Interior Secretary Donald Hodel gave away royalties worth as much as $210 billion on federally owned oil shale last year, according to congressional investigators.
That was the conclusion of an unpublished House Appropriations Committee report obtained by our associate Stewart Harris. The committee investigators were looking into a 1986 Interior Department agreement with speculators who held old mining claims to federal land in the West.
It is not yet worthwhile to extract oil from the shale deposits, found mostly in Colorado, Utah and Wyoming. But entrepreneurs have been staking out claims to produce oil from federally owned lands since 1872.
That's when prospectors and speculators were first allowed to buy mineral mining rights -- for peanuts -- on federal lands rich with oil shale. The scramble for claims lasted until 1920, when Congress put a stop to the giveaway. But the old claims to oil-shale mining rights on about 240,000 acres of federal land still linger.
Congressional criticism has been focused on the claims that Hodel agreed to honor on 82,000 acres of oil shale, staked out between 1872 and 1920. But Congress itself must share the blame: It didn't wake up to the possible giveaway until after Aug. 4, 1986, the date Hodel signed the settlement that stopped government efforts to overturn the claims. With a stroke of his pen, Hodel gave up taxpayers' rights to oil-shale royalties that could be worth $210 billion -- and were certainly worth at least $34 billion -- the investigators found.
Hodel's decision to settle with the claimants appears to have been based on considerations of legal strategy rather than financial gain or loss to the government. According to recent congressional testimony by Hodel aide James E. Cason, Interior was afraid that if it appealed and lost the lawsuit in question, TOSCO v. Hodel, the department wouldn't be able to challenge other oil-shale claims in the three western states.
In TOSCO v. Hodel, a U.S. District Court judge in Colorado had forbidden the Interior Department to deny oil-shale claims even though claimants had not maintained their claims as required by law. Claimants were required to spend at least $100 a year assessing claims that were not actively mined, and many oil-shale claims had been abandoned when low oil prices made oil shale a less attractive energy source.
Few of the original oil-shale prospectors hold claims. Most have died or disappeared. Many old claims are now held by corporations that tracked down the prospectors' descendants and bought the claims for next to nothing.
Despite the sometimes shady background of oil-shale claims, Cason told the Senate subcommittee on mineral resources that prospects for overturning TOSCO v. Hodel were slim. But the Interior Department attorney in charge of the Denver office told congressional investigators that she had been leaning toward an appeal -- when Hodel's settlement killed that possibility. She said Hodel never asked for her opinion, even though officials in the Bureau of Land Management recommended her to the secretary as the best-informed lawyer on the case.