The Obama administration has slowed the expansion of oil shale development in western Colorado and neighboring states, reversing a decision issued in the final days of the Bush administration.

Interior Secretary Ken Salazar's decision marks the latest case in which the Obama administration has put the brakes on George W. Bush's energy policy.

Earlier this month, the former Colorado senator scrapped oil and gas leases on 77 parcels of federal land after opponents argued that the drilling would mar southeast Utah.

Salazar said Wednesday that he also would scrap the last administration's decision to issue expanded research, development and demonstration leases for oil shale. The Interior Department will instead offer a new round of leases after taking 90 days of public comment on how the leases should be written.

Salazar told reporters in a teleconference that he is reversing a "midnight decision" that would have locked in low royalty rates and short-changed taxpayers. He also said more time is needed to study the environmental impact and feasibility of commercial oil shale development in the West.

"Those who have fantasized that oil shale is the panacea for America's energy needs have been living in a fantasy land. . . . No one at this point in time can quantify how we're going to get the (oil) out of those rocks and what the associated costs are," he said.

Salazar said he also is scrapping an initial 5 percent royalty rate on oil shale production, saying the rate "sells taxpayers short." Conventional oil and gas production on public land produces royalties of up to 18.8 percent.

Colorado politicians were divided over the moves. Gov. Bill Ritter hailed Salazar's "commitment to take a more deliberate look at the Bush administration's hasty decision."

But Republican Colorado Rep. Doug Lamborn said, "The thousands of jobs that would be created by oil shale development will be lost, in addition to many millions of tax and royalty dollars both to Colorado and the United States."

Jerry Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines, said the decision would "slow things down."

"It's a pretty good idea for him to step back and say, 'How do we want to move ahead on this,' " Boak said.

The Wilderness Society welcomed Salazar's decision.

"Secretary Salazar's action will give the Interior Department and the public an opportunity to weigh in on the oil shale research-and-development program, before more public lands are committed to this problem- fraught industry," the environmental group said.

Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell are among the companies working on oil shale technology.

Tracy Boyd, a spokesman for Shell Exploration & Production Co. in Denver, said Salazar's decision would not have much impact on his company's research- and-development efforts in Colorado. Shell was awarded three R&D leases in 2006.

"We're in sync with Secretary Salazar's philosophy," Boyd said, adding that R&D work should proceed "cautiously and carefully" before commercial development.

Staff writer M.E. Sprengelmeyer contributed to this report.

At a glance

* What is oil shale? A fine-grained sedimentary rock containing organic matter from which oil may be produced, either through heat or a chemical process.

* Where is it found? The largest deposits in the world are found in the Green River Formation.

* What is its potential? The deposits under Colorado, Utah and Wyoming have about three times the proven reserves of Saudi Arabia, according to the Interior Department.

* Mining status: Energy companies can conduct research and pilot projects involving oil shale extraction. Five such research, development and demonstration leases exist in western Colorado.