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January 30, 2009 — Former Rep. Kevin Lundberg may have been bumped up to the state Senate, but the Berthoud Republican has no intention of leaving behind the first bill he introduced in the House this session — a tax break for the oil shale industry.
Lundberg, who was recently named to fill the seat vacated by Steve Johnson, said Tuesday he will reintroduce the oil shale bill in the Senate despite the industry’s unproven technology and mounting opposition in Washington.
“It was the first bill I ran because I believe it’s a very important issue that needs to be discussed and considered and I should hope adopted,” Lundberg told RealVail.com. “It’s all about creating jobs and encouraging an industry that I believe will be a very significant part of Colorado’s future.”
An estimated 800 billion barrels of recoverable oil are believed to be trapped in the shale rock and sand of the Green River Formation of Colorado, Wyoming and Utah, most of it on federal lands. Heavyweights such as Shell and Exxon have been working for years to perfect the technology to extract and refine the oil in a commercially viable way.
Lundberg’s bill would give those companies a 20-percent break on severance taxes until the year 2020 if they have a commercial production operation in place and have hired 25 percent of the necessary peak-production personnel by 2012.
The U.S. Bureau of Land Management in the waning days of the Bush administration adopted a management plan and rules governing oil shale production; it also went as far as to set a royalty rate of 5 percent, which many critics charged was far too low.
Former U.S. Sen. Ken Salazar, the Colorado Democrat who now is secretary of the interior, helped impose a one-year moratorium on commercial oil shale leasing in Colorado that expired last fall, and he is likely to slow the process in his new role. Colorado’s newly elected Democratic Sen. Mark Udall also has said he will try to reimpose a leasing ban.
And Earthjustice, an environmental nonprofit law firm, on Jan. 16 filed a lawsuit against the BLM on behalf of a coalition of environmental groups that accuses the federal agency of violating the National Environmental Policy Act by rushing through the new regulations.
“The stakes for the future of the West are high,” the lawsuit claims [PDF]. “Development of domestic oil shale and tar sands industries would destroy important [wildlife] habitat. It would also require massive amounts of water and electricity. Those demands for water and electricity could foul the air, worsen global warming, and dry up streams and rivers.”
Lundberg is undaunted by the opposition.
“I most realistically understand that there are significant political forces today that want to stop oil shale production dead in its tracks,” Lundberg said. “I find that shortsighted and counterproductive to our energy needs as a nation and to our economic well-being as the state of Colorado.”
Nor is Lundberg swayed by arguments the process consumes too much water and would contribute to global climate change.
“A lot of those who want to shut down oil shale are driven by this frenzy to control global warming, which I have studied a great deal over the last several years and am thoroughly convinced that their assumptions are not based on good science,” said Lundberg, owner of a media and video production company.
He added that concerns over a perceived lack of water to accommodate full-blown oil shale production are based on 30- and 40-year-old extraction technologies, another reason the industry needs incentives to develop more efficient methods.
Oil shale critics say other fledgling energy industries are cleaner and more deserving of taxpayer subsidies.
“Shouldn’t we be embarking upon a major effort in this country to develop clean and renewable resources of energy, not embark upon a big program of figuring out a way to continue to rely on fossil fuel resources?” the Wilderness Society’s David Alberswerth said in an earlier interview.
Lundberg, who in the 1990s fulfilled a dream of building a home entirely off the energy grid, knows firsthand the benefits and pitfalls of the alternative-energy industry. He said the government provided far too many subsidies for solar in the ’70s, fostering a false sense of expectation and promoting poor products.
He said the oil shale tax break will immediately create jobs and comes with no costs to taxpayers, but he admitted it flies in the face of his general rule of letting market forces dictate the success of a particular industry.
“I don’t see that I’m distorting that particular free-market mechanism in such a way that it’s creating an unrealistic expectation or standard for the industry. And it also shows you that, yeah, there’s nothing perfect in government either,” Lundberg said.
“It’s a general principle of mine to not tinker with the marketplace, but it’s not an absolute principle of value that I never violate. It’s something that you have to look very long and hard and say, ‘What’s the effect?’”
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