The Energy Policy Act of 2005
By John S. Kirkham, Richard R. Hall
On August 8, 2005, President Bush signed into law the Energy Policy Act, the first comprehensive national statement of “policy” on the subject in more than a decade. This 549-page Act provides over $12 billion in tax breaks, research and development funding, and other production and conservation incentives for both industry and consumers. The Act reflects the nation’s focus on increasing the energy supply by balancing domestic production with conservation and more efficient technologies.
The development of energy resources in Utah is a key component of that national strategy. While no one should be expected to be fully informed as to all of the provisions of the Act, there are numerous provisions that will directly impact Utah, its economy, and its citizens. Primarily, those provisions address the development of oil shale/tar sand, coal and geothermal resources.
Oil Shale/Tar Sand
The Act authorizes a program to accelerate development of oil shale and tar sand in Utah, Colorado and Wyoming. The Green River Formation covering northeastern Utah, northwestern Colorado and southwestern Wyoming contains more than half of the world’s oil shale resources, or an estimated 1.5 trillion barrels of oil. The Utah portion of the Green River oil shale resource is estimated to be at 499 billion barrels of oil. By comparison, the total domestic crude oil production in the United States in 2005, including offshore and Alaskan production, was approximately 1.8 billion barrels of oil. Approximately 72 percent of the oil shale resources within the Green River Formation underlie land owned by the federal government. The Act sets up an oil shale task force to study the fuel’s potential and requires a comprehensive environmental impact statement on how oil shale might be developed on federal lands.
The Department of Energy estimates that oil shale’s direct economic value to the nation may approach $1 trillion by 2020, not counting other equally or more valuable strategic and national security benefits that may not be fully measured in dollars, such as reducing the nation’s dependence on foreign sources of oil. Obviously, much of the economic benefit arising out of increased oil shale production will be felt here in Utah.
Coal provides more than half of all electricity in the country. In 2004, Utah produced more than 21.5 million tons of coal, while coal production nationally exceeded 1.1 billion tons. A number of issues surround the nation’s continued dependence on coal as a source of electricity, including environmental concerns and the cost of clean coal combustion technologies. However, while some may consider coal a novelty of a bygone era, the Act identifies coal as an important part of the nation’s future energy strategy. The Act sets out a comprehensive approach for the short and long-term viability of coal, authorizing $200 million annually for fiscal years 2006 to 2014 for the development and implementation of an accelerated research, development, and demonstration program for advanced clean coal technologies. The Act also provides for financial incentives to encourage early commercial deployment of advanced clean coal technologies in existing facilities and new construction of coal-based electricity generating facilities.
Utah possesses an abundance of untapped geothermal resources. In a geothermal electric generating plant, the source of energy is super-heated ground water found several thousand feet below the surface. Currently, Utah Power operates the Blundell Geothermal Facility which has the capacity to generate 26.1 megawatts of electricity. A second geothermal facility is planned at Cove Fort. Utah has one of the largest underground hot water reservoirs in the nation. The provisions of the Act promote continued development of geothermal energy resources through tax incentives for electricity produced from geothermal resources.
Utah contains a vast storehouse of energy resources, ranging from coal to oil shale, from geothermal to oil and gas. Undoubtedly, increasing development of Utah’s energy resources, as provided for in the Energy Policy Act, will be key to providing for the nation’s energy needs in the future.
(The above article first appeared in the March 2006 issue of Connect magazine and is reprinted with permission). John Kirkham and Richard Hall are natural resource attorneys with Stoel Rives LLP. John and Richard represent companies involved in all aspects of the extractive industries with operations on public and private lands, and assist with all aspects of resource development from land acquisition to joint venture agreements, financing, permitting and compliance. John can be reached at firstname.lastname@example.org, and Richard can be reached at email@example.com.