[Senate Hearing 110-515]
[From the U.S. Government Publishing Office]



                                                        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



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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel

                            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


                          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.
    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 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.
    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.
    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.*
---------------------------------------------------------------------------
    * See Appendix II.
---------------------------------------------------------------------------
    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.
    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.
    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 requires 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.
    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 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.
    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 anti-oil 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 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.
    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.
    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.
---------------------------------------------------------------------------
    * Document has been retained in committee files.
---------------------------------------------------------------------------
    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 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:]
   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 cure-all 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.
    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 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 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 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.*
---------------------------------------------------------------------------
    \1\ See 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.
---------------------------------------------------------------------------
    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, ecological, 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 
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 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.
    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.
---------------------------------------------------------------------------
    * Graphics have been retained in committee files.
---------------------------------------------------------------------------
    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 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 number 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.
                         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 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 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?
    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.
    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 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 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?
    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?
    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 
including 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.
    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.
   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, off-again 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.
   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 
development 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.
    [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.
    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.
    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.
    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.
    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:]
 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 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.
                  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 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.
    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.

    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 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 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.
    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.
    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 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 barrier 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 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 long-term, 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.
    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.
    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 understand 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 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 naIve 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 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?
    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 
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?
    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.
    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.
    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 participating 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 energy 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 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.*
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    * See Appendix II.
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    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.]
                               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 
demonstrate 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.
    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.
                                 ______
                                 
      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.
    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 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.
    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 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?
                              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 commercial-leasing 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 commercial-leasing 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 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 barrels\1\, 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.
---------------------------------------------------------------------------
    \1\ J. R. Dyni, Geology and Resources of some World Oil-Shale 
Deposits, Scientific Investigations Report 2005-5294, USGS, 2006.
---------------------------------------------------------------------------
                     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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
   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\
---------------------------------------------------------------------------
    \3\ See 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 
Oil-shale resources of the Mahogany Zone in eastern Uinta Basin, Uintah 
County, Utah OFR 91-285, 1991.
---------------------------------------------------------------------------
   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.
---------------------------------------------------------------------------
    \4\ US DOE Office of Petroleum Reserves--Fact Sheet--Energy 
Efficiency of Strategic Unconventional Resources--2007. (Available 
online http://www.unconventionalfuels.org/publications/factsheets/
Energy_Efficiency_Fact_Sheet.pdf).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \5\ DOE Office of Petroleum Reserves--Strategic Unconventional 
Fuels Fact Sheet: Oil Shale Water Resources (available on-line http://
www.unconventionalfuels.org/publications/factsheets/
Oil_Shale_Water_Requirements.pdf).
    \6\ Similar 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).
---------------------------------------------------------------------------
   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.
---------------------------------------------------------------------------
    \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 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 contrast 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.
---------------------------------------------------------------------------
    \8\ http://www.eia.doe.gov/cabs/Saudi_Arabia/Profile.html, http://
www.eia.doe.gov/emeu/international/oilreserves.html, http://
www.eia.doe.gov/cabs/Canada/Profile.html
---------------------------------------------------------------------------
    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 mechanism 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\
---------------------------------------------------------------------------
    \9\ http://fossil.energy.gov/programs/reserves/npr/
npr_oil_shale_program.htmlCO2 Emissions
---------------------------------------------------------------------------
    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 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
   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 
        ``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.
            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 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.
---------------------------------------------------------------------------
    * Documents have been retained in committee files.
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                                 ______
                                 
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.''
    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 governors, 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 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.
                                 ______
                                 
    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 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 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.*
---------------------------------------------------------------------------
    * Document has been retained in committee files.
---------------------------------------------------------------------------
            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.
    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.]
                           James T. Bartis\1\
---------------------------------------------------------------------------
    \1\ The 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.
---------------------------------------------------------------------------
                          the rand corporation
               Policy Issues for Oil Shale Development\2\
---------------------------------------------------------------------------
    \2\ This testimony is available for free download at http://
www.rand.org/pubs/testimonies/CT279.
---------------------------------------------------------------------------
                             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.
---------------------------------------------------------------------------
    \3\ Oil Shale Development in the United States: Prospects and 
Policy Issues, Santa Monica, CA: RAND MG414-NETL, 2005.
---------------------------------------------------------------------------
    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 objectives. 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 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 near-term 
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 expansion 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 co-produced 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.
          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 well-informed path, 
recognizing that we have important environmental, economic, and 
national security issues at stake.

                                    

      
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