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Oil and Gas Development

The Wall Street Journal, November 18, 2008

Bush Allows Shale Drilling Over Protests
By Siobhan Hughes

WASHINGTON -- The Bush administration Monday opened up two million acres of public land in Colorado, Utah and Wyoming to oil-shale exploration, challenging congressional Democrats who have opposed the move.

House Speaker Nancy Pelosi (D., Calif.) has indicated that she would prefer to limit shale drilling on environmental grounds, but found it politically difficult to extend a ban on oil-shale operations after oil prices surged to record highs earlier this year.

It is unclear what will happen after President-elect Barack Obama takes office in January. If he and other Democrats want to keep federal oil-shale lands off-limits, they would have time to change course, because requests for new commercial leases undergo a lengthy review by the Interior Department.

The shale region in the western U.S. holds the equivalent of about 800 billion barrels of oil, according to Bureau of Land Management estimates. That is enough to meet current levels of U.S. demand for 110 years.

But the recent slump in oil prices could damp the petroleum industry's interest in the oil-shale region. Shale oil is costly to produce, because the dense rock where it is found has to be heated to extract the petroleum. Exxon Corp. in 1982 abandoned a big oil-shale project in Colorado when oil prices collapsed.

Environmental groups such as the Natural Resources Defense Council have called oil shale one of the planet's dirtiest fuels. It can be converted into liquid petroleum, but only after being heated to 900 degrees Fahrenheit for five years or more, so production requires massive quantities of energy, the council says.

Copyright ©2008 Dow Jones & Company, Inc.

Photo © Paul S. Hamilton