Oil Shale Economics Existing Analyses Do Not Measure Impacts of Commercial Development Adequately

Is oil shale economically viable? Even the federal government does not know. And yet, in making the case for accelerated commercial development of oil shale and tar sands resources in Colorado, Utah, and Wyoming, President Bush’s Departments of Energy (DOE) and the Interior (DOI) pointed to a range of macroeconomic, socioeconomic, and consumer benefi ts that would result. However, a close review of data and existing studies reveals far diff erent conclusions.

What’s at Stake? Environmental quality is a As Colorado’s Governor, Bill Ritt er, has argued, oil shale critical economic force in leasing on top of the “existing network of energy develop- oil shale country and the environmental amenities provid- ment and changing land uses will put more pressure on an ed by public lands are an important economic driver. Areas already fragile ecosystem and public temperament.” proposed for oil shale development overlap with tourism, agriculture, and recreational opportunities. Older workers Th e federal and retirees, who are drawn to the region because of its What’s the Problem? government environment and quality of life, bring with them invest- has a poor understanding of the economic and socio- ment, retirement, and other non-employment income. economic impacts of commercial oil shale development. Despite DOI’s att empt to address the information defi cit What’s at Risk? Water demands for shale through the federal RD&D program, there are inextricable development will come at questions that need to be answered regarding how industrial the expense of local farms and ranches. Industrial develop- scale oil shale operations would impact the region and the ment can also confl ict with and displace a wide variety of nation – questions that cannot be answered by the current uses, including recreation, hunting, energy production, scale of research. and livestock grazing. Development would also compro- mise clean air, clean water, climate, water supply, and wild- life habitat. More Work is Needed 1. Updating outdated or inapplicable employment data. Prioritizing oil shale and tar sands development at the Th e employment information and related support activi- expense of non-extractive economic drivers may harm the ties (electric generation, coal mining, etc.) comes from economy of the region in the long run by depleting the late-1970s, early-1980s, or current Alberta tar-sands devel- natural amenities currently responsible for the economic opment. Changes in technologies and labor productivity growth and stability. Further, oil shale development is not since the last boom make the earlier data of questionable necessary to “save” the local economy. In fact, quite the relevance. Likewise, the diff erences in the properties of opposite may be true: oil shale may under- Alberta tar sands and Colorado, Wyoming, and Utah oil mine the fundamental components of a shale make the use of Alberta employment data question- solid, diversifi ed, and vital economic able. and socioeconomic environment. 2. Understanding and quantifying impacts to water supplies. Energy companies will exercise large numbers of unused water “The socioeconomic and environmental rights, displacing costs and benefits associated with oil shale development are likely to be quite large. As has been noted above, we have no reasonable way to generate meaningful scenarios to quantify the potential impacts for an industry that does not exist or technologies that have not been deployed.” BLM, November 2008 (73 Fed. Reg. 69452) many current users, including some 2. Th e federal government must existing irrigated agricultural opera- contract for new independent tions. Water supply and demand in analyses that, among other things, the arid West have been under pres- Colorado In Focus: examine the economic and socio- sure. Th e pressure, when coupled Snapshot of economic impacts of commercial with loss of water due to global warm- Economic development. A complete and accu- ing, is expected to increase need and Challenges rate picture of likely local economic competition amongst users. impacts would require: 1. There is a projected $1.3 Billion 3. Understanding demographic and shortfall in a four county region to a. Identifying the full set of econom- economic shift s since the 1982 oil meet infrastructure demands after ic changes triggered by commercial shale bust. As rural communities oil shale revenues to local govern- development. diversify their economies, the frame- ments are taken into account. work for making public land manage- b. Identifying the true labor ment decisions must also evolve. 2. Baseline population projections demands of oil shale production. Management plans for public lands already strain most municipalities. Oil shale would overwhelm the need to account for all aspects of the c. Recognizing and accurately capacity of local governments to economic and social systems of these meet growth requirements. depicting the local economy. communities, including investment and retirement income, recreation, 3. Federal tax support is unknown d. Broadening the economic base tourism, and entrepreneurial busi- and infrastructure needs will pre- view of the local economy to include nesses att racted to scenic locations. cede tax revenues by years. retirement and investment income, Management plans must also consider trade, tourism, cultural institutions, the increasing importance of indus- 4. Development will likely require and federal and state organizations tries and economic sectors that rely on new towns̶or similar private and facilities. these public lands, but not necessarily investment. on the extraction of natural resources. 3. Industry, especially those with Source: 2008 Associated Governments of NW Colorado Socioeconomic Analysis and federal research leases, must open 4. Comparing oil shale development Forecast their books for inspection so that to alternative energy sources. Alter- all can bett er understand the likely native, sustainable energy sources impacts. are showing increased promise and are proving to be economically competitive. DOE and DOI If you have questions or would like more information, please must evaluate the economic value these sources off er to meet contact David Abelson, WRA Oil Shale Director, at david@ American’s energy needs as a way of contextualizing the exag- crescentstrategies.com. gerated public benefi ts – including economic benefi ts – DOE associates with oil shale development.

Policy & Research Needs

As proponents and opponents of oil shale development agree, commercial development cannot proceed unless and until industry and government demonstrate that proven technologies can develop oil shale without unacceptable environmental, climate, economic, or social costs. Th is 2260 Baseline Road, Suite 200 burden has not been met. Boulder, CO 80302 Tel: 303.444.1188 1. Th e federal government must prohibit commercial devel- opment until questions regarding economic and socioeco- www.westernresorceadvocates.org nomic impacts are answered.