[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
                       AMERICAN JOBS AND ENERGY
                    SECURITY: DOMESTIC OIL SHALE--
                        THE STATUS OF RESEARCH,
                       REGULATION AND ROADBLOCKS

=======================================================================

                        OVERSIGHT FIELD HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

        Wednesday, August 24, 2011, in Grand Junction, Colorado

                               __________

                           Serial No. 112-56

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov
      



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                       DOUG LAMBORN, CO, Chairman
               RUSH D. HOLT, NJ, Ranking Democrat Member

Louie Gohmert, TX                    Peter A. DeFazio, OR
Paul C. Broun, GA                    Madeleine Z. Bordallo, GU
John Fleming, LA                     Jim Costa, CA
Mike Coffman, CO                     Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Dan Benishek, MI                         CNMI
David Rivera, FL                     Martin Heinrich, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Paul A. Gosar, AZ                    Betty Sutton, OH
Bill Flores, TX                      Niki Tsongas, MA
Jeffrey M. Landry, LA                Vacancy
Charles J. ``Chuck'' Fleischmann,    Edward J. Markey, MA, ex officio
    TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
                                 ------                                
      

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, August 24, 2011.......................     1

Statement of Members:
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     3
    Tipton, Hon. Scott R., a Representative in Congress from the 
      State of Colorado..........................................     4
        Prepared statement of....................................     5

Statement of Witnesses:
    Aho, Gary D., Board Member/Former Chairman, National Oil 
      Shale Association..........................................    56
        Prepared statement of....................................    58
    Hagood, Michael C., Director, Program and Regional 
      Development, Energy and Environment Science & Technology, 
      Idaho National Laboratory..................................    17
        Prepared statement of....................................    19
    Hankins, Helen, Colorado State Director, Bureau of Land 
      Management, U.S. Department of the Interior................     6
        Prepared statement of....................................     8
    McCloud, Brad, Executive Director, Environmentally Conscious 
      Consumers for Oil Shale....................................    59
        Prepared statement of....................................    61
    Mittal, Anu K., Director, Natural Resources and Environment 
      Team, U.S. Government Accountability Office................    35
        Prepared statement of....................................    36
        Highlights...............................................    44
    Sladek, Thomas A., PhD, Director, Ockham Energy Services.....    21
        Prepared statement of....................................    23
        Response to questions submitted for the record...........    27
    Spehar, Hon. James G., Former Mayor, Grand Junction, 
      Colorado, and Past President, Colorado Municipal League....    62
        Prepared statement of....................................    64
        Letter to Secretary of the Interior Ken Salazar dated 
          November 18, 2009, submitted for the record............    68
        Letter to Secretary of the Interior Ken Salazar dated 
          December 17, 2010, submitted for the record............    70
        Letter to Senator Mark Udall dated March 24, 2011, 
          submitted for the record...............................    72
    Spinti, Jennifer P., Research Associate Professor, Department 
      of Chemical Engineering, and Assistant Director, Institute 
      for Clean and Secure Energy, The University of Utah........    28
        Prepared statement of....................................    30
    Whitney, Dan, Heavy Oil Development Manager, Shell 
      Exploration and Production Company.........................    52
        Prepared statement of....................................    53

Additional materials supplied:
    Burnham, Alan, PhD, Chief Technology Officer, American Shale 
      Oil (AMSO), LLC, Statement submitted for the record........    80
    List of documents retained in the Committee's official files.    81
                                     



    OVERSIGHT FIELD HEARING ON ``AMERICAN JOBS AND ENERGY SECURITY: 
DOMESTIC OIL SHALE--THE STATUS OF RESEARCH, REGULATION AND ROADBLOCKS."

                              ----------                              


                       Wednesday, August 24, 2011

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                        Grand Junction, Colorado

                              ----------                              

    The Subcommittee met, pursuant to call, at 9:05 a.m., at 
Grand Junction City Hall, 250 North 5th Street, Grand Junction, 
Colorado, Hon. Doug Lamborn [Chairman of the Subcommittee] 
presiding.
    Present: Representatives Lamborn and Tipton.

    STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Lamborn. The Committee will come to order. The Chairman 
notes the presence of a quorum, which under Committee Rule 3(e) 
is two Members. The Subcommittee on Energy and Mineral 
Resources is meeting today to hear testimony on an oversight 
hearing on American Jobs and Energy Security: Domestic Oil 
Shale--The Status of Research, Regulation, and Roadblocks.
    Under Committee Rule 4(f), opening statements are limited 
to the Chairman and Ranking Member of the Subcommittee. 
However, I ask unanimous consent that Mr. Tipton be permitted 
to give an opening statement and to include any other Members' 
opening statements in the hearing record if submitted to the 
clerk by close of business today.
    Hearing no objection, so ordered.
    Mr. Lamborn. I now recognize myself for 5 minutes.
    Thank you all for being here today. This is a very 
important topic.
    I am Congressman Doug Lamborn, and I have the privilege of 
not only representing Colorado in the Congress, but I am also 
Chairman of the House Natural Resources' Subcommittee on Energy 
and Mineral Resources.
    I am especially pleased that my colleague, Scott Tipton, is 
here. Representative Tipton has made a big impression in just 
the few months he has been in Congress and on this Committee in 
particular, and he is known as a staunch defender of the 
interests of the 3rd Congressional District.
    And in honor of being in the 3rd Congressional District, I 
wore my Mesa Verde tie----
    [Laughter.]
    Mr. Lamborn. Which is one of the highlights of the vast and 
beautiful 3rd District, a manmade wonderful place to visit. I 
urge everyone here to go there if you haven't already, 
especially visitors here. I am sure hometown people have 
already been there.
    But there are so many wonderful things in the 3rd District 
to do and to see, and that is one of the things that we need to 
talk about here at this meeting today. I think that we can 
balance all of the competing needs that are so important.
    We have the environment with protected species. We have 
environmentally sensitive fish and other wildlife that need to 
be protected for tourism. We need to have water protected. That 
is such a tremendous and important resource here in the West. 
We need an opportunity for jobs to be created and for the 
economy to grow. So I think that we, as Americans, can 
accomplish all of these things at the same time.
    Our Subcommittee has broad jurisdiction over onshore and 
offshore energy production on public lands. Obviously, much of 
that we have here in the West. And these are issues that affect 
every one of us here in Colorado.
    Today, we are here specifically to discuss one of the most 
challenging, tantalizing, and promising sources of energy our 
country has to offer, oil shale. The United States is blessed 
with tremendous oil shale resources. Nearly 75 percent of the 
world's recoverable oil shale is estimated to be located in 
this country, and we have been called by some the ``Saudi 
Arabia of oil shale.''
    Much of that is located right here around us in this three-
State region, where, according to the U.S. Geological Survey, 
the Western United States may hold more than 1.5 trillion 
barrels of oil, enough to provide us, if it were to be used and 
produced, with energy for the next 200 years.
    Unfortunately, the oil shale development has historically 
been characterized by boom and bust, industrial surges due to 
inconsistent and sometimes contentious Federal policies 
regarding leasing and land development. As Federal land 
contains about 80 percent of the known recoverable resources in 
the West, these policies are sometimes significantly hindering 
the research and development projects that could lead to 
commercial oil shale production.
    In 2005, the House of Representatives passed the Energy 
Policy Act of 2005, which directed the Department of Energy and 
the Bureau of Land Management to expand their work on oil 
shale.  Accordingly, in 2007, six areas of land were leased for 
oil shale projects.
    However, since then, the Obama Administration has shown 
little support or interest in the advancement of these 
projects. Shortly after taking office, they delayed RD&D leases 
and offered a second round of leases with new, revised, and 
restrictive lease terms that were so uninviting to oil shale 
production that industry showed almost no interest in procuring 
this valuable land.
    Although they did receive some applications, the leases 
have yet to be issued. To add further burdens to the process, 
in February, the Obama Administration announced that they would 
be reviewing the current rules for commercial oil shale 
leasing, adding further delays to an already unreasonably 
prolonged process.
    While oil shale development is still in its infancy in the 
United States, other countries, such as Brazil, Estonia, 
Jordan, and China, support substantial oil shale industries 
without having nearly the same amount of oil shale resources 
that we have here. Instead of promoting American jobs and 
developing cutting-edge, clean technologies to utilize these 
resources and lead the way in global development of this 
resource, the Obama Administration has stone-walled its 
production, diverted resources that could be used for oil shale 
RD&D, and continues to put up roadblocks for companies that 
want to utilize Federal land for energy production. I find this 
extremely troubling.
    I am especially looking forward to our witnesses' thoughts 
on how we can successfully expand the oil shale industry while 
preserving a resource that we in the West work hard to 
conserve--water. Striking a balance between energy production 
and water management is, and continues to be, an extremely 
important issue for our region. It is vital that we continue to 
safeguard this precious natural resource while at the same time 
creating jobs for our citizens and producing homegrown energy 
for all Americans.
    Again, I want to thank our witnesses for taking time out of 
your busy schedules to be with us today. Thank you all for 
being here, and I look forward to hearing from the testimony 
shortly.
    At this point, I would now like to recognize Representative 
Scott Tipton for an opening statement.
    [The prepared statement of Mr. Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Thank you everyone for being here today. I'm Congressman Doug 
Lamborn and I not only have the privilege of serving you all in my home 
state of Colorado, but I am also the Chairman of the House Natural 
Resources Subcommittee on Energy and Mineral Resources. Our 
subcommittee has broad jurisdiction over onshore and offshore energy 
production on public lands, much of which we have here in the West--and 
issues that affects every single one of us in from the state of 
Colorado.
    Today we are here to discuss one of the most challenging, 
tantalizing, and promising sources of energy our country has to offer--
oil shale. The United States is blessed with tremendous oil shale 
resources--nearly 75% of the world's recoverable oil shale is estimated 
to be located in this country and we have appropriately been called the 
``Saudi Arabia of oil shale.'' Most of that shale is located right here 
around us, where according to the U.S. Geological Survey, the Western 
United States may hold more than 1.5 trillion barrels of oil -enough to 
provide the United States with energy for the next 200 years.
    Unfortunately, oil shale development has historically been 
characterized by ``boom and bust'' industrial surges due to 
inconsistent and combative federal policies regarding leasing and land 
development. As federal land contains about 80 percent of the known 
recoverable resources in the West, these policies are significantly 
hindering the research and development projects that could lead to 
commercial oil shale production.
    In 2005, the House of Representatives passed the Energy Policy Act 
of 2005 which directed the Department of Energy and the Bureau of Land 
Management to expand their work on oil shale. Accordingly, in 2007 six 
areas of land were leased for oil shale projects. However, since then, 
the Obama Administration has shown little support or interest in the 
advancement of these projects. Shortly after taking office they delayed 
RD&D leases, and offered a second round of leases with new, revised 
lease terms that were so uninviting to oil shale production that 
industry showed nearly no interest in procuring this valuable land. 
Although they did receive applications, the leases have yet to be 
issued. To add further burdens to the process, in February the Obama 
Administration announced they would be re-reviewing the current rules 
for commercial oil shale leasing, adding further delays to an already 
unreasonably prolonged process.
    While oil shale development is still in its infancy in the United 
States, other countries such as Brazil, Estonia, Jordan, and China 
support substantial oil shale industries without nearly the amount of 
oil shale resources we have in our country. Instead of promoting 
American jobs and developing cutting edge clean technologies to utilize 
these resources and lead the way in global development of this 
resource, the Obama Administration has stonewalled its production, 
diverted resources that could be used for oil shale RD&D, and continues 
to put up roadblocks for companies that want to utilize federal land 
for energy production. This is extremely concerning.
    I am especially looking forward to our witnesses' thoughts on how 
we can successfully expand the oil shale industry while preserving a 
resource that we in the West work hard to conserve--water. Striking a 
balance between energy production and water management is, and 
continues to be an extremely important issue for our region. It is 
vital that we continue to safeguard this precious natural resource 
while at the same time creating jobs for our citizens and producing 
homegrown energy for all Americans.
    Again, I want to thank our visitors for taking time out of your 
busy schedules to be with us today and look forward to hearing from our 
witnesses.
                                 ______
                                 

    STATEMENT OF THE HON. SCOTT TIPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Tipton. Thank you, Congressman Lamborn. I would like to 
thank you for conducting this hearing.
    I want to join with him as well in thanking all of our 
witnesses for taking the time out of your busy schedules to 
come in and talk about a very important issue and for everyone 
else in attendance as well.
    We have some real challenges that we are facing as a Nation 
when we look at what is going on right now in the Middle East, 
the turmoil in Egypt, in Libya, Syria, Jordan, and the 
challenge of Iran perhaps getting a nuclear weapon, which will 
further destabilize the Middle East.
    When we look at the importance of the flow of oil coming 
out of the Suez Canal not only for the American economy, but 
for the world economy as well, the time is appropriate for the 
United States to grasp the reins of its own economic future, 
its own energy future. The 3rd Congressional District of 
Colorado can play a very important role.
    Recently, President Obama made an announcement favoring $1 
billion going to Brazil to be able to develop their resources 
off of their shores and proclaimed that we wanted to be one of 
their best customers. The question that crossed my mind is, if 
we are going to be making an investment, wouldn't it be better 
to invest dollars on American soil, developing American 
resources, putting Americans back to work, creating an 
opportunity to get the American economy moving once again?
    For me, that is an easy answer. As I travel throughout the 
3rd Congressional District--so far during this break, I have 
been from Cortez to Grand Junction. I will be in Steamboat down 
to Pueblo, down to Trinidad, over to Alamosa. As we go through 
every one of our communities, I think many of us who live here, 
it breaks our hearts as we drive through our communities, and 
we are seeing closed stores. We are seeing businesses that are 
facing a challenge.
    As I have walked down Main Street, Grand Junction, I have 
shaken hands with people that are worried about their economic 
future. Mothers that are worried about being able to provide 
for their children.
    We have to get this economy moving. Energy plays an 
important role in that. But we are also very cognizant here in 
the 3rd Congressional District of the valuable resource that we 
have called our public lands. The beauty of our landscapes, the 
value of our water, the value of the air that we breathe.
    Well, it has been my experience going out, the people that 
are working in developing our natural resources breathe that 
same air, drink that same water. We can develop these resources 
responsibly. We can create a win-win. It does not have to be a 
win-lose scenario in the United States of America.
    We are truly talking about the future of our Nation. If we 
are going to capitulate our ability to be able to provide 
energy, to be able to drive the economic engine, which means 
providing for our families, putting roofs over our head and 
food on our table, we have that opportunity. The 3rd 
Congressional District can play a very important role in doing 
that.
    We will all stand guard to make sure that it is done 
responsibly. We will hold the industry accountable to make sure 
that that is done. But it is important that we take this 
opportunity at this point in time to make sure that we are 
developing responsibly American resources on American soil and 
getting Americans back to work.
    I am very appreciative of Congressman Lamborn holding this 
hearing in regards to oil shale. As he noted, we have the 
potential to have 1.5 trillion barrels of oil. That doesn't 
even include the natural resources that we have in natural gas 
as well.
    I am an ``all of the above'' sort of a guy. I think that we 
need to be developing wind, solar, geothermal. It is going to 
be the entire package to be able to move to economic certainty 
and an energy certainty for America.
    This district can play a very important role, and I thank 
you for conducting I believe this very important hearing. 
Again, I thank all of our witnesses for taking the time to be 
here, as we explore this and see where we can create those 
opportunities to create a win-win for America and to be able to 
get our people back to work and get the American economy moving 
once again.
    Thank you.
    [The prepared statement of Mr. Tipton follows:]

 Statement of The Honorable Scott Tipton, a Representative in Congress 
                       from the State of Colorado

    Thank you Mr. Chairman for convening today's hearing, and thanks to 
the panelists and the folks from the Third District for being with us 
today in Grand Junction to examine this very important issue.
    The USGS indicates that there are as many as 1.5 trillion barrels 
of recoverable oil shale in the United States, the vast majority of 
which is in Colorado, Wyoming, and Utah. Of this, some of the most 
promising reserves are in the Pineance Basin in northwest Colorado. As 
a result, the Third Congressional District of Colorado, along with our 
neighboring western states, are in a unique position to contribute to 
our nation's energy security, ensure that the United States remains 
competitive in the world market, and to create much needed jobs here at 
home.
    The world's primary energy demand has grown by more than 50% since 
the year 1980 and this growth is expected to continue at an annual rate 
of 1.6% during the 30 years. Over 70& of this growth is expected to 
come from developing countries and fossil fuels are estimated to 
provide the vast majority of the energy during this period, even with 
increased efforts towards production of renewable energy sources and 
new technological advancements in the renewable energy sector. While we 
must continue to support the development of all our domestic energy 
resources, it is naive to think that renewable resources can replace 
hydrocarbons in the near future. For the sake of our national security, 
our economic stability, and our ability to remain competitive in the 
world market, we must continue to move towards new innovations in 
unconventional oil production, most notably, oil shale here in the 
Western United States.
    Because 72 percent of the oil shale in this area is beneath lands 
governed by the Department of the Interior, the policies of this 
administration and those to come play a significant role in whether or 
not we are able to make wise use of these resources. The road to 
viability for the oil shale industry is reliant on a predictable 
regulatory structure and an environment in which companies can invest 
in research and development and create jobs. To this end, it is 
critical that the federal government remove duplicative approval 
processes and help, rather than hinder development in the United 
States. The proper implementation of our environmental and safety 
regulations already on the books is a far better strategy than adding 
additional layers of bureaucracy to the process. By establishing a 
common sense regulatory framework and embracing research and 
development of oil shale, we can continue to remain competitive, ensure 
national security, and provide an environment for job creation here in 
western Colorado and in our neighboring western states.
                                 ______
                                 
    Mr. Lamborn. All right. And thank you.
    I also should note for the record that the Ranking Member, 
Representative Rush Holt of New Jersey, very much wanted to be 
here. We talked on the phone. He just couldn't rearrange his 
schedule enough to make it work to be here.
    It did not help matters when we had originally scheduled 
this for late July at a time when we were going to be back in 
our districts and not in Washington, but we had to change 
everything because of those important debt ceiling negotiations 
that required us to be in Washington after all during that 
week. So everything got turned around.
    I would like to now hear from the invited witnesses, and I 
want to ask forward Ms. Helen Hankins, Colorado State Director 
of the Bureau of Land Management, and Mr. Ronald C. Johnson, 
Oil Shale Assessment Project Chief for the U.S. Geological 
Survey. This is our first panel.
    We were going to have one more larger panel, but what we 
are going to actually do is have two smaller panels because of 
space limitations. So we will have a total of about 10 
witnesses that we are going to hear from who are experts in 
various facets of this important subject.
    But now we will start with these two in particular. Like 
all witnesses, your written testimony will appear in full in 
the hearing record. So I ask that you keep your oral statements 
to 5 minutes, as outlined in the invitation letter to you and 
under Committee Rule 4(a).
    Our microphones are automatic. So you do not need to turn 
them on when you are ready to begin, and you will see the 
timing light, which will go on. After 4 minutes, it will turn 
yellow and then, after 5 minutes, will turn red.
    Ms. Hankins, you may begin. Thank you for being here.

STATEMENT OF HELEN HANKINS, COLORADO STATE DIRECTOR, BUREAU OF 
 LAND MANAGEMENT, ACCOMPANIED BY RONALD C. JOHNSON, OIL SHALE 
        ASSESSMENT PROJECT CHIEF, U.S. GEOLOGICAL SURVEY

    Ms. Hankins. Thank you very much for the invitation to 
speak before this Subcommittee hearing.
    As stated, my name is Helen Hankins. I am the State 
Director for the Bureau of Land Management in Colorado.
    Mr. Lamborn. And Ms. Hankins, if you can make sure that you 
talk into the microphone so everyone can hear you. Thank you.
    Ms. Hankins. It is my pleasure to discuss the oil shale 
program of BLM and the Department of the Interior this morning.
    As we know, oil shale is a very abundant resource in the 
Western United States, particularly Colorado, Wyoming, and 
Utah. A recent assessment, actually several assessments by the 
U.S. Geological Survey indicate that there are 4.3 trillion 
barrels of oil present in place in these States.
    We have had a long history of interest in oil shale dating 
back to the late 1800s, when anecdotal information tells us 
that a homesteader built a fireplace of oil shale and during a 
housewarming party not only saw his fireplace, but his home go 
up in flames.
    Even since those days and particularly in the last three or 
four decades, people have continued to have an interest in oil 
shale development. But to date, we do not yet have a 
commercially viable, environmentally responsible approach here 
in the United States.
    The Energy Policy Act of 2005 provided that the Department 
of the Interior establish a program for research, development, 
and demonstration leases; that we complete a programmatic 
environmental impact statement for identification of available 
lands for oil shale and tar sand development; and that we 
launch a commercial leasing program for oil shale and tar 
sands.
    In 2008, a programmatic EIS was completed as required by 
this Act, and 8 of BLM's land use plans were amended to provide 
for 1.9 million acres being available potentially for oil shale 
development. In 2006 and '07, in what is referred to as ``round 
one,'' six leases were issued for research, development, and 
demonstration projects. Work is actively going on on all of 
these leases.
    In 2010, based on industry's request, the Secretary 
determined to initiate a second round of RD&D nominations. 
Three of those nominations have been advanced, and those 
companies are currently completing environmental assessment 
work, which must be completed before leases can be issued.
    The BLM's goal, as we manage this important program on the 
public lands, is to provide an opportunity for companies to 
develop new generation of technology that ensures that we have 
environmentally responsible development, commercially viable 
operations, and that we can provide a fair return to the 
American public for the extraction of this resource and the use 
of these public lands.
    We are currently beginning a new planning process with the 
development of a programmatic environmental impact statement to 
reexamine lands that are suitable for oil shale leasing and 
potential development. We also, at the same time, are 
undertaking a review of the regulations that were developed 
previously to make sure that we have an environmentally 
responsible and sound management approach to oil shale 
development.
    Many of us here can recall the oil shale leases that were 
issued in the 1970s and some of the concerns associated with 
those. Those lessons have helped us remember that we must have 
an understanding of environmentally acceptable development and 
commercially viable operations before we approve leases of 
large acreages for the development of this resource.
    Research, development, and demonstration projects are key 
to advancing oil shale development on public lands. They help 
companies test their bench-scale technologies at the field 
level, and they provide an opportunity to evaluate various 
aspects of development, including environmental concerns.
    There are several questions that we all need to be thinking 
about and which Representative Lamborn and Representative 
Tipton alluded to in their opening remarks. One of the key 
things is, are the current technologies going to be 
commercially viable and environmentally responsible?
    We also need to make sure that we have an understanding of 
the potential impacts on our Western lands, wildlife--habitat 
and wildlife, and water as we proceed with the development of 
this industry. As was addressed by both of our Representatives, 
water is a key factor here in the West, and it is, of course, 
not of boundless supply. So part of our analysis needs to 
consider water availability in the arid West in which we live.
    These are fundamental questions which we need to be sure 
that we address as we proceed with our efforts. BLM is 
interested in a balanced and orderly approach, but we want to 
ensure that we address these environmental concerns, water 
issues, and commercially viable operations.
    Thank you for the opportunity to appear before your 
Subcommittee today. And at the appropriate time, I will be 
happy to answer any questions you may have.
    [The prepared statement of Ms. Hankins follows:]

         Statement of Helen Hankins, Colorado State Director, 
  Bureau of Land Management, United States Department of the Interior

    Good morning. My name is Helen Hankins, and I am the state director 
of the Bureau of Land Management's Colorado office. It is my pleasure 
to testify before you on the Department of the Interior's Oil Shale 
Program here in the Centennial State, which, along with Utah and 
Wyoming, is home to the nation's largest reserves of oil shale.
Background
    Oil shale is a type of rock that contains kerogen, a waxy organic 
material that can be refined to make oil. It is a resource that the 
nation has been trying to unlock for the past century because it is so 
abundant. U.S. resources are approximately 4.3 trillion barrels of oil 
in place, a significant portion of the world's resources, according to 
the U.S. Geological Survey (USGS). However, after many attempts to 
develop the resource, no one has yet discovered how to extract it 
economically on a commercial scale.
    The Energy Policy Act of 2005 directed the Department of the 
Interior to establish a leasing program for oil shale research and 
development, publish a programmatic environmental impact statement 
(PEIS), and launch a commercial leasing program. In 2008, the BLM 
published the PEIS that amended eight resource management plans in 
Colorado, Utah, and Wyoming to make approximately 1.9 million acres of 
public lands potentially available for commercial oil shale development 
and 431,224 acres for tar sands leasing and development.
    In 2006 and 2007, the BLM issued six oil shale Research, 
Development, and Demonstration (RD&D) leases. The BLM's goal is to 
provide an opportunity for companies to develop a new generation of oil 
shale technologies by establishing an orderly and environmentally 
responsible program that provides a fair return for taxpayers. In 2010, 
the BLM advanced three nominations for a second round of RD&D leases. 
For a variety of reasons, the BLM began a new planning process this 
year that would take a fresh look at what public lands are best suited 
for oil shale and tar sands development. This planning process will not 
disturb RD&D activities already under way; rather, any information 
developed from RD&D activities may help inform this planning process. 
In addition, the BLM anticipates taking a fresh look at the regulations 
governing oil shale development to ensure they reflect a sound 
management approach.
    The BLM's RD&D program is essential to encouraging companies to 
test their bench-scale technologies and to help answer fundamental 
questions about how oil shale might be safely and economically 
developed on a commercial scale. The RD&D program began with the intent 
of avoiding the mistakes of the 1960s and 1970s, which left a legacy of 
spent shale piles, contaminated runoff, and multimillion dollar 
cleanups. One need not look further than the Naval Petroleum Oil Shale 
Reserves 1 and 3 here in Colorado to know that the oil is extractable, 
but at a significant cost to the environment and taxpayers. 
Approximately $25 million has been spent on clean-up and monitoring 
that continues to this day. The work has included excavating spent 
shale and preparing a storage vault to protect a tributary of the 
Colorado River from potentially hazardous runoff.
    The BLM learned from four leases issued in Utah and Colorado in the 
1970s that companies must first demonstrate that their technology is 
economically viable and environmentally sound before approving a 
development process that could potentially disturb thousands of acres 
of public lands. On ``Black Sunday'' in 1982, a major oil shale player 
shutdown its oil shale development efforts, called the Colony Project, 
putting 2,000 people out of work in single day, and demonstrating the 
potential harm when communities count on an industry that hasn't proved 
the sustainability of its proposed development.
USGS Resource Assessments
    The Green River Formation in the Piceance Basin (Colorado), the 
Uinta Basin (Utah and Colorado), and the Greater Green River Basin 
(Wyoming, Colorado, and Utah) contains one of the largest known oil 
shale deposits in the world. Recent USGS assessments estimate an in-
place oil volume of 1.53 trillion barrels in the Piceance Basin (http:/
/pubs.usgs.gov/dds/dds-069/dds-069-y/), 1.32 trillion barrels in the 
Uinta Basin (http://pubs.usgs.gov/dds/dds-069/dds-069-bb/), and 1.44 
trillion barrels in the Greater Green River Basin (http://
pubs.usgs.gov/fs/2011/3063/). The oil shale deposit in the Piceance 
Basin is probably the world's most concentrated oil shale resource with 
as much as 400,000 barrels of oil in place per acre. It is important to 
note that these resource assessments are in-place resources rather than 
technically recoverable resources because there is currently no 
commercial oil shale development in the United States.
    The mineral nahcolite is associated with high-grade oil shale 
deposits in the Piceance Basin, and because it is important as a 
leasable mineral, the USGS assessed its resource potential as well. 
Nahcolite has an in-place resource estimate of 43 billion short tons. 
The nahcolite is intimately associated with the oil shale horizons in 
the richest part of the basin and therefore will be affected by any oil 
shale development in that area.
    The U.S. Geological Survey recently subdivided the 1.53 trillion 
barrels of in-place oil shale in the Piceance Basin into several 
subsets (http://pubs.usgs.gov/fs/2010/3041/). Of the 1.53 trillion 
barrels total, about 920 billion barrels (60 percent) exceed 15 gallons 
of oil per ton of oil shale (GPT), and about 352 billion barrels (23 
percent) exceed 25 GPT. More than 67 percent of the total in-place 
resource, or 1.027 trillion barrels, is located under Federal lands. 
About 689 billion barrels (75 percent) of the 15 GPT total and about 
285 billion barrels (81 percent) of the 25 GPT total are under Federal 
mineral (subsurface) ownership. An evaluation of the Federal oil shale 
resources in Wyoming is nearing completion and should be available in 
the near future.
Development Questions
    There are several issues that need to be addressed before a 
successful commercial oil shale program will be economically viable.
    The first is whether the technologies that are currently being 
developed can become viable on a commercial scale. Some of the 
technologies under development would require vast amounts of energy, 
increasing production costs and creating a burden on the power grid. 
The companies working on these challenges report generally that they 
are several years away from knowing whether their technologies will 
work on a commercial scale.
    The second is to understand the potential impacts of commercial oil 
shale development on Western lands, wildlife, and watersheds. 
Historically, the techniques of retorting or milling the shale have 
caused serious environmental consequences, creating large 
concentrations of contaminants in areas not designed to contain them. 
In the arid West where water supplies are extremely limited, much 
hinges on the question of water. Accordingly, we must have a better 
understanding of the impacts of oil shale development on the water 
supply.
    The Government Accountability Office studied the issue of oil shale 
development impacts on water resources, and determined in an October 
2010 report that: ``Oil shale development could have significant 
impacts on the quality and quantity of water resources, but the 
magnitude of these impacts is unknown because technologies are years 
from being commercially proven, the size of a future oil shale industry 
is uncertain, and knowledge of current water conditions and groundwater 
flow is limited.'' To address these important water questions, the USGS 
has begun to gather baseline data that would be used to analyze 
groundwater and surface water systems that could be affected by 
commercial-scale oil shale development.
    In light of the many fundamental questions about oil shale that 
need to be answered, it is vital that the BLM administer a balanced, 
carefully planned RD&D program. As the BLM takes a fresh look at the 
regulations governing oil shale development, it will ensure that the 
regulations reflect the latest information about water, potential 
environmental considerations, and uphold its responsibility to deliver 
taxpayers a fair return on the development of this resource.
Moving Forward with RD&D
    Of the six leases issued in 2006 and 2007, five are in Colorado and 
one is in Utah. Activity is under way on the RD&D lease sites. American 
Shale Oil, which owns one of the leases, reports that its processing 
facilities are 90% complete with plans to initiate pilot testing soon. 
Other leaseholders also report progress in establishing extraction 
techniques.
    In the second round of RD&D leases, three nominations, two in 
Colorado and one in Utah, advanced in October 2010. Analysis under the 
National Environmental Protection Act (NEPA) is under way to examine 
how the proposed technologies will affect the environment. Issuance of 
those leases will depend largely on the results of the NEPA analyses 
and other factors as the nominees refine their individual processes for 
developing oil shale.
    This is an exciting time as these companies move forward, testing 
new technologies to harness this abundant resource. At the Department 
of the Interior, we are pleased to be part of the effort to keep the 
oil shale program on an orderly and successful path, encouraging 
development while ensuring environmental protection.
Conclusion
    Thank you again for the opportunity to testify on the Oil Shale 
Program. I would be glad to answer your questions.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you so much.
    I should note for clarification that Mr. Johnson won't be 
directly testifying but is available to answer technical 
questions as needed.
    I will go ahead and start with questions. I will recognize 
myself. First of all, a very quick question, then a couple of 
longer questions.
    Ms. Hankins, as you know, the Administration is currently 
reviewing a second round of oil shale RD&D leases. Can you tell 
us when we can expect a final decision on this second round of 
potential leases?
    Ms. Hankins. The timeframe on when the bureau will make 
decisions on those RD&D leases depends on when the companies 
involved complete the environmental assessment work and those 
environmental assessments are reviewed. Right now, each of 
those three companies are in the midst of doing that 
environmental review.
    So I am not able to give you a precise estimate. But I can 
tell you that the companies are diligently pursuing that 
effort, and as soon as we receive their environmental 
documents, we will very carefully and diligently look at them 
and proceed as quickly as possible with the next steps.
    Mr. Lamborn. OK. Now a little bit lengthier question. In 
2009, BLM announced a second round of 160-acre oil shale RD&D 
leases. However, while the first round of leases allowed for 
the potential expansion of 5,120 acres of commercial 
development, in the second round of leases, the terms were 
decreased, and only 480 acres were available for potential 
expansion.
    We have heard that this decrease of land available was one 
of the main reasons for industry's apparent lack of interest in 
the second round of leases. Can you tell us the reason for this 
large decrease in potential land expansion and what new 
information that BLM relied on that led them to change the 
original terms?
    Ms. Hankins. Unfortunately, Representative Lamborn, I 
cannot address that question because I was not involved in 
those discussions. However, I will be happy to provide a 
written response to the Committee on that question.
    Mr. Lamborn. OK. I would really appreciate that answer in 
writing later.
    Mr. Johnson, would you have anything to add to that?
    Mr. Johnson. No, I don't.
    Mr. Lamborn. OK. Well, Ms. Hankins, going on to the next 
question, in April of this year, BLM announced plans to re-
review the 2008 programmatic environmental impact statement--we 
referred to that earlier--for the development of oil shale 
resources. Can you tell us what substantive new information has 
been brought to your attention that warrants an entire re-
review of a barely 3-year-old document that is very lengthy--
2,000 pages already and--well, I will have a follow-up. But 
first of all, that part of the question. What new information 
came to you that you felt it necessary to re-review the PEIS?
    Ms. Hankins. The Secretary of the Interior has the 
discretion at any time to review previous decisions--in this 
case, an allocation decision relating to which lands might be 
available for development of oil shale. And it is an authority 
that he has.
    In this particular case, I think there are a number of 
factors that were considered. One is that because this is an 
industry that is still in its infancy, it was thought to be a 
good idea to evaluate whether we have new information about new 
technology, about economic viability of some of that 
technology.
    Also there has been a report released about the need to 
look at some of the water issues, which I alluded to in my 
testimony. That report was published by the General Accounting 
Office. And there are other concerns relating to sage grouse 
and great concern about their potential listing as an 
endangered species range wide across 11 Western States. New 
information has come forward on some of their habitat and 
priority use areas.
    In addition, new information is available on some plants 
that are potentially threatened and endangered. So, for all of 
those factors, as well as concerns raised in litigation in 2009 
challenging the 2008 PEIS and regulations, all of those things 
are factors in why the Secretary has decided to take a second, 
fresh look at these issues while the industry is still in its 
infancy.
    I might add that this new look will not affect the six 
existing leases. They will still proceed on the course that 
they are on.
    Mr. Lamborn. All right. Thank you.
    At this point, I would like to recognize Representative 
Tipton for questions.
    Mr. Tipton. Thank you, Congressman Lamborn.
    And Ms. Hankins, thank you for being here. Good to see you 
again.
    Ms. Hankins. Always.
    Mr. Tipton. Appreciate your testimony. When we look at some 
of the real challenges we face as a country, it is energy. We 
also have some of the issues in terms of what are called rare 
earths. And perhaps Mr. Johnson, with a little bit of backup on 
this, may be able to speak to that.
    Has the BLM explored some of the rare earths that may also 
be available out of the oil shale?
    Ms. Hankins. I don't have information to address that 
question. But I would be happy to provide information after the 
hearing. --
    Mr. Johnson. There have been studies in the past of 
elements within the oil shale itself, and I don't have those 
with me. But there may be some minor amounts of rare earth in 
oil shale. We could provide that later.
    Mr. Tipton. You know, that might be something that we 
really want to explore in terms of looking at the entire 
package of resource development. It is my understanding and 
there is the potential to have aluminum, lithium, a variety of 
different elements that may be in there in addition to the oil 
shale, and those are all, obviously, some important issues for 
America as well, since we are now relying primarily on the 
Chinese for a lot of the rare earths since we have closed down 
a lot of the mining industry in this country, to be able to 
develop those resources.
    So I would appreciate some follow-up information on that. I 
think that that is important in terms of having the entire 
universe of information and looking at where we are heading.
    Ms. Hankins, maybe you can give us just a little bit of 
background. I grew up here on the West Slope, and I remember 
looking out at Grand Junction, we saw some of the boom and bust 
cycle when we had Unocal, when we had Occidental Petroleum, I 
think, coming in and trying to establish some of that early 
development for oil shale.
    Can you tell me what steps that you are observing, since 
you are working with the industry and we have six leases that 
seem to be proceeding right now in the process, what are some 
of the steps that are being taken to be able to avoid that 
boom/bust cycle?
    Ms. Hankins. I think one of the reasons that we are 
undertaking this new programmatic environmental impact 
statement is to provide us yet another opportunity to look at 
not only the resource and how it might be developed, but also 
to look at concerns related to socioeconomic impacts, 
infrastructure development, et cetera, of such a possible 
development. One of the opportunities that we have in this sort 
of process is to make recommendations for what might assist 
with making sure that we minimize the boom/bust cycle.
    Of course, that is not entirely within the control of the 
Bureau of Land Management. But we have an opportunity to look 
for mitigation options as we look at economics as part of our 
analysis, and I think it remains to be seen what those 
recommendations will be. But we can address that in our 
process.
    Mr. Tipton. OK. Great. You know, really, one of the 
problems we are seeing, and we have discussed it before, one of 
the big challenges, it seems, to having real economic 
development and we will again underscore, as you noted in your 
testimony, and we want to make sure that things are being done 
responsibly. But we have heard that regulatory uncertainty is 
really one of the main factors that is delaying research and 
technological development of oil shale.
    Could you maybe speak to that? And has BLM or others that 
you may be aware of, have we done any sort of cost-benefit 
analysis in terms of continually moving the goal posts, if you 
will, in terms of addressing developing resources responsibly?
    Ms. Hankins. Well, as I mentioned a few minutes ago, the 
current effort to relook at the land allocation decisions in 
2008, the PEIS in 2008, and the regulatory efforts that were 
also completed at the same time, look at economics and they 
consider a lot of these various things. But one thing that they 
don't do in our new effort is our new effort does not affect 
the current research and development that is going on on these 
six leases, five in Colorado and one in Utah.
    And the purpose of these leases is, of course, for research 
and development. Nor are things that we are doing on Federal 
land affect the ability of companies to do research and 
development and evaluate various techniques on private land. So 
I think that our current efforts to look at land allocation and 
to look at the rules that we have in place to make sure they 
are environmentally responsible really don't preclude research 
and development on either the existing Federal leases or on 
private land.
    Mr. Tipton. Well, yet when we are talking about those five 
leases that are currently in Colorado, one in Utah, and they 
have some certainty, can you give me some kind of a timetable 
that they are working off of, actually, for that RD&D?
    Ms. Hankins. I believe that they are 10-year leases. But 
each company has to determine its own timetable based on its 
development, plan of development and the steps that are in that 
plan. Each one, of course, is unique, so there is not a set 
timeframe for when that development will occur.
    Mr. Tipton. So I guess it is my understanding then that, 
obviously, we can introduce some sort of caveat in there that 
may change a bit over this 10-year period. The BLM is giving 
some certitude in terms of the regulatory process for these 
companies in terms of developing the oil shale. Is that 
correct?
    Ms. Hankins. The companies that have the six leases--five 
in Colorado and one in Utah--will be given a choice. At such 
time, if they arrive at the time, when they want to convert 
these RD&D leases to commercial leases, they will have the 
opportunity to choose whether they wish to operate under the 
existing regulations. Or if there is a different set of 
regulations at that time, they can opt to choose that. But the 
choice is theirs which way they want to go.
    Mr. Tipton. Thank you. I yield back.
    Mr. Lamborn. OK. And then, if you would indulge us for some 
follow-up questions?
    Ms. Hankins, you said you were not part of the decision-
making on the lease changes. Can you tell me, do you think that 
the changes made for RD&D leases are more--would make the goals 
of the RD&D leases more or less difficult to achieve?
    Ms. Hankins. You know, I think it is important that I talk 
about what--the areas where I have authority to make decisions 
and to operate. And as the State Director of BLM, my 
responsibilities are to evaluate proposals that come forward 
for any types of energy development, and of course, I do that 
through our field managers and district managers.
    That is really my role in terms of oil shale. BLM 
participated in both round one and round two with other 
agencies, including representatives of State government from 
the three States--Colorado, Wyoming, and Utah--to look at 
proposals for RD&D nominations and participated in the approval 
of those leases for the first six, as we will in the next 
three. My responsibility is to deal with field issues and 
permitting or leasing of field activities.
    Mr. Lamborn. Well, along those lines, is BLM doing anything 
to make sure that there is some kind of regulatory certainty 
for the companies that may wish to invest large sums of money, 
and this could affect many jobs here in Colorado as well, as 
well as possible energy production that would help the whole 
country? So what is BLM doing to ensure that there is some kind 
of stability or certainty going forward?
    Ms. Hankins. I think it is important to talk about that in 
the context of where we are with the oil shale industry, and 
you know, we are yet many years away from a commercially 
viable, environmentally approved oil shale development project. 
And why I mention that is that it provides us some time to 
evaluate carefully not only which lands we make available, but 
which rules we choose to employ as a nation to manage our oil 
shale development.
    In the case of the existing RD&D leases, there is 
certainty. As I mentioned, those companies know what the 
regulations are under which they are currently operating. They 
know what the royalty rates are. They know what the 
environmental concerns are of the Government. And so, I believe 
that they have certainty, and they can choose to stay on the 
path they are on with the existing regulations and royalty 
rates.
    For those companies that are in the--potentially in the 
pipeline to receive other leases in round two, of course, they 
will have to evaluate how to move forward based on what comes 
out in the rulemaking next year. But that is not uncommon in 
how the Bureau of Land Management and the Department of the 
Interior manages minerals in general.
    We have been addressing mineral exploration and development 
on public land since the mid 1800s, and since that time--150 
years, more or less--there have been many examples of us 
evaluating whether or not we have appropriate environmental 
protection measures in place, whether we have appropriate 
royalties in place to ensure appropriate return to the American 
people.
    So the process of reviewing and evaluating how we regulate 
industry is not new. It is part of our responsibilities as we 
take care of these public lands for all American people. But I 
think there is certainty for those who have existing RD&D 
leases. I think that the three that are in process, certainly 
they do know that we are in this review process, and it is part 
of how we manage minerals.
    Mr. Lamborn. Now, Ms. Hankins--and thank you for your 
answers--you are here as the BLM Director for Colorado. You are 
the Administration's witness, in effect, and you are also 
speaking indirectly for the Secretary of the Department of the 
Interior. Are you saying that you really don't have an opinion 
on how these recent changes will have an impact on the possible 
commercial use of oil shale in the future?
    Ms. Hankins. I think, as I said, the Secretary of the 
Interior has broad authorities, and he has the discretion, 
based on a variety of inputs that he gets, on when he feels it 
is appropriate to reevaluate, reexamine, or take a new look at 
both land allocation decisions and regulatory requirements that 
an agency--in this case, the BLM--might wish to impose.
    I believe that he is well within his prerogative to ask us 
to do this additional review, and I think as part of that, we 
need to look at environmental issues, economic issues, and make 
sure that the look we did 3 years ago is--a little bit longer 
than that--is still valid or whether we want to make some 
adjustments. So I believe we are on the right track, and I 
think it is important that we be open to new information about 
new technology, new environmental issues, water concerns, et 
cetera.
    Mr. Lamborn. Well, Ms. Hankins, I have no doubt that he has 
the authority to do this. You have stated that several times. I 
totally agree. I am curious as to whether this decision is 
going to have a negative impact on the research and development 
that we are hoping takes place so that we all know what is 
going to happen in the future, if anything.
    Ms. Hankins. Well, as I said, the existing RD&D leases are 
not affected by this ongoing planning effort or by the 
regulatory review. And so, those companies can continue, as 
they have been for some time, on their Federal leases and on 
private holdings that they have.
    I cannot predict how this new effort might affect future 
endeavors because we are still very early in the process. We 
are some time away from even having a draft document. So, it is 
not possible for me to speak to what it might address or what 
an ultimate decision might be more than a year from now.
    Mr. Lamborn. OK. My last question is in your discussions 
with your colleagues in Utah, is there any different approach 
on the Utah side of this basin to RD&D leasing, compared to 
Colorado?
    Ms. Hankins. I am not intimately familiar with the 
activities in Utah. They are looking at a more, if you will, a 
traditional approach. My understanding is they are looking at 
more traditional mining methods as a means of extracting the 
oil shale and then using surface retort. Whereas, in Colorado, 
the proposed methods relate more to in-situ heating of the oil 
shale and then extracting the mineral after that point.
    However, the leases in Utah, the RD&D leases, are under the 
same requirements as they are here in Colorado in terms of 
Federal law and regulation. So I would not expect them to be 
different in that regard. The regulations in the State of Utah 
under State law are different than Colorado, but I can't speak 
to that.
    Mr. Lamborn. OK. Thank you.
    Representative Tipton?
    Mr. Tipton. Thank you, Congressman Lamborn.
    I just have, I think, one follow-up question. Can you kind 
of clarify for me when you noted in your opening comments that 
there was, I believe you stated, 4.3 trillion barrels of oil 
potentially between Colorado, Utah, and Wyoming. Is it the BLM 
and the Administration's position that this is a resource that 
ought to be developed?
    Ms. Hankins. You know, I don't have detailed knowledge of 
the grade, character, ability for extraction, and many other 
factors about all of those deposits. So it is difficult for me 
to really say should they all be developed because there are 
many, many variables in terms of surface resources that might 
have to do with endangered species. It might have to do with 
water quality and quantity. It might have to do with, is it 
reasonably and economically extractable because of the 
topography, the amount of overburden, and other variables?
    So I don't think I really can definitively say for that 4.3 
trillion barrels of oil in place how much is readily available 
or should be available at this point in time because there are 
too many factors I don't know the answer to.
    Mr. Tipton. I guess my question, actually, it is a little 
more refined than the broader context of it. It is just on a 
philosophical basis, recognizing the energy needs of this 
Nation--the energy challenges that we face, what is happening 
on the worldwide level--is it the Administration's belief that 
this is a resource that we should be developing in this 
country?
    Ms. Hankins. I think that there are a couple of responses 
to that. Secretary Salazar has said in his policy statements 
and his areas that he expects the agencies to emphasize that 
energy development is one of his key priorities, and it is 
going to be some time before we have a viable renewable energy 
industry in the United States that produces significant amounts 
of energy for us.
    I believe I read recently that the President's goal is that 
by 2025, we are able to get 25 percent of our energy from 
renewable sources. But even if we are able to meet that goal, 
the amount of energy that we are going to need to get from 
conventional sources--particularly oil, natural gas, and coal--
will still be significant for years to come. When we are able 
to have commercially viable and environmentally responsible 
development of oil shale leases at some point in the future, 
which I understand from industry is still some years away, that 
also will be able to be one of our sources for domestic energy.
    However, having said that, it is important to talk about 
BLM's underlying mission, and that is a mission of multiple 
use. And so, the public lands that BLM manages generally are 
used based on decisions that we make in our land use plans, and 
those land use plans consider a variety of management 
objectives, which include watershed health, wildlife habitat, 
as well as energy development.
    So, in general, we would likely not make a determination 
about energy development without taking into account other 
surface values and resources that are important to all of us 
and that you all addressed in your opening remarks. Clearly, 
energy is on the Secretary's agenda. It is a top priority for 
him, as it is for BLM. Oil shale is one component of that, but 
not the only component.
    Mr. Tipton. Great. Well, appreciate that. Well, I think we 
certainly ought to be probably submitting the question to the 
Secretary's office as well because we were kind of on both 
sides of that. We want to develop it, but maybe not--and I 
understand where you are coming from in that regard.
    But I think that what it probably also speaks to when we 
are talking about economic viability, as I was listening to 
your answer, I heard probably from a development standpoint, a 
lot of uncertainty that is going to be accompanying in terms of 
the significant investment that developing a resource actually 
takes, to be able to do that. I don't know if you are going to 
be in contact with the Secretary. We will certainly submit a 
letter.
    But I think we do need to have some real clarity if there 
is going to be a real commitment to developing resources, given 
the challenges that we have because I think the industry 
deserves to be able to understand what those economic 
challenges are going to be as well.
    So thank you, and I yield back.
    Mr. Lamborn. All right. I want to thank Ms. Hankins for 
being here.
    The members of the Committee may have additional questions 
for you. We would ask that if we submit those to you in 
writing, that you respond to us in writing.
    Mr. Lamborn. Thank you for being here today, and thank you 
for giving us your valuable time.
    Ms. Hankins. Well, thank you for the opportunity to be 
here.
    Mr. Lamborn. You are welcome.
    Now I would like to invite the second panel to come 
forward. It consists of Mr. Michael Hagood, Director of Program 
and Regional Development of the Idaho National Laboratory; Dr. 
Thomas Sladek, Director of Ockham Energy Services; Ms. Jennifer 
Spinti, Research Associate Professor, Department of Chemical 
Engineering and Institute for Clean and Secure Energy of the 
University of Utah; and Ms. Anu Mittal, Director of Natural 
Resources and Environmental Division of the Government 
Accountability Office.
    Thank you all for being here. As you are getting situated, 
I would just like to remind you that like all of our other 
witnesses, your written testimony will appear in full in the 
hearing record. So I ask that you keep your comments to 5 
minutes, as outlined in the invitation letter.
    The microphones are automatic. So you don't have to turn 
them on. You will see the lights turn yellow at 4 minutes and 
red at 5 minutes.
    I want to thank you for being here. And we will start in 
the order of which I introduced you earlier.
    So, Mr. Hagood, you may begin. Thank you.

  STATEMENT OF MICHAEL HAGOOD, DIRECTOR, PROGRAM AND REGIONAL 
             DEVELOPMENT, IDAHO NATIONAL LABORATORY

    Mr. Hagood. Chairman Lamborn, Congressman Tipton, and 
members of the Subcommittee, thank you for the opportunity to 
testify before the Subcommittee.
    My name is Michael Hagood, and I represent the Idaho 
National Laboratory as the Director of Program and Regional 
Development.
    Idaho National Laboratory is one of several U.S. Department 
of Energy laboratories. We are an applied research energy 
systems laboratory with interest in looking at the development 
of a number of energy sources, including nuclear, fossil, and 
renewables. And we also work with advanced transportation, such 
as electric vehicles.
    And as part of this portfolio, we also engage in research 
associated with unconventional fossil energy sources, including 
oil shale. I will limit my comments today more along the lines 
of the research associated with oil shale development. It is 
based on history, technological innovation and associated 
investment will emerge to more effectively develop oil shale 
resources.
    Research has been and will continue to be a critical 
component in successful development of such unconventional 
fossil energy resources, including oil shale. An example is the 
recent impact of horizontal drilling, fracking, and use of 
proppants in accessing and recovering natural gas from shale.
    Another example is the innovative subsurface steam 
injection recovery process implemented to help unlock Alberta 
oil sands at depth. And on that foundation, a number of other 
innovations have been developed associated with the development 
of those resources, as well as dealing with environmental 
consequences.
    Increasingly, research is also playing a role in better 
understanding the interdependencies between energy and the 
environment, the impacts of energy development on the 
environment, and ultimately the development of innovation that 
helps mitigate environmental impact. So relative to the 
concerns on water, research plays a role in understanding the 
baseline conditions with groundwater, surface water in the area 
associated with oil shale. It also looks at the potential 
impacts, but it is also associated with developing innovation 
that helps address and mitigate some of those impacts.
    The United States should continue to pursue smart and 
environmentally responsible development of oil shale. Realizing 
a sizable oil shale industry can contribute significantly to 
U.S. energy security, but its establishment and impact could 
take several years. Along these lines, it is recommended that 
in the near term, steps be taken to implement recommendations 
made by the Unconventional Fuels Task Force, which was put 
together as a result of the Energy Policy Act of 2005, Section 
369.
    As a result of the findings from that task force, a 
strategy was developed by an ad hoc group to create an 
unconventional fuel strategy, which included addressing some of 
the challenges associated with the environment, including 
looking at the groundwater and surface water issues associated 
with oil shale.
    Relative to supporting this endeavor, it is recommended to 
establish a regionally based, long-term integrated and focused 
applied research program that helps accelerate identification 
of the challenges and issues and implementation of solutions 
that would be impactful in a smart and environmentally 
responsible development of oil shale resources. It is also 
recommended that such a program leverage the rich research 
capabilities within the region and internationally.
    The size of the oil shale resources, the magnitude, the 
richness, and the impact on the energy security of the United 
States is such that this deserves greater attention.
    Thank you.
    [The prepared statement of Mr. Hagood follows:]

    Statement of Michael C. Hagood, Director, Program and Regional 
    Development, Energy and Environment Science & Technology, Idaho 
                          National Laboratory

    Introduction. Chairman Lambourn, Congressman Tipton, and members of 
the subcommittee, thank you for the opportunity to testify before the 
subcommittee. My name is Michael Hagood and I represent the Idaho 
National Laboratory. I have over thirty years of experience working in 
the fields of energy and environment, including participating in 
associated research, development and demonstration programs. I have BS 
and MS degrees in the field of geology and am a licensed geologist and 
hydrogeologist. I have been with Idaho National Laboratory since 2003 
and am responsible for developing science and technology and regional 
programs for the Energy and Environment Directorate. My testimony today 
will touch upon western oil shale development and its potential impact 
on U.S. energy security and economy, however, the emphasis of my 
testimony will be on relevant research.
    Idaho National Laboratory Background. Idaho National Laboratory 
(INL) is a science-based, applied engineering U.S. Department of Energy 
(DOE) laboratory dedicated to supporting missions in energy research, 
science, and national defense. INL has a long history in energy 
resource evaluation, energy systems analysis and integration, and 
system-of-systems engineering, coupled with a technical focus on 
advanced modeling and simulation, computational engineering and 
analyses, instrumentation and controls, and materials development and 
testing. INL addresses research in nuclear, fossil and renewable 
energy, advanced transportation and energy storage, as well as critical 
energy infrastructure protection. In particular, INL is known for 
conducting demonstrations to help reduce risks associated with 
deployment of technology and being an honest, independent broker of 
technical information.
    Idaho National Laboratory also has a goal to assist in addressing 
regional U.S. energy and environment challenges. From this perspective, 
INL has taken a particular interest in energy resource development in 
the Western Energy Corridor, including the rich oil shale resources 
located in Colorado, Utah and Wyoming. INL has been engaging in oil 
shale research, supporting the U.S. Department of Energy and industry 
for several years, as well as investing in unconventional fossil energy 
research internally. INL partners with regional universities relative 
to energy and environment research, including with Colorado School of 
Mines, University of Utah, Utah State University Bingham Research 
Center, and University of Wyoming. INL has also developed technical 
relationships with Canadian research institutions in Alberta and 
Saskatchewan, which have challenges and capabilities relevant to oil 
shale development.
    Western Oil Shale and Energy Security. The world class nature of 
western oil shale resources is measured in magnitude, longevity and 
strategic import to U.S. energy security. It is the largest hydrocarbon 
resource on earth and on a per acre basis is the most concentrated oil 
bearing resource on earth. The United States is expected to continue to 
rely heavily on oil through at least 2035 according to the U.S. Energy 
Information Administration and one would expect U.S. dependence to 
extend much beyond this. In the meantime, the U.S. will need to pursue 
securing access to reliable supplies of energy and at the same time 
lessen its dependence on politically and economically unstable sources 
of oil imports. Given this situation, western oil shale can play a 
substantial role in contributing to U.S. energy security.
    Western Oil Shale and the Economy. Development of a substantial 
industry around western oil shale can lead to significant regional job 
creation as well as help reduce the flow of dollars being sent overseas 
to purchase oil. As western oil shale becomes officially recognized as 
a secure, known and long-term source of oil reserves, the creation of 
an oil shale industry would result in significant national and 
international investment. As an example, I would point to what has 
transpired in Alberta associated with oil sands development.
    Western Oil Shale and Research. As world oil demand and prices 
continue to rise there will be increasing efforts to develop more of 
the unconventional fossil energy resources, such as oil shale. In 
parallel, technological innovation and associated investment will 
emerge to more effectively develop these resources. Research has been, 
and will continue to be, a critical component in successful development 
of these unconventional fossil energy resources. An example is the 
recent impact of horizontal drilling, fracking and use of proppants in 
accessing and recovering natural gas from shale. Another example is the 
innovative subsurface steam injection and recovery process implemented 
to help unlock Alberta oil sands at depth. Increasingly, research is 
also playing a role in better understanding the interdependencies 
between energy and the environment, the impacts of energy development 
on the environment and ultimately the development of innovation that 
helps mitigate environmental impact.
    Congress recognized the importance of unconventional fossil energy 
research when they passed the Energy Policy Act of 2005 (Act). In 
particular, Sec 369 of that Act focused directly on promoting the 
development of liquid fuels from the Nation's vast unconventional 
hydrocarbon resources, including oil shale, and directed the study and 
mitigation of technical impediments to unconventional fuels 
development.
    Oil shale research being conducted today addresses a variety of 
topics, many of which are profiled in U.S. DOE's ``Oil Shale Research 
in the United States''. Research is being conducted to better 
understand the nature of the oil shale resource itself as well as its 
setting. A number of these projects are also focused on realizing a 
better understanding of specific and cumulative impacts on the 
environment. A significant need in the future is to further address oil 
shale development impacts on green house gas emissions, water use and 
quality, and air quality concerns. For example, INL is conducting 
modeling and bench-scale tests in an effort to better understand 
potential impacts of in situ heating of oil shale on groundwater 
quality.
    Oil shale recovery and retort processes are also a major research 
focus, and there are several approaches being advanced. These processes 
exist at various levels of maturity and many are still in the research 
and development phase. A summary profile of these approaches can be 
found in U.S. DOE's report ``Secure Fuels from Domestic Resources: The 
Continuing Evolution of America's Oil Shale and Tar Sands Industries''. 
A particular trend in such research is addressing in situ oil shale 
retorts at depth. Another emerging research interest relates to 
reducing the energy requirements associated with oil shale development 
and the potential integration of renewable and nuclear energy, which 
have the potential to help extend the lifetime of the oil shale 
resource and reduce green house gases.
    Research on western oil shale is being conducted by a number of 
regional universities, state and federal agencies, national 
laboratories and private industry. University and research laboratories 
working in this area include Colorado School of Mines, University of 
Utah's Institute for Clean and Secure Energy, Utah State University 
Bingham Research Center, Los Alamos National Laboratory and Idaho 
National Laboratory, along with sponsorship through the National Energy 
Technology Laboratory. Regional federal offices and state agencies such 
as U.S. Geological Survey and Utah Geological Survey are also 
contributing to assessing oil shale resources and their environmental 
setting. Private industry, primarily comprising larger companies, is 
investing significantly in research built around recovery and 
processing techniques. Relative to industry between 2007 and 2010 DOE 
identified twenty-nine private companies engaged in research and 
development.
    Of special note, the Department of the Interior's Bureau of Land 
Management (DOI/BLM) has been advancing opportunities for oil shale 
(and tar sands) technology research and demonstration on Federal lands 
in the West through the Oil Shale Research Development and 
Demonstration (RD&D) Leasing Program. A first set of leases have been 
allocated to Shell, Chevron, American Shale Oil and Enefit American Oil 
(formerly OSEC). Nominations for a second set of RD&D leases are 
currently under review, with BLM recently announcing their reviews of 
three candidates for leases in Colorado and Utah.
    Relevant research on oil shale is also occurring internationally. 
Companies which are assessing the application of their technologies to 
western oil shale are also conducting technology demonstrations 
elsewhere in the world. Technology transfer associated with already 
demonstrated, conventional oil shale retort operations have also 
emerged with the intent that these may be applied to western oil shale, 
including technologies derived from Estonia, Brazil, and even China. In 
this spirit, the U.S. has recently signed a cooperative research 
agreement with the republic of Estonia.
    International technology transfer was recognized by Congress, as 
per Section 369 (h) of the Energy Policy Act of 2005, in which the 
Congress directed the Secretary of Energy to establish the 
Unconventional Fuels Task Force to ``make recommendations with respect 
to initiating a partnership with the Province of Alberta, Canada for 
the purpose of sharing information relating to tar sands. Although 
focused on tar sands (oil sands), the associated innovation and 
``lessons learned'' in Alberta is useful in addressing oil shale 
development approaches and impacts.
    Oil shale research can result in direct job creation in private 
industry, regional research institutions and government agencies. The 
greater long-term positive impact on the economy, however, will be 
realized through the ultimate deployment of innovation that in turn 
helps realize substantial oil production in an environmentally 
responsible manner. Once a substantial oil shale industry is 
established in the region, accompanied by a healthy market place, one 
would also expect greater investment in, and contribution from, aligned 
research efforts that would bring additional economic benefits. For 
example, with a set of more mature R&D relationships in the region, 
innovation would result in creation of spinoff companies and services, 
which would lead to creation of jobs. A rich environment comprising 
industry, education, research and sound policy will lead to large 
international investment, similar to what is being experienced with the 
oil shale industry in the United States.
    Recommendations. In view of its size, value and longevity, western 
oil shale deserves greater attention. It is of international scale. The 
United States should continue to pursue smart and environmentally 
responsible development of these resources. Realizing a sizeable oil 
shale industry can contribute significantly to U.S. energy security, 
but its establishment and impact could take several years. Along these 
lines, it is recommended that in the near term, steps be taken to 
implement recommendations made by Unconventional Fuels Task Force. A 
strategy was proposed by the Unconventional Fuels Ad Hoc Working Group 
in 2008 to address these recommendations, and developed an approach for 
further advancing development within the Western Energy Corridor, with 
an initial emphasis placed on oil shale.
    Relative to oil shale research, it is recommended to establish a 
regionally based, long-term integrated and focused applied research 
program that helps accelerate identification and implementation of 
solutions that would be impactful in the smart and environmentally 
responsible development of oil shale resources. It is also recommended 
that such a program leverage the rich research capabilities within the 
region and internationally.
    When aligned with a healthy oil shale industry, research on western 
oil shale can lead to even greater economic development within the 
region, sustainable over this century. As witnessed in similar 
circumstances elsewhere, research can also lead to strengthening 
existing U.S. competitiveness, nationally and internationally. Beyond 
this, there is also the opportunity to identify and establish value 
added industrial enterprises built upon the oil shale energy platform.
REFERENCES
Idaho National Laboratory. June, 2011. Western Energy Corridor
Task Force on Strategic Unconventional Fuels. Annual Report, December 
        2009
Task Force on Strategic Unconventional Fuels. September 2006. 
        Development of America's Strategic Unconventional Fuels 
        Resources. Initial Report to the President and the Congress of 
        the United States
U.S. Department of Energy, Office of Petroleum Reserves, Office of 
        Reserve Lands Management, September 2010. Oil Shale Research in 
        the United States: Profiles of Oil Shale Research and 
        Development Activities in Universities, National Laboratories, 
        and Public Agencies, Second Edition: September 2010
U.S. Department of Energy Office of Petroleum Reserves Office of 
        Reserve Lands Management, Fourth Edition: September 2010. 
        Secure Fuels from Domestic Resources: The Continuing Evolution 
        of America's Oil Shale and Tar Sands Industries--Profiles of 
        Companies Engaged in Domestic Oil Shale and Tar Sands Resource 
        and Technology Development: 4th Edition: September 2010
Ad Hoc Unconventional Fuels Working Group: U.S. Department of Energy, 
        Office of Naval Petroleum and Oil Shale Reserves, November 
        2008: Strategic Plan--Unconventional Fuels Development within 
        the Western Energy Corridor
National Oil Shale Association. Oil Shale Update, May 2010: http://
        www.oilshaleassoc.org/documents/FinalUpdateMay2010.pdf
                                 ______
                                 
    Mr. Lamborn. I want to thank you for your testimony.
    Dr. Sladek?

              STATEMENT OF THOMAS SLADEK, PH.D., 
                DIRECTOR, OCKHAM ENERGY SERVICES

    Dr. Sladek. Thank you. Thank you, Congressman. I appreciate 
the opportunity to be here.
    I always look forward to coming to Grand Junction, 
especially during the peach season. I intend to go back to 
Lakewood this afternoon pursued by a cloud of fruit flies.
    [Laughter.]
    Dr. Sladek. I have been involved in oil shale off and on 
since 1967. And although much has changed in the world since 
then, oil shale development in the United States still 
confronts many of the same concerns--access to resources, 
production costs, environmental and social effects, water 
availability, and uncertainties about future oil prices. Other 
countries are facing most of the same issues as their 
industries emerge.
    I would like to summarize the work underway in those 
countries and attempt to relate that experience to the 
potential emergence of an American industry. There are oil 
shale-producing industries in three countries right now--China, 
Estonia, and Brazil--and another country, Jordan, is moving 
very rapidly toward creating an oil shale industry. Rapidly, 
but somewhat erratically. Their recent progress has been 
impeded by the political unrest in the Middle East, and when 
they get by that, they'll get back to business, I guess.
    China has produced shale oil since the 1930s, when Japan 
invaded Manchuria and began to extract oil to fuel their 
military machine. China now has one large oil plant and six 
small ones and two plants that make electricity from oil shale. 
Four oil plants and two power plants are under development.
    Estonia has utilized oil shale as a source of power and oil 
since the early 20th century, and today, nearly all of 
Estonia's electricity is produced from oil shale. They also 
export large quantities of electricity to the surrounding 
countries and their power grids. Two Estonian companies 
currently produce oil and power from oil shale, and their 
plants are being expanded.
    One company, Eesti Energia, is also active in Jordan and 
the United States. The Hashemite Kingdom of Jordan has 
agreements with eight prospective developers to produce cement, 
shale oil, and electric power from oil shale. Eesti Energia's 
agreement could result in the largest shale oil plant in 
history, plus the plant to make most of the country's 
electricity.
    Although Brazil is not expanding its domestic oil shale 
industry, the national oil company Petrobras is involved in 
projects in Jordan, the USA, Morocco, and China. Turkey imports 
more than 90 percent of its fuel oil and gas and has considered 
developing its oil shale to reduce that dependence.
    There are some interesting opportunities. One small deposit 
yields up to three barrels of oil per ton of rock. Very unusual 
material in the world.
    Morocco has a memorandum of understanding with Petrobras 
and Total. Syria, before their political unrest, had signed an 
agreement with Jordan to share expertise in the development of 
electricity from oil shale. Egypt was examining the feasibility 
of developing its oil shale to conserve the country's 
economically important oil and natural gas reserves. I suspect 
that has been suspended as well.
    Resource surveys and field exploration studies are underway 
in Canada, Thailand, and other places. There is a cement plant 
in Germany that makes cement from oil shale. And in Sweden, 
tests on the alum shale continue to determine the feasibility 
of recovering oil, uranium, nickel, molybdenum, vanadium, and 
probably rare earths if they are there.
    Some very interesting work is underway in Australia, where 
a company from Rifle, about 60 miles east of us, called Shale 
Tech International, recently completed a large pilot plant 
which will use the Paraho returning process to make liquid 
fuels from Queensland oil shale. Paraho is American technology. 
It was developed in Colorado to use oil shale from the Green 
River formation, and now it is being used in Australia.
    All of these activities are very relevant to the future of 
an oil shale industry in the United States. Like the U.S., 
nearly all of the other countries that are working on oil shale 
consume much more oil than they produce. A few have essentially 
no indigenous fuel production and are totally dependent on 
imports with the attendant economic dislocations and security 
problems.
    Many have small populations and economies and would have 
difficulty raising billions of dollars to pay for integrated 
oil shale plants, despite their potential economic benefits in 
the long term. The oil shale projects in other countries are 
relevant to the U.S. because they will advance understanding of 
the processing technologies and reduce risks associated with 
their deployment.
    A very important benefit will be the validation of high-
level engineering designs and cost estimates. Although the 
plants in the current and proposed industries are relatively 
small compared with what might be supported by the Green River 
oil shales, they are large enough to address many of the 
unknowns that must be confronted by promoters of the commercial 
industry. This is especially important for the retorting 
facilities, which are expensive to build and operate.
    The growing body of operating experience and information 
will greatly reduce the risks associated with the 
commercialization phase. This progress will facilitate 
financing and permitting of a facility, which will ultimately 
mean lower product cost.
    These advancements are especially important, regardless of 
where oil shale technology is deployed next and especially if 
it is deployed in the United States.
    That completes my prepared statement. Any questions?
    [The prepared statement of Dr. Sladek follows:]

  Statement of Thomas A. Sladek, PhD, Director, Ockham Energy Services

Introduction
    I started my first oil shale project in the fall of 1967, at the 
Colorado School of Mines, as part of my master's program in the 
Department of Chemical and Petroleum Refining Engineering. I set out to 
measure thermal conductivity factors for oil shale in the Green River 
formation, the huge geological entity that underlies much of 
northwestern Colorado, northeastern Utah, and southwestern Wyoming. My 
work was sponsored by Sinclair Oil Company, which wanted to simulate 
the transmission of heat through beds of oil shale at their property 
overlooking the Parachute Valley in Colorado. Sinclair's field tests in 
the 1950s were somewhat successful, and they were encouraged by high 
oil prices (almost $3 per barrel and holding) to try again. Sinclair 
called its process ``underground retorting'' or ``retorting in place.'' 
The currently popular phrase in situ was provided later, by Latin 
scholars.
    After graduate school, I worked in a steel mill and then on oil 
shale, coal conversion and tar sands processing, fuel alcohol from 
corn, oil shale, resource recovery from municipal waste, management of 
scrap tires and other special wastes, domestic independent power 
projects, waste-to-energy facilities, recycling and solid waste 
composting, international power projects, gas-to-liquids technology, 
recovery of energy from agricultural residues, hybrid power plants, and 
oil shale.
    In 2007 and 2008, I was principal investigator and director of the 
Jordan Oil Shale Technical Assistance project. My colleagues and I 
conducted a feasibility study for development of the oil shale 
resources in The Hashemite Kingdom of Jordan and prepared a strategic 
plan for their commercialization. Work included reviewing the mining 
and processing technologies and industries under development in other 
countries and updating cost engineering studies from the 1970s to allow 
forecasting of the product prices required to support an oil shale 
industry in Jordan. The client was Jordan's Ministry of Energy and 
Mineral Resources. The prime contractor was Behre Dolbear and Company 
(USA) Inc. Funds came from the U.S. Trade and Development Agency, a 
branch of the Department of Commerce.
    In 2008 and 2009, I was engaged by the European Union to support 
the Euro-Mediterranean Energy Market Integration Project, or MED EMIP. 
My job was to develop a concept paper for creation of an oil shale 
council for the countries of Turkey, Syria, Jordan, Egypt, and Morocco. 
All of these countries have oil shale deposits and not much else in the 
way of indigenous fossil fuels. The council would allow them to share 
their experience, influence, and expertise and develop their resources 
in an orderly and beneficial manner. My work again included reviewing 
the status of oil shale technologies and projects in the Middle East, 
North Africa, and other regions and assessing the significance of that 
work for the council's members. The project was successful in that an 
Oil Shale Cooperation Center was established in Amman in April of 2010. 
The future of that center is unclear, given the social unrest in its 
member countries.
    I would now like to describe what I learned about oil shale 
projects around the world and to highlight some of the implications of 
that work for the emerging oil shale industry in the United States.
Oil Shale Projects in Other Countries
People's Republic of China
    In Liaoning Province, the Fushun Mining Group plant uses a large 
number of small retorts to make about 2 million barrels of oil per year 
from lump oil shale, plus bricks and cement from the ash. Installation 
of a large retort to handle fine oil shale was completed in 2010. The 
plant uses the Alberta Taciuk Process (ATP) technology which was 
developed for soil cleaning in Canada. FMG has announced plans to 
expand their capacity by 3 million barrels per year.
    In Jilin Province, Jilin Energy & Communication Corporation 
produces 12 MW of electricity by burning oil shale in fluidized bed 
boilers. Jilin Energy is developing a plant that will use Petrosix 
retorts to produce 1.5 million barrels per year of shale oil, 100 MW of 
electricity, and cement. Six other companies produce shale oil in Jilin 
Province. Quantities are relatively small. And Royal Dutch Shell has 
established a joint venture to evaluate the potential of Shell's in-
situ conversion process in the province.
    SINOPEC has proposed to build an oil shale power plant in Guangdong 
province. A retorting plant has been proposed for Heinan Province. In 
Heilongjiang Province, PetroChina is building a plant that will make 
about 700,000 barrels of shale oil per year, and a larger plant has 
been proposed by China National Coal Company and Harbin Coal Chemical 
Company. Several other minerals companies have proposed oil shale 
projects, some involving co-processing of oil shale and coal.
Estonia
    Serious development of Estonia's resources began after World War I, 
and today more than 12 million tonnes of oil shale is mined per year. 
More than 85% is burned to generate electric power. Retorting plants 
produce 1.6 million barrels of shale oil per year, mostly in 
descendents of the Kiviter and UTT retorts that were developed when 
Estonia was part of the Soviet empire. One of the big players is Viru 
Keemia Grupp AS (VKG), which operates a power station and two shale oil 
plants which process lump oil shale in Kiviter retorts. In December 
2009, VKG commissioned a Petroter retort (a descendent of the UTT 
process) which produces 730,000 barrels of shale oil per year plus fuel 
gas and steam. VKG has a permit to pursue oil shale development in 
Ukraine.
    The other big player is Eesti Energia AS, the national power 
utility. Eesti Energia operates the Narva Oil Factory, which produces 
about 950,000 barrels of shale oil per year in two TSK140 retorts. 
These process fine oil shale and are also descendents of the UTT 
retorts developed in Soviet times. In 2009, Eesti Energia announced 
plans to expand its retorting capacity by more than 2 million barrels 
per year by 2012. Production of fuel gas, steam, and electricity will 
also rise. In 2008, Eesti Energia and Finnish minerals processing 
company Outotec formed a joint company--Enefit--to develop oil shale 
processes and projects, especially in other countries. Enefit's 
subsidiary Oil Shale Energy Jordan is developing a retorting plant and 
a large power station in Jordan. Enefit American Oil has acquired the 
Oil Shale Exploration Company project in Utah, which could, in time, 
produce 57,000 barrels of shale oil per day.
The Hashemite Kingdom Jordan
    Jordan's deposits are located 60 to 90 miles south of Amman. They 
are large, have medium yield, and might be extracted with low-cost 
surface mining. The oil shale and the shale oil are very high in 
sulfur, which complicates combustion and retorting and makes refining 
difficult and expensive. These defects could be offset by selling the 
sulfur recovered during refining, because sulfur is a valuable 
commodity. In January 2000, sulfur sold for $3 per long ton along the 
west coast of the USA; in January 2011, the price was $180 per long 
ton.
    The Kingdom has no other significant resources of fossil fuel, and 
the government is committed to oil shale development. Since November 
2005, the government has executed memoranda of understanding (MOUs):
          With Jordan Cement Factories Company to manufacture 
        cement from oil shale in the El Lajjun deposit
          With Royal Dutch Shell to evaluate applying Shell's 
        in-situ process to deeply buried oil shale in central and 
        southern Jordan
          With Eesti Energia to evaluate using Enefit retorts 
        to make at least 37,000 barrels per day of shale oil and its 
        boilers to generate at least 440 MW of electricity
          With Jordan Energy and Mining Ltd. to investigate 
        shale oil production using the ATP technology
          With the International Corporation for Oil Shale 
        Investment to evaluate retorting of oil shale from the El 
        Lajjun resource in successors to the fine-shale and coarse-
        shale retorts developed in Estonia during the Soviet era
          With Brazil's national oil company Petrobras to 
        examine application of the Petrosix retorting technology. The 
        global energy company Total S.A. is participating.
          With Russian firm Inter Rao and Jordan's Aqaba 
        Petroleum to examine using Russian technology for oil shale 
        mining and shale oil extraction
          With the International Company for Oil Shale 
        Investment to evaluate development of the Attarat Umm Ghudran 
        resource.
    The agreements cover both in situ retorting and aboveground 
processing in a diverse selection of retorts, with a range of potential 
production capacities, in several of Jordan's oil shale areas. One 
agreement could produce a major power generating facility capable of 
meeting most of Jordan's electrical demand, and one agreement provides 
for recovery of a valuable byproduct--Portland cement. With these 
agreements, Jordan is well positioned to become a major producer of 
shale oil. However there are restraints. In addition to the usual issue 
areas--economic feasibility, land disturbance, waste management, water 
requirements, and environmental, social, and cultural concerns--there 
is competition for access to the rock, some of which may contain 
uranium.
Australia
    Australia has very large oil shale resources, principally in 
Queensland, and had oil shale industries of substantial size between 
1865 and 1952. In June 1997, the Stuart Project was begun near the town 
of Gladstone in Queensland as a joint venture between Suncor Inc. of 
Canada and the affiliated Australian companies Southern Pacific 
Petroleum (SPP) and Central Pacific Minerals (CPM). Suncor subsequently 
departed, and SPP absorbed CPM. A demonstration plant using an ATP 
retort was constructed. The plant operated intermittently from 2000 to 
2004, despite resistance from environmental, tourism, and fishing 
groups. Although the project had significant accomplishments, it had 
ongoing technical problems because dryer was too small. In February 
2004, Queensland Energy Resources Ltd. acquired most of SPP's assets, 
and Stuart was suspended. In August 2008, QERL announced that it was 
abandoning the ATP technology in favor of the Paraho II technology. The 
ATP plant was dismantled.
    QER processed 8,000 tonnes of Australian oil shale in the Paraho 
pilot plants maintained by Shale Technology International in Rifle, 
Colorado. In October 2009, QERL completed a feasibility study and began 
a campaign to restart Stuart with Paraho retorts. The first phase of 
that development was completed in August 2011, with commissioning of a 
small processing plant containing a single Paraho retort and its cadre 
of ancillary equipment, on the Stuart site. The plant can process about 
2.5 metric tons of oil shale per hour (vs. the 250 tonnes per hour 
capacity of the ATP retort). When it is fully operational, the plant 
will manufacture ultra-low-sulfur diesel fuel, jet fuel, fuel oil, and 
synthetic crude oil.
    Demonstration of the Paraho retorting process is particularly 
significant for oil shale initiatives in the American West. Reasons 
include:
          Paraho is American technology, developed in Colorado 
        to use oil shale from the Green River formation.
          Paraho's history extends back nearly 70 years to the 
        Synthetic Liquid Fuels Act of 1944, by which the U.S. Congress, 
        in its wisdom, involved the Federal Government in development 
        of the western oil shale resources. The Act led to a long 
        series of pioneering tests on oil shale mining and retorting at 
        Anvil Points in Colorado. The Gas Combustion retort was 
        developed there. Its successor was the Paraho retort.
          The Paraho retort was developed with emphasis on 
        energy self-sufficiency and water conservation. These 
        requirements are important in the remote, arid west.
          Some of Paraho's operating principles were embodied 
        in the Petrosix retort and have been thoroughly tested in 
        Brazil with the difficult Irati oil shale and with other 
        unforgiving materials, such as scrap tires.
          The QER project will rise on the site of a failed oil 
        shale project which failed, in part, because of environmental 
        controversy. QER is aware of the challenges in this area and 
        seems to be dealing with them constructively. Similar 
        controversy is likely to accompany any oil shale project in the 
        U.S.
Others
    Although Brazil is not expanding its domestic oil shale industry, 
the national oil company Petrobras is involved in projects in Jordan, 
the U.S.A., Morocco, and China. Turkey imports more than 90% of its 
fuel oil and gas and has considered developing its oil shale to reduce 
that dependence. There are some interesting opportunities (oil shale in 
one small deposit yields up to 3 barrels of oil per ton), but only a 
few deposits have been investigated in significant detail. Morocco has 
executed an MOU with Petrobras and Total to evaluate aboveground 
retorting of oil shale from the Tarfaya and Timhadit deposits and an 
MOU with San Leon Energy to investigate in situ development of portions 
of Tarfaya. Syria exports oil, but production is declining and the 
country is looking to its gas and oil shale deposits to maintain energy 
revenues. In 2009, Syria signed an MOU with Jordan to exchange 
expertise in producing electricity from oil shale. Before the Arab 
Spring of 2011, Egypt was examining the feasibility of developing its 
oil shale to conserve the country's economically important oil and 
natural gas. Resource surveys and limited field exploration studies are 
underway in Canada, Thailand, and other places. The Holcim Cement plant 
in Dotternhausen, Germany, continues to make cement from oil shale. 
Tests continue on the alum oil shale in Sweden to determine feasibility 
of recovering oil, uranium, nickel, molybdenum, and vanadium.
Significance for Oil Shale Development in the USA
    Oil shale activities in other countries are very relevant to the 
future of an oil shale industry in the United States. Like the U.S., 
nearly all of the other countries that are working on oil shale consume 
much more oil than they produce. A few (Jordan, Morocco, Turkey) have 
essentially no indigenous liquid fuel production and are totally 
dependent on imports, with the attendant economic dislocations and 
security concerns. Many have sensitive physical environments that could 
be damaged by poorly controlled and inadequately regulated mining and 
processing facilities. Many are water-poor and cannot divert water to 
supply oil shale plants and their associated populations without 
depriving other people and activities, especially agriculture. Many 
have small populations and economies and would have difficulty raising 
billions of dollars to pay for integrated oil shale plants, despite 
their potential economic benefits in the long term.
    Oil shale projects in other countries are also relevant to the U.S. 
because they will advance understanding of the processing technologies 
and reduce risks associated with their deployment. A very important 
benefit of the projects will be validation of high-level engineering 
designs and cost estimates. Although plants in the current and proposed 
industries are relatively small compared with what might be supported 
by the Green River oil shales, they are large enough to address many of 
the unknowns that must be confronted by promoters of a commercial 
industry. This is especially important for the retorting facilities, 
which are expensive to build and operate. In 2006, China's Fushun 
Mining Group estimated it cost $18.46 to deliver a barrel of shale oil, 
with 75% of the cost associated with retorting, 23% with 
transportation, and less than 1% with mining. A failed retort could 
bring an entire plant down, and it could be very expensive to repair or 
replace.
    The growing body of operating experience and information will 
greatly reduce the risks associated with a commercialization phase. 
This progress will facilitate financing and permitting of a facility, 
which will ultimately mean lower product costs. These advancements are 
important regardless of where oil shale technology is deployed next, 
and especially if it is deployed in the U.S.A.
    In short, the challenges faced by oil shale proponents in other 
countries are similar to those encountered in the United States: how to 
develop a practical, efficient, beneficial industry while protecting 
the environment and avoiding unacceptable social dislocations. It 
hasn't been easy over there; it won't be easy here.
                                 ______
                                 

                         Ockham Energy Services

                   Energy Efficiency Economy Ecology

                         8820 W. Francis Place

                      Lakewood, Colorado 80215 USA

                     303 238 0785 [email protected]

                           September 17, 2011

Mr. Tim Charters, Staff Director
Subcommittee on Energy & Mineral Resources
1324 Longworth House Office Building
Washington, DC 20515

Dear Mr. Charters:

    I appeared before the Subcommittee's oversight hearing on 
``American Jobs and Energy Security: Domestic Oil Shale the Status of 
Research, Regulation and Roadblocks'' which was held in Grand Junction, 
Colorado, on August 24. On September 9, Representative Lamborn asked 
me, as a followup question, ``Is there any more information on the 
important subject of rare earth elements in oil shale that was not 
discussed at the hearing?'' This is my response.
    The rare earth elements (REEs) constitute 17 elements in the 
periodic table: the 15 members of the lanthanide series--lanthanum, 
cerium, praseodymium, neodymium, promethium, samarium, europium, 
gadolinium, terbium, dysprosium, holmium, terbium, thulium, ytterbium, 
lutetium--plus the elements scandium and yttrium. Many of the rare 
earths are important industrial materials. They are used as colorants 
and oxidizers and in lasers; batteries; permanent magnets; catalytic 
converters in automobiles; phosphors in televisions, monitors, 
lighting, and radar; metallurgical alloys; glass; catalysts for 
chemical production and petroleum refining; and medical technology such 
as X-ray, MRI, NMR, and PET. They have essential roles to play in the 
deployment of renewable energy technologies, especially wind and solar. 
Advanced storage batteries made with REEs help make electric cars more 
practical.
    REEs are a current concern because they are no longer produced in 
the United States. China is the principal supplier worldwide, and the 
reliability of the supply is uncertain. Interruptions could cause 
serious problems for numerous U.S. manufacturers.
    Few of the REEs are actually ``rare'' as such. The average 
abundance of cerium, for example, is about the same as for copper, and 
all of the REEs except promethium are much more abundant than gold or 
silver. However the REEs are dispersed through the earth's crust and 
are seldom concentrated in easily exploitable deposits, as is often the 
case with other metals, including copper, gold, and silver. The rare 
earths are easy to find, because they are occur nearly everywhere. 
However they are hard to extract, because they are so diffuse, which 
makes them expensive. A pound of high-purity scandium, for example, 
currently sells for nearly $7,000.
    If some of the REEs were relatively abundant in the oil shale, 
their recovery as co-products with shale oil might make an oil shale 
project more economically attractive. With that possibility in mind, I 
examined a report on trace elements in the oil shale of Colorado's 
Piceance Basin that was prepared in 1981 for USEPA by Lawrence Berkeley 
Laboratory and USDOE's Laramie Energy Technology Center. Results are 
summarized in the attached table, which compares the maximum REE 
concentrations measured in the oil shale with average concentrations in 
the earth's upper crust.
    Not all the REEs were assayed in the oil shale. Of those that were 
assayed, cerium is the only element with a higher concentration in the 
oil shale than in the crust, and that margin is only about 15%. 
Concentrations of the other rare earths are similar to concentrations 
reported for average rocks. These findings do not suggest the existence 
of a rare-earth bonanza in Colorado oil shale.
    I hope this very limited study will help you in your work. Please 
contact me if I can be of further assistance to you or your associates.

Sincerely,

Thomas A. Sladek, PhD

[GRAPHIC] [TIFF OMITTED] T8237.009

                                 .eps__
                                 
    Mr. Lamborn. All right. I am sure we will have some 
questions shortly.
    Thank you.
    Ms. Spinti? Professor Spinti?

  STATEMENT OF JENNIFER SPINTI, RESEARCH ASSOCIATE PROFESSOR, 
DEPARTMENT OF CHEMICAL ENGINEERING AND INSTITUTE FOR CLEAN AND 
               SECURE ENERGY, UNIVERSITY OF UTAH

    Ms. Spinti. Yes, Chairman Lamborn, Congressman Tipton, 
thank you for this opportunity.
    I am here representing the Institute for Clean and Secure 
Energy at the University of Utah. We have had a program in oil 
shale and sands research for approximately the last 5 years.
    I would like to talk about chemical engineering since that 
is what I am, and in chemical engineering, you first draw a 
control volume around the problem you want to solve. And that 
means you are just putting boundaries on the problem.
    So, I want to consider a control volume for a wind turbine 
that sits on a windy ridge. But this control volume doesn't 
just include the windy ridge, but it includes the mine where 
the ores are processed that are needed for the wind turbine 
manufacture. And one of those ores that is needed is neodymium 
ore. Approximately 1 ton of metal is needed for the manufacture 
of a 1 megawatt turbine.
    Most of that manufacturing, as you indicated, I believe, 
Congressman Tipton, is occurring in China, where they have very 
lax environmental laws. And there are toxic lakes of acidic 
processing waste right now because of the ore processing that 
is going on.
    We can also consider a control volume around a solar power 
installation in California. Most of the proposed facilities 
have involved water cooling, which is a very water-intensive 
process. You have higher plant efficiency than air cooling, but 
it requires lots of water.
    If you go look at the California Web site where they apply 
for these or they have applications for these types of 
facilities, a recently proposed 250 megawatt facility would 
require 536 million gallons of water per year.
    What about mining and water use impacts from oil shale 
development? Let's draw a control volume that includes these 
issues. In Utah, the Division of Oil, Gas, and Mining issues 
permits for oil and gas drilling, coal mining, and minerals.
    Oil shale is regulated as a mineral and is subject to 
minerals regulatory permits. Annual permit fees are required. 
Operation and reclamation plans must be maintained, and 
approval must be sought for modification.
    As for water, a recent analysis by our institute, a 
previously published estimate shows an average water 
consumption rate for oil shale applications that have--where we 
have public information is 2.5 barrels of water per barrel of 
shale produced. In order to compare that to the water usage of 
the solar power plant, we have to convert from energy content 
to unit of power.
    So, I made some assumptions about oil shale's energy 
content and that you would be burning it in a 30 percent 
efficiency engine. And that comes out to a 50,000-barrel-a-day 
oil shale facility, 1.8 million gallons of water per megawatt. 
That is compared to 2.1 million gallons per megawatt for the 
solar power plant.
    So my question is, is oil shale development orders of 
magnitude worse than any other kind of development that 
involves extraction or use of resources on a large scale? There 
are certainly other issues associated with oil shale 
development that we can't ignore in our control volume, 
including the power plant that provides electricity to the oil 
shale processing plant, the air shed around the facility, the 
nearby town that will be impacted by development, the 
endangered species and habitat that will be affected, et 
cetera.
    Do we currently have the information we need to predict 
with some degree of certainty what will happen in our control 
volume? I argue yes and no. So we do have quite a bit of 
information available in the public arena from previous decades 
of oil shale research, from oil shale booms and busts, and from 
current international production.
    The University of Utah, as I mentioned, has had an oil 
shale and sands research center that built on several decades 
of research at the university. We have a report that I brought 
a copy of for each of you that we published in 2007, assessing 
some of the technical, economic, and legal issues associated 
with oil shale and sands production. We have a current research 
program looking at quite a few issues ranging from policy to 
economic to technical. I would be happy to discuss those 
research initiatives with you.
    Given all this information, what do we need? We need 
domestic energy resources to fulfill our domestic needs, and 
the development of all resources should be held to the same 
high standards.
    We need to move all forms of energy development forward so 
that we don't miss a solution to the problem. Poor solutions 
will be eliminated by the market, by the weight of scientific 
and economic data, or by their failure to meet environmental 
thresholds set by regulation.
    We need a regulatory regime in place that will allow oil 
shale to stand or fall on its own merits. We need opportunities 
for oil shale companies to move their technologies up scale 
from the laboratory to the field, to move from research to 
application.
    We need companies willing to share information with 
Government, academia, and the general public. Transparency will 
be the key to success in the arena of public opinion.
    We need a multidisciplinary U.S. oil shale research center 
to address the unforeseen problems--engineering, socioeconomic, 
environmental, et cetera--that will arise as processes move up 
scale. Lessons learned at the larger scale can then be used to 
refine research directions and initiatives.
    In conclusion, at the university, we have a couple of 
models for perhaps moving forward in these arenas. We are 
working with several oil shale companies, with some simulation 
tools we have developed, and the idea there is that we want to 
be able to have quantified predictivity about effects of 
different technologies.
    We also have a lot of public outreach events, conferences 
that we sponsor that we feel are important to address some of 
these issues. And the common theme with all of the things that 
we are doing are collaboration with a wide range of 
constituencies and data and information sharing. The issues are 
too large to be discussed and solved in isolation.
    Thank you.
    [The prepared statement of Ms. Spinti follows:]

    Statement of Jennifer P. Spinti, Research Associate Professor, 
Department of Chemical Engineering, Assistant Director, Clean & Secure 
 Energy from Domestic Oil Shale/Sands Program, Institute for Clean and 
                 Secure Energy, The University of Utah

    According to the U.S. Environmental Protection Agency, renewable 
energy comes from sources that ``restore themselves over short periods 
of time and do not diminish'' (1). Wind energy is one of the renewable 
energy sources that the U.S. government has supported through direct 
spending and tax credits and that states have pushed through renewable 
energy targets. At the end of 2010, thanks to rapid expansion in 
capacity, wind power provided 2.3 percent (40,000 MW of the energy 
generated in the U.S. (2,3). According to a metals industry analyst, a 
wind turbine with an electric power generating capacity of 1 MW 
requires one metric ton of the rare earth metal neodymium for making a 
permanent magnet (4). That neodymium is most likely mined in Inner 
Mongolia, a region in China with more than 90 percent of the world's 
reserves. One of China's most polluted cities, Batou, is located in 
this region adjacent to a 5-mile wide lake of toxic waste containing 
acids, heavy metals, and other chemicals left over from the processing 
of the neodymium ore (5). Studies show high rates of cancer, 
osteoporosis and skin and respiratory diseases in villages around the 
lake (5). Does the legacy of this environmental impact diminish the 
status of ``renewable'' for wind power?
    Another renewable energy source, concentrated solar power, can come 
with a high price tag for water. Wet cooling, where water is evaporated 
to remove excess heat, is preferred by developers. Dry cooling, where 
fans and heat exchangers are used for heat removal, consumes about 90 
percent less water but reduces plant efficiency, thus reducing 
profitability (6). The California Energy Commission has received 
numerous applications for large-scale solar energy projects in 
California, and many have large water requirements due to their use of 
wet cooling technology (7). For example, the Genesis Solar Energy 
Project would consume an estimated 536 million gallons of water a year 
for power plant cooling, process water makeup, mirror washing, etc. to 
produce 250 MW of electricity (8), a rate of 2.1 million gallons of 
water per megawatt of power generated by this renewable energy source. 
Is this a sustainable level of water consumption in the arid 
southwestern deserts where concentrated solar plants are targeted for 
development?
    What about mining and water use impacts from oil shale development? 
In Utah, the Division of Oil, Gas, and Mining (DOGM) issues permits for 
oil and gas drilling, coal mining, and minerals mining using guidelines 
established in the Utah Oil and Gas Conservation Act, the Utah Mined 
Land Reclamation Act, and the Utah Coal Mining and Reclamation Act (9). 
Oil shale is regulated as a mineral and is subject to minerals 
regulatory permits. A large mine, defined as greater than 10 acres, 
requires a 50+ page application that includes detailed calculations for 
the bond based upon specific operations. In addition, annual permit 
fees are required, operation and reclamation plans must be maintained, 
and approval must be sought for modification (9).
    DOGM currently oversees 670 permitted mines in the state of Utah 
(10). Coal, oil sands, and oil shale mines are particularly 
controversial. In 2010, after a lengthy appeals process, DOGM issued a 
permanent program permit to a new surface coal mine, the Coal Hollow 
Mine, which allows 635 acres of surface disturbance. Earth Energy 
Resources has applied for a permit to mine 213 acres of oil sands. That 
permit is currently in appeal (9). Red Leaf Resources is in the process 
of applying for a large mine permit for development of its oil shale 
resources.
    It is unclear what water consumption rates for oil shale 
development will be. A recent analysis of previously published 
estimates shows an average water consumption rate of 2.5 barrels of 
water per barrel of oil produced (11). An ethanol plant requires four 
barrels of water to produce one barrel of ethanol, and this amount does 
not include the water needed for the cultivation of corn (12). How does 
water usage for oil shale compare to that for the solar energy plant? 
The energy content of a barrel of oil is measured in units of energy 
while power plant output is reported in units of power. To compare the 
two, one must make several assumptions. If one assumes the energy 
content of a barrel of shale oil to be approximately 1.7 MWh (13) and 
that it is burned in an engine that has an efficiency of 30 percent, 
then a 50,000 barrels per day oil shale operation would produce a power 
equivalent of approximately 1060 MW. At 2.5 barrels of makeup water 
required per barrel of oil produced, yearly water consumption would be 
in the 1,900 million gallon range, or 1.8 million gallons of water per 
megawatt of power produced.
    Is oil shale development orders of magnitude worse than any other 
kind of development that involves extraction or use of resources on a 
large scale? The above paragraphs address two common critiques used to 
single out oil shale development, e.g. land disturbance and water 
usage. There are also critiques related to energy usage, air quality, 
carbon footprint, capital cost, socioeconomic impacts, etc. All of 
these concerns are valid given the potential scale of oil shale 
development in the Uinta and Piceance Basins of Utah and Colorado (see 
Figure 1). However, there is currently a dearth of data on which to 
base projections for large-scale impacts because the last active U.S. 
oil shale facility, the Union Oil operation located in Parachute, CO, 
was shut down in 1991 (14), and the current round of Research, 
Development, and Demonstration (RD&D) leases has yet to provide 
publicly available information on the economic feasibility of various 
oil shale extraction technologies.
    What information on oil shale development and its impacts do we 
have in the public arena? We have reports and papers from decades of 
research by academia, national laboratories, companies, and other 
entities, the experience of oil shale companies currently producing in 
other countries, and the lessons learned from previous oil shale booms.
    The University of Utah has been a contributor to this body of 
knowledge for many years, beginning with the work of Professor H. Y. 
Sohn during the oil shale boom of the 1970s and early 1980s and 
continuing with contributions from Professor J. D. Miller, Dr. James 
Bunger, and Professor M. D. Deo. In late 2005, the Institute for Clean 
and Secure Energy (ICSE) at the University of Utah announced the 
creation of the Utah Heavy Oil Program (UHOP). UHOP's original mission 
was to provide research support to federal and state constituents for 
addressing the wide-ranging issues surrounding the creation of an 
industry for oil shale, oil sands and heavy oil production in the U.S. 
The scope of the mission was later reduced to focus exclusively on oil 
shale and oil sands production. The research sponsored by UHOP was 
broad and interdisciplinary in nature, involving researchers from the 
Colleges of Engineering, Science, Law, and Business. Funding for UHOP 
came as the result of a Congressionally Directed Program; the FY2006 
budget was $1.8 million. At the time it was funded, there had been no 
federal support for oil shale/sands research for well over a decade. 
Part of the renewed interest in oil shale and oil sands was the passage 
of the Energy Policy Act of 2005 (EPAct 2005).
    UHOP was given two directives in EPAct 2005. The first was to 
prepare an update to the 1988 technical and economic assessment of 
domestic heavy oil resources (15) and to the 1996 Department of Energy 
feasibility study of heavy oil recovery (16). UHOP published ``A 
Technical, Economic, and Legal Assessment of North American Heavy Oil, 
Oil Sands, and Oil Shale Resources'' in 2007. This report evaluated the 
size of the North American unconventional fuel resource, the production 
technologies available, the upgrading and refining steps needed, and 
the economic, social, legal, and environmental issues related to 
unconventional fuels production (17). The second directive was to 
sponsor research that related to the objective of Section 369 of EPAct 
2005. Four of the sponsored projects were directly related to oil shale 
and included reservoir modeling for in situ production of oil shale, 
oil shale pyrolysis kinetics, a analysis of how a federal oil shale 
program might be implemented, water usage estimates for oil shale 
development in Utah's Uinta Basin, and produced water treatment 
options. A final report was submitted to the Department of Energy (DOE) 
in early 2010 (18).
    ICSE received additional funding in FY2008, FY2009, and FY2010 for 
the Clean and Secure Energy from Domestic Oil Shale and Oil Sands 
Resources Program. Current research initiatives include the simulation 
of a modified in situ production process, the development of improved 
models for kerogen pyrolysis, the development of a predictive geologic 
model for the Uinta Basin, an analysis of the geomechanical reservoir 
state (including subsidence issues associated with in situ production), 
basin scale simulation of the economic and environmental impacts of oil 
shale development, and conjunctive management of surface water and 
groundwater resources in Utah. An economic assessment of various oil 
shale and oil sands development scenarios in Utah's Uinta Basin is also 
being prepared for publication this fall.
    Given that we have all this information, what do we need? We need 
domestic energy resources to fulfill our domestic needs, and the 
development of all resources should be held to the same high standards. 
If we don't like the tailings ponds and open pit oil sands mines in 
Alberta or the toxic wastes generated by rare earth mines in China for 
wind turbine components, we need domestic development adherent to more 
stringent U.S. environmental laws. We need to move all forms of energy 
development forward so that we don't miss a solution to the problem. 
Poor solutions will be eliminated by the market, by the weight of 
scientific and economic data, or by their failure to meet environmental 
thresholds set by regulation. We need a regulatory regime in place that 
will allow oil shale to stand or fall on its own merits. For example, 
oil shale development is and should be held to the same standard as all 
other types of mining operations in the state of Utah. It should not be 
singled out for approval or disapproval just because of the resource 
type that is being mined. We need opportunities for companies to move 
their technologies upscale. As a 2005 Rand report on oil shale 
development notes, ``Reliable estimates of water requirements will not 
be available until the technology reaches the scale-up and confirmation 
stage'' (19). We need companies willing to share information with 
government and academia. It is difficult to employ tools such as high 
performance computing that could lead to more rapid deployment of 
technologies without data for validation and uncertainty 
quantification. We need a multidisciplinary U.S. oil shale research 
center. Unforeseen problems will arise, and additional research will be 
required to address those problems. All of those problems will not have 
an engineering solution, so such a research center will require experts 
in the fields of policy, environmental science, law, and economics in 
addition to engineering and science. Finally, we need research to be 
moved out of the laboratory and/or the policy think tank and into 
application. Lessons learned at the larger scale can then be used to 
refine research directions and initiatives.
    ICSE has several models for moving forward with respect to the 
engineering, policy/legal, and economic sides of oil shale development. 
On the engineering side, ICSE has partnered with several oil shale 
technology companies to produce simulation tools with quantified 
predictivity that can be used by industry to assist in the assessment 
of the technological, economic and environmental consequences of the 
production of new gas and liquid fuels from U.S. oil shale/sands 
deposits. The first model is the application of the simulation tools to 
Red Leaf Resources' patented EcoShale process. In this model, Red Leaf 
is providing temperature data so that the thermal heating of oil shale 
can be evaluated. The simulation tools will also be used to study 
product yield as a function of operating conditions for indirectly 
heated, rubblized oil shale beds.
    The second model is a capstone project that is intended to draw 
together the results of many years of ICSE research to demonstrate 
computational simulation capability for the assessment and deployment 
of the shale oil production process commercialized by American Shale 
Oil, LLC (AMSO). In this integrated project, we are coupling simulation 
capabilities with experimental data from key small-scale experiments in 
a formal validation process where the controlling uncertainties are 
accounted for and quantified. Our goal is to demonstrate that optimal 
risk assessment and decision-making regarding deployment of this new 
technology is most efficiently accomplished by this formal validation 
and uncertainty quantification process. In this model, AMSO is 
providing funding for the small-scale experiments.
    The third model is a joint research project with Los Alamos 
National Laboratory (LANL) to develop a predictive tool for assessing 
the basin- or regional-scale environmental and economic impacts of 
unconventional fuel development. LANL developed a dynamic, integrated 
assessment tool several years ago that is being updated, improved, and 
subjected to a rigorous validation and uncertainty quantification 
process through the cooperative efforts of ICSE and LANL researchers.
    On the policy/legal side, ICSE is collaborating with the Wallace 
Stegner Center for Land, Resources, and the Environment at the 
University of Utah. Professor Robert Keiter, the director of the 
Stegner Center, is also the Associate Director of ICSE for Legal and 
Policy. Together, ICSE and the Stener Center have hosted the Energy 
Forum the past two years. The Energy Forum 2011 will feature former 
U.S. Senator Bob Bennett and former Wyoming Governor Dave Freudenthal 
in a panel discussion of energy policy challenges including climate 
change, regional energy demand, natural resources, and national energy 
security.
    Outreach efforts by ICSE also include hosting the annual University 
of Utah Unconventional Fuels Conference. This year's conference 
featured speakers from the Bureau of Land Management Office in 
Washington, D.C., a member of the Ute Tribe whose lands encompass 
significant conventional and unconventional fuel resources, 
representatives from AMSO, Red Leaf, and Enefit, and the director of 
the Division of Oil, Gas, and Mining for the state of Utah. ICSE has 
also teamed with the Utah Geological Survey and the Bingham 
Entreprenseurship and Energy Research Center in Vernal, UT, to lead 
field trips to oil shale and sands sites in the Uinta Basin.
    I will be happy to answer any questions you might have about 
specific research results, overall program directions, or information 
contained in our reports at the hearing.
References
     1.  U.S. Environmental Protection Agenday. (n.d.). Green power 
market. Retrieved Augsut 19. 2011, from http://www.epa.gov/greenpower/
gpmarket/.
     2.  American Wind Energy Association. (n.d.) Industry statistics. 
Retrieved August 19, 2011, from http://www.awea.org/learnabout/
industry_stats/index.cfm.
     3.  Science Daily (2011, April 27). Wind turbines: In the wake of 
the wind. Retrieved August 21, 2011, from http://www.sciencedaily.com/
releases/2011/04/110426151040.htm).
     4.  Lifton, J. (2009, March 4). Braking wind: Where's the 
neodymium going to come from? Technology Metals Research. Retrieved 
August 21, 2011, from http://www.techmetalsresearch.com/2009/03/
braking-wind-wheres-the-neodymium-going-to-come-from/.
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cost of Britain's clean, green wind power experiment: Pollution on a 
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stumble on a need for water. The New York Times. Retrieved August 22, 
2011, from http://www.nytimes.com/2009/09/30/business/energy-
environment/30water.htm.
     7.  Woody, T. (2009, October 27). Water use by solar projects 
intensifies. The New York Times. Retrieved August 21, 2011, from http:/
/green.blogs.nytimes.com/2009/10/27/water-use-by-solar-projects-
intensifies/.
     8.  California Energy Commission (n.d.). Genesis solar energy 
project. Retrieved August 21, 2011, from http://www.energy.ca.gov/
sitingcases/genesis_solar/index.html.
     9.  Baza, J. (2011, May). Division of Oil, Gas, and Mining 
permitting processes. Paper presented at the 2011 University of Utah 
Unconventional Fuels Conference, Salt Lake City, UT. Retrieved August 
19, 2011, from http://www.icse.utah.edu/assets/archive/2011/
ucf_agenda.htm.
    10.  Division of Oil, Gas, and Mining. (n.d.). Associate directors. 
Retrieved August 22, 2011, from http://linux1.ogm.utah.gov/WebStuff/
wwwroot/tabs.html.
    11.  Ruple, J. & Keiter, R. (2010). Policy Analysis of Water 
Availability and Use Issues For Domestic Oil Shale and Oil Sands 
Development. Salt Lake City, UT: Institute for Clean & Secure Energy, 
University of Utah. Retrieved from http://repository.icse.utah.edu/
dspace/handle/123456789/11017.
    12.  Rapier, R. (2007, March 20). Water usage in an oil refinery. 
Consumer Energy Report. Retrieved August 22, 2011, from http://
www.consumerenergyreport.com/2007/03/20/water-usage-in-an-oil-
refinery/.
    13.  Wikipedia (n.d.). Barrel of oil equivalent. Retrieved August 
22, 2011, from http://en.wikipedia.org/wiki/Barrel_of_oil_equivalent
    14.  Russell, P. L. (1990). Oil shales of the world, their origin, 
occurrence, and exploitation. Pergamon Press: New York.
    15.  Dowd, W. T., Kuuskraa, V. A., & Godec, M. L. (1988). A 
technical and economic assessment of domestic heavy oil: Final report 
(DOE/BC/10840-1). Interstate Oil Compact Commission: Oklahoma City, OK.
    16.  Strycker, A. R., Wadkins, R., Olsen, D. K., Sarkar, A. K. 
Ramzel, E. B., Johnson, W. I., & Pautz, J. (1996). Feasibility study of 
heavy oil recovery in the United States (NIPER.BDM-0225). BDM-Oklahoma, 
Inc.: Bartlesville, OK.
    17.  Institute for Clean and Secure Energy. (2007). A technical, 
economic, and legal assessment of North American heavy oil, oil sands, 
and oil shale resources. Salt Lake City, UT: Author. Retrieved from 
http://repository.icse.utah.edu/dspace/handle/123456789/10823.
    18.  Institute for Clean and Secure Energy. (2010). Utah Heavy Oil 
Program: Final scientific/technical report, project period June 21, 
2006 to October 20, 2009. Salt Lake City, UT: Author. Retrieved from 
http://repository.icse.utah.edu/dspace/handle/123456789/11086.
    19.  Bartis, J. T., LaTourrette, T., Dixon, L. Peterson, D. J., & 
Cecchine, G. (2005). Oil shale development in the United States (MG-
414-NETL). RAND Corporation: Santa Monica, CA.
[GRAPHIC] [TIFF OMITTED] T8237.001

                                 .eps__
                                 
    Mr. Lamborn. All right, thank you.
    Ms. Mittal?

   STATEMENT OF ANU MITTAL, DIRECTOR, NATURAL RESOURCES AND 
     ENVIRONMENT DIVISION, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Mittal. Chairman Lamborn and Congressman Tipton, I am 
pleased to be here today to participate in your field hearing 
on oil shale development.
    As you know, interest in developing a domestic oil shale 
industry can be traced back to the early 1900s. However, the 
industry has been hampered by technological challenges, average 
oil prices that have been too low to consistently justify 
investment in this resource, and concerns about the potential 
impacts on the environment.
    In October 2010, GAO issued a report that focused on one 
area of particular concern--the amount of water that could be 
needed to develop an oil shale industry. My testimony today 
will summarize the findings of that report and focus on what is 
known about the potential impacts of oil shale development on 
water resources, what is known about the amount of water that 
may be needed for the commercial development of oil shale, the 
extent to which water could be a potential limiting factor in 
the industry's development, and the need for Federal research 
efforts to help mitigate these potential impacts.
    First, we found that oil shale development could have 
significant impacts on the quantity and quality of water 
resources in Colorado and Utah, but the magnitude of these 
impacts is largely unknown. This is because the technologies 
that would be used have not yet been commercially proven, the 
size of the future oil shale industry is currently uncertain, 
and there is limited knowledge of current water conditions and 
groundwater flows in the area.
    While it is difficult to definitively determine the 
quantitative impacts of oil shale development on water 
resources, it is possible to identify the potential qualitative 
impacts of this development. For example, oil shale development 
could impact water quality through surface disturbances from 
the construction of roads and production facilities.
    Water quality could also be impacted by large water 
withdrawals from streams and aquifers and from discharges of 
contaminants through operations. It will, therefore, be 
critical for the industry to implement effective measures to 
mitigate these potential impacts.
    With regard to the amount of water that could be needed to 
develop a commercial oil shale industry, we found that the 
estimates varied widely, depending on the characteristics of 
the processes used. We also found that there is greater 
uncertainty in how much water could be needed by an in-situ 
operation versus a surface retorting operation.
    Nonetheless, it is expected that the average total water 
needs for the entire oil shale production life cycle could be 
about three barrels of water for each barrel of oil produced 
for surface retorting operations and five barrels for in-situ 
operations. Most of the companies that we contacted said that 
they are looking for ways to reduce their water use, for 
example, by reusing or recycling water at their operations.
    We also found that while the amount of water needed for the 
initial development of an oil shale industry is most likely 
available, the growth of the industry may be limited by a 
number of factors that could impact future water availability. 
Most of the companies we contacted were confident that they 
held enough water rights for their initial shale development 
projects, and they would most likely be able to purchase more 
rights in the future as needed.
    However, these companies could face challenges in acquiring 
additional water rights in the future because of expected 
increases in water demands from municipal and industrial users 
in these areas, because of potential reductions in water 
supplies from a warming climate, and because of greater need 
for water to fulfill interstate compact obligations and protect 
endangered species.
    Finally, since 2006, the Federal Government had spent over 
$22 million on oil shale development research, and only about 
$5 million of this amount was spent to study water-related 
issues. However, most Government officials and water experts 
that we spoke to agree that there are insufficient data on the 
baseline conditions of water resources in the oil shale regions 
of Colorado and Utah and that additional research is needed to 
understand the movement of groundwater and its interaction with 
surface water.
    We also found that Federal officials at DOE and Interior 
seldom coordinate their water-related oil shale research with 
each other or with State water officials. As a result of these 
findings, we made three recommendations to Interior to 
proactively begin preparing for the potential impacts of a 
future oil shale industry. Interior generally concurred with 
our recommendations and noted that it has and will continue to 
take actions to implement them.
    In conclusion, Mr. Chairman, for nearly a century, 
industry, with some Government support, has focused on 
overcoming the technological challenges of developing a 
commercially viable oil shale industry. However, there are a 
number of other associated impacts that should not be 
overlooked, and now is the time for Federal agencies to 
proactively begin focusing on these issues.
    This concludes my prepared statement. I would be happy to 
answer any questions.
    [The prepared statement of Ms. Mittal follows:]

Statement of Anu K. Mittal, Director, Natural Resources and Environment 
          Team, United States Government Accountability Office

    Chairman Lamborn, Ranking Member Holt, and Members of the 
Subcommittee:
    I am pleased to be here today to participate in your field hearing 
on oil shale development. As you know, being able to tap the vast 
amounts of oil locked within U.S. oil shale could go a long way toward 
satisfying our nation's future oil demands. The Green River Formation--
an assemblage of over 1,000 feet of sedimentary rocks that lie beneath 
parts of Colorado, Utah, and Wyoming--contains the world's largest 
deposits of oil shale. The U.S. Geological Survey (USGS) estimates that 
the Green River Formation contains about 3 trillion barrels of oil and 
that about half of this may be recoverable, depending on available 
technology and economic conditions. This is an amount about equal to 
the entire world's proven oil reserves. The thickest and richest oil 
shale within the Green River Formation exists in the Piceance Basin of 
northwest Colorado and the Uintah Basin of northeast Utah (see app. I). 
The federal government is in a unique position to influence the 
development of oil shale because 72 percent of the oil shale within the 
Green River Formation is beneath federal lands managed by the 
Department of the Interior's (Interior) Bureau of Land Management 
(BLM). The Department of Energy (DOE) has provided technological and 
financial support for oil shale development through its research and 
development efforts, but oil shale development has been hampered by 
technological challenges, average oil prices that have been too low to 
consistently justify investment, and concerns over potential impacts on 
the environment.
    One area of particular concern is that developing oil shale will 
require large amounts of water--a resource that is already in scarce 
supply in the arid West where an expanding population is placing 
additional demands on water. Some analysts project that large scale oil 
shale development within Colorado could require more water than is 
currently supplied to over 1 million residents of the Denver metro area 
and that water diverted for oil shale operations would restrict 
agricultural and urban development. The potential demand for water is 
further complicated by the past decade of drought in the West and 
projections of a warming climate in the future. In October 2010, we 
issued a report that examined the nexus between oil shale development 
and water impacts. \1\
---------------------------------------------------------------------------
    \1\ GAO, Energy-Water Nexus: A Better and Coordinated Understanding 
of Water Resources Could Help Mitigate the Impacts of Potential Oil 
Shale Development, GAO-11-35 (Washington, D.C.; Oct. 29, 2010).
---------------------------------------------------------------------------
    My testimony today will summarize the findings of that report. 
Specifically, I will discuss (1) what is known about the potential 
impacts of oil shale development on surface water and groundwater, (2) 
what is known about the amount of water that may be needed for the 
commercial development of oil shale, (3) the extent to which water will 
likely be available for commercial oil shale development and its 
source, and (4) federal research efforts to address impacts on water 
resources from commercial oil shale development. To perform this work 
we, among other things, reviewed an environmental impact statement on 
oil shale development prepared by BLM and various studies from private 
and public groups; we also interviewed officials at DOE, USGS, BLM; 
state regulatory agencies in Colorado and Utah; oil shale industry 
representatives; water experts; and organizations performing research, 
including universities and national laboratories, and reviewed relevant 
documents describing their research. We conducted this work in 
accordance with generally accepted government auditing standards.

Background
    Interest in oil shale as a domestic energy source has waxed and 
waned since the early 1900s. More recently, the Energy Policy Act of 
2005 directed BLM to lease its lands for oil shale research and 
development. In June 2005, BLM initiated a leasing program for 
research, development, and demonstration (RD&D) of oil shale recovery 
technologies. By early 2007, it granted six small RD&D leases: five in 
the Piceance Basin of northwest Colorado and one in Uintah Basin of 
northeast Utah. The leases are for a 10-year period, and if the 
technologies are proven commercially viable, the lessees can 
significantly expand the size of the leases for commercial production 
into adjacent areas known as preference right lease areas. The Energy 
Policy Act of 2005 also directed BLM to develop a programmatic 
environmental impact statement (PEIS) for a commercial oil shale 
leasing program. During the drafting of the PEIS, however, BLM realized 
that, without proven commercial technologies, it could not adequately 
assess the environmental impacts of oil shale development and dropped 
from consideration the decision to offer additional specific parcels 
for lease. Instead, the PEIS analyzed making lands available for 
potential leasing and allowing industry to express interest in lands to 
be leased. Environmental groups then filed lawsuits, challenging 
various aspects of the PEIS and the RD&D program. Since then, BLM has 
initiated another round of oil shale RD&D leasing.
    Stakeholders in the future development of oil shale are numerous 
and include the federal government, state government agencies, the oil 
shale industry, academic institutions, environmental groups, and 
private citizens. Among federal agencies, BLM manages the land and the 
oil shale beneath it and develops regulations for its development. USGS 
describes the nature and extent of oil shale deposits and collects and 
disseminates information on the nation's water resources. DOE, through 
its various offices, national laboratories, and arrangements with 
universities, advances energy technologies, including oil shale 
technology. The Environmental Protection Agency (EPA) sets standards 
for pollutants that could be released by oil shale development and 
reviews environmental impact statements, such as the PEIS. Interior's 
Bureau of Reclamation (BOR) manages federally built water projects that 
store and distribute water in 17 western states and provides this water 
to users. BOR monitors the amount of water in storage and the amount of 
water flowing in the major streams and rivers, including the Colorado 
River, which flows through oil shale country and feeds these projects. 
BOR provides its monitoring data to federal and state agencies that are 
parties to three major federal, state, and international agreements 
that together with other federal laws, court decisions, and agreements, 
govern how water within the Colorado River and its tributaries is to be 
shared with Mexico and among the states in which the river or its 
tributaries are located. \2\
---------------------------------------------------------------------------
    \2\ These three major agreements are the Colorado River Compact of 
1922, the Upper Colorado River Basin Compact of 1948, and the Mexican 
Water Treaty of 1944.
---------------------------------------------------------------------------
    The states of Colorado and Utah have regulatory responsibilities 
over various activities that occur during oil shale development, 
including activities that impact water. Through authority delegated by 
EPA under the Clean Water Act, Colorado and Utah regulate discharges 
into surface waters. Colorado and Utah also have authority over the use 
of most water resources within their respective state boundaries. They 
have established extensive legal and administrative systems for the 
orderly use of water resources, granting water rights to individuals 
and groups. Water rights in these states are not automatically attached 
to the land upon which the water is located. Instead, companies or 
individuals must apply to the state for a water right and specify the 
amount of water to be used, its intended use, and the specific point 
from where the water will be diverted for use, such as a specific point 
on a river or stream. Utah approves the application for a water right 
through an administrative process, and Colorado approves the 
application for a water right through a court proceeding. The date of 
the application establishes its priority--earlier applicants have 
preferential entitlement to water over later applicants if water 
availability decreases during a drought. These earlier applicants are 
said to have senior water rights. When an applicant puts a water right 
to beneficial use, it is referred to as an absolute water right. Until 
the water is used, however, the applicant is said to have a conditional 
water right. Even if the applicant has not yet put the water to use, 
such as when the applicant is waiting on the construction of a 
reservoir, the date of the application still establishes priority. 
Water rights in both Colorado and Utah can be bought and sold, and 
strong demand for water in these western states facilitates their sale.
    A significant challenge to the development of oil shale lies in the 
current technology to economically extract oil from oil shale. To 
extract the oil, the rock needs to be heated to very high 
temperatures--ranging from about 650 to 1,000 degrees Fahrenheit--in a 
process known as retorting. Retorting can be accomplished primarily by 
two methods. One method involves mining the oil shale, bringing it to 
the surface, and heating it in a vessel known as a retort. Mining oil 
shale and retorting it has been demonstrated in the United States and 
is currently done to a limited extent in Estonia, China, and Brazil. 
However, a commercial mining operation with surface retorts has never 
been developed in the United States because the oil it produces 
competes directly with conventional crude oil, which historically has 
been less expensive to produce. The other method, known as an in-situ 
process, involves drilling holes into the oil shale, inserting heaters 
to heat the rock, and then collecting the oil as it is freed from the 
rock. Some in-situ technologies have been demonstrated on very small 
scales, but other technologies have yet to be proven, and none has been 
shown to be economically or environmentally viable.
    Nevertheless, according to some energy experts, the key to 
developing our country's oil shale is the development of an in-situ 
process because most of the richest oil shale is buried beneath 
hundreds to thousands of feet of rock, making mining difficult or 
impossible. Additional economic challenges include transporting the oil 
produced from oil shale to refineries because pipelines and major 
highways are not prolific in the remote areas where the oil shale is 
located, and the large-scale infrastructure that would be needed to 
supply power to heat oil shale is lacking. In addition, average crude 
oil prices have been lower than the threshold necessary to make oil 
shale development profitable over time.
    Large-scale oil shale development also brings socioeconomic 
impacts. There are obvious positive impacts such as the creation of 
jobs, increase in wealth, and tax and royalty payments to governments, 
but there are also negative impacts to local communities. Oil shale 
development can bring a sizeable influx of workers, who along with 
their families, put additional stress on local infrastructure such as 
roads, housing, municipal water systems, and schools. Development from 
expansion of extractive industries, such as oil shale or oil and gas, 
has typically followed a ``boom and bust'' cycle in the West, making 
planning for growth difficult. Furthermore, traditional rural uses 
could be replaced by the industrial development of the landscape, and 
tourism that relies on natural resources, such as hunting, fishing, and 
wildlife viewing, could be negatively impacted.
    Developing oil shale resources also faces significant environmental 
challenges. For example, construction and mining activities can 
temporarily degrade air quality in local areas. There can also be long-
term regional increases in air pollutants from oil shale processing, 
upgrading, pipelines, and the generation of additional electricity. 
Pollutants, such as dust, nitrogen oxides, and sulfur dioxide, can 
contribute to the formation of regional haze that can affect adjacent 
wilderness areas, national parks, and national monuments, which can 
have very strict air quality standards. Because oil shale operations 
clear large surface areas of topsoil and vegetation, some wildlife 
habitat will be lost. Important species likely to be negatively 
impacted from loss of wildlife habitat include mule deer, elk, sage 
grouse, and raptors. Noise from oil shale operations, access roads, 
transmission lines, and pipelines can further disturb wildlife and 
fragment their habitat. Environmental impacts could be compounded by 
the impacts of coal mining, construction, and extensive oil and gas 
development in the area. Air quality and wildlife habitat appear to be 
particularly susceptible to the cumulative effect of these impacts, and 
according to some environmental experts, air quality impacts may be the 
limiting factor for the development of a large oil shale industry in 
the future. Lastly, the withdrawal of large quantities of surface water 
for oil shale operations could negatively impact aquatic life 
downstream of the oil shale development. My testimony today will 
discuss impacts to water resources in more detail.

Oil Shale Development Could Adversely Impact Water Resources, but the 
        Magnitude of These Impacts Is Unknown
    In our October report, we found that oil shale development could 
have significant impacts on the quantity and quality of surface and 
groundwater resources, but the magnitude of these impacts is unknown. 
For example, we found that it is not possible to quantify impacts on 
water resources with reasonable certainty because it is not yet 
possible to predict how large an oil shale industry may develop. The 
size of the industry would have a direct relationship to water impacts. 
We noted that, according to BLM, the level and degree of the potential 
impacts of oil shale development cannot be quantified because this 
would require making many speculative assumptions regarding the 
potential of the oil shale, unproven technologies, project size, and 
production levels.
    Hydrologists and engineers, while not able to quantify the impacts 
from oil shale development, have been able to determine the qualitative 
nature of its impacts because other types of mining, construction, and 
oil and gas development cause disturbances similar to impacts that 
would be expected from oil shale development. According to these 
experts, in the absence of effective mitigation measures, impacts from 
oil shale development to water resources could result from disturbing 
the ground surface during the construction of roads and production 
facilities, withdrawing water from streams and aquifers for oil shale 
operations, underground mining and extraction, and discharging waste 
waters from oil shale operations. For example, we reported that oil 
shale operations need water for a number of activities, including 
mining, constructing facilities, drilling wells, generating electricity 
for operations, and reclamation of disturbed sites. Water for most of 
these activities is likely to come from nearby streams and rivers 
because it is more easily accessible and less costly to obtain than 
groundwater. Withdrawing water from streams and rivers would decrease 
flows downstream and could temporarily degrade downstream water quality 
by depositing sediment within the stream channels as flows decrease. 
The resulting decrease in water would also make the stream or river 
more susceptible to temperature changes--increases in the summer and 
decreases in the winter. These elevated temperatures could have adverse 
impacts on aquatic life, which need specific temperatures for proper 
reproduction and development and could also decrease dissolved oxygen, 
which is needed by aquatic animals.
    We also reported that both underground mining and in-situ 
operations would permanently impact aquifers. For example, underground 
mining would permanently alter the properties of the zones that are 
mined, thereby affecting groundwater flow through these zones. The 
process of removing oil shale from underground mines would create large 
tunnels from which water would need to be removed during mining 
operations. The removal of this water through pumping would decrease 
water levels in shallow aquifers and decrease flows to streams and 
springs that are connected. When mining operations cease, the tunnels 
would most likely be filled with waste rock, which would have a higher 
degree of porosity and permeability than the original oil shale that 
was removed. Groundwater flow through this material would increase 
permanently, and the direction and pattern of flows could change 
permanently. Similarly, in-situ extraction would also permanently alter 
aquifers because it would heat the rock to temperatures that transform 
the solid organic compounds within the rock into liquid hydrocarbons 
and gas that would fracture the rock upon escape. The long-term effects 
of groundwater flows through these retorted zones are unknown. Some in-
situ operations envision using a barrier to isolate thick zones of oil 
shale with intervening aquifers from any adjacent aquifers and pumping 
out all the groundwater from this isolated area before retorting.
    The discharge of waste waters from operations would also 
temporarily increase water flows in receiving streams. These discharges 
could also decrease the quality of downstream water if the discharged 
water is of lower quality, has a higher temperature, or contains less 
oxygen. Lower-quality water containing toxic substances could increase 
fish and invertebrate mortality. Also, increased flow into receiving 
streams could cause downstream erosion. However, if companies recycle 
waste water and water produced during operations, these discharges and 
their impacts could be substantially reduced.

Estimates of Water Needs for Commercial Oil Shale Development Vary 
        Widely
    Commercial oil shale development requires water for numerous 
activities throughout its life cycle; however, we found that estimates 
vary widely for the amount of water needed to produce oil shale. These 
variations stem primarily from the uncertainty associated with 
reclamation technologies for in-situ oil shale development and because 
of the various ways to generate power for oil shale operations, which 
use different amounts of water.
    In our October report, we stated that water is needed for five 
distinct groups of activities that occur during the life cycle of oil 
shale development: (1) extraction and retorting, (2) upgrading of shale 
oil, (3) reclamation, (4) power generation, and (5) population growth 
associated with oil shale development. However, we found that few 
studies that we examined included estimates for the amount of water 
used by each of these activities. Consequently, we calculated estimates 
of the minimum, maximum, and average amounts of water that could be 
needed for each of the five groups of activities that comprise the life 
cycle of oil shale development. Based on our calculations, we estimated 
that about 1 to 12 barrels of water could be needed for each barrel of 
oil produced from in-situ operations, with an average of about 5 
barrels (see table 1); and about 2 to 4 barrels of water could be 
needed for each barrel of oil produced from mining operations with a 
surface retort operation, with an average of about 3 barrels (see table 
2).

[GRAPHIC] [TIFF OMITTED] T8237.010

[GRAPHIC] [TIFF OMITTED] T8237.011


Water Is Likely to Be Available Initially from Local Sources, but 
        the Size of an Oil Shale Industry May Eventually Be Limited by 
        Water Availability
    In October 2010, we reported that water is likely to be available 
for the initial development of an oil shale industry, but the eventual 
size of the industry may be limited by the availability of water and 
demands for water to meet other needs. Oil shale companies operating in 
Colorado and Utah will need to have water rights to develop oil shale, 
and representatives from all of the companies with whom we spoke were 
confident that they held at least enough water rights for their initial 
projects and will likely be able to purchase more rights in the future. 
According to a study by the Western Resource Advocates, a nonprofit 
environmental law and policy organization, of water rights ownership in 
the Colorado and White River Basins of Colorado companies have 
significant water rights in the area. For example, the study found that 
Shell owns three conditional water rights for a combined diversion of 
about 600 cubic feet per second from the White River and one of its 
tributaries and has conditional rights for the combined storage of 
about 145,000 acre-feet in two proposed nearby reservoirs.
    In addition to exercising existing water rights and agreements, 
there are other options for companies to obtain more water rights in 
the future, according to state officials in Colorado and Utah. In 
Colorado, companies can apply for additional water rights in the 
Piceance Basin on the Yampa and White Rivers. For example, Shell 
recently applied--but subsequently withdrew the application--for 
conditional rights to divert up to 375 cubic feet per second from the 
Yampa River for storage in a proposed reservoir that would hold up to 
45,000 acre-feet for future oil shale development. In Utah, however, 
officials with the State Engineer's office said that additional water 
rights are not available, but that if companies want additional rights, 
they could purchase them from other owners.
    Most of the water needed for oil shale development is likely to 
come first from surface flows, as groundwater is more costly to extract 
and generally of poorer quality in the Piceance and Uintah Basins. 
However, companies may use groundwater in the future should they 
experience difficulties in obtaining rights to surface water. 
Furthermore, water is likely to come initially from surface sources 
immediately adjacent to development, such as the White River and its 
tributaries that flow through the heart of oil shale country in 
Colorado and Utah, because the cost of pumping water over long 
distances and rugged terrain would be high, according to water experts.
    Developing a sizable oil shale industry may take many years--
perhaps 15 or 20 years by some industry and government estimates--and 
such an industry may have to contend with increased demands for water 
to meet other needs. For example, substantial population growth and its 
correlative demand for water are expected in the oil shale regions of 
Colorado and Utah. State officials expect that the population within 
the region surrounding the Yampa, White, and Green Rivers in Colorado 
will triple between 2005 and 2050. These officials expect that this 
added population and corresponding economic growth by 2030 will 
increase municipal and industrial demands for water, exclusive of oil 
shale development, by about 22,000 acre-feet per year, or a 76 percent 
increase from 2000. Similarly in Utah, state officials expect the 
population of the Uintah Basin to more than double its 1998 size by 
2050 and that correlative municipal and industrial water demands will 
increase by 7,000 acre-feet per year, or an increase of about 30 
percent since the mid-1990s. Municipal officials in two communities 
adjacent to proposed oil shale development in Colorado said that they 
were confident of meeting their future municipal and industrial demands 
from their existing senior water rights and as such will probably not 
be affected by the water needs of a future oil shale industry. However, 
large withdrawals could impact agricultural interests and other 
downstream water users in both states, as oil shale companies may 
purchase existing irrigation and agricultural rights for their oil 
shale operations. State water officials in Colorado told us that some 
holders of senior agricultural rights have already sold their rights to 
oil shale companies. A future oil shale industry may also need to 
contend with a general decreased physical supply of water regionwide 
due to climate change; Colorado's and Utah's obligations under 
interstate compacts that could further reduce the amount of water 
available for development; and limitations on withdrawals from the 
Colorado River system to meet the requirements to protect certain fish 
species under the Endangered Species Act.
    Oil shale companies own rights to a large amount of water in the 
oil shale regions of Colorado and Utah, but we concluded that there are 
physical and legal limits on how much water they can ultimately 
withdraw from the region's waterways, which will limit the eventual 
size of the overall industry. Physical limits are set by the amount of 
water that is present in the river, and the legal limit is the sum of 
the water that can be legally withdrawn from the river as specified in 
the water rights held by downstream users. Our analysis of the 
development of an oil shale industry at Meeker, Colorado, based on the 
water available in the White River, suggests that there is much more 
water than is needed to support the water needs for all the sizes of an 
industry that would rely on mining and surface retorting that we 
considered. However, if an industry that uses in-situ extraction 
develops, water could be a limiting factor just by the amount of water 
physically available in the White River.

Federal Research Efforts on the Impacts of Oil Shale Development on 
        Water Resources Do Not Provide Sufficient Data for Future 
        Monitoring
    Since 2006, the federal government has sponsored over $22 million 
of research on oil shale development and of this amount about $5 
million was spent on research related to the nexus between oil shale 
development and water. Even with this research, we reported that there 
is a lack of comprehensive data on the condition of surface water and 
groundwater and their interaction, which limits efforts to monitor and 
mitigate the future impacts of oil shale development. Currently DOE 
funds most of the research related to oil shale and water resources, 
including research on water rights, water needs, and the impacts of oil 
shale development on water quality. Interior also performs limited 
research on characterizing surface and groundwater resources in oil 
shale areas and is planning some limited monitoring of water resources. 
However, there is general agreement among those we contacted--including 
state personnel who regulate water resources, federal agency officials 
responsible for studying water, water researchers, and water experts--
that this ongoing research is insufficient to monitor and then 
subsequently mitigate the potential impacts of oil shale development on 
water resources. Specifically, they identified the need for additional 
research in the following areas:
          Comprehensive baseline conditions for surface water 
        and groundwater quality and quantity. Experts we spoke with 
        said that more data are needed on the chemistry of surface 
        water and groundwater, properties of aquifers, age of 
        groundwater, flow rates and patterns of groundwater, and 
        groundwater levels in wells.
          Groundwater movement and its interaction with surface 
        water. Experts we spoke with said that additional research is 
        needed to develop a better understanding of the interactions 
        between groundwater and surface water and of groundwater 
        movement for modeling possible transport of contaminants. In 
        this context, more subsurface imaging and visualization are 
        needed to build geologic and hydrologic models and to study how 
        quickly groundwater migrates. Such tools will aid in monitoring 
        and providing data that does not currently exist.
    In addition, we found that DOE and Interior officials seldom 
formally share the information on their water-related research with 
each other. USGS officials who conduct water-related research at 
Interior and DOE officials at the National Energy Technology Laboratory 
(NETL), which sponsors the majority of the water and oil shale research 
at DOE, stated they have not talked with each other about such research 
in almost 3 years. USGS staff noted that although DOE is currently 
sponsoring most of the water-related research, USGS researchers were 
unaware of most of these projects. In addition, staff at DOE's Los 
Alamos National Laboratory who are conducting some water-related 
research for DOE noted that various researchers are not always aware of 
studies conducted by others and stated that there needs to be a better 
mechanism for sharing this research. Based on our review, we found 
there does not appear to be any formal mechanism for sharing water-
related research activities and results among Interior, DOE, and state 
regulatory agencies in Colorado and Utah. The last general meeting to 
discuss oil shale research among these agencies was in October 2007, 
but there have been opportunities to informally share research at the 
annual Oil Shale Symposium, such as the one that was conducted at the 
Colorado School of Mines in October 2010. Of the various officials with 
the federal and state agencies, representatives from research 
organizations, and water experts we contacted, many noted that federal 
and state agencies could benefit from collaboration with each other on 
water-related research involving oil shale. Representatives from NETL 
stated that collaboration should occur at least every 6 months.
    As a result of our findings, we made three recommendations in our 
October 2010 report to the Secretary of the Interior. Specifically, we 
stated that to prepare for possible impacts from the future development 
of oil shale, the Secretary should direct the appropriate managers in 
the Bureau of Land Management and the U.S. Geological Survey to
          establish comprehensive baseline conditions for 
        groundwater and surface water quality, including their 
        chemistry, and quantity in the Piceance and Uintah Basins to 
        aid in the future monitoring of impacts from oil shale 
        development in the Green River Formation;
          model regional groundwater movement and the 
        interaction between groundwater and surface water, in light of 
        aquifer properties and the age of groundwater, so as to help in 
        understanding the transport of possible contaminants derived 
        from the development of oil shale; and
          coordinate with the Department of Energy and state 
        agencies with regulatory authority over water resources in 
        implementing these recommendations, and to provide a mechanism 
        for water-related research collaboration and sharing of 
        results.
    Interior generally concurred with our recommendations. In response 
to our first recommendation, Interior commented that there are ongoing 
USGS efforts to analyze existing water quality data in the Piceance 
Basin and to monitor surface water quality and quantity in both basins 
but that it also plans to conduct more comprehensive assessments in the 
future. With regard to our second recommendation, Interior stated that 
BLM and USGS are working on identifying shared needs for modeling. 
Interior underscored the importance of modeling prior to the approval 
of large-scale oil shale development and cited the importance of the 
industry's testing of various technologies on federal RD&D leases to 
determine if production can occur in commercial quantities and to 
develop an accurate determination of potential water uses for each 
technology. In support of our third recommendation to coordinate with 
DOE and state agencies with regulatory authority over water resources, 
Interior stated that BLM and USGS are working to improve such 
coordination and noted current ongoing efforts with state and local 
authorities.
    In conclusion, Mr. Chairman, attempts to commercially develop oil 
shale in the United States have spanned nearly a century. During this 
time, the industry has focused primarily on overcoming technological 
challenges and trying to develop a commercially viable operation. 
However, there are a number of uncertainties associated with the 
impacts that a commercially viable oil shale industry could have on 
water availability and quality that should be an important focus for 
federal agencies and policymakers going forward.
    Chairman Lamborn, Ranking Member Holt, and Members of the 
Committee, this completes my prepared statement. I would be pleased to 
respond to any questions that you may have at this time.

[GRAPHIC] [TIFF OMITTED] T8237.002

Contact and Staff Acknowledgments
    Contact points for our Offices of Congressional Relations and 
Public Affairs may be found on the last page of this testimony. For 
further information about this testimony, please contact Anu K. Mittal, 
Director, Natural Resources and Environment team, (202) 512-3841 or 
[email protected]. In addition to the individual named above, key 
contributors to this testimony were Dan Haas (Assistant Director), 
Quindi Franco, Alison O'Neill, Barbara Timmerman, and Lisa Vojta.

GAO's Mission
    The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability.
                                 ______
                                 
GAO HIGHLIGHTS
August 24, 2011
ENERGY DEVELOPMENT AND WATER USE
Impacts of Potential Oil Shale Development on Water Resources
Why GAO Did This Study
    Oil shale deposits in Colorado, Utah, and Wyoming are estimated to 
contain up to 3 trillion barrels of oil--or an amount equal to the 
world's proven oil reserves. About 72 percent of this oil shale is 
located beneath federal lands managed by the Department of the 
Interior's Bureau of Land Management, making the federal government a 
key player in its potential development. Extracting this oil is 
expected to require substantial amounts of water and could impact 
groundwater and surface water.
    GAO's testimony is based on its October 2010 report on the impacts 
of oil shale development (GAO-11-35). This testimony summarizes (1) 
what is known about the potential impacts of oil shale development on 
surface water and groundwater, (2) what is known about the amount of 
water that may be needed for commercial oil shale development, (3) the 
extent to which water will likely be available for such development and 
its source, and (4) federal research efforts to address impacts to 
water resources from commercial oil shale development. For its October 
2010 report, GAO reviewed studies and interviewed water experts, 
officials from federal and state agencies, and oil shale industry 
representatives.

What GAO Found
    Oil shale development could have significant impacts on the quality 
and quantity of water resources, but the magnitude is unknown because 
technologies are not yet commercially proven, the size of a future 
industry is uncertain, and knowledge of current water conditions is 
limited. In the absence of effective mitigation measures, water 
resources could be impacted by disturbing the ground surface during the 
construction of roads and production facilities, withdrawing water from 
streams and aquifers for oil shale operations, underground mining and 
extraction, and discharging waste waters produced from or used in such 
operations.
    Commercial oil shale development requires water for numerous 
activities throughout its life cycle, but estimates vary widely for the 
amount of water needed to commercially produce oil shale primarily 
because of the unproven nature of some technologies and because the 
various ways of generating power for operations use differing 
quantities of water. GAO's review of available studies indicated that 
the expected total water needs for the entire life cycle of oil shale 
production range from about 1 barrel (or 42 gallons) to 12 barrels of 
water per barrel of oil produced from in-situ (underground heating) 
operations, with an average of about 5 barrels, and from about 2 to 4 
barrels of water per barrel of oil produced from mining operations with 
surface heating, with an average of about 3 barrels.
    GAO reported that water is likely to be available for the initial 
development of an oil shale industry but that the size of an industry 
in Colorado or Utah may eventually be limited by water availability. 
Water limitations may arise from increases in water demand from 
municipal and industrial users, the potential of reduced water supplies 
from a warming climate, the need to fulfill obligations under 
interstate water compacts, and decreases on withdrawals from the 
Colorado River system to meet the requirements to protect threatened 
and endangered fish species.
    The federal government sponsors research on the impacts of oil 
shale on water resources through the Departments of Energy (DOE) and 
Interior. Even with this research, nearly all of the officials and 
experts that GAO contacted said that there are insufficient data to 
understand baseline conditions of water resources in the oil shale 
regions of Colorado and Utah and that additional research is needed to 
understand the movement of groundwater and its interaction with surface 
water. Federal agency officials also told GAO that they seldom 
coordinate water-related oil shale research among themselves or with 
state agencies that regulate water.
    In its October report, GAO made three recommendations to the 
Secretary of the Interior to prepare for the possible impacts of oil 
shale development, including the establishment of comprehensive 
baseline conditions for water resources in the oil shale regions of 
Colorado and Utah, modeling regional groundwater movement, and 
coordinating on water-related research with DOE and state agencies 
involved in water regulation. The Department of the Interior generally 
concurred with the recommendations. GAO is making no new 
recommendations at this time.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    Thank each one of you for your good testimony, for the 
facts that you brought to our attention.
    I would now like to recognize myself to begin the first 
round of questions. Professor Spinti, you gave, I believe, a 
different estimate of the per barrel use of water for barrel of 
extracted petrochemicals. Is that correct? I think you said one 
and a half?
    Ms. Spinti. Equals 2.5 barrels of water per barrel of oil 
produced. That number is from previously published research. We 
published that report about a year ago. We did not query the 
operating companies.
    Mr. Lamborn. OK. Now does that take into account recycling?
    Ms. Spinti. Yes. That is--in chemical engineering terms, 
that is what we call makeup water. So that is the what we will 
call water usage per barrel is actually more----
    Mr. Lamborn. Could you speak into the microphone?
    Ms. Spinti. The overall water use is actually more than 
that, but you are recycling a lot of that. And so, the water 
that you have to add, the makeup water, is 2.5 barrels per 
barrel of water.
    Mr. Lamborn. OK. How much of that is direct use versus 
indirect use? Like if there is a facility that is newly built 
that brings in water for people to live as a small village, 
let's say, to me, that would be an indirect use.
    Ms. Spinti. Yes. So that number is only direct use.
    Mr. Lamborn. Direct use. Good.
    Ms. Spinti. That doesn't include the additional water 
demand from the town and the number of employees that are 
there.
    Mr. Lamborn. All right, thank you.
    Dr. Sladek, what are some of these other countries doing to 
bring in innovative technology that could be of use here in the 
United States to reduce the environmental impact of oil shale 
production?
    Dr. Sladek. Well, one of China's projects is to add a large 
Canadian retort, which has been tested fairly thoroughly in 
Australia with some disappointing results. So the developers of 
that technology are familiar with the environmental 
consequences of doing things unwisely. So I think that 
experience will be reflected.
    Of the other countries, Jordan is a very small country, and 
their hope, I believe, is to finance a lot of their oil shale 
development with funding from international banks, such as the 
World Bank and big commercial banks. Those banks are 
constrained in their lending practices by the Equator 
principles, which is a set of environmental and social 
standards which the banks agree to maintain in any project that 
they support with their financing. And if the projects do not 
meet those requirements, then the loans will not be made.
    So Jordan in particular is under the gun to make sure that 
the industry is developed in a responsible manner in compliance 
with world standards for environmental and social protection.
    Now the specifics of what they are doing, what types of 
equipment they are adding to their plants to ensure that that 
compliance occurs, I don't know. One suggestion I have for the 
Government is that they try and find out by engaging in those 
projects by sharing experience and expertise with countries 
like Jordan that would be very glad to get it.
    Mr. Lamborn. All right. Thank you.
    Professor Spinti, what is the difference between the use of 
water for a surface mining basic approach, like the retort 
method, versus the in-situ processes that companies in Colorado 
are researching, from a chemical engineering standpoint?
    Ms. Spinti. Yes. So, actually, most of the development in 
Utah, which I am most familiar with, is surface mining. And so, 
it is ex situ. Because of the resources that are available, 
non-Federal resources, the resource is actually more amenable 
to mining. And so, and most of those companies are not using 
that much water, per se, in the process itself.
    So they have some sort of retort, but they require water 
for ancillary uses and for dust control for--so they have the 
spent shale when they are done, and so they use water--well, 
nobody has got commercial production. But you would use water 
to cool off the shale and for dust control. It turns out that 
those can be fairly large uses, the dust control.
    For in-situ production processes, one of the concerns there 
is what is left over once you are done. So, what is in the 
ground, and does it have a potential to contaminate 
groundwater? So how much flushing do you have to do once you 
are done producing?
    And then also the other issue in Colorado is just that some 
of the rich oil shale zones are in the aquifer, and so you have 
to worry about issues of water contamination of the aquifer 
with in-situ production if you are in that particular zone. In 
Utah, some of the richest zones actually don't have that 
problem because they are below the level of one of the main 
aquifers.
    Mr. Lamborn. All right. Thank you all.
    Representative Tipton?
    Mr. Tipton. Thank you, Congressman Lamborn.
    And Mr. Sladek, I may not have caught--you mentioned rare 
earths in part of your testimony. Have there been some studies, 
when you were talking about Estonia, Jordan, Egypt, Syria, of 
extraction of some of the rare earths?
    Dr. Sladek. I am not aware of any specifically aimed toward 
rare earths. Jordan has spent a great deal of time looking for 
uranium in their oil shale region, and they have found some. In 
fact, that introduced a substantial delay in their oil shale 
program because the leasing program was suspended while they 
attempted to find out if the uranium was of commercial 
interest.
    The rare earths are a relatively new topic in world 
commerce, but an increasingly important one. I know that there 
have been very detailed studies done of the geochemistry of the 
Green River formation oil shales, and I know that data have 
been published on concentrations of rare earths in specific 
samples that were analyzed. That has been a long, long time 
ago, and I doubt that the data are current and probably not 
terribly reliable. But it is a useful thing to look at.
    You mentioned aluminum in your question to Mr. Johnson. 
There is a lot of aluminum in oil shale, and some of it is 
potentially recoverable.
    Mr. Tipton. Since you have a little bit of background on 
this because it is the entire package, is lithium pretty 
prevalent, depending on some of the formations?
    Dr. Sladek. Not to my knowledge, I am afraid. I do not 
know.
    Mr. Tipton. OK. All right. Important issue, I think, 
obviously, because, as Ms. Spinti was noting, some of the 
production techniques over in China are not the best.
    Dr. Sladek. Yes, I agree.
    Mr. Tipton. And on the reliability end of that.
    Mr. Hagood, could you maybe give us a little bit of 
background in terms of maybe just an estimate? Obviously, 
listening to a lot of the testimony, there is a lot to take 
into consideration that when we are looking back on even an 
employment issue, if we were able to get this industry moving, 
were able to have that cost effective, what are some of the job 
estimates in regard to this?
    Mr. Hagood. Yes, I am not familiar with the job estimates, 
but I can point to maybe an analog, and that is with the oil 
sands industry up in Alberta. And if you consider that it has 
taken them several decades to get to a production of 1.5 
million barrels per day, but that has resulted in a tremendous 
amount of employment in the area of Calgary and Edmonton and 
Fort McMurray, and also the side benefits associated with that, 
which has led to creation of world-class universities and 
research institutes, which, in turn, employ a number of 
individuals.
    But I can't give you an actual estimate on that.
    Mr. Tipton. It is probably unfair to even ask you, but do 
you know what the unemployment rate is up there?
    Mr. Hagood. No, I don't. It is very low, and----
    Mr. Tipton. It is low?
    Mr. Hagood.--the cost of housing, by the way, which is 
another socioeconomic impact, but it is pretty high.
    Mr. Tipton. Right.
    Mr. Hagood. In fact, Calgary, and this is just in general, 
associated with the entire oil and gas industry, is the largest 
U.S. ex-pat community in the world. And they actually do 
recruit quite heavily down the United States to attract welders 
and other folks to work up in Fort McMurray.
    But it is quite a healthy environment for employment.
    Mr. Tipton. Great. Thank you.
    And Ms. Mittal, you had mentioned something that I think is 
very important as well. We seem to have a lot of entities 
within Government that fail to speak to each other or to be 
able to share some of that information. And you were talking 
about DOE and Interior not currently sharing some of that 
information.
    You made a recommendation. Are you aware of any moves to 
actually make that happen?
    Ms. Mittal. We did recommend that Interior and DOE, as well 
as the State regulatory officials, because they are a really 
important part of this process, be involved and they develop 
some sort of a formal mechanism to share information about 
research that they have currently ongoing.
    Right now, what we have found is they do not have a formal 
mechanism. So they have to rely on informal mechanisms, and 
those don't always get the job done.
    Mr. Tipton. And that creates uncertainty?
    Ms. Mittal. Yes.
    Mr. Tipton. Yes, I am sure it does. I just wanted to get it 
clarified because I made the same note that Congressman Lamborn 
did in that we have in terms of large volume, a pretty 
significant discrepancy between your estimate in terms of water 
usage versus Ms. Spinti's estimate of water usage.
    Ms. Mittal. I think the big difference between our estimate 
and some of the studies that are out there is we looked at the 
whole life cycle of oil shale production. There are some 
studies that only look at the direct impacts. So that is the 
actual production of the oil versus we looked at the whole life 
cycle.
    So you are starting with--we took every single activity 
that is involved in the oil shale life cycle production, direct 
activities as well as indirect activities. We grouped them into 
five groups, and then we looked at the most optimistic water 
use scenarios and the most pessimistic water use scenarios, and 
we added all of those up.
    Because what we wanted to do was provide a comprehensive, 
consistent, and complete package of information. Obviously, 
when we talked to industry and water experts, they told us that 
the extremes in our ranges probably will not get met. So, it 
will be somewhere in the middle.
    So that is why the three to five range that I mentioned in 
my statement, that is probably going to be where we end up.
    Mr. Tipton. And it would probably be hard to measure, but 
it sounds, from what you are describing to me, at least, that 
it is kind of a static model as opposed to a dynamic model that 
you were really looking at?
    Ms. Mittal. Right.
    Mr. Tipton. Not anticipating with current technology, 
without development processes, that maybe it will actually 
reduce water consumption. Is that accurate?
    Ms. Mittal. Absolutely. Absolutely. That was one thing that 
was very clear when we talked to the industry. Reducing water 
use is very high on their radar screen. They are looking for 
ways to reduce that. The more they can come up with new 
technologies that limit that use, the more we will go toward 
that lower range.
    But the bottom line is there is a lot of uncertainty right 
now, as Ms. Spinti said, about the reclamation and the in-situ 
process. We don't know how many times we are going to have to 
rinse the retort zone. It could be two or three times like some 
researchers expect. That is about a barrel of water. If we have 
to do 20 rinses, that could be over 5 barrels of water, and 
that is the uncertainty that is part of the equation right now.
    Mr. Tipton. Great. Thank you.
    Mr. Lamborn. All right. Thank you.
    Mr. Hagood, in preparing for this hearing, we invited the 
Department of Energy to also come and testify, but they did not 
want to do so because they have no current oil shale programs. 
So they didn't feel they had a lot to offer.
    Do you believe that basic research and investment in 
domestic oil shale development would be a good thing for the 
Department of Energy to be doing? And larger than that, will 
this help--and I think I know what you are going to say. But 
will that help us reduce our dependence on foreign sources of 
energy?
    Mr. Hagood. Relative to your first comment, indeed, basic 
research is very important to this topic. And given, as I 
mentioned before, the size of the resource I think is essential 
and a tremendously good investment.
    But also add that it needs to be more than just basic 
research. It needs to be applied and moving toward 
demonstration and, as mentioned earlier, toward reducing the 
risks associated with deployment.
    Second question again?
    Mr. Lamborn. How would this help reduce our dependence on 
foreign energy?
    Mr. Hagood. So, currently, we import between 50 to 60 
percent of our oil primarily directed toward transportation. 
The current use today in the United States is roughly between 
18 million and 19 million barrels per day. Five million of that 
is produced domestically.
    Therefore, if you look at the top providers of our oil from 
import, they basically consist of Canada, Nigeria, Saudi 
Arabia, Venezuela, and I forgot the last one.
    Voice. Mexico.
    Mr. Hagood. Thank you very much. Mexico.
    [Laughter.]
    Mr. Hagood. And which, by the way, has a declining reserve. 
So if you look at all of that, and 2.5 million barrels come 
from Canada--most of that actually from the oil sands, 
increasingly so--it would be very important for the United 
States to reduce its vulnerability on accepting imports from 
those other sources. So it is really a risk management aspect 
to me toward developing our own resources and managing that 
risk more smartly over the long term.
    Mr. Lamborn. As a follow-up, is the particular products 
that are produced by certain techniques, the blend of 
petrochemical, the resulting blend, is that of significance? 
Like if it is more weighted toward what would normally take 
more refining because some of the refining, in effect, is 
already done in the process?
    Mr. Hagood. I am not sure I am capturing the question, 
Chairman.
    Mr. Lamborn. Like if you get more jet fuel, for instance, 
than you would if from a heavy like tar sand?
    Mr. Hagood. Yes, I can't speak to that, Chairman.
    Mr. Lamborn. OK.
    Mr. Hagood. But indeed, I think in general you can take a 
number of these types of resources, whether it is oil sands or 
tar sands or oil shale, and convert them into a number of 
different types of products. Currently, the U.S. does have 
significant refining capacity to take a lot of that import or 
domestic resource to refine to a number of different products.
    Mr. Lamborn. OK. And then my last question for you or 
anyone on the panel is what can Congress be doing in a 
responsible way to make sure that we are continuing to look at 
this potentially valuable resource and not drop the ball?
    I am going to start with you, Mr. Hagood.
    Mr. Hagood. Well, I think my recommendation is, and again, 
it goes back to this is a world-class resource. It is going to 
be long-lived. It will be with us through this entire century, 
and it is important for us to steward that in an 
environmentally responsible way, but to use it and develop it 
for our energy security, but also for our economy.
    So I do believe that this deserves--at least from the 
research perspective, deserves a more focused and integrated 
approach to address the challenges associated with development 
of these resources. It is being done, albeit with oil sands, in 
Alberta, but it is a proactive, can-do attitude to develop 
those resources. And if they find a problem, they put their 
money where their mouth is to address the problem through both 
Government and industry.
    I think that same type of attitude may be exercised through 
a program focused in western oil shale is needed.
    Mr. Lamborn. OK. Thank you.
    Anyone else on the panel? Doctor?
    Dr. Sladek. Yes, I would like to second that, and also this 
outreach program that I alluded to earlier to put the 
Department of Energy back in the oil shale business and 
specifically to track what is going on in other countries and 
to join in those projects.
    Not just because it is nice to help other people, but 
because you can bring information back to this country that 
will be very helpful in the emergence of our industry. Water 
conservation, for example, is even more of an issue in Jordan 
than it is in the Western United States. They have no water. 
And what they do have in the ground is committed not only to 
their own people, but the surrounding countries.
    They must reduce water consumption in oil shale production. 
They could use some help in doing that, and the help that is 
provided could come back to help us.
    I would also like to supplement Dr. Hagood's response about 
whether shale oil is a better source of jet fuel and diesel 
fuel than it is of other petrochemicals. The Green River 
formation of crude oil shale is a better source of the middle 
distillates, jet fuel and diesel fuel specifically, than it is 
of gasoline. So, in terms of providing our motor fleet and our 
trains, it is a good source of energy for doing that.
    Mr. Lamborn. OK. Thank you.
    Either one of you?
    Ms. Spinti. I always have something to say.
    Mr. Lamborn. Good.
    Ms. Spinti. OK. So just to comment, there was actually a 
really good policy paper that came out that I can send to your 
assistants that talks about some of these policy issues and how 
they affect the markets.
    Mr. Lamborn. Please do.
    Ms. Spinti. And one of those issues is that we were just--I 
was actually traveling in Scandinavia this summer, driving a 
nine-passenger diesel van and gasoline there is very expensive, 
or diesel. We were dreading every time we had to go fill up. 
But we were getting like 45 to 50 miles per gallon.
    And you get a much higher efficiency with a diesel engine, 
but the problem is the way certain laws have been written in 
the U.S. favor gasoline. Anyway, that paper has a very good 
explanation of that.
    So it depends on what you want to drive demand for. But if 
you want to drive demand for diesel fuel, then you need to look 
at the laws that are driving demand for gasoline because there 
are certainly technical advantages to having a diesel engine.
    OK. So there are two other comments I wanted to make. Our 
funding comes through DOE, the National Energy Technology 
Laboratory so I guess I am a little surprised at their 
response. Maybe they are not aware of us?
    We have been working for about the last 5 years, and we are 
the only funded program in the U.S. So, the problem in academia 
is, of course, as a professor, a research professor especially, 
you are only working on what you are funded for. Now that we 
are at the end of 5 years and we are nearing the end of our 
funding, we have assembled what we feel a very strong group of 
researchers in law, economics, science, and engineering.
    And the problem is if there is no more money, all those 
people go off and work on other problems. So if you want smart 
people working on problems, then there has to be a funding 
source so that you are not jumping from one thing to another 
every 4- or 5-year cycle.
    Then, finally, I come from the simulation group, 
computational fluid dynamics, and we feel strongly that the 
future is simulation, and that if we want to have these 
simulation tools that will give us quantified predictivity. So 
what is our uncertainty, and how well do we know that 
uncertainty? So that we can say not just, well, this might 
happen if you build this. But we can say, you know what, we 
have done these simulations, and we can tell you that this is 
the uncertainty of what will happen, and here is your answer.
    To be able to do that, we need to have data. That means we 
have to be able to have companies and national laboratories and 
other people doing research willing to share their data so that 
we can do this validation.
    Thank you.
    Mr. Lamborn. And briefly, Ms. Mittal?
    Ms. Mittal. Just very briefly, I would ask that Congress 
hold Interior accountable for collecting the baseline water 
data that we need. Because if we don't have that baseline 
information now before the industry starts, we will not be able 
to attribute any changes in water resources back to the oil 
shale industry.
    So it really impacts their ability to monitor and mitigate 
future impacts. So hold them accountable for gathering that 
data.
    Mr. Lamborn. OK. Thank each one of you.
    Representative Tipton?
    Mr. Tipton. Thank you. I am good.
    Mr. Lamborn. OK. I would like to ask all the witnesses to 
please respond in writing if any of the members of the 
Committee submit questions to you.
    Mr. Lamborn. Thank you for being here, and we appreciate 
it.
    I will now call the last panel up, and that consists of Mr. 
Dan Whitney, the Upstream Americas Heavy Oil Development 
Manager for Shell Exploration and Production Company; Mr. Gary 
Aho, Board Member and former Chairman of the National Oil Shale 
Association; Mr. Brad McCloud, Executive Director of 
Environmentally Conscious Consumers for Oil Shale; and Mr. Jim 
Spehar, probably no stranger here, former Mayor of Grand 
Junction and former Mesa County Commissioner.
    Thank you all for being here.
    As I mentioned earlier with the two previous panels, your 
written testimony will appear in full in the hearing record. So 
I ask that you keep your oral statements to 5 minutes, as 
outlined in our invitation letter to you.
    The microphones are automatic. You don't have to press any 
buttons. The timing lights will turn yellow after 4 minutes and 
red after 5 minutes.
    We will now begin with our first witness, and that would be 
Mr. Whitney.

     STATEMENT OF DAN WHITNEY, UPSTREAM AMERICAS HEAVY OIL 
 DEVELOPMENT MANAGER, SHELL EXPLORATION AND PRODUCTION COMPANY

    Mr. Whitney. Chairman Lamborn, Representative Tipton, thank 
you for having me here today.
    I am pleased to have the opportunity to speak with you 
about oil shale development. Today, I would like to focus on 
three points. First is the growing world energy demand and our 
Nation's need for secure supplies, Shell's commitment to a 
cautious approach on oil shale, and finally, the importance of 
future regulatory stability in assuring new energy development.
    Global energy demand is high and rising constantly. So is 
competition for energy resources and the investment needed to 
develop them. Growing populations and economies in China, 
India, and elsewhere will at least double demand by 2050.
    Today, about 80 percent of the world's energy comes from 
coal, oil, and natural gas. At most, nuclear and renewable 
sources might meet a third of the world's needs by mid century. 
Fossil fuels will supply the rest. While the mixed percentage 
will be a little bit lower, demand growth means that the world 
will actually be burning more fossil fuel at mid century than 
it does today.
    Most of that increase will have to come from sources 
undeveloped and even undiscovered today and often in remote and 
challenging locations, such as the Arctic and ultra deep water, 
but not always. As you know, there are vast unconventional oil 
resources here in Colorado in the form of oil shale, some of 
the world's richest hydrocarbon deposits. Properly developed, 
they could play a major role in U.S. energy security.
    The U.S. Geological Survey and others estimate recoverable 
U.S. oil shale reserves at more than 800 billion barrels, 
enough to supply the U.S. for more than a century. Shell is 
committed to a cautious approach in our oil shale efforts. 
Since the early 1980s, Shell has pursued steady research and 
development of the in-situ conversion process as a means to 
produce from oil shale in an environmentally responsible and 
socially sustainable manner.
    This has required dedicated scientific application and a 
significant financial investment, many tens of millions of 
dollars. Oil shale's long research cycle time and high upfront 
capital costs need consistent Government policy and regulatory 
certainty. Gaining experience and building industry capacity 
must occur before new technology can contribute meaningfully to 
energy supply. This requires billions of dollars and patient 
investment spread over decades.
    Predictable rules, created in a thorough, well understood, 
and legally established process, are critical to that type of 
long-term commitment. Unfortunately, weakening regulatory 
certainty is the trend and a negative for U.S. energy 
development.
    A case in point is the BLM's reopening of the 2008 PEIS 
covering oil shale in the Piceance Basin. The existing, fully 
vetted, comprehensive 1,800-page PEIS is less than 3 years old. 
No material new information has emerged to merit this revisit 
in so short a time. The entire exercise ignores the 
comprehensive framework of regulatory checks and balances 
already in place, including site-specific NEPA reviews that 
will apply to every future oil shale project under Federal 
jurisdiction.
    Since the stated concerns are already covered, this PEIS 
fresh look is a waste of taxpayer money and a deterrent to 
industry confidence and future capital investment. Shell firmly 
believes that if foreign technology and those being tested by 
other energy companies can be proven through the RD&D program, 
we can unlock a significant long-term domestic energy source 
for the U.S. To do this, industry needs a regulatory regime 
that fosters innovation and encourages production growth.
    An environmentally driven, no development policy in the 
Piceance is unwise. Social and economic benefits, national 
energy needs, and other realities must be considered.
    Our country is in resource competition with the world. We 
need energy in every form, and we are sitting on the world's 
largest and most concentrated energy resource. It can be 
developed responsibly, and it will be needed maybe sooner 
rather than later.
    Thank you for listening to my testimony.
    [The prepared statement of Mr. Whitney follows:]

       Statement of Dan Whitney, Heavy Oil Development Manager, 
                Shell Exploration and Production Company

    Chairman Lamborn, members of the Subcommittee on Energy and 
Minerals. I am pleased to have this opportunity to speak with you today 
on the topic of oil shale development.
    I will focus on three points:
        1.  Growing world energy demand and our nation's need for 
        secure supplies,
        2.  Shell's commitment to a cautious approach on oil shale, and
        3.  The importance of future regulatory stability in assuring 
        new energy development.
    Global energy demand is high and increasing constantly. So is 
international competition for limited energy resources and the 
investments needed to develop them.
    Growing populations and economies in China, India, and elsewhere 
will at least double energy demand by 2050. Some analysts say it could 
triple.
    One thing certain is we will need a lot more energy. The world will 
depend on fossil fuels for decades until technology and economics can 
deliver a larger contribution by alternative energy sources.
    Today about 80% of the world's energy comes from coal, oil and 
natural gas. At most, nuclear and renewable energy sources might meet a 
third of the world's needs by mid-century--fossil fuels will supply the 
rest. And, while the percentage will be a little lower, demand growth 
means the world will actually be burning more fossil fuel at mid-
century than it does today
    Most of that increase will have to come from sources undeveloped 
and even undiscovered today. We will need every available energy 
source--renewable, alternative and conventional--and greater efficiency 
too.
    As you know, there are vast unconventional oil resources here in 
Colorado, in the form of oil shale--some of the world's richest 
hydrocarbon deposits. Properly developed, they could be a major 
component of US energy security.
    The U.S. Geological Survey (USGS) estimates recoverable reserves at 
more than 800 billion barrels, enough to supply the US for more than a 
century at current consumption rates.
    The challenge of developing a commercial oil shale industry starts 
with its geologic state. The Green River Formation is a carbonate rock, 
generally marlstone that is very rich in kerogen. This source of oil 
has not had the natural forces of pressure and temperature over the 
millennia to convert it to oil and gas. So, unlike conventional oil and 
gas operations, oil shale cannot be pumped directly from the ground. 
Oil Shale must be processed either above ground or in place (in situ) 
to convert the kerogen into oil.
    Shell is committed to a cautious approach in oil shale research and 
development. Shell has pursued the technical and commercial development 
of the In situ Conversion Process (ICP) for oil shale since the early 
1980s as a means to produce from oil shale--in an environmentally 
responsible and socially sustainable manner. This has required 
considerable dedicated scientific application and significant financial 
investment--many tens of millions of dollars.
    To date, through persistence and much effort, a logical progression 
of work has been completed from desk top studies, to laboratory scale 
testing, to prototype scale testing, and finally to field pilot testing 
in Colorado.
    Shell's seven previous Colorado pilot projects have tested broad 
technology themes, including:
        (1)  Demonstrating that the technology works,
        (2)  Measuring energy balance and recovery efficiency necessary 
        to estimate commercial project economics,
        (3)  Producing and measuring the properties of ICP oil and gas,
        (4)  Proving that the groundwater can be protected, and
        (5)  Testing the effectiveness of a variety of heat delivery 
        methods.
    In the process, Shell has carried out extensive pre-operational 
environmental assessments. Shell has given careful attention to 
archaeologically sensitive areas by completely assessing and avoiding 
such areas, and has cooperated fully with agencies such as the State 
Historical Preservation Office and BLM to identify and avoid areas of 
critical environmental concern, including establishing conservation 
easements to provide permanent protection of certain areas.
    Shell also funds research into environmental restoration and 
recently established a professorial chair in the subject at Colorado 
State University. Shell has also demonstrated, through its own research 
and field trials, that disturbed lands can be returned to beneficial 
uses that are equivalent to the pre-disturbance conditions, and was 
recognized by the BLM for these efforts.
    The long cycle time of research and high up-front capital 
requirements of an oil shale project, need broad and consistent 
government support to establish a commercial industry. Supporting 
government policy and regulatory certainty are necessary for private 
industry to reasonably assess risks and economics, and be confident in 
that assessment, so that the billions of dollars in required investment 
can be made.
    Commercial scale technologies with economically attractive recovery 
efficiency and acceptable environmental impacts are prerequisite for 
success. The road to commercialization is likely to be measured in 
decades not years--a long time horizon is necessary to allow 
development to occur through the ``bust and boom'' oil and gas price 
cycles.
    This extended time frame for supply growth and commercial viability 
is not unique to unconventional oil. Looking back through history, it 
consistently takes around 30 years for new forms of energy to achieve 1 
percent market share after a commercial business is established. 
Biofuels are just now reaching 1 percent of the world oil market, or 
about 0.5 percent of total energy, after decades of development and 
government support. Wind may get to the 1 percent mark in the next few 
years, nearly three decades after the first large wind farms were built 
in Denmark and here in the United States.
    Gaining experience and building industry capacity must occur before 
a new technology can contribute meaningfully to energy supply--and this 
requires billions of dollars in patient investment over decades in the 
hope of eventual growth. Regulatory stability is critical. This kind of 
commitment depends on predictable rules created in a well understood, 
legally established and exhaustive process.
    Weakening regulatory certainty is a negative trend for US energy 
development.
    A key case in point is the BLM's re-opening of the 2008 PEIS 
covering Piceance Basin oil shale on the basis of ``concerns'' already 
fully covered by existing regulatory programs.
    Potential ramifications of re-writing the existing regulations 
include:
          lower capital investment,
          lower domestic oil production,
          higher oil imports--(costing hundreds billions that 
        might otherwise be invested within the US,)
          higher unemployment (a natural consequence of reduced 
        investment,)
          lower tax revenues from royalties, federal and state 
        corporate and individual incomes taxes, severance tax, and 
        property and sales taxes, and
          lower overall economic growth.
    The existing, fully vetted, comprehensive, 1800 page PEIS is less 
than three years old. No substantive new information has emerged that 
merits this revisit in such a short time.
    The entire exercise ignores the comprehensive framework of 
regulatory checks and balances already in place in the form of 
environmental (and other) laws, including site specific NEPA review, 
that will apply to every future oil shale project under federal 
jurisdiction.
    Remarkably, all five areas proposed for removal from development as 
identified in the Notice (i.e. those with wilderness characteristics, 
``very rare or uncommon'' designation, sage grouse habitat, ``areas of 
critical environmental concern'', and areas made off limits in the 
original PEIS) are already either
        (a)  precluded from development by Federal or State statutes,
        (b)  precluded from development under the original PEIS, or
        (c)  may be precluded under the existing leasing authority 
        assigned to BLM land managers.
    Given that there are already adequate checks and balances provided 
in existing regulatory programs to accomplish the stated basis for this 
PEIS, Shell views the ``fresh look'' at the PEIS as an inefficient and 
unnecessary use of taxpayer money and as a significant deterrent to 
capital investment by Shell and others in the energy industry.
    While questions and challenges remain regarding the future 
implementation of oil shale technology, Shell believes that commitment 
by the Federal Government to maintaining a regulatory environment that 
encourages investment in oil shale RD&D, as defined in the 2005 Energy 
Act and the subsequent regulations including the 2008 PEIS, is critical 
to long term success.
    The lack of policy and regulatory consistency from one 
administration to another makes the investment climate even more risky 
and potentially untenable.
    For Shell to make informed investment decisions, we must be able to 
predict the likely costs of future development. This includes 
royalties, bonds, reclamation requirements, lease duration, diligent 
development requirements, commercial leas conversion process and other 
aspects of permitting, lease administration, and commercial operation.
    Given the substantial investments necessary for oil shale pilots, 
research and commercial facilities, regulatory uncertainty has 
significant adverse impact on Shell's interests. To put it another way, 
the 2008 Oil Shale Rules and associated regulatory processes provide 
certainty and basis for investment decision. Reopening elements, of 
which the PEIS is one, and the prospect of future changes removes that 
certainty.
    Shell firmly believes that if our technology and those being tested 
by other energy companies can be proven through RD&D testing, we can 
unlock a significant long term domestic energy source for the US. To do 
this, industry needs a regulatory environment that fosters innovation 
and results in production growth. This is accomplished by providing 
access to acreage with sufficient oil shale resources combined with 
long-term stable fiscal regimes and regulatory processes that provide 
industry the certainty and time needed to develop oil shale.
    Our country is in competition with the world for energy resources. 
We need energy in every form, and we are sitting on the largest and 
most concentrated energy resource on the planet. And it will be needed, 
potentially sooner rather than later.
    The benefits are huge. Consider this: an acre disturbed for corn 
production might generate the energy equivalent of 10 barrels of oil 
per year, and an acre of conventional oil and gas production might 
generate the equivalent of 10,000 barrels of oil, but an acre of oil 
shale in the Piceance Basin of Colorado has the potential to produce 
well over 1,000,000 barrels of oil. So the energy produced per acre 
disturbed is well over 100 times greater than any other known form of 
energy development. Colorado's oil shale is literally the richest and 
most concentrated hydrocarbon energy resource on the planet.
    Shell has often said, we intend to develop oil shale in a manner 
that is economically viable, environmentally responsible and socially 
sustainable. If one only focuses on environmental concerns without also 
considering the socioeconomics, national energy needs, and the facts 
and realities of the situation, it becomes clear that a ``no 
development'' policy is unsustainable. As NEPA requires, the 
environmental and social impacts and benefits of any proposed action 
need to be considered. Our country needs energy in every form. There is 
clearly a path forward where our energy needs are supplemented with oil 
shale, while managing and mitigating impacts of development.
    Thank you for considering my testimony.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    Mr. Aho?

 STATEMENT OF GARY AHO, BOARD MEMBER/FORMER CHAIRMAN, NATIONAL 
                     OIL SHALE ASSOCIATION

    Mr. Aho. Thank you, Mr. Chairman and Mr. Tipton, for the 
opportunity to speak here today.
    My name is Gary Aho. I am here today representing the 
National Oil Shale Association. I am an industry 
representative. I have over 35 years of experience with oil 
shale, starting out as a chief engineering, becoming a manager, 
vice president, and eventually the president of two of the oil 
shale companies that have been active in the Western States.
    The National Oil Shale Association is a not-for-profit 
organization with the goal of educating the public and 
providing factual information on oil shale. Our members consist 
of corporations, university and research groups, national 
laboratories, and individuals. We print written materials that 
are carefully scrutinized to assure that all statements are 
accurate and supported by factual data and sound references. We 
are not a lobbying organization.
    Today, I would like to enter for the record our most recent 
2010 publication, entitled ``Oil Shale: America's Untapped 
Energy Source.'' The purpose for this newest publication is to 
present facts about oil shale, lay out the benefits to the 
Nation and to this region, present challenges facing the 
development of oil shale, and discuss a way to arrest many of 
the misconceptions that persistently surround oil shale.
    This NOSA publication was carefully prepared and edited by 
experienced oil shale veterans, each with many years of 
experience in trying to get an oil shale industry started in 
the United States. Today, there are just a few key points for 
the time I have allotted that I would like to make from this 
particular publication.
    First of all, as we have heard, the U.S. has nearly 70 
percent of the world's oil shale resources, and the deposits in 
the Western United States contain more oil than the world's 
proven reserves of conventional oil. At a time like this, when 
our Nation is going through tremendous economic uncertainty, 
developing oil shale in the Western United States would create 
tens of thousands of high-paying jobs, reduce the Nation's 
dependency on foreign oil, improve the balance of trade, 
enhance national security, provide stimulus to the economy, and 
generate tax revenues for all levels of Government.
    There are already a number of proven and unproven 
technologies to produce shale oil, and production is occurring, 
as we have heard here today, in the countries of Estonia, 
Brazil, and China. We believe that shale oil can be produced in 
the United States safely and in an environmentally responsible 
manner. Industry and research organizations will figure out the 
best technologies if the incentives to do so exist and if the 
roadblocks are minimized.
    The Federal Government through the BLM controls only 70 
percent of the Western oil shale resources and some of the best 
resources. However, there is currently no Federal oil shale 
leasing program. Despite the fact that oil shale was placed 
under the Mineral Leasing Act of 1920 and was to be made 
available for public leasing, here it is 90 years later and, 
shame on us, we still don't have a leasing program in this 
country.
    As a nation, we have made a number of efforts to develop 
oil shale, and there have been many successful research 
programs completed over the past 90 years. However, we seem to 
lack the national resolve to keep a sustained oil shale program 
moving forward, and we have heard that again today with the 
lack of budgets, and these programs within the DOE, for 
example, start and stop.
    The most recent unconventional fuels legislation was the 
Energy Security Act of 2005 that laid out a program and 
mandated certain research and leasing activities. While that 
program got off to a great start, it, too, appears to be 
floundering, despite the fact that the actions required therein 
are very explicit.
    NOSA believes that the BLM should make lands available for 
lease. These lands should have terms, including rents and 
royalties, which are favorable for this capital-intensive, 
high-risk, unconventional fuels industry. Sufficient 
regulations and environmental rules and regulations already 
exist on the books. Industry should be allowed to select the 
technologies since it is industry that takes the investment 
risks.
    It should be up to industry to conduct the research and 
develop the best technologies, realizing that the technologies 
will evolve with time and experience. Just because the BLM 
leases oil shale property to a corporation, there is no 
assurance that the project will develop. Industry must still 
design the project, secure its permits, comply with NEPA, 
secure water and other services, get the buy-in of the 
stakeholders, arrange financing, and so forth.
    The burden falls on industry. BLM must simply make leases 
available. If it is in the Nation's best interest to develop 
oil shale, and we believe it is, then the Government should 
make the land available, expedite the permitting process in 
cooperation with State and local agencies, and then let 
industry make it happen.
    Industry needs a clear, consistent Federal program and a 
national commitment to develop oil shale. Access to lands and 
regulatory certainty are crucial to corporations starting a new 
capital-intensive industry such as oil shale.
    I thank you for the opportunity to appear here today. The 
National Oil Shale Association feels this hearing is very 
timely, and we thank you for your vision and your willingness 
to address the impeding development of oil shale, America's 
untapped energy source.
    Thank you.
    [The prepared statement of Mr. Aho follows:]

     Statement of Gary D. Aho on behalf of the National Oil Shale 
                              Association

    Mr. Chairman and Members of the Subcommittee, my name is Gary D. 
Aho and I am here today representing the National Oil Shale 
Association, a not-for-profit organization with the goal of educating 
the public and providing factual information on oil shale. Our members 
consist of corporations, university research groups, national 
laboratories and individuals. We print written materials that are 
carefully scrutinized to assure that all statements are accurate and 
supported by factual data and sound references. We are not a lobbying 
organization.
    Today I would like to enter for the record our most recent 2010 
publication entitled ``Oil Shale, America's Untapped Energy Source''. 
This publication is intended to (1) present facts about oil shale, (2) 
layout benefits to the nation and the region, (3) present the 
challenges facing the development of oil shale, and (4) discuss and lay 
to rest the misconceptions that persistently surround oil shale. This 
NOSA publication was carefully prepared and edited by experienced oil 
shale veterans, each with years of experience in trying to get an oil 
industry started in the United States.
    There are a few key points that I would like to focus on today:
          The US has the nearly 70% of the world's oil shale 
        resources and the deposits in the western US contain more oil 
        than the world's proven oil supplies.
          Developing oil shale in the western US would create 
        tens of thousands of high paying jobs, reduce the nation's 
        dependency on foreign oil, improve the balance of trade, 
        enhance national security, provide a stimulus to the economy, 
        and generate tax revenues for all levels of government.
          There are already a number of proven and unproven 
        technologies to produce shale oil and production is occurring 
        now in other nations, such as Estonia, Brazil and China.
          We believe that shale oil can be produced in the US, 
        safely and in an environmental responsible manner. Industry and 
        research organizations will figure out the best technologies, 
        if the incentives exist to do so and if the roadblocks can be 
        reduced.
          However, the federal government, through the BLM, 
        controls nearly 80% of the oil shale lands and there is 
        currently no oil shale leasing program, despite the fact that 
        leasing was provided for under the Mineral Leasing Act of 1920. 
        As a nation, we have made a number of efforts to develop oil 
        shale and there have been many successful research programs 
        completed over the past 90 years. However, we seem to lack the 
        national resolve to keep a sustained oil shale program moving 
        forward. The most recent unconventional fuels legislation was 
        the Energy Security Act of 2005 that laid out a program and 
        mandated certain research and leasing activities. While that 
        program got off to a great start, it too appears to be 
        floundering, despite the fact that the actions required therein 
        are very explicit.
          NOSA believes that the BLM should make lands 
        available for lease. Sufficient regulations and environmental 
        laws already exist. Industry should be allowed to select the 
        best technologies, realizing that industry takes the investment 
        risks. It should be up to industry to conduct the research and 
        develop the best technologies, realizing that the technologies 
        will evolve with time and experience.
          Just because the BLM leases an oil shale property, 
        there is no assurance that the project will develop. Industry 
        must still design the project, secure permits, comply with 
        NEPA, secure water and other services, arrange financing, etc. 
        The burden falls on industry. BLM must simply make the land 
        available.
          If it is the nation's interest to develop oil shale, 
        and we believe it is, then the government should make the land 
        available, expedite the permitting process, and then let 
        industry make it happen, while working with the numerous 
        stakeholders in the local region.
          Industry needs a clear, consistent federal program 
        and a national commitment to develop oil shale. Access to lands 
        and regulatory certainty are crucial to companies starting a 
        new, capital intensive industry.
    Thank you for the opportunity to appear here today. NOSA feels this 
hearing is very timely and we thank you for your vision and your 
willingness to address the issues impeding the development of ``Oil 
Shale, America's Untapped Energy Source''.

National Oil Shale Association
P.O. Box 3080
Glenwood Springs, CO 81602
Phone 970-389-0879
Website: www.oilshaleassoc.org
                                 ______
                                 
    Mr. Lamborn. OK. Thank you, Mr. Aho.
    Mr. McCloud?

STATEMENT OF BRAD McCLOUD, EXECUTIVE DIRECTOR, ENVIRONMENTALLY 
               CONSCIOUS CONSUMERS FOR OIL SHALE

    Mr. McCloud. Good morning. As stated, my name is Brad 
McCloud. I am the Executive Director for ECCOS, or otherwise 
known as Environmentally Conscious Consumers for Oil Shale.
    First, on behalf of myself and ECCOS, thank you to both 
Representatives Tipton and Lamborn for conducting these 
hearings and keeping the lines of communication open on an 
issue that we feel will impact the future security and economic 
prosperity for the United States.
    The ECCOS is a grassroots, nonprofit group. We have members 
in Colorado and Utah, and we have plans to expand into Wyoming. 
We are one voice for consumers--consumers of groceries, 
consumers of cars, consumers of fishing and hunting and camping 
equipment, and consumers of homes. We are taxpayers, and we are 
voters.
    We are not technical experts on oil shale. You have a 
roomful of many representatives today from the industry who can 
discuss in depth the ongoing development and research projects 
that are going on. Our mission is to educate the public and 
elected officials about oil shale energy and issues to promote 
the development of oil shale in order to decrease our Nation's 
dependency on foreign fossil fuels. We also feel that a strong 
energy policy--clear, consistent, and environmentally 
responsible--is necessary for both energy security and to 
maintain and grow good-paying jobs here in the United States.
    The development of oil shale and other domestic energy fuel 
sources will lead to energy independence for the United States, 
but the current policy of regulatory uncertainty in the United 
States will systematically dismantle the progress being made by 
the oil shale industry in recent years and further delay or 
halt the projects in the future.
    The Energy Policy Act of 2005 that has been referred to 
often today was a clear policy with clear direction and 
indicated the importance of oil shale development. The process 
was comprehensive. It was open, and it was rigorous. It 
achieved the resource development goals of the Energy Policy 
Act of 2005 and, along with follow-up amendments in 2008, 
protected the environment and recreational uses of those public 
lands.
    However, in December of 2007, then-Senator Ken Salazar 
inserted a moratorium on enacting rules for oil shale 
development on Federal lands in an omnibus spending bill. Come 
forward to 2011, not quite 3 years after the initial PEIS was 
finished in 2008, under a new administration and now Secretary 
of the Interior Ken Salazar, the BLM issued another notice to 
prepare a new PEIS. The only thing that changed roughly in 
about that 3 years is that technology in the oil shale industry 
had improved.
    Initiating a new PEIS on the same topic was not only a 
redundant waste of time and resources, but it caused concern 
and instability for an industry by once again arbitrarily 
changing the rules of the game.
    Currently, the unemployment rate in Grand Junction is 
around 10.5 percent. Up valley, you can go to Garfield County, 
it is about 10.7 percent. Colorado overall is about 9.2 
percent. And if we go just east--we will go to Utah--it is 
about 7.5 percent. Nationally, I probably don't have to tell 
you that we are shockingly high. It is still around 9.1 percent 
for unemployment.
    Recently, very recently, actually, an independent business 
information service called Visiongain released a report--and I 
can give you more information on it if you like. But the report 
calculates what it calls the global oil shale market. It does 
this by estimating spending on upgrading existing oil shale 
facilities, new infrastructure, and spending on R&D.
    The report calculates that the value on that global oil 
shale market to be worth just over $2.8 billion alone in 2011. 
Now it seems that it would make--it seems that finding a way to 
capitalize on just a portion of those billions of dollars in 
the Visiongain report that they mention could go a long ways 
into lowering unemployment rates, improving our roads and our 
schools and our national and local economies.
    If the United States wants companies to invest in oil shale 
research and development, as it claims, then companies must be 
provided a path to commercialization. The U.S. is sitting on a 
massive oil reserve. We are a stable nation with excellent 
safety and environmentally protective laws.
    The world would be well served by having a stable supply of 
oil from the United States, and our local and national 
economies would benefit immensely. America can be the world's 
leader in oil shale, but industry will not continue to invest 
in environmentally responsible technologies without consistent 
regulation and stable oversight from the Federal Government.
    ECCOS feels it necessary to point out inconsistencies in 
the policies of the Federal Government between administrations 
and the very political nature of these exercises that over the 
years have discouraged the development of oil shale production 
and potential energy independence for the United States.
    To help stabilize gasoline prices, create good-paying jobs, 
and make the U.S. less reliant on foreign governments for our 
energy needs, the U.S. must maintain an environment of 
regulatory consistency. Policy cannot be allowed to be 
arbitrarily changed every 3 to 4 years. If the U.S. can 
implement such a policy, we ensure a brighter future for our 
energy security, our national economy, and our local economies.
    And once again, I respectfully thank you for your time 
today.
    [The prepared statement of Mr. McCloud follows:]

            Statement of Brad McCloud, Executive Director, 
     Environmentally Conscious Consumers for Oil Shale (E.C.C.O.S.)

    On behalf of Environmentally Conscious Consumers for Oil Shale (or 
ECCOS) we want to thank Representatives Tipton and Lamborn as well as 
the Subcommittee on Energy and Mineral Resources for conducting this 
oil shale hearing and keeping the lines of communication open on an 
issue that has potentially prodigious and lasting impacts on the future 
energy security and economic prosperity of the United States.
    ECCOS is a grassroots, nonprofit group based in Grand Junction, 
Colorado. We have members in Colorado and Utah. Our mission is to 
educate the public and elected officials about oil shale and energy 
issues. We are not an advocacy group. However, we would like to see 
research into oil shale continue.
    The title of today's hearing strikes directly at the issue of what 
is at stake with the current policies and attitudes coming from the 
current administration and the U.S. Department of the Interior. A 
strong energy policy is necessary for both energy security and to 
maintain and grow good paying jobs in the United States.
    Many believe development of oil shale and other domestic energy 
fuel sources could very well lead to energy independence for the United 
States, but the current policy of regulatory uncertainty in the U.S. 
will systematically dismantle the progress made by the oil shale 
industry in recent years and further delay or halt projects in the 
future.
    For a recent example of instability in policies affecting the 
industry one only needs to look at the Energy Policy Act of 2005. It 
provided a clear policy direction that indicated the paramount 
importance of oil shale development to contribute to a viable, 
realistic path to meet urgent national energy needs and carefully 
balance the economic realities of oil shale development with 
appropriate environmental and socioeconomic safeguards. It, in addition 
to the 2008 Oil Shale Rule and 2008 RMP (``Approved Resources 
Management Plan Amendments/Record of Decision for Oil Shale and Tar 
Sands Resources to Address Land Use Allocations in CO, UT and WY'') 
Amendments established legal parameters for oil shale leasing in 
northwestern CO, southwestern WY, and northeastern UT. The 
administrative process was comprehensive, open, and rigorous. Most 
importantly, it achieved the resource development goals of the Energy 
Policy Act of 2005 and protected the environment and recreational uses 
of public lands.
    A good example of this instability came in December of 2007 when 
then Senator Ken Salazar inserted a moratorium on enacting rules for 
oil shale development on federal lands into an omnibus spending bill, 
then pushed in May of 2008 to extend the moratorium for another year 
and then less than three years after the initial PEIS was completed in 
2008 (April of 2011) the BLM, under a new administration and now 
Secretary of the Interior Ken Salazar, issued a ``Notice of Intent to 
Prepare a Programmatic Environmental Impact Statement (PEIS).'' Why? 
The redundancy of initiating a new PEIS on the same topic that was 
addressed three years ago is not only waste of time and resources, but 
it also causes concern and instability for an industry by once again 
arbitrarily changing the rules. If a project is forced to start and 
stop over and over, and is given no indication as to when clear 
policies will be provided and maintained, a company starts to wonder if 
it will ever see the light at the end of the tunnel. When issuing its 
notice of intent the BLM stated as its rationale ``. . .there are not 
economically viable ways yet known to extract and process oil shale for 
commercial purposes...''
    We feel that in many ways due to the redundancy of this process the 
BLM's rationale is a self-fulfilling prophecy. How can we expect 
companies to invest in oil shale research and development when the 
federal government creates uncertainty and stands in the way?
    The only thing that has changed in the past three years is oil 
shale technologies have improved. There are several nations around the 
world that are aggressively pursuing oil shale development. We are in 
the midst of another energy crisis with gasoline prices approaching $4 
per gallon. The unemployment rate in Grand Junction, Colorado and the 
United States is still staggeringly high, and there is even more unrest 
in the Middle East
    The largest and richest reserves of recoverable oil shale 
(estimated at more than five times the amount of oil located in Saudi 
Arabia) are found in Colorado, Utah and Wyoming. If the United States 
wants companies to invest in oil shale research and development, as the 
current administration and those before it have claimed, then these 
companies must be provided a path to commercialization. Why would a 
company invest hundreds of millions of dollars into research, if they 
have no clear path to recouping that investment?
    Companies like Shell, Chevron, American Shale Oil and Red Leaf 
Resources are continuing to develop exciting and new technologies that 
someday may lead to commercial viability and meet growing national and 
international energy needs. However, regulatory uncertainty has slowed 
research and development projects of oil shale dramatically and forced 
most investment dollars and the good paying jobs associated with those 
projects flowing in the direction of more development-friendly nations.
    The fact is the U.S. will be reliant on oil for decades to come. 
Even with the aggressive deployment of hybrid, electric vehicle, 
natural gas, and biofuels technologies, the U.S. Energy Information 
Administration reported that by 2035 93% of vehicles in the U.S. will 
still run on oil and, world oil consumption will increase 30%. Our 
dependence on oil and non-renewable resources is going to remain an 
issue for generations.
    The U.S. is sitting on a massive reserve of oil. We are a stable 
nation with excellent safety and environmental protection laws and a 
strong recognition of private property rights. The World would be well-
served by having a stable supply of oil from the United States. And, 
our local and national economies stand to benefit immensely.
    America can be a world leader in oil shale technology, but the 
private sector will not continue to invest in environmentally 
responsible oil shale technologies without consistent regulations and 
stable oversight from the federal government. This new PEIS process is 
just one example of how even more uncertainty is added into the 
equation for those companies trying to find an answer to our domestic 
energy needs.
    In closing, I would like to reiterate ECCOS is not an advocacy 
group. However, we feel it necessary to point out inconsistencies in 
the policies of the federal government between administrations and the 
very political nature of these exercises that over the years has 
discouraged the development of oil shale production and the potential 
energy independence of the United States. If you truly want to help 
stabilize gasoline prices, create good paying jobs, and make the U.S. 
less reliant on unstable foreign governments for our energy as has been 
stated by administration after administration then the U.S. must 
maintain a consistent regulatory policy. Policy cannot be allowed to 
arbitrarily change every three to four years. If the U.S. can implement 
such a policy we can secure a brighter future for our energy security, 
our national economy, and our communities.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    And Commissioner Spehar?

   STATEMENT OF JIM SPEHAR, FORMER MAYOR OF GRAND JUNCTION, 
           COLORADO, FORMER MESA COUNTY COMMISSIONER

    Mr. Spehar. Thank you, Mr. Chairman.
    I appreciate the opportunity to testify today before the 
Subcommittee and to submit the more formal written testimony 
with more detail for the record, which I have also done.
    I was pleased, Mr. Chairman, to hear your emphasis on 
balance as we began this hearing and to hear Representative 
Tipton talk about creating win-win situations. My purpose here 
today is to talk a little bit about that from the standpoint of 
a former elected official and as a former member of the 
Colorado Economic Development Commission.
    Six generations ago, my family came to western Colorado, to 
Crested Butte, to work on the extraction industries, mining 
coal and precious metals. Three times this month, my wife and I 
have traveled there, encountering various roadblocks on Highway 
15 on Kebler Pass.
    While those delays frustrated me, my much more patient wife 
explained to me that there is sometimes a positive purpose to 
roadblocks. They warn of potential danger, the need for special 
attention and caution, and they provide information to 
successfully navigate a change for a changing situation. And 
they protect us and others, including those working to make the 
changes.
    The same could be true of the roadblocks some complain 
about regarding oil shale. I am reminded of the well-known 
saying that the four most expensive words in the English 
language are, ``This time it's different.''
    From my experience working in and observing this latest 
development cycle, I know this is not the industry of 30 years 
ago. Many different technologies are being researched this 
time. The pace and timing is more cautious and deliberate.
    But some lessons from the time between disproven 
expectations and the devastation that followed last time do 
apply, and I wonder if we have learned them. Where is the 
necessary preparation to host this industry if it does emerge? 
Do we prudently plan, identify impacts and how to handle them, 
or struggle and suffer as northwest Colorado did three decades 
ago, a time, when, according to then-Governor Dick Lamm, it was 
like trying to change a tire on a car that was moving.
    There is no need to risk making northwest Colorado and 
neighboring oil shale areas a national sacrifice zone once 
again. There is still time to be strategic without compromising 
development of an oil shale industry. We have been chasing this 
rock that burns, this fuel of the future for more than a 
century now, 10 years at a time.
    It was 10 years when I began consulting with Shell in 1997. 
It was 10 years when that work ended for me in 2003, and it was 
still 10 years when I heard a presentation at the Mahogany test 
site last fall. In presentations, hearings, and symposiums in 
Utah and Colorado over the past few months, I still heard 
industry representatives estimate it will be 7 to 12 years 
before a commercial-scale oil shale industry might develop.
    That means there is time for the comprehensive impact 
studies that are as important as the science projects underway 
at research, development, and demonstration sites. These 
studies are vital if development is to be, as Shell and others 
have repeatedly promised, economically viable, environmentally 
responsible, and socially sustainable.
    Decades of creating nurturing and diversified economies 
need to be honored and supported. Taxpayers and their 
communities are just as deserving of certainty as the industry 
is. Whether we support or oppose oil shale development, it is 
irresponsible not to be planning now for that potential 
development and its impacts. To do that, we need comprehensive 
planning and preparation. However, the BLM's own 2008 
programmatic environmental impact statement confirmed the lack 
of adequate current information to do that.
    We need the resources to manage upfront impacts and help 
provide a soft landing if, once again, things don't pan out. 
But there has been no discussion of creating an oil shale trust 
fund, which did both last time.
    We need to assure current taxpayers they are not expected 
to increase their burden to finance the needs of the industry. 
But instead, we see proposed reduced royalty rates that would 
deprive communities of funding. As you know, just under half of 
those royalties flow back to State and local governments. I 
suspect Congress will not be anxious to defer its 51 percent 
and let all of the communities remain whole.
    We need to assure a reasonable return to taxpayers on the 
use of Federal lands but, instead, propose commercial leasing 
before technical research proves the need and the market helps 
establish an appropriate lease rate. We need to protect and 
provide for current sustainable economic drivers, such as 
agriculture, hunting and fishing, tourism and recreation, each 
with multimillion dollar positive current impacts and thousands 
of existing jobs.
    We need to all have realistic expectations for a potential 
industry, which, in my experience, is just as anxious to manage 
exuberant promises as anyone.
    In 2000, while I was on the city council, Grand Junction 
and other local partners funded an effort to define our future. 
That was known as Vision 2020. Among other things, 1,200 face-
to-face interviews were conducted here in Mesa County. Nearly 
20 years after the fact, ``black Sunday'' was still seen as the 
defining moment in this community's history.
    We need to cooperate in developing a ``no regrets'' 
strategy if the oil shale industry is to be successful this 
time, gather the full range of necessary information, and 
provide financial and other resources to implement prudent 
planning, all that if we are to make certain we have learned 
the lessons of that painful past. We should consider that an 
opportunity and a challenge, not a roadblock.
    Thank you for the opportunity to talk about the needs of 
our communities, and I look forward to answering any questions 
you may have.
    [The prepared statement of Mr. Spehar follows:]

    Statement of The Honorable James G. Spehar, Former Mayor, Grand 
     Junction, Colorado, Past President, Colorado Municipal League

    This written submission and my oral comments before the U.S. House 
of Representatives Subcommittee on Energy and Mineral Resources at its 
field hearing on ``American Jobs and Energy Security: Domestic Oil 
Shale the status of Research, Regulation and Roadblocks'' in Grand 
Junction, on August 24, 2011, are informed by several perspectives.
    They include coming from a six-generation western Colorado family 
that originally emigrated to the Western Slope to work in extraction 
industries; former responsibilities as an elected Mesa County 
Commissioner and as a city council member and Mayor of Grand Junction; 
work with other communities as a past president of the Colorado 
Municipal League and former board member of Associated Governments of 
NW Colorado; work within state government on growth and development 
issues and as a former member of the Colorado Economic Development 
Commission; and helping direct local economic development efforts as a 
past board member of the Mesa County Economic Development Commission 
(now the Grand Junction Economic Partnership).
    It also results from 15 years of consulting work on growth, energy 
and economic development, and job creation issues w/local governments, 
their regional associations, state agencies, multi-national energy 
companies and others. That includes six years of contract work on oil 
shale and community issues for one of the early lessees in the federal 
government's oil shale research, demonstration and development program. 
I have worked with the Colorado Department of Labor and Employment on 
workforce issues in rural Colorado and helped directed a collaborative 
multi-county effort on regional socio-economic issues that included 
portions of NW Colorado that will be directly impacted should a 
commercial oil shale industry develop.
    Given that background, I applaud the efforts of Congress and the 
subcommittee to investigate the role an emerging oil shale industry 
might play in job creation and providing the ``home grown'' energy 
resources to fuel employment growth and to help move our nation toward 
energy self-sufficiency. The purpose of my oral and written testimony 
is to make certain other important parts of that equation are given 
equal consideration as we move forward.
    Whether you oppose or support oil shale development, it's 
irresponsible not to be planning now for potential development and the 
possible impacts.
    That examination of impacts demands more than just a science 
project. But current research is focused primarily on technology, not 
the broad range of social, economic, environmental and other community 
impacts that will result if the technical research is ultimately 
successful.
    Just as the industry desires certainty in what's required of it, so 
do communities deserve that same degree of certainty as to what the 
expectations of will be of their local governments, non profits and 
other agencies, schools, hospitals, for infrastructure and services 
associated with the development of this industry.
    Similarly, this added use on public and private lands, its water 
and power requirements and potential impacts to air quality, will 
impact many existing multi-million dollar industries that also provide 
important jobs, including but not limited to agriculture and other 
water users, tourism and outdoor recreation, even natural gas and other 
existing extractive industries. We should be careful that we are not 
merely swapping jobs and that new employment does not come at the 
expense of existing job providers in already active and sustaining 
industries important to the economic well-being of the region.
    The BLM's own 2008 Programmatic Environmental Impact Statement 
(PEIS) acknowledges the lack of then-current information available 
regarding many of these issues. Subsequent analysis has served both to 
inform and confuse matters identified as uncertainties in the PEIS and 
the current review and potential update of that document ordered by 
Interior Secretary Ken Salazar will hopefully fill in some of the 
blanks.
    For several years now, I've been part of an informal NW Colorado 
group of current and former local elected officials, wildlife and 
agriculture interests, water organizations and others who've been 
working with our congressional delegation since the summer of 2009 to 
see that these sorts of impacts are quantified and addressed prior to 
any commercial leasing. We most recently met with Representative Tipton 
in February of this year and hope to continue these discussions with 
him, with Senator Mark Udall and with Senator Michael Bennet.
    The Colorado delegation, on our behalf, has twice forwarded to the 
DOI our request that an independent study of cumulative impacts of oil 
shale development be completed prior to any commercial leasing. (See 
Attachment A).
    A written reply to Sen. Mark Udall dated March 24, 2011, sent on 
behalf of BLM Director Bob Abbey, indicates that sort of investigation 
will be part of the PEIS review now in progress and is a welcome next 
step in the process of prudently planning for the possibility of an oil 
shale industry. (See Attachment B).
    The Associated Governments of NW Colorado, a regional association 
of municipal and county governments in the region, a few years ago 
commissioned a cumulative impacts study of development and population 
growth in the same geographic area that is ground zero for this 
potential industry. (See Attachment C.)
    That study, entitled ``Northwest Colorado Socio-Economic Analysis 
and Forecasts '' and released in 2008, likely already needs updating 
but provides an excellent outline of the sort of information local 
communities need in order to plan intelligently if they are to host 
commercial oil shale development, whether a decade or more from now or 
in some shorter time frame.
    There is still time to answer the important outstanding questions 
regarding how local communities expected to host oil shale development 
can manage associated impacts. As outlined in the attached report 
``Secure Fuels from Domestic Resources: The Continuing Evolution of 
America's Oil Shale and Tar Sands Industries'' prepared by INTEK, Inc., 
for the U.S. Department of Energy Office of Petroleum Reserves and 
released in September, 2010, all of the players active in oil shale 
development envision multi-year research and development scenarios. In 
recent months and in various settings, major players in this region 
have estimated time frames of 7-12 years for development of commercial-
scale technologies. (See Attachment D).
    If that time frame is shorter, or if some sort of new crisis in the 
Middle East or elsewhere accelerates the schedule, it's even more 
imperative that this sort of additional information over and above the 
``science project'' technology be made available and appropriate steps 
to mitigate impacts be put in place before commercial leasing and 
development take place.
    Here are some of the questions that need to be answered in the 
context of the subject matter of this hearing:
        (1)  Should development of an oil shale industry be subsidized 
        either directly, via government funding or product purchases, 
        as has been done in previous cycles, or indirectly, via reduced 
        royalty rates as anticipated in the Energy Policy Act of 2005?
        (2)  Should large-scale leasing of federal lands for commercial 
        oil shale production proceed, as anticipated in the Energy 
        Policy Act of 2005, prior to successful demonstration of 
        commercial-scale processes for production of fuel from oil 
        shale?
        (3)  How can the federal, state and local governments, the 
        industry, and other partners make certain impacts of oil shale 
        development do not fall unreasonably on current taxpayers and 
        not negatively impact important sustaining industries?
        (4)  What role does the federal government play in maintaining 
        realistic expectations of companies involved in oil shale 
        research and development and in creating realistic expectations 
        on the part of a public justifiably anxious about U.S. energy 
        security and concerned about job creation.?
    It is important to remember the lessons of the past, when 
understandable haste and federal subsidies fostered the oil shale boom 
of the late 1970s-early 1980s. Thousands of workers followed that boom 
to northwestern Colorado, overwhelming infrastructure, taxing services, 
and artificially inflated the economy. Just a few years later came the 
infamous ``Black Sunday'' when thousands lost their jobs, communities 
became ghost towns, and a decade or more of struggle began to regain 
economic balance.
    Helpful in dealing with that previous boom and bust was the Oil 
Shale Trust Fund, designed to assist industry in helping communities 
front the up-front impact costs that come prior to receipt of tax 
revenues. That fund, filled by advance payments against future 
royalties, also helped provide a somewhat softer landing after the 
bust, maintaining payments on infrastructure built in anticipation of a 
long-term industry and funding economic development aimed at 
diversifying jobs and industry in the region.
    There's been no talk of such a trust fund as we again look at what 
Rep. Tipton cites as the potential for 350,000 new jobs in a new oil 
shale industry.
    Equally concerning is the provision in the Energy Policy Act of 
2005 cutting initial oil shale royalty rates by more than half. As 
subcommittee members know, slightly less than half of royalty payments 
are returned to states and local governments where the activity occurs. 
Reducing those rates diminishes the ability of local communities to 
provide infrastructure and services a new industry finds necessary to 
create and sustain jobs.
    Congress needs to understand that direct correlation and become an 
active partner with the states and their local governments in dealing 
with impacts should a new oil shale industry come to fruition.
    Now we are hearing calls for large-scale commercial leasing as 
another incentive for kick-starting the industry. Two mayors of the 
region's largest cities raised important questions regarding that issue 
just a few days ago on the op ed page of the Grand Junction Daily 
Sentinel. ``If there is no proven commercial process, wouldn't this 
foster speculation,'' they asked. ``Should research be successful, 
won't it then be easier to make certain lease rates reflect the 
appropriate value to the public?''
    Equally concerning is the lack of comprehensive analysis of the 
impact of this potential new industry on existing jobs and industry. 
Air quality, water demands, land use changes have the potential to, as 
the BLM states in the operative PEIS for oil shale research and 
development, to cause the region to morph from its traditional 
agricultural, tourism, hunting and fishing and recreation economies, 
all of which provide important sustaining jobs, to an industrial zone.
    As an example, water issues alone raise enough issues to demand a 
thorough examination before rushing development of an oil shale 
industry. Estimates of potential water demands vary by a factor of 
three, from 120,000 acre-feet per year to nearly 380,000 acre-feet. 
Even if industry utilizes water it already owns, exercising those 
senior rights could have a dramatic effect on junior users in other 
industries.
    If additional water is necessary, it comes from a Colorado River 
Basin some say is already at maximum capacity. Others who count on some 
unallocated water in the river say that, even at the lowest estimated 
demand for oil shale, that would take up half of Colorado's allocation 
of the water remaining in the Colorado River.
    No one likes to consider these sorts of things as a ``worst case'' 
scenario when we are all in favor of good jobs, energy independence and 
a more promising future.
    Seeking definitive answers to these important questions should not 
been seen as a roadblock to oil shale development but instead as 
necessary strategic planning to insure a viable and sustainable future.
    But prudence would seem to dictate we develop a ``no regrets'' 
strategy that, as much as humanly possible, avoids the well-documented 
mistakes of the past, and assures local communities are prepared and 
adequately funded to deal with associated impacts of oil shale 
development.
    In conclusion, I would urge this subcommittee to expand its agenda 
to also include examination of the steps necessary to make certain the 
entire range of questions concerning development of a successful oil 
shale industry that might contribute to both job creation and energy 
independence. Only in that manner can we all be assured that oil shale 
will be a welcome and meaningful component our energy security and 
create new jobs without compromising existing economic drivers and our 
treasured way of life in northwest Colorado, northeast Utah and 
southeast Wyoming.
                                 ______
                                 
    [NOTE: Letters submitted for the record by Mr. Spehar 
follow:]
    [A letter to Secretary of the Interior Ken Salazar dated 
November 18, 2009, follows:]

[GRAPHIC] [TIFF OMITTED] T8237.003

[GRAPHIC] [TIFF OMITTED] T8237.004

    [A letter to Secretary of the Interior Ken Salazar 
dated December 17, 2010, follows:]

[GRAPHIC] [TIFF OMITTED] T8237.005

[GRAPHIC] [TIFF OMITTED] T8237.006

    [A letter to Senator Mark Udall dated March 24, 2011, 
follows:]

[GRAPHIC] [TIFF OMITTED] T8237.007

[GRAPHIC] [TIFF OMITTED] T8237.008

    Mr. Lamborn. Well, thank you all for being here. You 
have provided various kinds of illumination and education for 
us, and I appreciate that. We are going to launch into the 
first round of questions.
    Mr. Whitney, you talked about the PEIS, the preliminary 
environmental impact statement, and you gave a very 
diametrically different description of that than Ms. Hankins 
did earlier this morning. She said there had been all these new 
things going on that had come to light that justified it, 
whereas you say that--and Mr. Aho, you said the same thing--
that there has not been anything that has changed in 3 years.
    And Mr. McCloud, you may have said that as well--other than 
political changes in Washington. So which is it? I mean, I am 
confused here. I am mystified.
    Mr. Whitney. Well, as I said, we do believe there is no 
reason to revisit the PEIS. Shell believes in a transparent and 
regulated NEPA process, the National Environmental Policy Act 
process for potential commercial projects.
    When a successful RD&D pilot is completed, an application 
for conversion would be submitted that would include a 
description of a commercial project that would be used to work 
through the NEPA process. And that is when specific 
environmental concerns and socially sustainable issues can be 
addressed.
    Shell's ultimate goal is to create a commercial oil shale 
recovery operation that is economically viable, environmentally 
responsible, and socially sustainable. The exact scale and 
timing for development will depend on a number of factors, 
including regulatory stability.
    The PEIS is just a key element of the regulatory framework 
that oil shale industry needs to move forward.
    Mr. Lamborn. Yes, and I meant to say programmatic EIS.
    This issue of it is always 10 years out in the future, your 
company has one of the major demonstration projects, research 
projects going on here, which I have visited in the past. And I 
have had discussions--I don't want you to feel compelled to 
give anything that is proprietary to your company. But cost 
effectiveness is obviously a big issue.
    And with the rising and then lowering and then rising price 
of oil, an expensive technology because it is more complicated, 
more time intensive and everything else, at some cycles in the 
oil prices will not be profitable. At other times in the cycle, 
it will be profitable.
    Is this a technology that is always going to be 10 years 
away and never, ever materialize? I have heard that many times 
today and in the past. Or will we reach a point at some point 
with oil around the world becoming harder to access, more 
expensive to produce because we are going into deeper waters or 
troubled areas politically, or other things like that? What 
does your company think about the ultimate viability of oil 
shale oil production?
    Mr. Whitney. Shell supports the RD&D program. In general, 
if a regulatory environment exists that awards numerous 
companies leases and a framework exists where a stable, long-
term regulatory environment is well understood, then industry 
has the best chance of truly assessing how economically viable, 
environmentally responsible, and socially sustainable it can 
create--the projects that they can create.
    So, there is no definitive answer. The framework just needs 
to exist for industry to put its shoulder against it and see if 
we can solve the problem and make oil shale a robust business 
for the future.
    Mr. Lamborn. So you are convinced that at some point, the 
break-even point will be reached and exceeded to make this an 
ongoing proposition?
    Mr. Whitney. Yes, sir.
    Mr. Lamborn. I will just state for the record, I, for one, 
would rather have a private company making this investment, as 
opposed to taxpayers being on the hook. As long as the 
environment is being protected, I would rather see private 
corporate dollars being invested, and you and I, as taxpayers, 
don't have to make that investment, as has been the approach in 
the past.
    That is my time for now. Representative Tipton?
    Mr. Tipton. Thank you, Congressman Lamborn.
    Listening to some of the testimony, and Commissioner Spehar 
and I have probably some of the longer history on this side of 
the West Slope, it is kind of like ``Groundhog Day,'' that old 
movie?
    [Laughter.]
    Mr. Tipton. You know, it is the same thing being played 
over and over again many times. When we are talking about it is 
always 10 years out, I recall back with the development under 
President Carter, the Department of Energy, a lot of our moves 
to move, to the best of our ability, to energy self-sufficiency 
in this country, it was always 10 years out.
    I would just like to have you maybe perhaps comment. Has 
part of that been political failure out of Washington, D.C., in 
particular, to be able to have that political will, to be able 
to actually achieve the goal? And if you would just maybe 
comment on that, I would appreciate it.
    You are up first, Mr. Whitney.
    Mr. Whitney. All right. Like I said, Shell supports the 
RD&D program. The way that that program works, of course, is, 
like I said, based on a successful pilot, an application for a 
conversion is submitted that describes the commercial project 
that would be moved forward through the NEPA process.
    So, indeed, the process will work. We just need to give it 
time and make sure that the business environment and regulatory 
environment allows things to move forward in a systematic, 
clear way. The more companies are awarded leases, the more 
companies are progressing their research and development, the 
more likely we are to be successful in finding a commercial 
path forward for oil shale.
    Mr. Tipton. Anyone else care to comment on that?
    Mr. Aho. Well, you know, the idea that shale is always 10 
years away, some of that is driven by low supply and demand for 
oil. And obviously, as the world population grows and the 
increased demand is now on the world scene and our oil supplies 
are gradually decreasing, we are reaching a point where our 
supply will not be able to meet demand, and we will see 
increased pricing of oil. Of course, we are seeing that today.
    So it comes to a point where there is a break-even point 
for the production of shale oil where it does become economic. 
And some of the companies are talking $50-$70 range. From the 
country of Estonia that just moved into Utah, they look at 
their break-even, including their return on investment, is at 
$70 a barrel.
    So they are making great strides to begin that project in 
Utah with the idea that they have a technology that works in 
Estonia. They intend to bring that to the United States and 
look at commercial development on that project.
    So, I think we are reaching the point where on the world 
scene, we don't expect the price of oil to drop much below--
certainly not below $70 a barrel. Some people think it could go 
back there for short periods of time.
    But the lead time involved in these projects is crucial for 
people to understand. Even the project that we are working on 
in Utah, that project which is aligning conventional surface 
retorting, they are looking at 4 to 6 years of permitting and 
environmental work in advance of construction. And their 
question becomes the uncertainty of the Federal regulations.
    We are all stuck with this. What are the rules going to be 
5 or 6 years from now? We don't know because they are not what 
they were 5 years ago, and they are not what they were 30 years 
ago when I started in this business. This uncertainty is what 
is driving us crazy.
    Also, and we have talked about today all these Federal 
programs that need to get lined up. But frankly, when a 
corporation gets a lease, and they begin the permitting 
process, we always have to put together a detailed development 
plan and go through a detailed permitting process that will 
address water supply. Corporations are not going to invest 
millions of dollars without an assured water supply.
    They are not going to get into a project where they haven't 
dealt with all of the local stakeholders in order to get the 
permits. There is a whole process that corporations have to go 
through. So just assigning somebody a lease doesn't give them 
the green light to build a plant.
    Thank you.
    Mr. Spehar. Representative Tipton, I agree with you. I 
think none of us could say over decades that we have had a 
consistent energy policy, and certainly, that is, I think, part 
of the problem. But I think it is also true that I expect this 
industry will be developed. That is why I am concerned about a 
head start on dealing with impacts and so on.
    As it has been explained to me in my work over the years, 
particularly the major energy companies know that new supplies 
of conventional oil are harder to find and more expensive to 
develop and produce. That is why they are investing admirably 
in alternative technologies, and one of them even helped do the 
energy conservation in the government buildings on this block.
    But I think there will need to be a bridge between the new 
technologies and conventional resources and that these what are 
called unconventional fuels, like tar sands and oil shale, are 
one opportunity to provide that bridge.
    I worry, though, because even at a mid-range scale, at a 
500,000-barrel-a-day industry, the study done by Associated 
Governments of Northwest Colorado that I refer to in and 
attached to my written testimony, anticipates population growth 
in excess of normal population growth of about 50,000 in just 
the three counties in northwest Colorado. That is a huge bite 
for these communities to take on.
    Current taxpayers shouldn't have to do the upfront 
development or upfront impacts for that. As you know, from your 
experience in our State Legislature, our tax structure here 
delays gratification. You know, if Gary builds a plant today, 
it may be reassessed next year. You may get the bill the 
following year, and the money may be collected the year after 
that. All that time he is building that plant is when most of 
the impacts occur.
    So, that is why I suggest that we revisit the idea of the 
oil shale trust fund, where these companies would pay royalties 
in advance against future billing and provide that upfront 
scenario where money is available for communities to deal with 
these impacts.
    Mr. Tipton. I appreciate your comments on that.
    And Mr. Whitney, can you give us an idea, and we are going 
back to 10 years down the road, 10 years down the road, has 
your business at Shell taken a look and said have we had a 
consistent regulatory policy? This is where we could have been?
    Are there any sorts of those types of estimates, or do you 
feel like you get to wake up in a whole new world every morning 
when it comes to regulatory policy and then try and move the 
ball forward from there?
    Mr. Whitney. In general, we just try to communicate clearly 
that a stable, long-term view and stable regulatory policy is 
very important for industry. And indeed, change does happen, 
and we always are forced to deal with that.
    But when we see change on the horizon, that is when we 
really want to communicate more clearly and make sure that 
people really understand that the things that they are 
considering, are they addressing them in the right way? Is the 
PEIS the right way to deal with it, or is it the NEPA process?
    What is the best way to address the concern, and how do you 
get it done in the appropriate regulatory environment?
    Mr. Tipton. I think that certainly goes to Mr. McCloud's 
comments in terms of companies must be provided with the path 
to commercialization. I think that was your comment.
    Mr. McCloud. Exactly. Actually, if I can, Representative 
Tipton? One of the things that the BLM stated when they 
reissued the PEIS and one of the rationale was that there was 
not an economically viable way yet known to extract and process 
oil shale for commercial purposes.
    By continually moving the parameters or not offering set, 
clear guidelines and policies, that is rather a self-fulfilling 
prophecy. Being a businessman, and people involved in business 
know that you have certain things you have to consider when you 
are putting together your business model and your business 
plan.
    You have to look at what your return on investment is, how 
is it potentially profitable, the different environmental, 
social, and economic considerations. Is it sustainable? And 
those are just a few of the things that you have to consider 
when you are putting those policies together. But if you can't 
maintain a stable regulatory environment to do that within, you 
can't build a business model that you are going to have for 
future needs down the road as well.
    The biggest thing we have to consider if it is going to be 
economically feasible, if you look at the U.S. Energy 
Information Administration, they reported that by 2035, even 
with aggressive use of hybrid, electric, hydrocarbons, natural 
gas, 93 percent of the vehicles in the United States are still 
going to run on oil.
    So, by that same year, 2035, they estimate that the 
consumption, the world's oil consumption will be up by 30 
percent. The thing is on supply and demand, at least now oil 
shale works to be a bridge fuel in that middle.
    Mr. Tipton. May I ask one more? I kind of ran through both 
my series of questions.
    Mr. Lamborn. OK. Sure. Go ahead.
    Mr. Tipton. But I would like to return back to the comment 
I was making to Ms. Mittal in the previous panel in regards to 
a static versus a dynamic model in terms of looking forward. I 
believe it is the Moore's principle, you know, we apply that to 
technology in terms of it reducing costs.
    It has been my experience in my business that we are able 
to at least create efficiencies. Would that be unexpected once 
we get this development process going, that we are going to be 
able to create efficiencies?
    If we are looking at the $70 barrel model, the Estonian 
model, that actually with American inventions, American 
creativity, and entrepreneurship, that we can probably 
anticipate that we would actually see those production costs 
lower, reducing, and a more affordable product for American 
consumers?
    Mr. Whitney. Yes, sir. We call that a learning curve. If we 
look back at history--I will just use a couple of examples--it 
consistently takes around 30 years for new forms of energy to 
achieve about a 1 percent market share. Biofuels is just now 
reaching 1 percent, and it is because of the number of 
companies and the number of tries that have been taken to make 
it a viable fuel on the world supply market.
    Wind. Wind took about three decades and may get to the 1 
percent mark in the next few years. The very first wind farms, 
large ones, were built in Denmark and here in the United 
States. But it still took that incredible amount of time and 
investment to go down the learning curve to make it a viable 
alternative source of energy.
    Mr. Aho. You are right. I think what we are looking at 
today, we call ``first generation'' or ``second generation'' 
retorting concepts. These will all continue to evolve.
    Corporations are in the business to make money. So when 
they look at reducing cost of production, we are doing that day 
in and day out, whether it is the amount of water we use. And 
our objective is to get water use to a minimal amount because 
water costs us money.
    Anything we are doing in a project of this nature, this is 
a capital-intensive industry. A shale oil project that will 
produce 50,000 barrels per day, we are talking--again, it is 
the model with mining and surface retorting--roughly $4 
billion. And on a 50,000-barrel-per-day plant, we are looking 
at roughly 25-to-1 on barrels produced per worker. The question 
was raised earlier.
    So a 50,000 barrel per day plant would employ roughly 1,900 
to 2,000 permanent employees. Plus then there are the service 
industries and families and so forth. We are looking at that 
2,000 being the population of 8,000 in an area. Kind of brings 
up what Jim was talking about earlier that certainly 
socioeconomic impacts are an issue that corporations deal with 
when they look at permitting one of these projects.
    Will there be enough trained workers in that region? How 
are we going to support our employees? How are we going to 
provide housing?
    So we work together with the local economy and the counties 
to try and mitigate that impact. That is part of the permitting 
process. Corporations are not going to get permits to build a 
plant if they haven't dealt with mitigation issues that 
surround it.
    So, thank you.
    Mr. Tipton. Thank you.
    Mr. Lamborn. All right. Thank you, Representative.
    And to conclude now with the last couple of questions, Mr. 
Whitney, what is your company doing to concentrate on the 
important issue of reducing water consumption and using more 
recycling should the RD&D project be successful and you go 
forward?
    Mr. Whitney. Shell understands how important water is to 
the Western Slope and Western States. Shell is committed to 
using water responsibly. To date, Shell has purchased or 
appropriated a diversity of water rights, in accordance with 
Colorado law.
    Shell's overall water management strategy involves three 
key aspects, all aimed at minimizing the quantity of water used 
and negatives impacts to other users. So the first one is 
maintaining a diversity of water rights to provide our 
operations the flexibility of alternative sources and to 
minimize the impact on existing and traditional users.
    Second, it is optimizing our oil shale recovery and 
processing technologies to reduce the amount of water required. 
And third, applying best water management practices in our 
operations, such as water treatment, storage, and reuse 
wherever practical. In a commercial operation, we will have 
staff dedicated to water management and optimization.
    Mr. Lamborn. OK. Thank you.
    And Mr. McCloud, we have talked a lot here today about some 
of the concerns such as water and other things that we really 
have to watch closely about. What do you see, on the other 
hand, are the upsides, both locally and nationally, should 
these projects be successful and they go forward on a 
commercially viable scale?
    Mr. McCloud. We feel that those benefits become relatively 
obvious. If we have a potential industry that could create 
potentially 100,000 jobs roughly, not only is that good-paying 
jobs that we need here in the United States to help those 
unemployment rates, but we also create a tax base to support 
our local and Federal and regional governments.
    That, in turn, obviously, helping with our infrastructures, 
our schools, community support programs, et cetera. It should 
be, to use a term from earlier, self-fulfilling in the fact 
that if we can get those processes and that industry here, we 
will be able to create the revenues to support the communities 
like we would like to.
    Mr. Lamborn. OK. Mr. Spehar?
    Mr. Spehar. Well, again, I don't need to remind you, given 
your Colorado experience, that it is an issue of timing and 
when those revenues become available and if there is adequate 
funding in the early stages while the impacts are the greatest 
to make sure that the burden doesn't fall on the backs of 
taxpayers in existing communities.
    And there is a piece of that that we haven't discussed. I 
have a great deal of faith in a thoughtful and measured 
research process. It will give us the answer, yes or no, and I 
have no real concern about that going forward.
    My concern is this, and maybe we ought to all check our 
iPhones and see where Gaddafi is right now. But if Hugo Chavez 
wakes up on the wrong side of the bed or we have some new 
crisis in the Middle East, and supplies tighten dramatically, 
and we get back in that kind of Jimmy Carter era scenario, all 
bets are off.
    And unless we have done what I have suggested and, in the 
process of this research, identified how we are going to deal 
with impacts, then we are going to be chasing our tail, and we 
will be back in that scenario of 30 years ago, even though this 
is a different industry and a different technology today. So 
that, if anything keeps me awake, that is it.
    Mr. Lamborn. All right. Well, thank you all for being here.
    As we wrap up, I want to thank the crowd, for the people 
gathered here for being so polite and attentive. Maybe the best 
crowd I have ever seen.
    [Laughter.]
    Mr. Lamborn. Or one of the best. So thank you as well.
    For the witnesses, members of the Committee may have 
additional questions for the record, and I would ask that you 
respond to these in writing.
    Mr. Lamborn. I would also ask unanimous consent to submit 
three additional pieces of testimony to today's hearing record.
    Hearing no objection, so ordered.
    [The additional testimony follows:]

      Statement submitted for the record by Alan Burnham, Ph.D., 
       Chief Technology Officer of American Shale Oil (AMSO), LLC

    I am Dr. Alan Burnham, Chief Technology Officer of American Oil 
Shale Co. AMSO, LLC is a joint venture of IDT Corporation and Total, 
S.A., and holder of one of the first-round oil shale research, 
development and demonstration (RD&D) leases awarded by the Bureau of 
Land Management in 2007.
    On behalf of AMSO, I thank you, Chairman Lamborn, and Congressman 
Tipton for holding this hearing on Domestic Oil Shale Research, 
Regulations and Roadblocks. It provided a good opportunity to provide 
an update on the status of oil shale RD&D activities.
    In response to your hearing, an anti-oil-shale organization posted 
quotes from the hearing witness compared to predictions about the 
future viability of an oil shale industry with the intent of 
discrediting the witnesses as telling the same old (and incorrect) 
story. While it is appropriate to ask the question, ``what is different 
this time?'' This is an important question that deserves a thoughtful 
answer. The opponents presume that nothing is different. However, that 
presumption demonstrates a lack of understanding of both history and 
economics.
    Production of shale oil from oil shale is not new. Shale oil was 
used for street lights in Italy in the 1600s. There was a British 
patent on oil shale retorting in 1694. Commercial lamp-oil industries 
started in France and Scotland in the mid 1800s to compete with whale 
oil. The Scottish industry lasted more than a century and employed up 
to 5000 miners. The Swedes produced a couple thousand barrels per day 
from surface and in-situ retorting after their fuel was cut off by the 
Nazis until 1966. The largest oil shale industry today is in Estonia, 
and it is profitable at current world oil prices. China also has a 
significant oil shale industry.
    The reason shale oil is not being produced in the United States 
today is simple--it could not compete in the past with crude oil for 
any sustained period of time. Over the past century, a pending shortage 
of crude oil was predicted every 25 years or so, and interest in oil 
shale rose. However, oil shale was crushed every time by collapsing 
crude oil prices. The predicted oil shale boom in the 1920s was killed 
by crude oil discoveries in Texas. The oil shale boom in the 1970s was 
inspired by a high prices caused by a politically contrived oil 
shortage. That boom was killed in the early 1980s when crude oil prices 
collapsed due to a combination of reduced usage, North Sea oil, and 
Alaskan North Slope oil. OPEC's market share dropped from 50% to 30%, 
and OPEC's price-fixing power was neutralized.
    So there are three real questions before us now: (1) are the 
current high oil prices a reflection of true demand pressure on 
achievable production levels, (2) will the situation get worse over the 
next couple decades as demand increases in the developing world while 
conventional crude oil production peaks, and (3) will alternatives such 
as electric vehicles and biofuels be able to beat shale oil on cost? We 
believe the difference in the situation today from the past is real, 
and oil shale will be economically competitive with the new sources of 
crude oil and with biofuels in the coming decades.
    But what if we and other oil shale investors are wrong and oil 
shale really is fools gold after all? The answer is simple--we will 
lose our investment. It is not now nor ever has been the responsibility 
of the public to prevent companies from making bad investments--it is 
not a topic worthy of public discussion. The public's primary 
responsibility is to be sure that any successful industry would be 
conducted in an environmentally acceptable manner. Environmental 
performance standards can be set to a large extent without a detailed 
understanding of oil shale technology, and they are basically in place 
today. It is industry's responsibility to meet those standards. That 
said, it is desirable to consider all such environmental standards in 
an intelligent manner that includes the cost-benefit ratio to society, 
but those tradeoffs are broader than the oil shale industry.
    While industry has the responsibility for providing the capital and 
technical expertise for oil shale development, if it is in fact viable, 
the Federal government also has a unique role as the owner of the most 
and richest resource. Over human history, economic development has been 
optimized by producing the best known mineral resources of the day. And 
by law, the federal government has a responsibility to use the oil 
shale resource for the public good, which includes establishing a 
reasonable leasing policy. Oil shale leasing will not preclude the 
simultaneous use of the land for other purposes such as grazing and 
hunting. In fact, the oil shale industry can partner with the 
government to optimize the habitat for desired vegetation and animals.
    Projected costs for in-situ oil shale are competitive other sources 
of unconventional fuels being produced today. The same cannot be said 
for biofuels, which exist today only because of governmental mandates 
and tax subsidies. If the United States had taken a longer term view 
for oil shale as Canada did for oil sands over the past few decades and 
the United States is doing today for biofuels, oil shale would be a 
commercially viable industry today supplying a significant fraction of 
our liquid fuels. While we cannot change the past, we can still 
influence the future.
    That concludes our supplemental testimony. Again, we very much 
appreciate the Subcommittee's visit to Grand Junction last month, and 
we thank you for the important work you are doing to draw attention to 
federal oil shale and unconventional fuels policy.
                                 ______
                                 
    Mr. Lamborn. And if there is no further business, without 
objection, the Committee stands adjourned.
    [Whereupon, at 11:26 a.m., the Subcommittee was adjourned.]

    [A list of documents retained in the Committee's official 
files follows:]
      ``Final Report: Northwest Colorado Socioeconomic 
Analysis and Forecasts,'' BBC Research & Consulting, submitted 
for the record
      Hrenko, Rikki Lauren, CEO, Enefit American Oil, 
Statement submitted for the record
      ``OIL SHALE: America's Untapped Energy Source'' 
prepared by the National Oil Shale Association
      ``Secure Fuels from Domestic Resources: The 
Continuing Evolution of America's Oil Shale and Tar Sands 
Industries''; U.S. Department of Energy, June 2007

                                 
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