Shale Game - II

Oil shale development continues to wait:

The Obama administration has been granted a third extension of a deadline for responding to lawsuits that challenged the Bush administration’s oil shale decisions. The government says it needs the input of people nominated but not yet confirmed for top offices overseeing public lands.

U.S. District Court Judge John Kane on Friday agreed to postpone the deadline until Aug. 31.

The environmental groups' lawsuits challenge the Bush administration's oil shale decision on environmental grounds as well as for failing to set royalty rates high enough to provide the legally required fair return for the use of public resources.

Interestingly, both the environmental groups and the industry groups (Shell and the API) agree on the postponement, albeit for different reasons. For the enviros, delay forestalls the rapacious development. Forestall long enough and it might never happen. Industry doesn't mind the wait because the cost of development is not feasible currently, and won't be until the price of oil (or its future prospect) rises above $80 or so per barrel and stays there. Unless the global economy turns around that could be a long wait.

The government has said it needs time for the new administration to determine the appropriate course of action.

The government's motion specifically begs time for the confirmations of Bob Abbey as director of the Bureau of Land Management and Wilma Lewis as assistant secretary for land and minerals management in the Interior Department.

Both had a hearing in front of the Senate Energy and Natural Resources Committee last Thursday. John McCain (R-AZ) announced the next day that he would oppose the confirmation of both until the Obama administration takes a position on a land swap enabling a copper mine in his state. McCain spokeswoman Brooke Buchanan said that McCain intends to place holds on both nominees if and when they come before the full Senate for a final vote. He seems ready to allow the nominations to proceed if he gets his way on the copper mine bill [pdf], but the Obama administration has stated that they need more time to study that too.

I'd like to think that the Obama administration wants to carefully assess oil shale development as I wrote last November. And perhaps they will. For now the Obama administration is likely stalling for time, taking advantage of the willingness of both parties to delay. The reason they present to the court, wanting to have their key staff in place, is reasonable, and the court agreed to the extension. But how long will having staff in place take? Will these public servants have anything like the time they need for a detailed review and the filing of legal briefs between their (eventual) confirmation and August 31? Even without the threat of a hold, the confirmations could take a while; Republicans haven't exactly expedited the process for Obama's nominees in general, and these seemed destined for special treatment.

Delay satisfies a political purpose as well. Obama has a lot of moving parts in his legislative agenda, and a large, visible and critical piece is climate change legislation--the Waxman-Markey bill, HR 2454. Oil shale is one of a few current issues that pit environmentalists against the legacy energy industry (others include offshore oil and gas drilling, so-called clean coal, and nuclear power.) While Waxman-Markey is still on tenterhooks it is expedient to defer decisions on these other matters as much as possible, keeping some powder dry for the later fight, and forcing the opposing sides to largely hold their fire. All parties have more at stake right now than just a decision on oil shale.

Unless oil prices rise dramatically, rekindling imminent development interest by Shell, the oil shale lawsuit will be repeatedly delayed because no one benefits by moving it forward in the near term. By not taking sides (yet) the Obama administration prevents needlessly aggravating either camp while it attempts the tortuous guiding of Waxman-Markey into law. McCain, in pursuit of his tactical parochial interest may actually be helping Obama's strategic objective. Environmentalists, while suspicious of Obama's commitment to the environment prevent for now the development of oil shale by delay. Developers expect delay to increase their bargaining power, as they expect energy costs to increase and pressure for domestic fossil fuel development to grow.

In some respects, all of this maneuvering will in time prove a sideshow; any apolitical decision on oil shale development will necessarily be one based on a resource more critical and more threatened than energy supplies or political capital--water.