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Show Western Resources WRAP-UP Oil shalesyn-fuels i By Helene C. Monberg 'a-uhington-The Administration has Wdttie first large scale commer-&uction commer-&uction of synthetic fuels 1 Tn fis country: two oil shale K in Colorado and a lignite Season Pant in North Dakota. W time, Charles Ebbecke. project S for the Great Plains Coal Son Project for the Depart-f Depart-f o Energy (DOE) told Western cSup(WRW)onAug.5. rLt think these guys could hang on S longer," he said Sponsors told nFon Jul 13 approval had to come or they would abandon their $2.76 L project in Mercer County, N. D., ,gasify lignite coal. ergy Secretary James B. Edwards . Aug 5 approved two loan arantees, a $1.1 billion loan Brantee to Tosco of Los Angeles ,ard most of its portion of the conation con-ation of the COLONY project in Col-,do Col-,do oil shale country, and a $2.02 Dion loan guarantee to American ilural Resources Co. of Detroit to jld a 125 million cubic feet a day sification plant near lignite coal beds western North Dakota. Earlier, Ed-sirds Ed-sirds approved on July 29 a price aarantee agreement with Union Oil rj, of California to build an oil shale ;-jut in Colorado. ingress is also moving. The House proved an omnibus oil shale leasing H (HR 4053) on July 28 by a vote of 45. Hearings on similar legislation iotisored by Sen. John Warner, R-Va., !iire held on July 23 by a subcommittee -the Senate Energy Committee, and Vk up is scheduled on the bill in the late Energy panel in September. He House approved on July 14 a bill ;:(R3975) authorizing the issuance of a ;mbined hydrocarbon lease of 5120 :res in specific tar sands areas, so tit lessees may hold combined oil, gas cd tar sands leases in such areas, nyiinly on public lands in Utah. Sen. c:4lcolm Wallop, R-Wyo., introduced sjilar legislation (SS 1575) on July 31, 1 4 hearings are expected to be held on rtbill before the Senate Energy Com- ttee in September. Both bills clarify a;j 1920 Mineral Leasing Act. Without tr.b clarification the Interior Depart-i Depart-i plbas refused to issue a single lease far sands for 15 years. j( : - .Tie House passed oil shale bill was Hisively amended in the House In-tj.ior In-tj.ior Committee mark up on July 22 at Ci; insistence of Chairman Morris K. jj.all, D-Ariz., of the House Interior nmittee. The six amendments ; ;feed to, five by Rep. Ray Kogovsek, jt Colo., and one by Rep. John F. . jjlerling, D-Ohio, previously had been irt, rked out by several members of the Ml, notably Udall and Rep. Jim San- 1, D-Nev. OIL SHALE BILL PROVISIONS I tiree amendments were particularly Portant. As reported by the Santini bcommittee on June 25, the bill thorized two leases per state and four lionwide to one individual or comity. com-ity. This was unacceptable to Udall. 1 insisted the new bill continues to lit to one entity one lease per state, 6 ' provided under the 1920 Mineral leasing Act, with one exception; a see may acquire one additional lease state (Colorado, Utah or Wyom-" Wyom-" ;) when "it has achieved production commercial quantities from an ex-- ex-- ;ng lease, and it is within 15 years of justing the commercially ive T'e reserves on the existing ithvL Kgovsek amendment was j to in Committee by voice vote on rtt? two other Kogovsek amend-fo"owing amend-fo"owing discussion with the r?ation and governors of a ?, dorado. Governors must be n new leases and if the wary of Interior decides to issue iOrL ? contrary to a governor's J'edation, he must notify the 'tfSf and SpeU out his masons. may make advance payments ,,2, and rentals- with credits . J future years, to the affected , "Such funds sha11 e .Jued by the governor...only to ether) Ti'es' municipalities or He , visions impacted by oil fiiSfitfr wheJthe P ire,ta may increase the size nd fe le . ase from the basic 5120 rtes' 0 a maximum of 15,360 nmerciaVT1",1 """ally viable, ft ClH vfCale operations" in the il ? ?nd Wvoming shales. it-iods h7,?y , for indeterminate ua TTm are subject to ad-m ad-m ThAVnd of eacn 20 year g bv t ,a'S0 Pr0Vides for off site '! S soL lders of oil alemining 2 ' for the purpose of usinf IVo i t" other waste Md the i 4 t a rtl"g facilitie and other i:g wht!aiWSf0rmulti mineral MS u .f1 minerals are in- Si? fU shale'. r mining not nar of federal land which 5TsulherWlSe leased without ft' lease Teage against an en" UV lea.s lim.tation, and it underscores that lessees must protect "environmental and other resource values." THREATENED CONTEMPT SPRINGS UNION CONTRACT "The Great Plains people called me and asked how they could get the Secretary cited for contempt," Eb-becke Eb-becke told WRW in jest after the Union contract was hastily approved by President Presi-dent Reagan on July 29 without any fanfare. fan-fare. A running battle has been raging for weeks over the three syn fuels contracts con-tracts between Energy Secretary James B. Edwards and Director David A. Stockman of the Office of Management Manage-ment and Budget. Edwards favored approval ap-proval of the three syn fuels contracts, which Stockman opposed. Stockman opposes federal aid to launch a syn fuels industry on principle. Meanwhile, Rep. Toby Moffett, D-Conn., chairman of the Environment, Energy and Natural Resources Subcommittee Sub-committee of the House Government Operations Committee, found himself stymied in his efforts to get precise information in-formation on the Union contract, as Edwards Ed-wards refused to supply the data. So Moffett 's Subcommittee voted to cite Edwards for contempt of Congress, and House "Gov. Op" was due to take up the Subcommittee resolution on July 30. The White House intervened. Edwin Meese III, Counselor to the President, got Mr. Reagan to approve the contract and Edwards signed it the evening of July 29.- So full details of the contract were made public a few hours before the Committee could act on the citation. Moffett and Stockman sought to head off the contract approval, but the end result was that the battle which ensued pushed the contract thru. It was a big break for Union, all sides agree. And a leg up for the other two. The Union and Tosco contracts must lie before Congress for 30 days before they have cleared all of the federal hurdles, under a provision of the Defense Production Act under which both were drawn up. But Ralph Blackwell, chairman of the DOE task force which negotiated the contracts for the government, told WRW on Aug. 4 there appears to be no problem on that score. TERMS OF UNION CONTRACT The maximum liability of DOE under the price guarantee to Union Oil is $400 million under terms of the contract. "But, of course, if oil prices remain high, it won't cost us (DOE) anything. It protects Union against an oil glut and other unpredictable factors," Blackwell told WRW. While the agreement agree-ment provides that the contract between bet-ween Union and the government "shall be interpreted. ..to promote synthetic fuel production... at all times," the contract con-tract is basically a sale of 33 million barrels of oil by Union to the Department Depart-ment of Defense (DOD). The oil is to be aviation turbine fuel and diesel fuel meeting DOD specifications, specifica-tions, and it may be syncrude, a blend of syncrude and conventional crude oil or conventional crude oil. If there is a difference between the market price for oil and the cost of the syncrude, the government will pay the difference up to the $400 million liability. Union will produce the oil shale to be used in the production of the syncrude from its fee lands located in Garfield County, Colo., including a mine, a retorting retor-ting facility, shale oil upgrading facilities, a rail spur, pollution control equipment and other equipment. Union has contracted to have Phase One of its synthetic fuel production facility completed com-pleted by July 1, 1983, with a design capacity of not less than 10,000 barrels of syncrude per day. After Phase I is operational for "a continuous period of at least 90 days" and if Union does not run into majo,r regulatory or legal action and can obtain ob-tain permits, and adequate financing, Union will commit itself not later than July 1, 1985 to start construction on Phase II, a 40,000 barrel a day plant, prior to Jan. 1, 1986. The contract is for ten years, until June 30, 1993, but it may be terminated by mutual consent earlier by the two parties or it may be terminated unilaterally by DOE "if Union fails to complete construction of the Phase I synthetic fuel production facility prior to April 1, 1984." The contract prohibits Union from using us-ing funds obtained under the contract to influence legislation. It contains extensive exten-sive barge and bunkertanker loading requirements and other transportation loading conditions. It indicates Union has two federal, 37 state and nine county coun-ty permits-total 49. TOSCO AND GREAT PLAINS The COLONY project to extract oil shale from fee land in Western Colorado's Col-orado's oil shale country is 60 percent owned by EXXON, the nation's largest oil company and 40 percent owned by Oil Shale Corp., a subsidiary of Tosco, which developed the retorting process to be used in the COLONY project. Cost of the project is estimated at $3.4 billion to build, of which 75 percent of the ToscoOil Shale Corp. share, or $1.1 billion, is guaranteed under the federal contract signed by DOE on Aug. 5 EXXON EX-XON will be the project manager, but it is not involved in the federal loan guarantee. The COLONY partners plan to build and operate a 48,300 barrel a day commercial com-mercial oil shale complex in Garfield County, Colo. It will be built in increments in-crements of about 10,000 barrel a day units. The syncrude will be mixed with crude oil and will be sold under specifications as aviation fuel and diesel fuel to DOD under terms very similar to the Union contract, except, of course, there will be no price guarantee for the COLONY product. Both the TOSCO and Union contracts provide for use of room and pillar mining min-ing methods. The Tosco contract provides pro-vides not only for the construction of the mine retort complex but also for the construction of a new town known as Battlement Mesa which will contain up to 7,100 dwelling units to house COLONY COL-ONY employees. It's expected to take about 5 years to build the project. Operating life of the project is estimated at 20 years. Maximum government liability is estimated at $1.3 billion in the unlikely event that the COLONY project fails and then Tosco goes bankrupt. The Great Plains contract providing for a federal loan guarantee of $2.02 billion to American Natural Resources Co. spreads the risk as follows: 30 percent per-cent to the company and 70 percent to . Uncle Sam on the first billion; 20 percent per-cent to the company and 80 percent to the government on the second billion; and 50-50 above the second billion. This will be a strip mine operation, one of the largest in the country, in Mercer County, Coun-ty, N.D., in the Williston Basin on the Fort Union lignite formation. It will be located adjacent to Garrison Reservoir on the Missouri River about 75 miles northwest of Bismarck. Four companies have contracted to buy the gas from the project when it is completed in 1988. They are Michigan Wisconsin Pipeline Co., 25 percent; Natural Gas Pipeline Co. of America, 20 3 percent; Tennessee Gas Pipeline Co.;"' 30 percent; and Transcontinental Gas ' Pipeline Corp., 25 percent. American has already spent about $120 million on the project, Ebbecke told WRW. It has been approved by Federal Energy Regulatory Commission. |