Feds to propose rules for squeezing oil from rock

[July 22, 2008]  WASHINGTON (AP) -- The Bush administration wants to set the stage before leaving office for developing oil shale, rocky deposits in the western U.S. that could eventually yield 800 billion barrels of oil, according to government estimates.

The Interior Department is scheduled to unveil proposed regulations Tuesday for a program to sell oil shale leases on federal lands, similar to the leases sold now for oil and natural gas both on and offshore.

The shale is concentrated in the Green River Basin of Colorado, Wyoming and Utah. Developing it has become a hot topic of debate between Democrats and Republicans in response to voter anger over $4-a-gallon gasoline prices this summer.

President Bush said last month that "one major deposit in the Rocky Mountain West alone would equal current annual oil imports for more than 100 years." The U.S. currently consumes about 20 million barrels of oil per day, about 58 percent of which is imported.

Oil shale may be the largest untapped source of domestic oil, dwarfing the quantity of oil available offshore and on federal lands currently off-limits. However, it is very expensive to extract. A government program to subsidize its development in the 1980s was shut down when cost figures came in at several times the then-market price for oil.

Unlike traditional sources of oil, oil shale requires energy to bake the rock and pump the molten oil to the surface. There are also big environmental concerns about the possible effect on the region's water, wildlife and public lands.

Sen. Ken Salazar, D-Colo., last year inserted language into a spending bill that bars the federal government from issuing final rules for commercial oil-shale development.

"Tomorrow's announcement does not change the realities," said Matt Lee-Ashley, a spokesman for Salazar. "While the administration can finalize its draft rules, it is premature to move forward with a full commercial leasing program."

Bureau of Land Management spokesman Matt Spangler said Tuesday's proposal does not conflict with Salazar's provision.

In late 2006, the government issued leases for 10-year experimental projects to Shell Frontier Oil & Gas Co., Chevron USA and EGL Resources Inc. In testimony before a Senate committee in May, Assistant Interior Secretary Stephen Allred said commercial production of oil shale would not be underway until at least 2015.

[Associated Press; By DINA CAPPIELLO]

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