extend this moratorium for the reasons listed below. 

Water users on both sides of the Continental Divide use the water resources of 

the Western Slope, from agricultural producers to recreational and municipal users. 

Instead of playing a game of chance with Colorado’s most precious natural resource, 

Congress should authorize oil shale leases only when comprehensive data from research leases are properly analyzed. 

The issues before us are complex. We must fully understand the possible demands 

on statewide infrastructure from water needs to energy consumption to transportation demands before leasing regulations are adopted. Rocky Mountain Farmers 

Union is opposed to the leasing of commercial oil lease resources before the full effectiveness of and impacts from research and development are fully known. Please 

do not play games with Colorado’s precious water resources. 

Sincerely, 

KENT PEPPLER, 

President. 

THE STATE OF WYOMING, 

OFFICE OF THE GOVERNOR, 

Cheyenne, WY, May 16, 2008. 

Hon. DIANNE FEINSTEIN, 

Chair, 

Hon. WAYNE ALLARD, 

Ranking Republican Member, Subcommittee on Interior, Environment, and Related 

Agencies, SD-131, Dirksen Senate Office Building, Washington, DC 

DEAR CHAIRMAN FEINSTEIN AND SENATOR ALLARD: I am writing to share the state 

of Wyoming’s perspective on the oil shale provisions of the Energy Policy Act of 2005 

(EPACT). 

Because the technologies that may one day be used for large-scale, economical 

production of synfuels from oil shale are unproven and still unknown, I believe the 

best course for the future of oil shale development is to support the current Research, Development and Demonstration (RD&D) leasing program. Commercial 
95 

* Document has been retained in committee files. 

lease-land allocations and the promulgation of regulations for oil shale development 

should occur only after the RD&D phase has clarified what the deployable technologies and their impacts may be. 

At present, the limitations on developing oil shale are defined by technology rather than policy. For this reason, section 433 of the 2008 Consolidated Appropriation 

Act, which provides that none of the funds made available by that Act can be used 

to prepare or publish final regulations or conduct an oil shale lease sale pursuant 

to subsection 369(e) of EPACT, is appropriate and ought to be extended for fiscal 

year 2009. 

Thank you for your consideration of this matter. I have attached a copy of the 

state of Wyoming’s comments on the Oil Shale and Tar Sands Programmatic Environmental Impact Statement (PEIS) to clarify my position further.* 

Best regards, 

DAVE FREUDENTHAL, 

Governor. 

ATTACHMENT

THE STATE OF WYOMING, 

OFFICE OF THE GOVERNOR, 

Cheyenne, WY, March 19, 2008. 

BLM Oil Shale and Tar Sands, 

Attn: Draft Programmatic EIS Comments, 

9700 South Cass Avenue, 

Argonne, IL. 

To Whom It May Concern: Thank you for the opportunity to comment on the Oil 

Shale and Tar Sands Programmatic Environmental Impact Statement (PEIS). Because I believe a careful, research-driven approach is the key to unlocking the energy potential of western oil shale, I support the ‘‘No Action’’ Alternative A at this 

time. 

The technologies that may one day be used for large-scale, economical production 

of synfuels from oil shale are unproven and still unknown. Based on this lack of 

technological information, it is not feasible to make long-term policy decisions to 

manage this industry. Potential technologies and their impacts must be understood 

before oil shale leasing, lease-land allocations and Resource Management Plan modifications move forward. 

The Energy Policy Act and current RD&D projects 

Following the enactment of section 369 of the 2005 Energy Policy Act, the U.S. 

Congress charged the BLM with publishing final regulations for commercial oil 

shale leasing. Since then, noticeably less emphasis has been placed on oil shale commercialization, and a restriction has been put on Interior Department appropriations preventing the preparation or issuance of final oil shale commercial leasing 

regulations in fiscal year 2008. The state of Wyoming interprets these signals from 

Congress as an invitation to take a more deliberate, circumspect approach to oil 

shale—one which will allow private industry to continue research and development, 

and provide adequate time for public understanding of what future developments 

might entail. 

The five Research, Development and Demonstration (RD&D) projects currently 

underway will serve as the foundation from which to identify technological hurdles, 

gauge economic viability, and assess socioeconomic and environmental impacts. 

Only if one or more of these 160-acre projects are proven economically and environmentally viable should the ramping up to commercial-scale operations be considered. Finally, the promulgation of regulations should await completion of the RD&D 

phase, in order to give states the necessary data and time to completely understand 

the risks. 

Advantages of Alternative A over Alternatives B and C 

Oil shale development has had a checkered past, and, if not undertaken cautiously and correctly this time, efforts at commercial development could be impeded 

for years to come. The state of Wyoming remembers well the results of the ‘‘Colony 

Project’’ and ‘‘Black Sunday’’ in the Colorado’s western slope communities. Between 

1969 and 1979, the U.S. Department of Energy funded an in-situ fracturing and retort operation near Rock Springs. Efforts to remediate that operation are still ongoing. 
96 

Alternative A defers action, but it also does something very important for future 

oil shale development. It provides adequate time to identify a reserve, the synfuel 

that theoretically could be contained within the oil shale resource. Alternative A 

does this without attempting to describe the synfuel reserve. The PEIS has identified a tremendous oil shale resource in Wyoming and estimated billions of barrels 

of synfuel, but the reserve is governed by unknown technological, environmental, geological, socioeconomic, and economic constraints. Before a reserve is identified and 

quantified, potential impacts must be assessed. It would seem a peculiar use of time 

and money to allocate lands available for commercial leasing for an unknown synfuel reserve, especially when there is no known technology to recover the energy reserves. 

Alternatives B and C both intersect with Adobe Town, an area in south central 

Wyoming that was recently designated by the Wyoming Environmental Quality 

Council (EQC) as ‘‘Very Rare or Uncommon.’’ Once this designation is finalized 

under Wyoming Statute 35-11-112 (a) (v) and Chapter 7 of the Rules of Practice and 

Procedure rules by the Environmental Quality Council, development in the Adobe 

Town area for oil shale and gravel development will be subject to state regulation. 

Specifically, non-coal mining will be limited by the Director of the Department of 

Environmental Quality under Wyoming Statute 35-11-406 (m) (iv) if the proposed 

mining operation would irreparably harm, destroy, or materially impair Adobe 

Town. 

Conclusion 

I appreciate your consideration of these comments and urge the selection of Alternative A in the PEIS. I firmly believe that it is the best option for both the state 

and the future of oil shale development. It is worth underscoring once again that 

Alternative A would still allow the five RD&D leases to operate, which if any of the 

projects prove viable, could result in both commercial-scale development and data 

sets that would clarify the still-uncertain impacts. 

Best regards, 

DAVE FREUDENTHAL, 

Governor. 

RAND CORPORATION, 

Arlington, VA, May 12, 2008. 

Hon. JEFF BINGAMAN, 

Chairman, Senate Committee on Energy and Natural Resources, 304 Dirksen Senate 

Office Building, Washington, DC. 

DEAR CHAIRMAN BINGAMAN: Thank you for the invitation to testify before the Senate Committee on Energy and Natural Resources hearing regarding oil shale on 

May 15, 2008. Unfortunately, I will not be able to testify in person before the Committee; however, I would like to submit a copy of my testimony ‘‘Policy Issues for 

Oil Shale Development’’ for the record. This testimony was given on April 17, 2007 

to the House Committee on Natural Resources Subcommittee on Energy and Natural Resources. 

I would welcome the opportunity to meet with you and your staff to discuss issues 

pertaining to the development of oil shale resouces. 

Regards, 

JAMES T. BARTIS, 

Senior Policy Researcher. 

[Enclosure.] 
97 

1The opinions and conclusions expressed in this testimony are the author’s alone and should 

not be interpreted as representing those of RAND or any of the sponsors of its research. This 

product is part of the RAND Corporation testimony series. RAND testimonies record testimony 

presented by RAND associates to federal, state, or local legislative committees; government-appointed commissions and panels; and private review and oversight bodies. The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that 

address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. 2This testimony is available for free download at http://www.rand.org/pubs/testimonies/CT279. 

3Oil Shale Development in the United States: Prospects and Policy Issues, Santa Monica, CA: 

RAND MG414-NETL, 2005. 

JAMES T. BARTIS1

THE RAND CORPORATION

POLICY ISSUES FOR OIL SHALE DEVELOPMENT2

APRIL 17, 2007

Chairman and distinguished Members: Thank you for inviting me to speak on the 

development of our nation’s oil shale resources. I am a Senior Policy Researcher at 

the RAND Corporation with over 25 years of experience in analyzing and assessing 

energy technology and policy issues. I am also the principal author of a RAND report that addresses the prospects and policy issues of oil shale development in the 

United States. 3 This work was sponsored and funded by the National Energy Technology Laboratory (NETL) of the U.S. Department of Energy. Since that work was 

published in the summer of 2005, I have continued to follow the industrial progress 

and government activities associated with oil shale development in Colorado and 

Utah. 

The Energy Policy Act of 2005 (EPACT) established the framework the federal 

government is currently using to move forward in developing the domestic oil shale 

industry. In some areas, such as in the awarding of small lease tracts for research 

and development (R&D), significant progress has occurred. But in other areas, such 

as in preparing for early commercial leasing, I am concerned that the EPACT oil 

shale provisions fall short of what is needed to ensure that the strategic potential 

of this unique resource could be realized. 

Today, I will discuss the key problems and policy issues associated with developing the domestic oil shale industry and the approaches Congress can take to address these issues. My key conclusions are as follows: (1) the knowledge base about 

the economic, technical, and environmental feasibility of oil shale development is 

not adequate to support the formulation of a commercial leasing program on the 

timescale mandated by EPACT; (2) the fundamental approach the Department of 

the Interior is currently taking may be counterproductive if the goal is to keep open 

the option for a sustainable domestic oil shale industry ; (3) meanwhile, important 

opportunities for early action are not being addressed; and (4) additional legislation 

may be appropriate to ensure that federal actions are most effectively directed at 

the sustainable development of oil shale at a level commensurate with its importance to our national security and economic well-being. 

THE IMPORTANCE AND VALUE OF OIL SHALE

The potential public wealth embedded in our oil shale lands is staggering. Many, 

if not most, of the potential lease tracts in Colorado will contain over 2 million barrels of oil per surface acre. That means that a single 5,760-acre lease tract holds 

nearly 6 billion barrels. Assuming a modest recovery of the total oil within a lease 

tract, the potential public value of a single lease is clearly in the tens of billions 

of dollars. The potential public value of the total oil in place in oil shale deposits 

in the Green River Formation is in the trillions of dollars. However, realizing this 

potential depends on making further technical progress and on developing a regulatory and land management framework that ensures environmentally sustainable 

oil shale production. 

As part of RAND’s examination of oil shale development, our research addressed 

the strategic benefits of having in place a mature oil shale industry producing millions of barrels of oil per day. Such a level of production would yield considerable 

economic and national security benefits, primarily by causing world oil prices to be 

lower than what would be the case in the absence of oil shale development. As a 

result, consumers would pay tens of billions of dollars less for oil. Lower world oil 

prices would also cause a decrease in revenues to oil exporting nations, some of 

which are governed by regimes that are not supportive of U.S. foreign policy objec-
98 

tives. These benefits associated with lower world oil prices accrue to our nation as 

a whole; however, they are not captured by the private firms that would invest in 

oil shale development. 

If shale-derived oil can be produced at prices well below world oil prices, then the 

private firms that do invest in oil shale development could garner economic profits 

above and beyond what is considered as a normal return on their investments. 

Through lease bonus payments, royalties, and taxes on these profits, we estimate 

that roughly half of these economic profits could go to federal, state, and local governments and, thereby, broadly benefit the public. 

While the prospects of major economic and national security benefits motivate the 

development of oil shale, federal actions need to be tempered by the need to address 

the adverse environmental impacts and risks that accompany such development. 

Moreover, with the growing realization of the role of carbon dioxide in promoting 

climate change, these adverse impacts are not just local and regional, but also global. 

THE CURRENT COMMERCIAL LEASING SCHEDULE

At present, a number of firms are making appreciable investments in research directed at furthering the development of technologies required to produce liquid fuels 

from oil shale. However, to my knowledge, none of these firms has gathered technical information adequate to warrant a decision to invest hundreds of millions, if 

not billions, of dollars on first-of-a-kind commercial oil shale plants. These firms 

continue to focus on process development, improvement, and evaluation, but they 

have not yet conducted the front-end engineering and design work needed to establish the economic viability, oil recovery potential, and environmental performance of 

the approaches under consideration. 

The fact that industry is years away from establishing commercial viability and 

environmental performance calls into question the analytic basis of the current, legislatively imposed schedule for establishing regulations for commercial leasing. The 

programmatic Environmental Impact Statement (EIS) for commercial leasing is 

being prepared with very limited information on the environmental performance of 

important new processes, especially the in-situ extraction methods that offer to reduce significantly the environmental impacts of oil shale development. There is limited information on the response of local vegetation and wildlife to ecosystem loss 

or damage, on the eventual options for habitat restoration, or on how carbon dioxide 

emissions will be managed, including the feasibility of geological sequestration. 

A reasonable alternative is to eliminate the legislative requirement to fast-track 

the promulgation of regulations for a commercial leasing program. Instead, the federal government could focus its efforts on the critical steps required for developing 

oil shale, as further discussed in this testimony. 

THE CHALLENGE OF OIL SHALE LEASING

For several reasons, the federal approach to oil shale leasing cannot be based on 

the approach used to lease other energy resources—such as coal, petroleum, and 

natural gas—that occur on federal lands. First, as discussed above, there is no prior 

commercial experience that is relevant to the development of the rich U.S. oil shale 

resources. The government lacks important information about the costs and risks 

of development. It thus runs the risk of either being too lenient about lease bonus 

and royalty payments, allowing firms to have access without adequate compensation 

to the public, or too zealous, causing a loss of private-sector interest in oil shale development, especially for initial commercial plants. 

Second, because of the vast size and geographic concentration of the highest-value 

oil shale resources and the need to perform extensive on-site processing, leasing decisions made by the federal government may have a profound impact on the residents of northwestern quarter of Colorado and the northeastern quarter of Utah. In 

particular, large-scale development of oil shale will cause federal lands to be diverted from their current uses, will almost certainly have adverse ecological impacts, and will likely be accompanied by socioeconomic impacts that could be particularly severe, especially within the northwestern quarter of Colorado. 

Finally, and most important, the impacts on air and water quality, the provisions 

taken to meet demands for water, and the infrastructure associated with the initial 

round of commercial plants may impede, if not fully preclude, the development of 

oil shale to a level commensurate with its potential economic and national security 

value to the nation. As with the previous issue, this problem derives from the geographic concentration of all high-value oil shale resources to the very small area encompassed by the Piceance Basin of Colorado and within a small portion of the 

Uinta Basin within Utah. As an example of this problem, estimates made in the 
99 

early 1980s predicted that shale-derived oil production could not exceed a few hundred thousand barrels per day, based on considerations of how just a few plants located in the Piceance Basin would degrade regional air quality. 

THE CRITICAL PATH FOR OIL SHALE DEVELOPMENT

In my judgment, establishing a broad-based commercial leasing program within 

the next five years is not necessary and, in fact, may be detrimental to oil shale 

development. Since the publication of the 2005 RAND report sponsored by NETL 

on the prospects and policy issues of oil shale development, important technical 

progress has taken place. A number of highly reputable firms have announced their 

interest in pursuing oil shale. Some of these firms are participating in the Research, 

Development, and Demonstration (RD&D) lease program being administered by the 

Bureau of Land Management (BLM). Others are interested in participating, if a second round of RD&D leases becomes available. However, based on our knowledge of 

where these firms are in technology development and evaluation, none—with the 

possible exception of Shell Oil—will be prepared to make a financial commitment 

to a pioneer commercial-scale oil shale facility for at least five and, in some cases, 

as many as ten years. 

Given this judgment about corporate preparedness to move forward with oil shale, 

I suggest the federal government direct its efforts at the list of ‘‘early actions’’ listed 

in the RAND oil shale report, viewing those actions as priority measures for developing oil shale as a strategic resource for the United States. 

Conducting critical ecological and environmental research 

This includes developing and implementing a research plan directed at establishing options for mitigating damage to plants and wildlife, conducting mathematical modeling and monitoring of the subsurface environment, and conducting research directed at identifying options for long-term spent shale disposal. 

Developing a federal oil shale leasing strategy 

The overall goal of this strategy should be preserving the option of the sustainable, and publicly acceptable, large-scale development of oil shale within the Green 

River Formation. While developing information and analyzing options for eventual 

commercial leasing should be an important component of this strategy, the nearterm objectives should focus on obtaining information required for determining 

when, how, where, and how much development should occur on federal lands within 

the Green River Formation. Beyond the above-mentioned ecological and environmental research, critical information needs include process performance, infrastructure demands (especially, water, power, processing facilities, and pipelines), options 

for protecting regional and local air and water quality, analysis of the feasibility of 

multi-mineral development, and options for carbon sequestration. 

Fostering technology development 

By providing small RD&D leases within the Piceance Basin to three firms, the 

BLM has made important progress in moving oil shale technology forward. However, this should not be a one-time program. In preparing for a second round of 

RD&D leases, the BLM should review the continued appropriateness of provisions 

that may not be consistent with a strategic plan for large-scale oil shale development. Examples of questionable provisions include requiring multi-mineral development and granting preference rights to future commercial leases. Other firms that 

appear to be highly qualified to invest in oil shale development are interested in 

obtaining small lease tracts suitable for RD&D. Encouraging their participation is 

in the national interest, because a broader set of participants will promote greater 

innovation and competition. We also suggest that the federal government consider 

sponsoring high-risk, high-payoff research directed at improving the yield and environmental performance of oil shale technologies. To the extent that this research is 

conducted at universities and national laboratories, it offers the important benefit 

of educating and maintaining a cadre of scientists and engineers that are highly 

knowledgeable of oil shale development. 

Providing land access to early commercial plants 

While a commercial leasing program is premature, a mechanism is required for 

providing access to federal oil shale lands to those firms prepared and able to finance, construct, and operate pioneer commercial oil shale production facilities. 

Given that production from a single lease may have a public value of tens of billions 

of dollars—once oil shale technology is commercial and competitive leasing is possible—we suggest that the government refrain from attempting to establish the regulatory parameters for the full exploitation of a lease site that would occur after ex-
100 

pansion of the pioneer facility. An alternative approach is for the government to provide land access and possibly other assistance in the context of a cooperative agreement with the industrial proponent of the project. Such an agreement would be 

project-specific and would include provisions covering the schedule and duration of 

the project, environmental performance, environmental monitoring, and payments to 

the government, all of which would be consistent with the government’s overall leasing strategy. Most important, the initial cooperative agreements should not prejudice how lease agreements might be done in the mature phase of an oil shale industry. 

Fostering early commercial experience 

In building first-of-a-kind plants, a private firm will take on considerable technical risks, as well as the market risks associated with fluctuating world oil prices. 

Considering the economic and national security benefits associated with achieving 

large-scale oil shale production, it is appropriate for the government to share in 

these risks. This is a policy area that RAND is currently examining. At this time, 

I can say that we are considering a number of options, such as allowing capital investments in pioneer plants to be expensed and deferring lease bonus and royalty 

payments until the production facility is operating at a profit. The efficacy and economic and fiscal impacts of these options require further analysis. 

However, based on my own professional experience and judgment, I caution 

against the use of federal loan guarantees. Firms with the technical and management wherewithal to build and operate first-of-a-kind oil shale plants—and then 

move forward with subsequent plants—generally have access to needed financial resources. Loan guarantees can induce the participation of less-capable firms, while 

shielding the project developer from the risks associated with cost overruns and 

shortfalls in plant performance. The public then ends up with the bill if the project 

fails. 

Dealing with the impact of oil shale development on global climate change 

Most process concepts for producing liquid fuels from oil shale cause carbon dioxide emissions in excess of those associated with refining conventional crude oils. 

Since most of these emissions will come from large stationary sources, such as 

power plants providing electricity to oil shale facilities and plants for processing 

shale-derived oil, it may be feasible to capture this excess carbon dioxide. For initial 

commercial shale processing plants, an option is to use this captured carbon dioxide 

for enhanced oil recovery in nearby oil production areas. 

But the extensive development of oil shale would likely produce carbon dioxide at 

levels beyond the capacity of the enhanced oil recovery market. In this case, the captured carbon dioxide may need to be geologically sequestered. At present, however, 

the technical feasibility of geological sequestration has not been demonstrated. 

Thus, a critical issue in developing oil shale may be successfully demonstrating geological sequestration in the general vicinity of the Piceance Basin. Toward this end, 

planning for oil shale development should include assessing the potential use of coproduced carbon dioxide for enhanced oil recovery and the viability of geological sequestration, including a large-scale demonstration. 

Options for Legislative Action 

Congress has the opportunity to address a number of existing legislative constraints and mandates that may not be in the best long-term interest of the nation, 

if oil shale development is to remain a viable option. There are also a few areas 

where Congress may need to assert its will, such as including the U.S. Environmental Protection Agency in federal planning for oil shale development. I suggest 

the following for consideration by the Committee. 

1) Rescind the requirement to prepare a programmatic EIS for a commercial 

leasing program within 18 months. Instead, require that the programmatic EIS 

be a phased effort for establishing an oil shale leasing and development strategy 

for the federal government. The initial phase of this effort should be directed 

at establishing critical information needs so that appropriate research programs 

can be formulated and carried out. 

2) Rescind the requirement to establish final regulations for a commercial 

leasing program within six months of completing the programmatic EIS. As discussed above, within the next few years, it is unlikely that adequate technical, 

economic, and environmental information will be available to formulate fair and 

equitable leasing regulations. 

3) Require that the Department of Energy, the Department of the Interior, 

and the Environmental Protection Agency cooperatively develop a federal oil 

shale leasing strategy. 
101 

4) Require that the Department of Energy, the Department of the Interior, 

and the Environmental Protection Agency investigate and report on alternative 

approaches to providing access to federal lands for early first-of-a-kind commercial facilities. 

5) Require that the Department of the Interior make available for leasing additional lands for the purpose of conducting RD&D activities. 

6) Require that the Department of the Interior and the Department of Energy 

prepare plans for conducting critical environmental and ecological research; 

high-risk, high-payoff process improvement research; an assessment of carbon 

management options; and a large-scale demonstration of carbon dioxide sequestration in the general vicinity of the Piceance Basin. 

In closing, I commend the Committee for addressing the important topic of moving forward with oil shale development. In much of the policy debate on oil shale 

development, I see two sides. On the one hand, there are the boosters who overestimate the benefits and urgency of moving forward and often dismiss the serious environmental and policy issues that need to be addressed. They advocate using the development of oil sands in Alberta, Canada, as a model for the development of U.S. 

oil shale. Anyone familiar with the heavy subsidization of early oil sands production 

and the environmental degradation that continues to be associated with Canadian 

oil sands extraction knows that the ‘‘Alberta model’’ is a nonstarter for development 

in the Green River Formation. On the other hand, there are the naysayers, who in 

their concern for environmental protection appear to dismiss the economic costs of 

importing high-priced oil and the national security consequences of continued 

wealth transfers to certain oil exporting nations. 

At RAND, our research has identified a course that addresses both the environmental concerns and the national benefits that accrue from large-scale production. 

We often refer to the RAND approach as a ‘‘measured approach’’ in that it involves 

gathering information and proceeding at a slow enough pace to enable evaluation 

and course correction along the way but fast enough to advance understanding and 

preparation for possible large-scale commercial production so that in a decade we 

are in much better position to weigh both benefits and costs. The current framework 

established by EPACT to rush forward with commercial leasing is clearly not a 

measured approach. 

The United States has before it many opportunities—including oil shale and coal, 

renewables, improved energy efficiency, and fiscal and regulatory actions—that can 

promote greater energy security. Oil shale can be an important part of that portfolio. And it will be as long as we proceed with a strong commitment to take a wellinformed path, recognizing that we have important environmental, economic, and 

national security issues at stake. 

Æ