The Senate is expected to vote this week on a little-noticed bill that would give several major oil companies control of as much as 40 percent of the oil shale on federal land out west.
Sen. John W. Warner (R-Va.), who drafted the bill, says it is designed to create incentives for the oil companies, which will have to risk billions of dollars on the new and untested shale oil technology. Warner's bill would triple the amount of western oil shale land that each oil company can lease from the federal government, and would require royalty payments of about 2 percent of the sale price of each barrel of shale oil--considerably less than the 16 percent set on most federal oil and gas leases.
Warner says the legislation, which has passed the House in similar form, strikes a careful balance among competing interests. "Our overall national defense posture is not stronger than our energy posture," he said. "My responsibility is to keep a keen balance between the industry needs, the environmental interests and the local interests."
But opponents are calling the measure a giveaway to the oil industry. "The oil companies are coming in and literally trying to steal this land, but nobody seems to be paying attention," said Sen. Howard M. Metzenbaum (D-Ohio), the bill's chief opponent. "They are worse than the robber barons, and the Republicans are doing their bidding."
The oil industry--led by Gulf Oil, Amoco, Exxon and Standard of Ohio--has been pushing hard for Warner's bill, along with top officials of the Interior Department. Sen. James A. McClure (R-Idaho), chairman of the Senate Energy Committee, got his panel to approve the measure Dec. 8 after turning back an amendment to limit the number of oil shale leases on an 11-to-8 vote. Metzenbaum, a committee member, was out of town that day making a speech.
"They saw I was gone and just decided to go ahead," said Metzenbaum, who insisted he had asked his Democratic allies to delay the vote until he returned. McClure maintains he had put the committee on notice that he was ready to act on the bill.
While there is still some question about the economics of extracting the rock-encased oil, experts believe that enough can be recovered in the richest areas of Colorado, Utah and Wyoming to produce 400 billion barrels of oil. That would equal more than 150 years of U.S. oil imports at the current rate of about 6 million barrels a day. The first shale oil is expected to be produced next year.
Warner's bill would clear the way for about two dozen companies to lease as much as 40 percent of this richest oil shale, assuming that all these firms follow through on their plans. Estimates are that production could reach 200,000 barrels a day by 1986 and more than 1 million barrels a day within 20 years.
At 200,000 barrels a day, the government would collect about $50 million a year in royalties, or one-eighth the roughly $400 million that the regular royalty rate on federal oil leases would yield. Metzenbaum tried without success to amend the bill by raising the royalty from 2 to 8 percent.
Under current law, each company is limited to one 5,120-acre oil shale lease, which, although it sounds small, may contain huge amounts of thick shale. The Warner bill would triple that amount by allowing each company to lease a tract that size in each of the three western states. The same company could invest in up to six tracts nationwide by forming partnerships for each venture, and it could secure a second lease in each state after mining 30 percent of the first tract.
Sen. Gary Hart (D-Colo.), who is not a member of the Energy Committee, argued that this level of oil shale mining would overwhelm the small towns in western Colorado, where the richest shale is concentrated. "We are, in effect, putting my state up for grabs," Hart said. "This bill allows for too much development and much too fast."
Some of Hart's colleagues complained that he didn't oppose Warner's bill strongly enough and appeared too willing to compromise. Hart said he was frustrated that he did not prevail, "but the deck was heavily stacked against us. The Republican majority on the committee lined up with the administration and the oil industry."
Metzenbaum said the bill should require the oil companies to compete for these leases by promising greater royalties to the treasury, and that the companies should be forced to begin mining the shale within a few years, to prevent some firms from simply holding onto the land as an investment.
"We've had experience with oil companies sitting on federal land," Metzenbaum said. "They get a lease and lock up the land and just do nothing for five or 10 years."
But McClure and Warner said the decisions on how to award the leases and how to charge royalties should be left to the discretion of the interior secretary.
Some environmental groups, led by Friends of the Earth, are opposing another provision of Warner's bill that would allow the leasing of still more federal land for open-pit mining. This is a method that involves digging out the oil shale from a huge mining pit--one that would be larger than any coal mine in the country--then extracting the oil and leaving behind thousands of tons of spent shale.
Companies such as Gulf and Amoco say they need a large tract of nearby land to dispose of this waste, although environmental groups say that toxic chemicals in the abandoned shale could damage the landscape. Warner's bill would provide two 6,400-acre tracts in Colorado to dump the waste--one for an open-pit mine being developed by Gulf and Amoco--and an unlimited number elsewhere.
"Unless that bill is amended to satisfy my concerns," Metzenbaum said recently, "I intend to filibuster it on the floor." But Warner said he hopes to work out a compromise before the final vote.