The Daily Sentinel (Colorado): Energy firms feel restless for big boom

By BOBBY MAGILL The Daily Sentinel
Sunday, January 07, 2007

The sprint to coax oil from solid rock officially has begun for three energy companies hoping they hold the technological key to America’s energy independence.

But before shale oil can flow from the Piceance Basin with the ferocity of Saudi Arabian black gold, the three firms must jump many regulatory hurdles, prove their technology economically viable and convince the public they can do it all with minimal environmental harm.

Environmentalists are eager to see the firms’ in-situ oil shale experiments proceed so they can illustrate to Congress that shale oil production could have environmental consequences serious enough to merit changing federal law.

“The main goal from the Western Colorado Congress is to lobby to have the Energy Policy Act (of 2005) amended to not allow commercial oil shale leasing until the research and development projects have proven that they’re economically, socially and environmentally sound,” said Cathy Kay, of the Western Colorado Congress in Grand Junction.

The Bureau of Land Management is quickly taking steps toward commercial leasing in the Piceance Basin, which it is required to do by 2008 under the Energy Policy Act.

In December, the BLM issued one 160-acre oil shale research and development lease each to Chevron and EGL Resources and three to Royal Dutch Shell. But those have little bearing on the federal commercial oil shale leasing program.

As the act stipulates, the BLM is in the midst of preparing a draft environmental impact statement for the program. Originally slated for release last fall, the document will analyze commercial oil shale and tar sands management and its impacts on air and water quality and wildlife.

But the document, delayed by the sheer mass of information BLM staffers must include, won’t likely see the light of day until summer, BLM spokesman Vaughn Whatley said. He said he couldn’t comment about what information is being added to the document contributing to the delay of more than six months.

The holdup could push back the date when the BLM begins issuing commercial oil shale leases, despite the Energy Policy Act, BLM Glenwood Springs spokesman David Boyd said.

“There aren’t regulations for commercial oil shale,” he said. “It’s important that it’s done right.”

Regardless, Shell, Chevron and EGL are readying their reports and permit applications so they can start geological testing at their research sites, getting a leg up on any other company that might obtain commercial leases by the end of the decade.

Each of the three companies must submit a site development plan to the BLM and test the hydrology of each research site for five consecutive quarters before the research projects can begin, BLM spokeswoman Denise Adamic said. Stormwater management plans and spill prevention plans also must be submitted to the BLM for each site, she said.

“There are dozens of permits that each one of these projects are going to have to receive between the federal, state and local governments,” likely taking at least 42 months to accomplish before oil shale experimentation can begin, said Ron Cattany, director of the Colorado Division of Reclamation Mining and Safety.

One of the biggest state permits on that list is the mining and reclamation permit, which is open to protest.

During the permitting process, Cattany said, public objections may lead to a hearing before the Mined Land Reclamation Board. The process usually takes about 180 days, he said.

Chevron, however, will be applying for a much more limited prospecting permit in lieu of the mining and reclamation permit, reducing the approval process to 60 days, Cattany said.

Other state permits Shell, Chevron and EGL may need to obtain include a monitoring well permit, water impoundment permit, storm water discharge permit and an air pollution emission notice, among others.

Public hearings during the permitting process may be a chance for environmentalists to educate the public and lawmakers on potential impacts of oil shale development, Kay said.

She said there are a plethora of unanswered questions about where the power and water for commercial in-situ oil shale development will come from, particularly because the BLM skimmed over many of those details in environmental analyses of the research projects.

“The BLM’s final (research, development and demonstration) leases disregard important water, air and community impacts raised during the public process,” she said.

She said the analyses failed to account for the possibility of reduced air quality in the Flat Tops Wilderness and impacts to ground water quality.

Western Colorado Congress’ goal is to educate the public about those issues so people can attend hearings and argue intelligently about the impacts of oil shale development, Kay said.

“This is a debate, not a confrontation,” she said.

“That’s what we would want at those public hearings, an educated debate.”

Steve Smith, assistant regional director for the Wilderness Society, said he is a fan of the oil shale research and development program, but echoed Kay’s concerns about commercial oil shale leasing slated for next year.

“We shouldn’t be in a hurry to go beyond (the oil shale research projects) until we understand them fully, to test the wisdom of going forward,” he said.

“I don’t think there’s been nearly enough research on really any aspect of these proposals, which is why proceeding with small case researches is so important.”

With their newly minted leases in hand, Shell, EGL and Chevron are eager to start work on their projects as soon as possible.

But, they say, 2007 will be a year of little more than groundwork, paperwork and testing.

Shell spokeswoman Jill Davis said the company wants to push ahead with work on its initial test site, where it will showcase the alleged success of its nearby Mahogany project in the public light.

“We feel like we’ve proven (oil shale development’s viability) on our private property, but we need to demonstrate it in a public way and on a commercial aspect on a commercial acreage that has a different hydrology,” Davis said.

“All the technological pieces aren’t put together. Our process makes high quality oil; we know that.”

Shell plans to file an application for its reclamation and mining permit early this year and expects the permitting process to take about a year before construction can begin on the company’s first site.

The company will soon hold community meetings around the region to discuss the oil shale tests with residents, she said.

“We need to make this a community process,” she said. “We want to understand what it is that we can do to help better community involvement.”

No dates for the meetings have been set.

“We’re behind what Shell is doing,” said Glenn Vawter, EGL oil shale manager.

EGL wants to obtain the necessary permits to begin drilling exploratory wells to define the geology and subsurface hydrology of the company’s research site.

“We would expect construction on the project would begin in 2008 and probably near the summer or fall of 2008,” he said. “That would take six months to conduct.”

EGL’s experiments on in-situ oil shale heating are set to begin in early 2009 and will continue for about three years, he said.

Company officials, he said, plan to meet with the BLM this week to discuss a development plan for the site.

Vawter said the company hasn’t proven its oil shale heating methods to be harmless to groundwater, but that’s part of what the research project is for.

“We’re doing this underground in the freshwater aquifer,” he said.

“We will have to prove that we can clean up that water that will become contaminated when you do the retorting of the oil shale. It’ll have to be done by pumping water out, putting it through a treatment process and restoring it to the aquifer.”

For Chevron, as with Shell and EGL, some initial construction on the sites will be part of the permitting process.

Chevron, which is working with Los Alamos National Laboratories in its oil shale research, anticipates it will clear a 200-foot by 200-foot area on the site, start the water testing process and begin drilling for and analyzing a rock formation core sample this year, said Dan Johnson, Chevron manager of public affairs for the Rocky Mountain region.

“We have a limited scope of activities planned for 2007,” he said, adding the company expects the permitting process to go on for “several months.”

“We are approaching this very methodically, very cautiously,” Johnson said.

“There’s a lot of work to be done here.”

Bobby Magill can be reached via e-mail at [email protected].

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