May 25, 2010

Oil Shale Management - General

Proposed Rule
Summary

Score: 26 / 60

Additional details
Agency
Department of Interior
Regulatory Identification Number
1004-AD90
Agency Name
Department of Interior
Rule Publication Date
07/23/2008

RULE SUMMARY

This rule sets out the policies and procedures for the implementation of a commercial leasing program for the management of federally-owned oil shale and associated minerals by incorporating specific provisions of the Mineral Leasing Act of 1920 and the Energy Policy Act of 2005 relating to oil shale lease size, acreage limitations, rental, and lease diligence. The rule also establishes work requirements and milestones for the development of leases and provides for other standard components of a BLM mineral leasing program, including lease administration and operations.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The RIA was not available online at the time of this scoring. The NPRM directs individuals to contact the Bureau of Land Management to obtain a copy.
0/5
2. How verifiable are the data used in the analysis?
For direct costs, all data sources are cited but not necessarily linked; much proprietary data identified and discussed in context of another study (i.e. evidence given that it's valid). For environmental costs, the data are more generally discussed (as non-quantifiable) and sources are more vague.
2/5
3. How verifiable are the models and assumptions used in the analysis?
Some literature (that may not be peer-reviewed) is cited and referred to in calculations, but it not always clear what the calculation was or what the motivating source was.
2/5
4. Was the analysis comprehensible to an informed layperson?
It was actually a very interesting read and comprehensible to almost anyone. The language is direct, simple, and easy to understand.
5/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The analysis mentions that increased production of oil will lead to less dependence on foreign oil, which it claims must be counted as a benefit. It does not explain why that must be a benefit.
2/5
Does the analysis identify how these outcomes are to be measured?
The goal of this regulation is the increased output of domestic oil, but it does not explain how that outcome will be tied to imports or how that tie will be measured.
1/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Given the desired outcome is increased output, the regulation has a testable theory that allowing/encouraging oil shale development will accomplish it.
3/5
Does the analysis present credible empirical support for the theory?
The analysis discusses many technologies developed by oil companies for extraction, but does not provide clear empirical support. But these are in development, so it is probably hard to do so.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
Perhaps most important is the failure to address uncertainty in protecting environment.
1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
The systemic problem implicitly addressed is that the federal government owns most of the land to be used for oil shale development. Another problem mentioned is the high capital risk for oil companies considering oil shale, but this is not well developed into a justification for the regulation.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
It's systemic because of the older government regulations/rules, but this RIA does not address it.
1/5
Does the analysis present credible empirical support for the theory?
The analysis does not present support.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The analysis does not address uncertainty.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
Many different technologies for oil shale are discussed, based on ongoing developments, as are different royalty rates and a possible government-financed pilot program to help lower initial costs.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The range is medium—different royalty rates, government subsidies of technology, different technologies—but there is no consideration of selling land rather than leasing.
4/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Given the options considered, the RIA considers how they would affect the output of oil from oil shale land under the options.
4/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
This is ignored.
0/5
8. How well does the analysis assess costs and benefits?
3/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Most costs, yes, but the unquantifiable costs are left as such. This is somewhat excused by the fact that the technologies for oil shale extraction (and their impacts) are unknown, but these could have been modeled or assumed.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
This, although speculative, seems thorough, based on technologies in development.
4/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Oil prices are assumed to be constant regardless of oil shale development.
0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The regulation assumes profit-maxing firms will take advantage of leasing rules. Environmental impacts from human developments are discussed. Higher oil consumption (from cheaper oil/greater supply) is not addressed.
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Many different discount and royalty rates (which affect costs to companies), and oil prices (tied to royalty rates), are assumed for calculations. Average costs are assumed and different discount rates (3,7,20), oil prices, and royalty rates are applied for calculations; however, uncertainty in costs themselves is not addressed in calculations although it is discussed. A fairly thorough analysis of different scenarios is included in the appendix.
4/5
Does the analysis identify the alternative that maximizes net benefits?
Given the options considered, yes.
4/5
Does the analysis identify the cost-effectiveness of each alternative considered?
For the various technologies, a break-even price of oil is calculated.
3/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Even the unquantifiable costs are attributed to the likely sufferers.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Profits benefits accrue to firms; the incidence of import avoidance "benefits" are not discussed. The analysis briefly discusses possible employment gains in particular localities that may see investment from oil companies.
2/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
It appears the rule relied on the RIA on at least one occasion (in setting the royalty rate at the beginning of the lease and the maximum rate achievable).
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Net benefits are maximized by the rulemaking, but the range of benefits is not sufficient to guarantee that this is true. Given the options considered, yes.
3/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The RIA mentions that a future NEPA will discuss some measures of environmental impact, but otherwise this is not discussed.
2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
The analysis does not address this topic.
0/5
 
Total 26 / 60