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Oil in Rocky Mountains no easy play

Oil in Rocky Mountains no easy play

Industry is divided on Bush call for more drilling.

From the Associated Press 
2:59 PM PDT, June 18, 2008
SALT LAKE CITY — President Bush’s call on Wednesday for speeding up development of oil shale in the Rocky Mountains runs headlong into Colorado leaders, who say the environmental costs are too high and the technology unproven.

“The reality about oil shale, it’s hydrocarbons locked up in rock and it is very difficult to extract,” Sen. Ken Salazar, D-Colorado, said Wednesday.

But in Utah, a developer says his company already has the technology to produce 4,000 barrels a day using a furnace that can heat up rock using its own fuel.

“This is not a science project,” said Daniel G. Elcan, managing director of Oil Shale Exploration Corp., an industry player in demonstration efforts.

Bush, in an energy speech from the Rose Garden, called for lifting restrictions on oil shale leasing in the Green River Basin of Colorado, Utah and Wyoming. He also called for Congress to lift a drilling ban on parts of the U.S. continental shelf.

“For many years, the high cost of extracting oil from shale exceeded the benefit. But today the calculus is changing,” Bush said.

“Companies have invested in technology to make oil shale production more affordable and efficient. And while the cost of extracting oil from shale is still more than the cost of traditional production, it is also less than the current market price of oil. This makes oil shale a highly promising resource,” he said.

Bush said Democrats in Congress “slipped” a moratorium on larger oil shale works into a spending bill last year. The provision, which will expire in October unless Congress renews it, stopped the government from authorizing a commercial leasing program.

“It is absurd to claim my amendment was just ‘inserted’ into an appropriations bill or that it is the main obstacle to oil shale development,” Rep. Mark Udall, D-Colorado, said in a statement.

“The obstacles are the same ones that have been there for a century — the lack of technology for developing oil shale in an economically realistic way,” he said.

Oil shale enjoyed a fleeting promise during the 1970s when oil prices skyrocketed, but was abandoned by the early 1980s when prices dropped and Exxon shut down major operations in western Colorado.

In Utah, Elcan said Oil Shale Exploration Corp. is ready to go, and that the whole industry was being held back by Congress. Companies need certainty on whether and how they will be allowed to work larger tracts of federal land, he said.

Sen. Orrin Hatch, R-Utah, said the country has to do everything it can to boost energy production.

“We have as much oil in oil shale in Utah, Wyoming and Colorado as the rest of the world combined,” he said.

Shell Exploration & Production Co. is working on its own lands in western Colorado but has permission to work three 160-acre parcels of federal land on an experimental basis. It wants the federal government to set a firm date when development of larger and more productive oil shale fields will be allowed. Shell says it needs the certainty to pace its capital and research investments.

“The regulatory framework will be very important as we move forward,” said Darci Sinclair, a Shell Oil Co. spokesman in Houston.

Shell is working to melt oil out of rock by heating up the ground using oven-like elements. The company says it’s about two years away from proving it can accomplish this without polluting groundwater.

Environmental groups have been watching Shell’s experiment with interest, but they doubt oil shale will solve anything.

“Today’s high gasoline prices are the result of a host of economic conditions that have little to do with how much drilling is or is not taking place on federal lands,” said David Alberswerth, an energy policy adviser for the Wilderness Society. He said the weak dollar, market speculation and demand in China and India are making oil more expensive.

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