Interior Secretary Ken Salazar has launched an investigation into deals the Bush administration gave oil shale companies in Colorado five days before Bush left office.
Salazar also announced Tuesday that his department will offer a second round of research-and-development oil-shale leases in the western United States.
The first round offered five 160-acre tracts in Northwest Colorado and a similar tract in Utah. On Jan. 15, the Bureau of Land Management locked in terms favorable for the four companies that held leases. The deal included low royalty rates and future expansions of each tract to 8 square miles.
“There are serious questions about whether the lease addenda are in fact legal and if they should be rescinded,” Salazar said Tuesday.
The controversy dates to President George W. Bush’s first Interior secretary, Gale Norton. Like Salazar, Norton had served as Colorado Attorney General before leading the Interior Department.
Norton’s department issued the first research-and-development leases in early 2006, two months before she resigned. That December, Shell hired her as a lawyer in its Denver office.
Shell won three of the six lease tracts, the only company of the 20 that applied to get more than one lease.
Shell has said its technology can retrieve a million barrels of oil per acre. If those figures prove true, the research leases ultimately could bring hundreds of billions of dollars to Shell.
The Los Angeles Times reported in September that the Justice Department is investigating Norton for talking about employment with a company involved with Interior Department deals. The paper also uncovered e-mails from Norton, in her job as a Shell lawyer, advising the company about how to deal with political fallout from the sweetheart leases this year.
The other winners of R&D leases were Chevron, EGL and Oil Shale Exploration Co.
Colorado potentially has vast oil resources locked up in shale rock formations, but so far, no company has been able to make money on oil shale.
Government and industry officials estimate as many as 800 billion barrels of oil – enough to displace oil imports for 100 years – is locked in sedimentary rock in parts of Colorado, Utah and Wyoming.
The second round of leases will have new terms asking companies to explore ways to curb the side effects of oil-shale development, including the enormous demands for water and power and the social impacts of developing a large, new industry in Western Colorado.
A study by the Bush administration BLM contemplated leasing more than 3,100 square miles of federal land in Colorado, Utah and Wyoming for oil-shale development. The industry would crowd out farmers and ranchers and ruin wildlife habitat, according to the study, while nevertheless recommended a commercial-scale leasing program.
Salazar, though, said it’s too soon to switch from research and development to commercial leasing.
“We have a duty to assure that potential development is done responsibly. We want to avoid the booms and busts of the past,” Salazar said.
Salazar also cited the potentially large need for water from the Colorado River Basin, which drains all of Western Colorado and serves Phoenix, Las Vegas and Los Angeles.
The new research-and-development leases will differ from the first round.
They can be expanded up to one square mile, not eight, and the companies that get leases will have to answer key questions about water and power use and social impacts, Salazar said.
The Interior Department has not decided how many new leases to offer.
jhanel@durangoherald.com
