Washington (Platts)--24Aug2011/451 pm EDT/2051 GMT

US oil shale development has been needlessly stalled by the Obama administration's reexamination of a Bush-era policy that opened 2 million federal acres to possible commercial-scale production, Republicans on a House of Representatives energy panel said Wednesday.

Representatives Doug Lamborn and Scott Tipton, both Colorado Republicans, criticized the Department of Interior's February decision to take a new look at a November 2008 federal rule for commercial development of oil shale.

At a field hearing of the House Energy and Minerals Resources Subcommittee in Grand Junction, Colorado, the pair couched the oil shale policy in the same terms House Republicans have approached other energy issues this session, saying federal regulations should not stand in the way of industry creating jobs, reducing oil imports and increasing national security.

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"The road to viability for the oil shale industry is reliant on a predictable regulatory structure and an environment in which companies can invest in research and development and create jobs," Tipton said. "The proper implementation of our environmental and safety regulations already on the books is a far better strategy than adding additional layers of bureaucracy to the process."

Helen Hankins, BLM's Colorado director, defended the decision to revisit the environmental impact statement completed as part of the Bush-era rule. While the industry is still in its infancy, she said, regulators were right to ensure that eventual production would not affect water availability or quality in the arid states and that it would not threaten sage grouse populations.

"We must have an understanding of environmentally acceptable development and commercially viable operations before we approve leases of large acreage for the development of this resource," she said.

The Government Accountability Office last year studied whether water availability would become the main limiting factor for commercial-scale oil shale production.

Anu Mittal, GAO's director of natural resources and environment, outlined for the subcommittee the results of the study, which found that mining operations that rely on underground heating might use an average of five barrels of water for every barrel of oil produced, and those using surface heating would require three barrels of water for each barrel of oil.

"But the magnitude of these impacts is largely unknown because the technologies that would be used have not yet been proven," she said, adding that companies were looking for ways to reduce water consumption.

Dan Whitney, Shell's upstream manager for heavy oil development in the Americas, said the producer understands the importance of water to western states and is committed to using it responsibly. He said the company would address the issue by maintaining a diversity of water rights to give operations the flexibility of multiple sources, developing extraction and processing technologies that need less water and to honing water-management practices such as recycling and storage.

Shell holds three "research, development and demonstration" leases for oil shale development in Colorado.

The US has an estimated 2 trillion oil-equivalent barrels of oil shale, more than half of global reserves, according to estimates by the US Geological Survey. Most of the reserves are found in the 16,000-square-mile Green River formation in Colorado, Utah and Wyoming.

Federal lands make up 72% of oil shale acreage and 82% of oil shale resources in the formation, according to BLM.

--Meghan Gordon, meghan_gordon@platts.com