E9-26440. Notice of Potential for Oil Shale Development: Call for Nominations-Oil Shale Research, Development and Demonstration Program

AGENCY:

Bureau of Land Management, Interior.

ACTION:

Notice.

SUMMARY:

The Bureau of Land Management (BLM) solicits the nomination of parcels to be leased for Research, Development and Demonstration (R, D and D) of oil shale recovery technologies in the States of Colorado, Utah, and Wyoming.

DATES:

Nominations for oil shale R, D and D leases can be made from November 3, 2009 through January 4, 2010.

ADDRESSES:

Please send nominations to the BLM State Director for the State in which the parcel you are nominating is located: Dave Hunsaker, Acting State Director, BLM, Colorado State Office, 2850 Youngfield Street, Lakewood, Colorado, 80215-7076; Selma Sierra, State Director, BLM, Utah State Office, 400 West 200 South, Suite 500, Salt Lake City, Utah, 84145-0155; or Don Simpson, State Director, BLM, Wyoming State Office, 5353 Yellowstone Road, P.O. Box 1828, Cheyenne, Wyoming, 82003.

FOR FURTHER INFORMATION CONTACT:

Charlie Beecham, BLM, Colorado State Office, [phone]; Roger Bankert, BLM, Utah State Office, [phone]; or Robert Janssen, BLM, Wyoming State Office, [phone].

SUPPLEMENTARY INFORMATION:

Pursuant to the authority of the Secretary of the Interior (Secretary) in section 21 of the Mineral Leasing Act to lease deposits of oil shale, on June 9, 2005, the BLM published in the Federal Register a notice entitled “Potential for Oil Shale Development; Call for Nominations—Oil Shale Research, Development, and Demonstration (R, D and D) Program” (70 FR 33753). While the BLM was processing the nominations, Congress enacted the Energy Policy Act of 2005 (EPAct), which included section 369 (codified at 42 U.S.C. 15927 and amendments to 30 U.S.C. 241). Section 369 addresses oil shale development and directs the Secretary to make public lands available for conducting oil shale research and development activities. 42 U.S.C. 15927(c). After processing the nominations received in response to the 2005 notice, the BLM issued six R, D and D leases, which became effective in 2007.

On January 15, 2009, the BLM published in the Federal Register (74 FR 2611) a notice for a call for nominations for a second round of R, D and D leasing. On February 27, 2009, the BLM published in the Federal Register a notice entitled “Potential for Oil Shale Development; Withdrawal of the Call for Nominations—Oil Shale Research, Development, and Demonstration (R, D and D) Program and Request for Public Comment” (74 FR 8983). In withdrawing the January 15, 2009, solicitation of parcels for R, D and D leases, the Federal Register notice stated, “The new administration intends to review and reconsider certain aspects of the current solicitation, including lease acreage and the rules that would govern conversion of an R, D and D lease to a commercial lease, particularly those related to royalty rates.” This notice also requested comments on the terms and conditions of any future R, D and D leases the BLM may issue.

The BLM received 51,685 comments from entities or individuals that may be grouped in five principal categories: Energy industry, academia, environmental groups, Federal/State/local government agencies, and citizens/citizen groups. The energy industry's comments generally suggested that (1) the acreage size for the second round of R, D and D should be large enough to allow expansion into potential commercial operations and (2) the royalty is too high to encourage investment. The academic commenters suggested that additional R, D and D is needed, particularly to test a low temperature process that would not impact water supplies. In general the environmental groups suggested that no additional leases be offered until the results of the current experiments are known and the BLM has completed a full, programmatic Environmental Impact Statement on the current oil shale R, D and D leases. One environmental entity suggested a 10-year R, D and D lease term, a 12.5 percent royalty rate, and in the event of a second round of R, D and D leasing, that acreage size should be limited to 160 acres, with no preference right lease acreage. Another environmental commenter recommended that the Department of the Interior engage in a mid-term assessment of the five R, D and D leases in Colorado, and that any future R, D and D lease offering should be conservative in size, scope, and lease terms. Commenters from the Federal/State/local government agencies generally stated that because the BLM has implemented a number of the provisions in the EPAct to promote oil shale development, the BLM should not make more land available for leasing through a second round of R, D and D. The citizen commenters were divided in their opinions. Some supported oil shale development primarily because they view oil shale development as an important component in the country's efforts to become energy independent. Others opposed oil shale development chiefly because of their concerns about potential adverse environmental impacts. One commenter from this category suggested that the current Federal royalty regime be abolished and replaced with an annual fee based on the value of the oil shale product.

By this notice, the BLM is soliciting the nomination of parcels, not to exceed 160 acres, for the conduct of oil shale R, D and D under a 10-year lease agreement. Applicants may also identify up to 480 additional, contiguous acres that the applicant requests the BLM to reserve for a preference lease area to be included in a commercial lease. Thus, any resulting commercial lease will be for a tract of a total of no more than 640 acres. The lease size available for commercial development is being reduced from the 5,120 acres in the first round of leasing because the substantial reserves represented by 640 acres are more than adequate for a major oil shale production operation.

The intent of this second round of R, D and D leases is to focus on the technology needed to develop the resources into marketable liquid fuels. Knowing the costs and benefits associated with the new technologies will inform the Secretary's future decisions about whether and when to move forward with commercial scale development and allow the Secretary to assess its impact on the environment, including an assessment of those impacts in light of climate change.

The lease form for this round of R, D and D leases has been revised from the one published in the Federal Register on June 9, 2005 (70 FR 33755). The revised R, D and D lease form is available at: http://www.blm.gov/​wo/​st/​en/​prog/​energy/​oilshale_​2.html.

The R, D and D nominations will be reviewed by an Interdisciplinary Review Team. For this Team, the BLM will request the participation of a representative from each of the States of Colorado, Utah, and Wyoming, as appropriate, and the Departments of Defense and Energy. The criteria for awarding an R, D and D lease will be the: (1) Potential for a proposal to advance knowledge of effective technology; (2) Economic viability of the applicant; and 3) Means of managing the environmental effects of oil shale technology. The BLM will conduct an analysis under the National Environmental Policy Act (NEPA) of the proposals prior to awarding any R, D and D lease. Each applicant will be responsible for the costs associated with the NEPA analysis of the R, D and D lease application. The time required for analysis and documentation under NEPA may differ depending on whether the application is for a tract that has previously been the subject of NEPA analysis for oil shale operations, the method of shale oil extraction, and whether the application involves mining or in-place shale oil recovery. Accordingly, some R, D and D leases may be awarded prior to others. If the BLM receives two or more applications to lease the same lands and determines that more than one meets the requirements for R, D and D leases, the BLM will issue the lease to the qualified applicant with the superior proposal, as determined by the BLM, having considered the recommendation of the Interdisciplinary Review Team.

Lease nominations must, at a minimum, contain the following information:

(1) Name, address, and telephone number of the applicant, and the representative of the applicant, who will be responsible for conducting the operational activities;

(2) Statement of qualifications to hold a mineral lease under the Mineral Leasing Act of 1920. Qualification requirements can be found in 43 CFR subpart 3902;

(3) Description of the lands, not to exceed 160 acres, together with any rights-of-way required to support the development of the oil shale R, D and D lease;

(4) A description of any additional lands you request be reserved for a preference right lease, adjacent to your R, D and D lease area and not exceeding 480 acres;

(5) A narrative description of the proposed methodology for recovering oil from oil shale, including a description of all equipment and facilities needed to support the proposed technology;

(6) A narrative description of the results of laboratory and/or field tests of the proposed technology;

(7) A schedule of operations for the life of the R, D and D project and proposed plan for processing, marketing, and delivering the shale oil to the market;

(8) A map of existing land use authorizations on the nominated acreage;

(9) Estimated shale oil and/or oil shale resources within the acreage of the nominated R, D and D parcel and the preference right area;

(10) The method of shale oil storage and the method of spent oil shale disposal;

(11) A description of any interim environmental mitigation and reclamation;

(12) The method of final reclamation and abandonment and associated projected costs of final reclamation;

(13) Proof of investment capacity to fund the proposed project;

(14) A description of the commitments of partners, if any;

(15) A statement from a surety qualified to furnish bonds to the United States Government of the bond amount for which the applicant qualifies under the surety's underwriting criteria;

(16) A non-refundable application fee of $6,500;

(17) Information that demonstrates the potential to:

(a) Minimize water usage;

(b) Protect surface and subsurface waters;

(c) Minimize life cycle greenhouse gas emissions and air pollution, including fugitive dust emissions;

(d) Capture and use natural gas onsite;

(e) Employ carbon capture and sequestration technology;

(f) Employ renewable energy and energy efficient technologies;

(g) Avoid and minimize impact on wildlife and habitat; and

(h) Minimize surface disturbance for roads and infrastructure/facilities.

Applications submitted for lands within any multi-mineral leasing area must demonstrate the potential capability to extract both shale oil and nahcolite or demonstrate a potential capability to extract one mineral while preserving the other for future recovery.

Applicants should prominently note and segregate any information submitted with their application that contains proprietary information, if the disclosure of this information to the public would cause commercial or financial injury to the applicant's competitive position. The BLM will protect the confidentiality of such information to the extent allowed by law. Any Freedom of Information Act requests for such information will be handled in accordance with the regulations at 43 CFR 2.23.

The lease terms and conditions for this round contain substantial diligence requirements to ensure operational effectiveness and accountability as well as to bring the new technology to the market effectively and efficiently. Specific timeframes are included within which to conduct specified/approved activities such as submitting the Plan of Development, obtaining state permits, developing infrastructure, and submitting required quarterly reports. As long as the lessee is not selling oil shale products or producing commercial quantities from the leasehold, no royalty will be collected during the lease term.

The BLM may issue a commercial lease, if at all, only after: (1) The lessee demonstrates that the applicant's technology tested in the original lease of up to 160 acres has the ability to produce shale oil in commercial quantities; (2) The BLM complies with NEPA and concludes through its evaluation under NEPA that commercial scale operations of the applicant's technology at that site do not pose environmental or social risks unacceptable to the BLM; (3) The lessee secures adequate bonding to cover all costs associated with reclamation and abandonment of the expanded lease area; (4) The lessee pays a bonus based on the fair market value of the lease to be determined by the BLM; and (5) The lessee, in conjunction with BLM, consults with State and local governments and affected tribes on a strategy to mitigate socioeconomic impacts, including, but not limited to, the infrastructure to accommodate the required workforce.

If the BLM issues a commercial lease, the lessee would have the exclusive right to acquire, along with the R, D and D lease area, lease rights to any or all portions of the preference lease area up to a total of 640 contiguous acres, upon compliance with the terms and conditions specified in the R, D and D lease agreement. Any commercial lease shall be subject to payment of rents and royalties at rates established in compliance with statutes and regulations in effect at the time of conversion.

The BLM will accept only one application per entity. A lessee may propose an amended plan of development if its research indicates that a different technology would more effectively achieve production in commercial quantities.

The non-refundable application processing fee has increased from $2,000 to $6,500 per application to cover the anticipated cost of processing these applications.

Robert V. Abbey,

Director, Bureau of Land Management.