Oil shale stuck between rock and wild place
GARFIELD COUNTY The ramshackle collection of wellheads and electric cables hidden in a pine-covered draw west of Rifle doesn’t look like much now, but until three years ago it was the home of the oil industry’s equivalent of the Manhattan Project.
Over five years here, Shell Oil conducted a series of secretive experiments that have the potential to blow open the status quo of North American oil production, unlocking the vast reserves of oil shale that underlie Colorado’s Western Slope.
Early attempts failed miserably. But beginning in 2002, Shell drilled a honeycombed series of wells, then lowered in giant heating elements, raising the temperature of the shale to 650 degrees Fahrenheit for 12 months. Out flowed an abundance of high-quality shale oil.
“It was our ‘eureka’ moment,” said Tracy Boyd, a spokesman for Shell, smiling as he showed off the historic spot. “Now we know we have a technology that works.”
Now that and similar technologies have become fodder in the increasingly contentious energy debate, holding out the possibility that, in an era of $4-a-gallon gasoline, America might just be sitting on oil reserves equal to a 100-year supply of the country’s imports.
The fight over oil shale has become a major issue in Colorado’s U.S. Senate race as well as a regular talking point for Republicans nationwide. At the White House in June, President Bush blasted Democrats for “standing in the way” of oil-shale development and hurting ordinary Americans.
The latest to enter the fray is Orrin Hatch, the powerful Republican senator from Utah, who accused Democratic Senate candidate Mark Udall of siding with “an elite, anti-oil crowd” by helping impose a moratorium on commercial leasing regulations for the shale deposits. (Utah is one of three Western states with oil-shale reserves.)
But a series of interviews with analysts, oil producers and local officials shows that the increasingly politicized debate hides as much as it illuminates.
On one hand, there is little doubt among experts that Shell’s technology represents a breakthrough. It’s a fundamentally different approach from the one that guided the failed efforts of Exxon here in the 1980s, producing an unconventional hydrocarbon technically a form of synthetic oil that is higher in quality and concentration even than conventional oil. (Consider the fact that the recovery rate in Shell’s experiment was 62 percent, compared with 25 percent for the average conventional oil field.)
On the other hand, the technology is in such early development that there is no realistic chance it will impact oil supplies (and thus prices) for at least 15 years, according to oil-company officials and analysts, putting it on the far side of other options such as offshore drilling and plug-in hybrid cars.
It’s also possible the technology simply won’t pan out.
Commercial scale unproven
The furthest along among several companies exploring “in situ” extraction of oil shale, Shell concedes that it doesn’t know if its model will work on a commercial scale. Although company officials have tested all the processes’ various parts, they have yet to put them together in a single experiment, including the improbable-sounding combination of massive heaters with an underground ice wall to protect groundwater.
The tests so far “proved to us our core technology. It didn’t prove we can scale it up to a commercial level. That’s
what the next phase is for,” said Shell’s Boyd.Beyond that, analysts say the debate is missing a key attribute that makes the risks of mismanagement enormous: The sheer concentration of the resource is unlike just about anything else in the world. At its richest point, the shale could yield an astounding 2 million barrels of oil per acre.
If the technology is a success, analysts say that means a single lease tract could hold over $1 trillion worth of oil.
But it also means that one small area the Piceance Basin between Rifle and Meeker could contain one of the biggest resource-extraction projects the country has ever seen, with the potential of highly concentrated impacts on air, water and the environment.
Full-scale commercial production would probably mean several new electricity plants on the Western Slope, as well as new refineries. Thousands of additional workers would reshape communities.
The amount of water required by the process would shift regional supplies from supporting agriculture to supporting industry, according to a 2007 analysis by the Bureau of Land Management.
“My concern is that they aren’t recognizing how geographically compact the oil-shale resource is. There is this idea that there’s 800 billion barrels of recoverable resource, but about half of that is in the Piceance Basin,” said James Bartis, a national oil-shale expert at the Rand Corp., a California-based think tank.
“This is sort of frightening, because you could really mess things up here. You get the wrong people . . . all of the sudden you’re choking on the air quality in a Class 1 (pristine) area,” Bartis said.
Hot election topic
But if all that is more than a decade away, it’s surprising even to some in the industry how oil shale suddenly has become a hot-button topic of the 2008 election season.
Republicans believe it serves as an effective symbol of the larger narrative around energy they’ve been weaving all summer one that casts Democrats as too allied with the environmental agenda to urgently pursue measures that could lower gas prices and extract the country from the grip of foreign producers.
To drive home its point, the GOP has focused on the year-long moratorium on commercial leasing regulations for oil shale that was inserted in a spending bill last year by two Colorado Democrats, Udall in the House and Ken Salazar in the Senate. (The moratorium is strongly supported by Gov. Bill Ritter, also a Democrat.)
The regulations are the basic rule book under which commercial leasing could occur, and Republicans charge the moratorium is slowing development of a resource that could lower gas prices and help the country reach energy independence. Democrats say the regulations need to wait until the technology is more advanced, and thus the impacts better understood.
To show it’s treating the issue with more urgency, the Department of Interior recently issued draft regulations not prevented by the moratorium and say they’ll push for final regulations soon after the Democrats’ block expires this fall.
But Republicans haven’t been helped by the sometimes-contradictory messages from the oil companies themselves, operating on a more extended timeline and wary of being cast as unresponsive to environmental concerns.
“We actually have a philosophy that is relatively consistent with Gov. Ritter’s and Ken Salazar’s,” said Boyd, the Shell spokesman. “We want to make sure that our technology is prudently and cautiously developed and that it results in something that is economically viable, environmentally responsible and socially sustainable.”
That message is calibrated in part to ease fears, especially in Colorado, of what commercial oil-shale development could mean.
One of the critical breakthroughs of Shell’s process is that it heats the shale in the ground slowly over a period of about three years using dozens of giant heating elements, each almost 2,000 feet long.
The area where the shale is being heated is surrounded by a perimeter made up of a 3-foot-thick wall of ice, created by circulating aqueous ammonia into deep wells for a year and a half.
Both processes take enormous amounts of electricity. At an ongoing freeze-wall test site west of Rifle, giant freezers the size of semitrailers run 24 hours a day and even that’s a far smaller version of what a commercial site would look like.
While critics charge that extracting oil shale may use as much energy as it produces, analysts point out that the key in the debate over liquid fuels is not how much energy is used but how much oil a lot of oil is used to produce one barrel of ethanol, for instance; very little is used to produce a barrel of shale oil.
But the process does create other problems. New power plants to feed the system would probably spew lots of carbon. And the refineries that analysts believe would need to be built nearby to process the liquids could contaminate the air.
But the biggest impact may be on water. Rand estimates that it would take three barrels of water to produce one barrel of shale oil. Although that’s significantly less than the amount of water needed to produce a barrel of ethanol, the water would come from the relatively scarce resources of the semi-arid Western Slope, some of which also feeds the Front Range.
As Shell and other companies snap up conditional water rights in the region, the Front Range Water Users Council a group of water boards that serves the state’s major cities formally requested an extension of the leasing regulation moratorium, believing, according to a letter to Congress, that the “development of oil shale in Colorado could significantly affect the Council’s ability to serve existing customers and the future growth projected for the Front Range of Colorado.”
Impact “100% Colorado”
“Even though the benefits of oil shale are nationwide in terms of the impact on overall oil prices, the environmental impacts of oil shale are almost 100 percent Colorado,” said Bartis, the Rand expert.
But Bartis’ biggest concern is that in a rush to nail down formal leasing regulations, the Bush administration is potentially giving away at fire-sale prices what may turn out to be among the biggest oil resources on the continent.
Bartis said the royalty structure in the draft regulations is based partly on the experimental nature of the technology. If the Department of Interior waited until that technology was more proven and thus the value of a potentially lucrative resource more fixed the federal government could justifiably ask for a larger share in bonus payments and royalties. (The vast majority of Western oil shale is under federal control.)
It’s a concern shared by Rifle Mayor Keith Lambert, whose community would get a share of that money and whose skepticism may be telling of the potential political risks the Republicans are taking by pushing the oil-shale debate on the Western Slope, an area that will be critical to GOP chances in the state this year.
An affable personality and a popular local figure, these days Lambert is also a man overwhelmed. The city of 9,000 is trying to keep up with the breakneck growth produced by a boom in natural-gas drilling, with construction projects for a new water treatment plant, millions of dollars in expanded roads and a new police station.
Lambert said locals have strong concerns over what commercial oil-shale development could mean on top of all that in terms of growth, infrastructure demands and especially water.
“They say around here that you talk over whiskey and fight over water. . . . We will dig our heels in when it comes to our water,” the mayor said.
Michael Riley: 303-954-1614 or firstname.lastname@example.org