Oil shale hearing should look at impacts on affected communities
By Tom Kenyon and Keith Lambert
As mayors of two of northwestern Colorado’s largest communities, we share the concern members of Colorado’s congressional delegation have about job creation as Grand Junction, Rifle and all areas of the state work through the current economic downturn. We will watch with great interest this week’s field hearing in Grand Junction by the U.S. House Subcommittee on Energy and Mineral Resources.
If the latest attempt to develop an industry around vast oil shale resources in northwestern Colorado, northeastern Utah and southeastern Wyoming is successful, it could add well-paying jobs and significant additional tax base to the region. Those of us in local government also know it is important to remove unnecessary impediments to job development while still making certain new growth is, as one of the prime movers in current oil shale research repeatedly states, economically, socially and environmentally responsible.
We hope the title of Wednesday’s session in the Grand Junction City Council Chambers, “American Job Security: Domestic Oil Shale, the Status of Research, Regulation and Roadblocks,” does not signal a one-sided oversight hearing that does not consider all impacts, both positive and potentially troublesome, that development of a substantial oil shale industry would have on the region’s existing economies, people and way of life.
In the announcement of the hearing on his website, Rep. Scott Tipton cites a 2006 study in saying that “over 350,000 jobs would be created by the development of our oil shale industry.” If we’re to assume that most of those jobs would be created in the region where the bulk of the country’s oil shale is located, that would bring substantial population growth to the area even if some workers already reside here.
How we accommodate that sort of growth is something that hasn’t been discussed by Congress and isn’t a major focus of the oil shale research programs underway on federal lands. Those research, development and demonstration leases, the latest pieces in a century old puzzle, center around technology, the quest for commercially viable process for squeezing fuel from “the rock that burns.”
Because techniques successful in the laboratory have yet to be proven commercially viable, there’s still time to ask and answer some important questions.
One is if we should subsidize oil shale development via reduced royalty rates. Royalties are split between federal and state entities with 49 percent returning to states and local communities to help deal with the impacts associated with extraction. Cutting the royalty rate by more than half, as rules set in place by the previous administration provide, effectively removes millions of dollars intended to help our communities provide the increased services and infrastructure necessary to accommodate the industry.
Increased property taxes might reasonably be expected to cover those costs. The problem is one of timing. The highest impacts occur in the start-up phase, but, under Colorado’s system of reassessment, billing and collection, it can be several years before tax revenues actually flow from those new projects.
That’s why, during the last oil shale boom a quarter-century ago, the Oil Shale Trust Fund was established. Advances paid against future royalties provided necessary funds to deal with the impacts of not only the boom, but also the resulting bust. There’s been no congressional discussion of implementing a similar mechanism in the current development cycle. There should be, unless we expect current taxpayers to cover impact costs or we’re content to play a never-ending game of catch up.
Another question is whether the federal government should proceed with leasing millions of acres of public land for oil shale production. If there’s no proven commercial process, wouldn’t this just foster speculation? Should research be successful, won’t it then be easier to make certain lease rates reflect the appropriate value to the general public?
There has been much discussion about potential water demands, but various estimates of water use by industry, the Government Accounting Office and conservation groups vary widely. The scale of that variance would make it seem prudent to seek verifiable independent analysis of how oil shale water demands might impact important current job providers such as agriculture, tourism, hunting and fishing and even existing energy industries.
We hope this week’s subcommittee hearing begins a much-needed comprehensive look at all aspects of potential development, including how to best mitigate impacts to communities expected to host the oil shale industry if and when it becomes viable.
Tom Kenyon is the mayor of Grand Junction. Keith Lambert is the mayor of Rifle.