New oil shale rules: Fair to industry or fuel for another speculative boom?

New federal rules that took effect Jan. 1 let energy companies include oil shale holdings in oil and gas reserves that they report to investors.

The change received widespread industry support. But it is raising concerns that it could create an unwarranted incentive for producing an unproven fuel and contribute to the kind of speculative behavior that led to the last oil shale boom and bust in western Colorado in the 1980s.

“There is a potential of cooking of books for a fuel that already has a pretty checkered past,” said Chase Huntley, energy policy adviser for the Wilderness Society.

The change in federal Securities and Exchange Commission rules is part of a much broader updating of oil and gas disclosure reporting requirements. The requirements are intended to help investors evaluate oil and gas companies, and the updates are aimed at reflecting industry practices and changes in technology.

Contacted for comment on the oil shale change, a commission spokesman pointed to discussion on the subject in an agency document on the new rules. It noted the SEC, in defining activities that produce oil and gas, traditionally excluded projects involving tar sands, coal and shale.

“However, such sources are increasingly providing energy resources to the world due in part to advancements in extraction and processing technology,” the agency said.

Huntley said oil shale has yet to be proven to be an economically viable form of energy development. As companies constantly struggle to replace diminishing oil and gas reserves, he fears the rule change will increase their efforts to seek access to oil shale deposits on federal land because of the deposits’ value as assets rather than because companies necessarily want to develop them.

Shell, which ran into legal troubles after overstating energy reserves in 2004, holds three federal oil shale research and development leases in northwest Colorado. It declined to comment for this story but was among companies that submitted written comments to the SEC in favor of the rule changes.

“Both internal management and the investment community view hydrocarbons produced from conventional and current and future unconventional resources as an integral part of the company’s upstream business. The inclusion of all in-place hydrocarbons or mineral resources that can produce hydrocarbons would improve completeness in company disclosures,” Shell wrote.

The rule change also raised fears among critics that it would let energy companies hide potential costs for dealing with carbon emissions and other climate-related issues involving dirtier fuels such as oil shale. But Huntley is encouraged by new SEC guidance specifying the need for energy companies to make certain climate-related disclosures to investors.

“Publicly traded companies with large bets placed on carbon-heavy fuels like oil shale will now have to come clean on their gamble,” he said.


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