[Federal Register Volume 69, Number 224 (Monday, November 22, 2004)]
[Notices]
[Pages 67935-67938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25761]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management


Potential for Oil Shale Development

AGENCY: Bureau of Land Management (BLM), Interior.

ACTION: Notice of request for comments.

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SUMMARY: The BLM seeks public input on the terms to be included in 
leases of small tracts for oil shale research and development within 
the Piceance Creek Basin, northwestern Colorado; the Uinta Basin, 
southeastern Utah: and the Green River and Washakie Basins, western 
Wyoming.

DATES: Please send your comments no later than December 22, 2004.

ADDRESSES: Please hand-deliver written comments: To Nick Douglas, Suite 
700, 1620 L Street, NW., Washington, DC. This is also the FedEx 
address. Mail written comments to BLM (Attention: Nick Douglas), 
Minerals, Realty and Resource Protection, Mail Stop: LS 700, 1849 C 
Street, NW., Washington, DC 20240. Electronic Mail: You may send 
comments through the Internet to BLM at: [email protected].

FOR FURTHER INFORMATION CONTACT: Nick Douglas, Senior Policy Advisor, 
Minerals, Realty and Resource

[[Page 67936]]

Protection, Bureau of Land Management, Mail Stop: LS 700,1849 C Street, 
NW., Washington, DC 20240 at (202) 452-0374.

SUPPLEMENTARY INFORMATION: The United States holds over 50 percent of 
the world's oil shale resources, which contain 2.6 trillion barrels of 
oil. These resources include the oil shale deposits in the Green River 
formation in the western United States. The Green River formation 
contains an estimated 1.5 trillion barrels of oil, 72 percent of which 
is on public lands administered by the BLM. In Colorado alone, the 
total resource approaches one trillion barrels of oil, and the Federal 
Government owns approximately 78 percent of the surface acreage and 82 
percent of the shale oil in-place. The oil shale deposits in the 
eastern United States are estimated to contain 189 billion barrels of 
oil, but the Federal ownership share is not known at this time.
    Section 21 of the Mineral Leasing Act, 30 U.S.C. 241, authorizes 
the leasing of federal lands for the development of oil shale. The BLM 
does not have any regulation for oil shale leasing. Therefore, all the 
essential leasing requirements must be included in the lease itself. 
The purpose of this notice is to solicit public comment on the specific 
provisions which BLM should include in a 40-acre lease for oil shale 
research and development (R&D). The intent of the leases is to further 
the development of technologies for the economic production of shale 
oil. The BLM seeks this information to facilitate oil shale development 
in furtherance of the President's National Energy Policy. The policy 
outlined several recommendations to diversify and increase energy 
supplies, increase energy security, encourage conservation, and ensure 
energy distribution. Diversification of energy supply could be enhanced 
with access to and development of the vast oil shale resources.
    The BLM seeks comments on the attached proposed lease form for oil 
shale R&D. The BLM requests comments on:
    (1) What terms (duration, royalty, rental, acreage, diligence, 
option for additional acreage) should BLM include in the R&D lease to 
provide short-term incentives, and also encourage long-term commercial 
development;
    (2) The adequacy of a 40-acre lease for a successful demonstration 
of oil shale technology;
    (3) The methodology for conversion of an R&D lease to a commercial 
lease;
    (4) The criteria to qualify a company or individual to acquire an 
R&D lease and what documentation should be required;
    (5) The level of National Environmental Policy Act (NEPA) 
documentation that would be appropriate for R&D leasing; and
    (6) The appropriate methodology for determining fair market value 
for conversion to a commercial lease.

Oil Shale Research and Development (R&D) Lease

    This lease is entered into on , , to be effective on , , (the 
``Effective Date''), by the United States of America (the 
``Lessor''), acting through the Bureau of Land Management 
(hereinafter called the ``Bureau''), of the Department of the 
Interior (the ``Department''), and ---------- (the ``Lessee''), 
pursuant and subject to the provisions of the Mineral Leasing Act of 
February 25, 1920 as amended (30 U.S.C. Sec. Sec.  181-287), 
hereinafter called the ``Act'', more specifically section 21 of the 
Act (30 U.S.C. Sec.  241), and to the terms, conditions, and 
requirements (1) of all regulations promulgated by the Secretary of 
the Interior (the ``Secretary'') in 43 CFR Part 3160, including 
Onshore Oil and Gas Orders, and 43 CFR Part 3590, including 
revisions thereof hereafter promulgated by the Secretary (and not 
inconsistent with any specific provisions of this lease), all of 
which shall be, upon their effective date, incorporated in and, by 
reference, made a part of this lease. To the extent the provisions 
of this lease are inconsistent with the requirements of any 
regulation or order, the lease term govern.

Section 1. Definitions

    As used in this lease:
    (a) ``Authorized Officer'' means any employee of the Bureau of 
Land Management delegated the authority to perform the duty 
described in the section in which the term is used.
    (b) ``Oil shale'' means a fine-grained sedimentary rock 
containing: (1) Organic matter which was derived chiefly from 
aquatic organisms or waxy spores or pollen grains, which is only 
slightly soluble in ordinary petroleum solvents, and of which a 
large proportion is distillable into synthetic petroleum, and (2) 
inorganic matter which may contain other minerals. This term is 
applicable to any argillaceous, carbonate, or siliceous sedimentary 
rock which, through destructive distillation, will yield synthetic 
petroleum.
    (c) ``Leased Lands'' means the lands described as follows:
    (d) ``Commercial Quantities'' means quantities sufficient to 
provide a positive return after all costs of production have been 
met, including the amortized costs of capital investment.
    (e) ``Shale oil'' means a synthetic petroleum derived from the 
destructive distillation of oil shale.

Section 2. Grant to Lessee

    The Lessee is hereby granted, subject to the terms of this 
lease, the exclusive right and privilege to prospect for, drill, 
mine, extract, remove, beneficiate, concentrate, process and dispose 
of the oil shale and the products of oil shale contained within the 
Leased Lands. In accordance with approved plans, the Lessee may 
utilize or dispose of all oil shale and oil shale products, together 
with the right to construct on the Leased Lands all such works, 
buildings, plants, structures, roads, powerlines, and additional 
facilities as may be necessary or reasonably convenient for the 
mining, extraction, processing, and preparation of oil shale and oil 
shale products for market. The Lessee has the right to use so much 
of the surface of the Leased Lands as may reasonably be required in 
the exercise of the rights and privileges herein granted.

Section 3. Lessor's Reserved Interests in the Leased Lands

The Lessor Reserves

    (a) The right to continue existing uses of the leased lands and 
the right to lease, sell, or otherwise dispose of the surface or 
other mineral deposits in the lands for uses that do not 
unreasonably interfere with operations of the Lessee under this 
lease.
    (b) The right to permit for joint or several use, such easements 
or rights-of-way, including easements in tunnels upon, through, or 
in the Leased Lands, as may be necessary or appropriate to the 
working of the Leased Lands or other lands containing mineral 
deposits subject to the Act, and the treatment and shipment of the 
products thereof by or under authority of the Lessor, its lessees, 
or permittees, and for other public purposes. Lessor shall condition 
such uses to prevent unnecessary or unreasonable interference with 
rights of the Lessee.

Section 4. Lease Term

    The lease is issued for a term not to exceed xxx years, (please 
comment on the duration of R&D lease) subject to conversion to a 
twenty-year lease under the conditions specified in section 23.

Section 5. Rentals: Non-Commercial Production

    The Lessee shall pay the Lessor an annual rental in advance for 
each acre or fraction thereof during the continuance of the lease of 
$xxx. (Please comment on annual rental.) Rental is payable annually 
on or before the anniversary date of the lease. Rentals for any 
lease year shall be credited by the Lessor against any royalty 
payments for that lease year.
    The failure to pay rental by the anniversary date shall be 
grounds for termination of the lease. Should you fail to pay the 
full amount on the anniversary, BLM will notify you of this failure 
and provide you with a grace period of 15 days from notice to make 
payment in full. Should no payments be received during the grace 
period, the lease shall terminate without the need for further 
administrative proceedings.

Section 6. Royalties

    (a) For the initial 5 years of the lease, the Lessor waives the 
requirement for royalty on any production. For the 6th through 10th 
year of the lease, the Lessee shall pay to the Lessor a royalty of 
$xxx (please comment on royalty amount or percentage) per barrel of 
shale oil which is sold or removed from the

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Leased Lands, except that used for production purposes or 
unavoidably lost.
    (b) Lessee shall file with the proper office of Lessor, no later 
than 30 days after the effective date thereof, any contract or 
evidence of other arrangement for sale or disposal of production. At 
such times and in such form as Lessor may prescribe, Lessee shall 
furnish detailed statements showing the amounts and quality of all 
products removed and sold from the lease, the proceeds therefrom, 
and the amount used for production purposes or unavoidably lost.
    (c) Payment for royalties due under this lease shall be payable 
monthly on or before the last day of the calendar month following 
the calendar month in which the shale oil is processed or, if it is 
not processed, is sold.
    (d) Payments and royalties under this lease shall be subject to 
the regulations in 30 CFR Part 218, Subpart E.

Section 7. Bonds

    (a) Prior to conducting operations on this lease, the Lessee 
shall provide a bond in the amount determined by the authorized 
officer, conditioned upon compliance with all terms and conditions 
of the lease and the plan of operations. This bond shall be of a 
type authorized by 43 CFR 3104.1 and must be sufficient to cover all 
costs associated with reclamation and abandonment activities. The 
authorized officer may adjust the required bond amount as he 
determines necessary to assure full compliance for the operations 
conducted under this lease.
    (b) Upon request of the Lessee, the bond may be released as to 
all or any portion of the Leased Lands affected by exploration or 
mining operations, when the Lessor has determined that the Lessee 
has successfully met the reclamation requirements of the approved 
development plan and that operations have been carried out and 
completed with respect to these lands in accordance with the 
approved plan.

Section 8. Plan of Operations

    (a) Prior to conducting operations on the lease, including 
exploration, the Lessee shall submit a plan of operations for review 
and approval by the authorized officer. This plan shall be submitted 
in accordance with the requirements of 43 CFR 3160 or 43 CFR 3590, 
depending on the nature of the proposed activity. The authorized 
officer shall make the final determinations as to which regulations 
govern the proposed activity and notify the Lessee of any additional 
requirements. The authorized officer may condition the approval on 
reasonable modifications of the plan to assure protection of the 
environment.
    (b) After plan approval, the Lessee must obtain the written 
approval of the authorized officer for any change in the plan 
approved under subsection (a).
    (c) The Lessee shall file annual progress reports describing the 
operations conducted under the plan of operations.

Section 9. Operations on the Lease Lands

    (a) The Lessee shall conduct all operations under this lease in 
compliance with all applicable Federal, State and local statutes, 
regulations, and standards including those pertaining to water 
quality, air quality, noise control, threatened and endangered 
species, historic preservation, and land reclamation, and orders of 
the authorized officer (written or if oral, reduced to writing 
within ten days.)
    (b) The Lessee shall avoid, or, where avoidance is 
impracticable, minimize, and where practicable correct, hazards to 
the public health and safety related to his operations on the Leased 
Lands conducted in accordance with the approved operations plan.
    (c) Lessee shall carry on all operations in accordance with 
approved methods and practices as provided in the applicable 
operating regulations and approved operations plan. Activities will 
be conducted in a manner that minimizes adverse impacts to the land, 
air, water, cultural, biological, visual, and other resources, 
including mineral deposits not leased herein, and other land uses 
and users.
    (d) The Lessee shall comply with all applicable state and 
Federal laws.

Section 10. Water Rights

    All water rights developed by the Lessee through operations on 
the Leased Lands shall immediately become the property of the 
Lessor. As long as the lease continues, the Lessee shall have the 
right to use those water rights free of charge for activities under 
the lease.

Section 11. Development by In Situ Methods

    Where in situ methods are used for the production of shale oil, 
the Lessee shall not place any entry, well, or opening for such 
operations within 500 feet of the boundary line of the Leased Lands 
without the permission of, or unless directed by the Authorized 
Officer, nor shall induced fracturing extend to within 100 feet from 
that boundary line.

Section 12. Inspection

    The Lessee shall permit any duly authorized officer or 
representative of the Department at any reasonable time:
    (a) to inspect the Leased Lands and all surface and underground 
improvements, works, machinery, and equipment, and all books and 
records pertaining to operations and surveys or investigations under 
this lease; and
    (b) to copy and make extracts from any books and records 
pertaining to operations under this lease.

Section 13. Reports, Maps, etc.

    (a) The Lessee shall submit to the Lessor in such form as the 
latter may prescribe, not more than 60 days after the end of each 
quarter of the Lease Year, a report covering that quarter which 
shall show the amount produced from the Lease by each method of 
production used during the quarter, the character and quality 
thereof, the amount of products and by-products disposed of and 
price received therefore, and the amount in storage or held for 
sale. This report shall be certified by an agent having personal 
knowledge of the facts who has been designated by the Lessee for 
that purpose.
    (b) The Lessee shall prepare and furnish at such times and in 
such form as the Lessor may prescribe, maps, photographs, reports, 
statements and other documents required by the provisions of 43 CFR 
Part 3160 or 3590 as appropriate.

Section 14. Assignment

    The Lessee may assign any interest in this lease with the 
approval of the authorized officer, subject to the assignor 
retaining liability for all obligations that accrued prior to the 
assignment and the provision of bond by the assignee for all 
liabilities arising after the assignment. The assignor shall 
maintain bond for liabilities arising in the period prior to the 
assignment unless the assignee provides bond for the entire period 
of the lease.

Section 15. Heirs and Successors in Interest

    Each obligation of this lease shall extend to and be binding 
upon, and every benefit shall inure to, the heirs, executors, 
administrators, successors, or assigns of the respective parties 
hereto.

Section 16. Relinquishment of lease

    The Lessee may relinquish in writing at any time all rights 
under this lease, or any portion thereof. Upon Lessor's acceptance 
of the relinquishment, Lessee shall be relieved of all future 
obligations under the lease or the relinquished portion thereof, 
whichever is applicable. The Lessee shall promptly pay all royalties 
due and reclaim the relinquished acreage in accordance with the plan 
of operations.

Section 17. Remedies in Case of Default

    If the Lessee fails to comply with applicable laws, regulations, 
or the terms, conditions, and stipulations of this lease and the 
noncompliance continues for a period of 30 days after service of 
notice thereof, this lease shall be subject to cancellation. The 
Lessor may (1) Suspend operations until the required action is taken 
to correct noncompliance, or (2) institute appropriate proceedings 
in a court of competent jurisdiction for the forfeiture and 
cancellation of this lease as provided in Section 31 of the Act (30 
U.S.C. 188) and for forfeiture of any applicable bond. If the Lessee 
fails to take prompt and necessary steps to (a) prevent loss or 
damage to the mine, property, or premises, (b) prevent danger to the 
employees, or (c) avoid, minimize or, repair damage to the 
environment, the Lessor may enter on the premises and take such 
measures as he may deem necessary to prevent, or correct the 
damaging, dangerous, or unsafe condition of the mine or any other 
facilities upon the Leased Lands. Those measures shall be at the 
expense of the lessee.

Section 18. Delivery of Premises in Case of Forfeiture

    (a) At such time as all or portions of this lease are returned 
to Lessor, the Lessee shall deliver to the Lessor the land leased, 
wells, underground support structures, and such other supports and 
structures necessary for the preservation of the mine workings on 
the leased premises or deposits and place all workings and wells in 
condition for suspension or abandonment. Within 180 days thereof, 
Lessee shall remove from the premises all other structures, 
machinery,

[[Page 67938]]

equipment, tools, and materials as required by the Authorized 
Officer. Any such structures remaining on the Leased Lands beyond 
the 180 days, or approved extension thereof, shall become the 
property of the Lessor. Lessee shall either remove all such property 
or shall continue to be liable for the cost of removal and disposal 
in the amount actually incurred by the Lessor.
    (b) Lessee shall reclaim all lands which have been disturbed and 
dispose of all debris or solid waste in an approved manner in 
accordance with the schedule established in the plan of operations 
and maintain bond coverage until such reclamation is complete.

Section 19. Protection of Proprietary Information

    (a) This lease, and any activities thereunder, shall not be 
construed to grant a license, permit or other right of use or 
ownership to the Lessor, or any other person, of the patented 
processes, trade secrets, or other confidential or privileged 
technical information (hereafter in this section called ``technical 
processes'') of the Lessee or any other party whose technical 
processes are embodied in improvements on the Leased Lands or used 
in connection with the lease.
    (b) Notwithstanding any other provision of this lease, the 
Lessor agrees that any technical processes obtained from the Lessee 
which are designated by the Lessee as confidential shall: (1) Not be 
disclosed to persons other than employees of the Federal Government 
having a need for such disclosures and (2) not be copied or 
reproduced in any manner. The Lessor further agrees this material 
may not be used in any manner that will violate their proprietary 
nature.
    (c) Prior to any disclosure pursuant to a Freedom of Information 
Act request, the Bureau will notify the submitter of the specific 
information which it has initially determined to release and give it 
thirty (30) days to provide a justification for the nondisclosure of 
the information under exemption 4 or other relevant exemptions. Your 
justification should address in detail, pursuant to the procedures 
in 43 CFR 2.23, whether the information
    (1) Was submitted voluntarily and falls in a category of 
information that the submitter does not customarily release to the 
public, or
    (2) If the information was required to be submitted, how 
substantial competitive or other business harm would likely result 
from release.
    (c) If after reviewing the information you submit, the bureau 
decides to release the information over your objections, it will 
inform you that it intends to release the information 10 workdays 
after receipt of the notice by the submitter.

Section 20. Lessee's Liability to the Lessor

    (a) The Lessee shall be liable to the United States for any 
damage suffered by the United States in any way arising from or 
connected with Lessee's activities and operations conducted pursuant 
to this lease, except where damage is caused by employees of the 
United States acting within the scope of their authority.
    (b) The Lessee shall indemnify and hold harmless the United 
States from any and all claims arising from or connected with 
Lessee's activities and operations under this lease.
    (c) In any case where liability without fault is imposed on the 
Lessee pursuant to this section, and the damages involved were 
caused by the action of a third party, the rules of subrogation 
shall apply in accordance with the law of the jurisdiction where the 
damage occurred.

Section 21. Appeals

    The Lessee shall have the right to appeal orders or decisions of 
the BLM under 43 CFR Subpart 3165.

Section 22. Special Stipulations

    The special stipulations that are attached to and made a part of 
this lease are imposed upon the Lessee, and the Lessee's employees 
and agents. The failure or refusal to comply with these stipulations 
shall be deemed a failure of the Lessee to comply with the terms of 
the lease. The special stipulations may be revised or amended, in 
writing, by mutual consent following appropriate notice to the 
public.

Section 23. Conversion Rights

    Upon production of commercial quantities of shale oil from the 
lease, the lease may be converted to a commercial lease containing 
up to a total of 5,120 acres, as allowed under the Mineral Leasing 
Act (30 U.S.C. Section 241) upon payment of fair market value for 
the additional acreage and the completion of appropriate NEPA 
analysis. This commercial lease may be issued for a term of 20 Years 
and so long thereafter as shale oil is produced from the Leased 
Lands in commercial quantities, and contain terms consistent with 
regulations to be developed by the Secretary pursuant to section 21 
of the Mineral Leasing Act. Such commercial lease shall be subject 
to the readjustment of lease terms at the end of the 20th lease year 
and each 20 year period thereafter, and subject to payment to the 
Lessor of a rental of 50 cents per acre or fraction thereof and a 
royalty of xxx% of the gross value (provide comment of the 
percentage of royalty for commercial production) of the shale oil 
which is removed or sold by the Lessee, at the First Point of sale.

Section 24. Reimbursable Costs

    In applying for required approvals, the lessee under the oil 
shale research and development (R & D) lease shall be subject to the 
obligation to reimburse the BLM as if the requirements of subpart 
2808 of Part 43 of the Code of Federal Regulations (43 CFR Subpart 
2808) were applicable.

    Dated: September 30, 2004.
Thomas P. Lonnie,
Assistant Director, Minerals Realty, and Resource Protection.
[FR Doc. 04-25761 Filed 11-19-04; 8:45 am]
BILLING CODE 4310-AG-P