### Regulatory Flexibility Act Threshold Analysis for The Proposed Commercial Oil Shale Management Regulations Introduction The Regulatory

Flexibility

Act (RFA) requires agencies to anal yz e the economic impact of proposed and final regulations to determine the extent to which there is a significant economic impact on a substantial number of small entities. The RFA establishes an anal yt ical process for determining how public policy goals can best be achieved without erecting barriers to competitio n, stifling innovation, or imposing undue burdens on s mall entities. Executive Order 13272 reinforces executive intent that agencies give serious attention to impacts on small entities and develop regulatory alternatives to reduce the regulatory

burden on small entit ies. When the proposed regulation will impose a significant economic impact on a substantial number of small entities, the agency must evaluate alternatives that would accomplish the objectives of the rule without unduly burdening small entities. Inherent in the RFA is a desire to remove barriers to competition and encourage agencies to consider way s of tailoring regulations to the size of the regulated entities. In order to certify a rule under the RFA, an agency must provide a description of the affect ed entities and the impacts that clearl y justifies and forms a factual basis for the “no impact” certification. The agency ’s reasoning and assumptions underlying its certification should be explicit in order to obtain public comment and thus receive infor mation that c ould be used to re

- evaluate the certification. 1 

### Proposed Rule This new rulemaking provide s the BLM an opportunity to consider the 2008 regulations in light of the still nascent character of the technology necessary

to economically

develop oi l shale resources. In addition, after publication of the final rule in 2008, the regulations were challenged in Federal court. As part of the settlement agreement, the BLM agreed to propose revisions to the 2008 regulations b y addressing the ro yalt y rate and certain environmental protection requirements applicable to commercial oil shale leasing. This proposed rule would revise the regulations at 43 CFR Parts 3900, 3920, and 3930. This proposed rule considers whether the ro yalt y rate for commercial oil shale production should not be set until more is known about the emerging oil shale technologies, whether future applications to lease should include specified resource protection plans (watershed and groundwater protection plan, an airshed review, an inte grated waste management plan, and an environmental protection plan), and activity would not be approved unless operations could proceed without unacceptable environmental risk.

1 U.S. Small Business Administration, Office of Advocacy, A Guide for Government Agencies: How to Com ply w ith the Regulatory Flexibility Act , May 2003 , ( http://www.sba.gov/advo/laws/rfaguide.pdf ).2

Royalt y Rates The Energy

Policy Act of 2005 directs the Secretary of the Inte rior (Secretary) to “establish ro yalties, fees, rentals, bonus, or other payments for leases under this section that shall: Encourage development of the oil shale and tar sands resource; and
Ensure a fair return to the United States.” Encourage Developm ent

- For economicall y developable resources, the various pay ments required to obtain, hold , and produce on a Federal oil shale lease will affect the lease’s development potential. The lower those pay ments, the less likely

those costs will adversel y impac t that potential. However, a reduction in those pay ments will not make an uneconomic operation financiall y viable.
Fair Return

- In the context of this regulatory initiative, fair return is considered the functional equivalent to fair market value (FMV). Fair market value is a well

- established concept in law, case law, regulation and practice for a number of BLM mineral and non

mineral management programs. The Federal Land Policy and Management Act (FLPMA) declares a policy that “the United States recei ve fair market value for the use of the public lands and their resources unless otherwise provided for b y statute.” A propert y’s FMV is based on the appraisal concept of the price a property would sell for given a knowledgeable and willing, but not obligated, buy er and seller. It is intended to be an estimate of what would occur in a market situation. Two commonly

accepted procedures for value estimation are the comparable sales approach and the income approach. The comparable sales approach is an appraisal procedure in which the prices paid in prior transactions of similar properties are used to value the propert y to be disposed of through leasing, exchange, or other means. This procedure generall y is preferred to other appraisal procedures since it is thought that prices paid in prior market transactions of similar properties provide the best indication of value. The income approach involves the estimation of annual costs and revenues associated with the development of the propert y under realistic con ditions. Annual cost and revenue streams are reduced to a single number in which future costs and revenues are discounted to the present. The property 's net income potential, discounted to the present, provides an estimate of current sale value. Under e ither approach, ascertaining a value figure must consider all factors that might affect the propert y’s market value. When estimating a property ’s FMV, the agency is generall y focusing on the bonus bid, assuming all other factors, including the ro yalt y r ate, to be held constant. Conversel y, in mak ing a determination about what ro yalty rate would ensure a fair return , the bonus bid must be held constant.3

Whether estimating the bonus bid or the ro yalty rate, to make a meaningful estimate, the oil shale le ase must have the potential to be economically developed. In the absence of an economic propert y, the bonus bid and/ or ro yalty rate would be a negative figure.
For economicall y developable resources, these payments will affect the lease’s development pot ential. These pay ments are cost s , and as with all acquisition s , development and production costs must be considered when determining the bonus bid and ro yalt y level that will allow the proposed operation to go forward. Under no scenario can the fair return for these pay ments be so onerous that the proposed development becomes uneconomic. The ability

to set a royalty

rate that meets both these requirements is dependent on a demonstrated technology to economicall y develop the resource. At this point in ti me, such technol ogy

has not been demonstrated. In 2009, Environmental groups sued the Secretary , arguing in part that the roy alt y rates established in the 2008 oil shale regulations were insufficiently supported and did not assure a fair return to the Uni ted States. Indeveloping this rule, the a pproaches the BLM considered in addressing the roy alty rate to apply

to oil shale leases included: Retaining the current ro yalty scheme; Proposing a new rate or sy stem of rates; or Establishing the rate prior t o a lease sale or lease conversion. During negotiations to settle that litigation, the BLM considered again the analy sis of the roy alt y rate alternatives that was considered prior to the promulgation of the 2008 oil shale regulations to determine whether to propose any amendment to those rates. The BLM determined that the 2008 anal ys is was the best possible given the information available at that time, but there could be doubt as to whether that information would accuratel y predict the relevant financial conditions of a commercial oil shale industry in the United States.
Therefore , the BLM has decided to propose that royalt y rates should be established on a lease

- by

- lease basis, with the benefit of information from Research, Development, and Demonstration (R, D and D) leases or other oil shale operations on non

- Federal lands that is not available at this time. The BLM expects that the comments on the proposed regulations will include detailed discussions of how best to establish royalty rates for an indus try that has not y et become commerciall y viable.
The BLM also considered whether to propose establish ing a new ro yalt y rate or rates. The BLM decided that there is no new information since publication of the 2008 rule about the costs and revenues of comm ercial oil shale operations, or about roy alties actuall y paid to non

- Federal mineral owners in the United States that would support establishing ro yalt y rates at this time.4

In addition to the proposal, the BLM is also requesting comments from the public o n various options for establishing an applicable ro ya lty scheme. These options are discussed below. Option 1

- Invite Comment on Proposed Lease Terms in a Proposed Notice of Lease Sale Under this option, the BLM would first publish a proposed notice of sale or conversion to a commercial lease for a period of not less than 30 day s. That proposed notice would include all proposed lease terms and stipulations, including proposed ro yal ty and rental rates. It also would include an explanation of how the BL M determined the proposed roy alt y rate. This would give interested parties and the public an opportunity to comment on all the proposed terms, including the proposed roy alt y rate. Under this option , and so as to allow adequate time for both comment and c onsideration of the comments, the BLM would amend s ection 3924.5 to require at least 60 day s between publication of the proposed notice of sale and the notice of sale. Option 2

- Invite Public Comment Using Coal Lease Sale Process As an alternative to p ublishing a proposed notice of sale, the BLM specifically seeks comments on a possible alternative procedure that would be modeled after a provision in the Federal coal leasing regulations at 43 CFR 3422.1. Instead of publishing a proposed notice of sale, the BLM would, at least 30 day s before the notice of sale, solicit public comment on the fair market value of, and expected economic recovery from, the oil shale lands proposed to be offered for lease and on what royalt y rate and other lease terms or stip ulations commenters believe should be required. The authorized officer would prepare a report evaluating the comments and containing his or her recommendations for the minimum bid and for the royalty rate and other lease terms to be included in the leases offered. Option 3

- Sliding Scale Royalt y Based on the Market Prices of Oil and Gas In the 2008 proposed oil shale rule, the BLM considered and sought comment on a sliding scale ro ya lty

. That approach was not adopted in the final 2008 rule, but in light of the need to reconsider the existing royalty rates under the terms of the settlement agreement , this rule seeks public comment on the best approach to implementing a sliding scale ro ya lty

structure. Although the BLM has expressed concerns in the past about the complexity of administering certain proposed sliding scale ro yalty proposals, we recognize that there is merit to the sliding scale concept, and in a simpler form, a sliding scale ro yalty could prove extremel y useful in meeting the dual goals of encouraging production and ensuring a fair return to taxpay ers from future oil shale development. One of the concerns that has been expressed regarding oil shale development is that potential oil shale developers may be reluctant to make the large up

- front investments5

required for commercial operations if they believe there is a chance that crude oil prices might drop in the future below the point at which oil shale production would be profitable (i.e., competitive with conventional oil production). A sli ding scale ro yalt y sy stem could allow the government to at least partiall y mitigate this development risk by providing for a lower ro ya lty

rate if crude oil prices fall below a certain price threshold. The basic concept is that in return for the Federal G overnment accepting a greater share of the price risk that an operator faces when prices are low (in the form of a lower roy alt y) , the G overnment would receive a greater share of the rewards (through a higher roy alt y) when prices are high.
The BLM has n ot decided on the specific parameters of a sliding scale ro ya lty sy stem, but is considering a simplified two

- or three - tiered sy stem based on the current roy alty rates alread y in effect for conventional fuel minerals. The applicable ro yal ty rate would be determined based on market prices of competing products (e.g., crude oil and natural gas) over a certain time period. In a two

- tiered s ys tem, if prices remain below a certain point during the applicable period, the ro yalt y rate on oil shale products would be the lower of two options. If prices are above that range for the period, the higher roy alt y would be charged. In a three

- tiered s ys tem, a third roy alt y rate would apply if prices rise above a second price threshold during the applicable period. Opti on 4

- Establish a Minimum Royalt y of 12.5% in Regulation, with Secretarial Flexibility

to Establish a Higher Rate Later Under this option, a minimum roy alt y of 12.5% would be established to address concerns about the existing rate and implement the terms of the settlement agreement. The minimum royalty

rate of 12.5%, the same rate as currentl y applied in the BLM's oil and gas program, is being considered as it is contemplated that the primary products produced from oil shale will compete directl y with th ose from onshore oil and gas production. However, the Secretary

would have the authorit y to establish a higher rate, if determined to be appropriate, without completing a new rulemaking. This option would provide flexibility for the Secretary

to adapt an d respond accordingl y to new information , such as emerging oil shale technologies , future oil shale production cost information , and changes to the price of this commodity , in order to help assure a fair return to the United States. Establishing a minimum roy alt y would be consistent with how other conventional fuels (e.g., oil, gas , and coal) are treated under existing statutes and regulations. In order to promote transparency in connection with the proposed change to allow a higher ro yalt y rate to be est ablished at a later time, the BLM would add a requirement to first publish a proposed notice of sale. That proposed notice would include all proposed lease terms and stipulations, including proposed roy alty and rental rates. It also would include an expl anation of how the BLM determined the proposed ro yalt y rate. The notice would invite comment on the proposed lease terms for a period of not less than 30 day s. This would give interested parties and the public an opportunity to comment on all the propose d terms, including the proposed ro yalt y rate. So as to allow6

adequate time for both comment and consideration of the comments, the BLM would require at least 60 day s between publication of the proposed notice of sale and the notice of sale.
The rule also invites comments on any other roy alty

sy stem or rates that would meet the dual two requirements of the E nergy P olicy Act of 2005 to encourage production and ensur e a fair return to the public. The cost of implementing these alternative ro yalty schemes wo uld not vary significantl y for either the industry

or the BLM. The proposed scheme, where the roy alty rate will be established on a lease

- by

- lease basis, will, however, add a level of uncertainty for prospective lessees. The uncertaint y in ro yalt y rates might discourage commercial oil shale development b y requiring entities to make business decisions with less information. Although this is a concern in theory , the proposed approach mirrors the approach used b y the BLM for non

- energy

solid mineral leases.
Resource Protection Plans Under the settlement agreement the BLM is required to propose expanding the information required from an operator as part of its plan of development (POD). The BLM considered several alternatives , including: Relying on the re quirement in the 2008 regulations to provide an y additional information necessary

for the BLM’s review of a proposed POD; or Proposing various specific resource protection plan, information , and review requirements.
The BLM considered whether such new r equirements were necessary in view of the provision in the regulations allowing the BLM to require operators to provide an y additional information necessary for the BLM’s review of a proposed POD. The BLM agreed to propose regulations requiring operators to submit a watershed and groundwater protection plan, an airshed review, an integrated waste management plan, and an environmental protection plan as part of each proposed POD because such information would likely

be necessary

in all or the vast majority of cases to conduct a complete anal ys is under the National Environmental Policy Act of 1969 (NEPA), and to assure that resources on the public lands are managed in the best interests of the United States. Thus, not including those plans and reviews would result in the BLM requiring that additional information from operators on an ad hoc basis even though it would not have been specified in the regulations. The proposed requirements would more completely inform the industry

and the public of the minimum re quirements for a complete POD. The proposed specific resource protection plan requirements might appear to be a significant additional cost to the applicant to prepare and for the BLM to review. This proposal, however, simply codifies in regulation what would likely be required for compliance with the requirements of NEPA prior to approval of a POD. The cost of7

implementing the various resource protection plans and review requirements should not vary significantl y between the alternatives for either the industry or the BLM.
Environmental Standard
Under the settlement agreement the BLM is required to propose an environmental performance standard for approval of oil shale leases and operations. The BLM considered several alternatives including:

 continui ng to make decisions based upon the BLM’s judgment subject to the mandate of the Federal Lands and Policy Management Act of 1976 (FLPMA) to prohibit unnecessary

and undue degradation (UUD) of the public lands, except that the existing R, D , and D leases in clude an additional standard for conversions to commercial leases that operations would not cause unacceptable environmental consequences (UEC);

 applying the UEC standard for all decisions; or

 applying the unacceptable environmental risk (UER) standard t o all decisions.
The BLM has included in the eight outstanding R, D , and D leases a standard for deciding whether to approve conversion to commercial leases

– UEC. The BLM took that standard from a decision by the United States Court of Appeals for the D istrict of Columbia Circuit in a case concerning compliance with NEPA. Although UEC is not defined, the intent was that it would be an appropriate qualitative standard for oil shale operations. In the course of its consideration of proposing regulations, however, the Department of the Interior ( DOI ) decided to propose as the standard UER. The DOI reasoned that the BLM should not be placed in the unintended position of having to issue leases or to approve plans of development unless it could prove that “c onsequences” would result, rather, it should be the proponent’s burden to establish that the risk of unacceptable environmental outcomes was acceptable. The notice of proposed rulemaking expressly

requests public comments on both UEC and UER.
Other alter

natives that the BLM considered included not proposing an environmental standard, but emplo yi ng for oil shale the practice of the BLM in numerous ty pes of decisions regarding other resources of using its best professional judgment instead of a regulatory

s tandard of environmental acceptability, and in light of the mandate in FLPMA , to prevent UUD of the public lands. The BLM expects thoughtful comments on whether an environmental standard is necessary and if so, what it should be. Assessing the cost diffe rences between these alternative is problematic. The BLM has extensive experience in evaluating environmental consequences, specifically tied to carryi ng out its FLPMA, UUD, and NEPA anal ys is and disclosure responsibilities. The agency has limited experi ence in evaluating and measuring environmental risk, and that standard generall y applies to laws that govern hazardous materials. The BLM does not anticipate that a quantitative risk assessment would be possible for its decisions regarding oil shale leasi ng and development. The application of this standard qualitatively may increase the economic burden for the agency and the proponent, potentiall y including the8

costs of non

- approval. However, there is no practical way of quantifying the potential costs o f this regulatory

alternative. As a practica l matter, applying either the UER or the UEC standard would probably result in the same level of protection. Both standards are based on the BLM’s understanding the environmental impacts of a proposed action. Application of either standard would involve the BLM’s professional judgment. As such , the cost of implementing these different standards is anticipated to be the same. 

### Num ber of Potentially Affected Entities
Entities that would be directly affected by this rule would include most, if not all, firms involved in the exploration and development of oil shale resources on Federal lands. Such firms are a subset of entities involved in the domestic oil shale industry

. The U.S. Census Bureau does not identify oil shale extraction and refining as a discrete industrial classification . Instead , firms involved in exploration and development of oil shale resources are included within the Crude Petroleum and Natural Gas Extraction 2 and Support Activities for Mining categories. Refining of oil from shale is grouped with the general category

of Petroleum Refineries. Therefore , there is no practical way to use the U.S. Census Data to calculate the number of entities involved in the domestic oil shale industry

. The l ast concerted effort to bring domestic shale oil into production was in the 1970s and 1980s. There was significant interest in developing the vast oil shale resources on Federal lands, specifically in Colorado and Utah . The last of these attempts ceased operations in 1991. Currently , there are no domestic commercial operations producing oil shale. Inaddition, there are currentl y no active commercial oil shale operations on Federal lands. However, there are six firms that hold eight R, D and D leases

. With technological advances and favorable market conditions that w ould support oil shale development, we anticipate an increase in the number of firms involved in oil shale development. However, the number of firms involved in oil shale development on Fe deral lands will likely

remain quite limited. Estimates for the size of the industry in the next 30 y ears range from 3 to 17 operations involved in the extracting and retorting of shale oil. To put these numbers in perspective, in 2009 there were approxi mately 6,500 establishments directly

involved in the extraction of crude oil and natural gas in the United States. 3 This count does not include establishments primarily engaged in performing drilling and other support activities for oil and gas operation s, which would add about another 10,000 establishments.

2 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, North American Industry Classification System (NAICS) Definitions, (http://www.census.gov/epcd/www/naics.html). 3 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Number of Firms, Number of Esta blishments, Employment, and Annual Payroll by Employment Size of the Enterprise for the United States, All Industries 200 9 (http://www.census.gov/csd/susb/susb09.htm).9

Although this rule w ould only affect entities that choose to explore and develop oil shale resources from land administered b y the BLM, there is no way to determine which firms w ould hold exploration licenses or leases , or operate on Federal lands in the future. The extent to which the rule would have an actual impact on an y firm would depend on whether it hold s leases or operate s on Federal lands

. 

### Im pacted Sm all Entities
The Small Business Adminis tration (SBA) has developed size standards to carry out the purposes of the Small Business Act; those size standards can be found in 13 CFR 121.201. 4 The SBA defines s mall entities involved in the oil and gas industry , which includes oil shale, as individ uals, limited partnerships, or small companies considered at “arm’s length” from the control of an y parent companies, with fewer than 500 employ ees. For firms involved in oil and gas field exploration services and other field s ervices SBA defines a small entity as having annual receipts of less than $5 million. As noted above, U.S. Census data on firms involved in oil shale research, exploration , and development by

number of employ ees is not available ; or at least not available in a form that allows us to separate those firms from the much larger oil and gas industry

. In formation on firms involved in the oil shale industry is included in the broader categories of Crude Petroleum and Natural Gas Extraction, Support Activities for Oil and Gas Operations and Petroleum Refineries

. Within the Crude Petroleum and Natural Gas Extraction cat egory , over 98 percent of the firms have fewer than 500 employ ees ; 5 and 74 percent of all firms in the Petroleum Refineries category had fewer than 500 employ ees. Ninety two percent of the firms involved in providing oil and gas field service support had an average annual receipt of less than $5 million. 6 This data would indicate that the preponderance of firms in the domestic oil and gas industry are small entities as define d by SBA. Currently , a ctive oil shale research and development on Federal lands is limited to a few firms operating on R, D and D leases

. Of the six companies holding the eight R, D and D leases, three are subsidiaries of major oil companies , one venture is 50 percent owned by a major oil compan y, and the other two firms are subsidiaries of foreign companies

. From the available information , it is not clear the size of these foreign companies. In addition to the current make up of those firms operating o n Federal lands, past efforts primarily involved the Federal G overnment or large corporations. This is not to say smaller firms were not involved , but rather their involvement would have been primaril y to support these larger organizations.

4 13 CFR 121.201 (http://www.sba.gov/regulations/121/). 5 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Number of Firms, Number of Establishments, Employment, and Annual Payroll by Employment Size of the Enterprise for the United States, All Industries 200 9 (http://www.census.gov/csd/susb/susb09.htm) 6 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Support Activities for Oil and Gas Operations: 2002, Table 4 (http://www.census.gov/prod/ec02/oc0221i213112.pdf).10

Under the right conditions , we anticipate the number of firms involved in the development of oil shale resources on Federal lands to increase. The BLM expect s potential future oil shale development will involve both large and small firms. If past development efforts are an indicator of how future development might occur , most leasing and development will be lead b y a large , well capitalized organization, supported by smaller entities. G iven the likely size of the industry

that may eventually

be involved in the leasin g and development of Federal oil shale resources, it is our conclusion that th is rule would not impact a “substantial number of small entities .” 

### Direct Economic Im

pacts The proposed changes would modify the existing commercial oil shale leasing and manag ement r egulations that were promulgated in 2008. The main proposed revision s to the existing regulations would include changes in the royalty applied to production, changes in the information required prior to authorization, and changes in the standards a pplied to an authorizatio n. The discussed impacts are associated with this proposed rule , not the anticipated impacts of the existing regulations. The primary

proposed provision with the potential to significantl y alter the future effects on lessees and operators is the proposal to replace the existing roy alt y provision with a provision that the Secretary would establish a lease ro yalt y rate prior to lease issuance in the notice of lease sale

. As with the original analy sis prepared for the final oil shal e rule in 2008 (73 FR 69414 , November 18, 2008) , any assessment of future effects must recognize significant uncertainties and unknowns. Currently , there is no domestic oil shale industry or even a definitive commercial technology for extracting oil from the shale. As proposed, the cost associated with ro yalt y pa yments could be higher or lower than th at required b y the current royalt y provisions. As the Secretary would establish the rate prior to lease issuance in the notice of lease sale , we have no way of accuratel y projecting what the royalty

rate(s) might actuall y be in the f uture under the proposed rule. In addition to the proposed changes to the existing ro yalt y provisions, there are a number of provisions related to the information requirements an d performance standards associated with lease issuance and operational approval. The proposal is to amend 43 CFR 3926.10 by specifying that the BLM may deny an application to convert an R, D , and D lease to a commercial lease based on “environmental or other natural resource considerations.” In addition, 43 CFR 3931.10 would be amended b y adding that the BLM may deny or require a modification of the proposed plan of development based on “environmental or other resource considerations.” At 43 CFR 3931.1 1, the plan of development content provisions would be amended b y identifying specific required content, including a “watershed and groundwater protection plan,” an “airshed review,” a n “integrated waste management11

plan,” and an “ e nvironmental protection p lan.” As these proposed additions for the most part codify

into regulations what the agency currently requires b y policy

and procedure, these proposed provisions are not expected to significantly increase the costs to the agency , lessees, or operators

. Q ualitative benefits include clarit y in expectations for applicants regarding information requirements, as well as for the BLM’s consideration of environmental issues. Under the propose d language at 43 CFR 3925.10, 3926.10 , and 3931.10 , the BLM w ould not i ssue a lease or approve an operation unless it determine d that the operations c an occur without unacceptable environmental risk. The application of this standard may increase the economic burden for the agency and the proponent , potentiall y including the costs of non

- approval. The BLM does not have sufficient information to quantify the potential costs or benefits of this proposed regulatory provision

. Short of a lease or plan of development being denied, the requirement is primarily on the BLM to make the determination of whether a lease or operations pose an unacceptable environmental risk. To the extent there is an increase in compliance costs, the agency would bear most additional cost associated with making such a determination under the proposed st andard. 

### Im pact Significance Oil shale development is characterized b y high capital investment and long periods of time between expenditure of capital and the realization of production revenues and return on investment. Revenues are uncertain because future market prices for shale oil and by products are unknown. Therefore, a key economic barrier to private development is the inability

to predict when profitable operations w ould begin. The economic risk associated with this uncertain outcome is magnified by the unusually

large capital exposure, measured in billions of dollars per project, required for development. Given the my riad of technological and economic unknown s , in addition to not knowing what the roy alt y rate might be until lease issuance , it is not possible to quantify the potential impacts of the proposed changes

. There are significant barriers to oil shale development, including technological unknowns and potentially significant environmental impacts. But the proposed regulatory changes , inc luding proposed changes to production royalties, are not likel y to impede development or have a significant economic impact on lessees or operators, regardless of the firm’s size. 

### Conclusion Potential oil shale development , if it occurs, will most likely involve a few very large well capitalized firms, supported b y a few smaller firms. We make this assumption because :

 Most development scenarios suggest relativel y few operations ;
 Most engineering cost models and past development efforts suggest significant capital investments; and12

 Past development efforts involved a few large well capitalized companies supported by a few smaller research and development firms and support firms.
As such , we do not anticipate the proposed revisions to the existing regulati ons to impact a significant number of small entities. In addition to not impacting a significant number of small entities, we also do not anticipate the impact of this final rule to have a significant economic impact . The proposed provision that has the potential to significantly alter the future costs is the roy alt y provision

. However, as the proposed ro ya lty provision is for the Secretary to establish the royalty

rate prior to lease issuance , the BLM cannot estimate the impact of the potential rate change
. The other proposed changes are not anticipated to be economicall y significant and/or are unknown.13



### Certification In conformance with section 605(b) of the Regulatory Flexibility Act, I certify

that th is rule will not have a significant economic imp act on a substantial number of small entities.

________ ______________________________________________ ________________ Director, Bureau of Land Management Date14



### References U.S. Small Business Administration, Of fice of Advocacy , A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act , May 2003 , ( http://www.sba.gov/advo/laws/rfaguide.pdf )

. U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, North Am erican Industry Classification Sy stem (NAICS) Definitions, ( http://www.census.gov/epcd/www/naics.html )

. Small Business Size Regulations , 13 CFR 121.201 (http://www.sba.gov/regulations/121/)

. U.S. Department of Commerce, Economics and Statistics Administr ation, U.S. Census Bureau, Number of Firms, Number of Establishments, Employment, and Annual Payroll by Employment Size of the Enterprise for the United States, All Industries 200 9 (http://www.census.gov/csd/susb/susb04.htm)

. U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Support Activities for Oil and Gas Operations: 2002, Table 4 ( http://www.census.gov/prod/ec02/oc0221i213112.pdf )

.