WASHINGTON — The Obama Interior Department is reviewing a decision made by the Bush administration in its final days that attempted to lock in lucrative royalty rates and favorable regulations for oil companies holding leases for oil-shale development on public lands.
The decision, which came in the form of amendments to existing leases, drew little public notice at the end of the Bush administration in January. But since then, congressional watchdogs, environmental groups and state officials in Colorado, where most of the leases are located, have denounced the amendments as a massive giveaway to the oil industry.
Obama Interior Secretary Ken Salazar has ordered the review "given the timing and circumstances of the execution of the lease addenda," Interior spokeswoman Kendra Barkoff said Thursday.
Previously undisclosed internal e-mails from the Bush Interior Department and Royal Dutch Shell PLC -- which held three leases and stood to benefit more from the amendments than any firm -- show a concerted if uncoordinated effort to deal with the expected blowback to the amendments. The e-mails were obtained by The Times' Washington bureau.
One Interior official sent an e-mail to colleagues describing the amendments as a "nuclear bomb" that would spark a hostile reaction from Colorado leaders and at the highest levels of the incoming Obama administration, which had already pledged to overhaul Bush administration energy development programs.
Executives at Shell hoped that Salazar, a critic of oil-shale development plans as a Democratic senator from Colorado, could nevertheless be swayed on the amendments, which analysts say could be worth billions of dollars to Shell and its fellow leaseholders if the companies eventually tap the full potential of shale on their leases.
One of the suggestions for approaching Salazar came from Gale Norton, who joined Shell as an attorney in its oil-shale division nine months after she resigned as Bush's Interior secretary. The Justice Department is investigating her for possible conflicts of interest involving her handling of Shell leases while she was Interior secretary.
In a Jan. 15 e-mail to colleagues, Norton suggested that environmentalists' legal challenge to Interior's shale plans "provides an external reason for locking in change as opposed to [the previous administration] being motivated by fears of how a new administration might alter" the regulations. Salazar, she reasoned, might be persuaded that the department needed to defend its own contracts in court.
