Shale proposal is a handout to oil industry, opponents say

Legislation in the U.S. House for oil shale development amounts to a handout to industry, a taxpayer-advocacy organization said Thursday.

The spending proposed in the bill, however, is intended to be spent by federal agencies to learn more about oil shale and how to develop it, industry officials said.

“This is when we’re supposed to implement austerity,” Jill Lancelot, of Taxpayers for Common Sense, said of spending proposed by Rep. Ralph Hall, R-Texas, in a measure to be heard today in Washington.

Hall is carrying H.R. 6603, the Tapping America’s Energy Potential through Research and Development Act of 2012, calling for the Energy Department to spend $10 million a year for five years on oil shale.

That amounts to a subsidy, Lancelot said, noting that her organization doesn’t oppose development of the resource, but insists that it be done at industry, not taxpayer, expense.

“It’s a cash subsidy, the first one in 30 years,” said Jim Spehar, a former Mesa County commissioner who has carved out a niche calling for oil shale development to take into account the needs of affected Western Slope communities.

Hall’s legislation was to be heard today before the House Committee on Space, Science and Technology, which he chairs.

The spending Hall is proposing would go not to the companies working on ways to develop oil shale, but to federal agencies, said Glenn Vawter, executive director of the National Oil Shale Association.

“It seems to us it is the kind of independent research the public has been asking for to answer questions about oil shale development,” Vawter said, noting that the research was authorized under the 2005 Energy Policy Act.

“Whether it is prudent to spend the federal funds for this work at this time is certainly debatable, but if authorized it is not a handout to industry, but rather funding for federal agencies,” Vawter said.

Taxpayers for Common Sense also is hoping that the Obama administration will require industry to bear the burden of commercial oil shale development as it considers royalty rates.

The rates and other regulations were to have been released last spring, but none have been issued.

The Bush administration set an initial 5 percent royalty rate for the first five years with annual 1 percentage-point increases up to 12.5 percent.

Large multinational oil companies shouldn’t require an initial reduction in royalty rate, Lancelot said.

The reduced initial rate reflects the high initial costs of development, Vawter said, noting that the rates proposed under Bush took into account the experience of the Canadian tar sands, in which royalties were set low at the beginning and rose incrementally as the industry became profitable.


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