Energy
Slick Promise
Oil shale is an energy developer’s dream: a plentiful rock that can be turned into billions of barrels of oil. But is it truly the Holy Grail, or fool’s gold?
By Daniel Glick
Arriving at the remote Mahogany Research Project administration building in rural western Colorado, Shell communications and sustainability manager Tracy Boyd steps out of his car and surveys the view like a man who’s pleased by what he sees. We take in a vast Western vista of pinyon-juniper forests scattered among a sea of green sage, brown rolling hills, and multi-hued strata of sedimentary rock that contain the promise we are here to see: oil shale. Tons and tons of oil shale.
Driving north from Rifle and west from Rio Blanco across a sparsely inhabited landscape, we had passed scene after scene of new industrial activity: clusters of royal-blue trailers filled with liquids used for natural gas drilling, compressors, drill pads, and packs of pickups and semis. We are smack in the middle of one of the West’s past, present, and possibly future energy booms. “You’re looking at the center of the Piceance Basin here,” says Boyd, pronouncing it “Pee-yance,” the way no first-timer ever would. He gathers hard hats and safety goggles for our tour of Shell’s gamble on geological alchemy—an effort, worth many tens of millions of dollars, to create a colossal underground toaster oven that will turn rock into oil.
Pointing across the valley, he gestures to where Royal Dutch Shell, American Shale Oil, LLC, and Chevron U.S.A. either own property or have leases to develop oil shale on federal lands. “They’re all right here,” says Boyd, referring to sites where Shell is experimenting with innovative—and controversial—underground heating technologies to unlock an elusive trove of energy. The challenge stems from the fact that oil shale is neither oil nor shale but a rock called organic marlstone. In its current form, oil shale is but potential oil, locked in a compound, kerogen, that needs human manipulation (or a few million years) to become fuel we can use. A good patch of organic marlstone might yield 25 gallons of oil for every 2,000 pounds of rock. What has captivated energy developers past and present is the sheer quantity of oil shale trapped in the Green River Formation, which stretches from southwestern Wyoming, through western Colorado, to eastern Utah. Some 800 billion barrels is the oft-repeated estimate of “recoverable” oil there, but nobody knows what technology might make that possible or how expensive it would be to retrieve.
Critics say the price of commercially produced oil from oil shale would be unacceptably high because of the amount of energy needed to convert the rock into oil and because of the habitats that would be permanently changed by the industrial complexes that would have to be built. One of the country’s largest mule deer herds migrates through these parts, and the region has prime habitat for sage-grouse and other wildlife that depends on wide-open sage landscapes (see “Running on Empty,” September-October 2008). These species are already under pressure from natural gas development, and may face future threats from global warming. Perhaps most important, turning oil shale into significant quantities of oil would unleash vast amounts of carbon dioxide. The liquids squeezed from the rock and processed into diesel, jet fuel, and gasoline would then be combusted, releasing even more CO2. As climate scientists and world leaders advocate massive reductions in greenhouse-gas emissions, the prospect of a successful commercial oil shale industry looms like an atmospheric disaster. It poses “horrific climate change impacts,” says Randy Udall, cofounder of the nonprofit Association for the Study of Peak Oil and Gas.
Despite the unanswered (and at this point unanswerable) questions, before leaving office, Bush administration officials published new regulations governing how this unproven, speculative, and potentially damaging industry should operate on federal lands, where most U.S. oil shale is located. Critics, like Colorado Governor Bill Ritter and Wyoming Governor Dave Freudenthal, have complained that the new rules are premature at best and reckless at worst. Ken Salazar, the new Secretary of the Interior, supported legislation as a U.S. senator from Colorado to slow down development, and called Bush’s approach “premature and flawed.”
This latest twist in oil shale’s long and convoluted history represents a particularly disturbing chapter in what Udall calls “a story of desperation, inspiration merging with madness, thermodynamic lunacy, and the power of a mirage to hypnotize Congress.”
Depending on whom you believe, the Green River Formation contains either the Holy Grail, or the fool’s gold, of America’s energy future. The controversy over oil shale development highlights some of the most critical energy issues facing the Obama administration: charting the best path to an energy future that relies less on fossil fuels, both for national security and for global climate change reasons, and restoring faith in our government’s environmental policies after eight years of allowing energy companies to essentially dictate how they operate on public land. Meanwhile, production of conventional crude is flat or declining, and many analysts say that if we have not reached “peak oil” already, we will before 2020. The United States has about three percent of the world’s proven oil reserves and consumes about 22 percent of the world’s oil. Despite the recent drastic drop in oil prices after all-time highs in 2008, oil shale’s seductive appeal will almost certainly rise with oil prices over the next decade. Oil shale developers, in fact, are counting on that. “Shell has a long-term commitment to this research,” says Boyd, “and over the years has not sped up or slowed down our research activities in particular reaction to short-term fluctuations of oil prices.”
Fights over oil drilling have been a staple of environmental politics for decades, from controversial plans to explore the Arctic National Wildlife Refuge to last year’s decision by President Bush and Congress to reopen offshore coastal areas to oil drilling (see “Squeeze Play,” Field Notes, September-October 2008). Much less well known, says Gary Graham, executive director of Audubon Colorado, is what could turn out to be an oil shale play across two million acres of federal lands at the heart of sagebrush and pinyon country: development that might literally generate a cauldron of problems. Graham says what the Bush administration did to set the terms and conditions for what even Shell admits is unproven technology is singularly appalling. “It was really irresponsible for the administration to force this through. We don’t know the impacts on water and the land. We have no clue.”
At the same time, many members of Congress, entranced by the politically pleasing mantra of “domestic production” without fully understanding the technological and environmental roadblocks, passed laws to encourage oil shale development. As part of the Energy Policy Act of 2005 (which then-Senator Obama voted for), regarded by critics as a legislative gift to the energy industry, traditional oil companies received the opportunity to lease federal public lands for oil shale “research and development.” (Shell has yet to develop its leases because the company is still conducting research on land it owns.) Last September Congress continued its approach when it let a ban on oil shale development expire, opening the possibility for companies to proceed on federal land. In Utah, several companies say they are ready to go, with technologies that many fear are plagued by the same unanswered questions as Shell’s plans. “No one understands what these impacts could be, but they are certain to be significant,” says Joro Walker, an attorney at the Western Resource Advocates in Salt Lake City.
The new administration and Congress will almost assuredly be less welcoming. Given Obama’s support for renewable energies, oil shale development will certainly not be a top priority for federal support. While campaigning, he expressed concern that the Bush administration’s approach to oil shale ran roughshod over local communities’ concerns about the environmental effects of large-scale development. Conservation groups are lobbying members of Congress to reverse the last-minute rule changes that could accelerate oil shale development. Overturning these rules, which took effect just weeks before Obama’s inauguration, can be difficult and time-consuming because of federal procedures. Congress might also have an opportunity to reverse the oil shale rules and other “midnight regulations” early in the 111th session.
In western Colorado, at the turn of the 19th century, a white settler unwittingly built his fireplace and chimney with volatile chunks of what Ute Indians called “mountains that burned.” According to Walter Youngquist, a geologist who has studied the oil shale phenomenon for decades, the intrepid settler’s housewarming party became a little too literal: He burned down the cabin when his chimney caught fire.
Word of what Youngquist calls “the elusive energy” spread throughout the land in the early 1900s, prompting hucksters to take samples of the black rock and set them on fire on city street corners to lure investors. In 1912 President William Howard Taft set aside the Naval Petroleum and Oil Shale Reserve in western Colorado and eastern Utah in case anybody could figure out how to turn this snake oil into real oil. In the late 1970s and early 1980s, as gas prices skyrocketed, energy companies flocked to oil shale-rich Colorado, and the “synfuels” industry took off. Then, when oil prices plummeted, the oil shale industry famously crashed. On May 2, 1982—still known as “Black Sunday”—Exxon closed the doors on its oil shale works, leaving thousands of devastated workers, stunned communities, and damaged landscapes in the bust’s wake.
Still, the lure of this hydrocarbon bounty keeps Shell and others trying, after many previous failures, to crack the oil shale code. “These are just companies trying to figure out how to do this economically and in an environmentally acceptable manner,” says Glen Vawter, executive director of the National Oil Shale Association. “I think they should get some encouragement to do just that.” Vawter doesn’t downplay the obstacles but says the “sheer magnitude” of the potential keeps the allure alive. “Let’s give it a shot,” he says. “Let’s see if somebody can make it work.”
Traditional oil shale operations, like the small-scale plants currently operating in a few natural resource-poor countries such as Estonia, use “retort” operations. In these systems, oil shale is conventionally mined, either underground or through surface operations, and the rock is transported and sometimes cooked into oil in a huge retort, or furnace. (This process was also allowed by the Interior Department in 2007 when it gave the Oil Shale Exploration Company permission to build a research facility on federal lands in Utah’s Uintah County.) Because of the enormous tonnage of rock required to produce modest quantities of oil, supersized retort operations would require massive mining operations and produce far fewer BTUs.
Shell’s proposed technique for extracting oil from rock, however, involves technology that wasn’t around during the past oil shale booms and busts. Inside Shell’s Mahogany Research Project building (Mahogany is the geological name of a swath of the Green River Formation), Boyd runs through a PowerPoint presentation that he says illustrates the promise, need, and desirability for “unconventional” fuels like oil shale. He shows a slide depicting Shell’s multi-pronged approach to future energy needs, which includes research into renewable energy like solar and wind. Oil shale is just part of the mix, he argues, especially for liquid fuels like gasoline. “We are not so presumptuous to think that oil shale is the silver bullet to all of our future energy needs,” Boyd says. “It’s certainly not.”
By any standard of industrial hubris, Shell’s in situ (in place) conversion process project is impressive. Across the valley and up a mountainside at about 9,000 feet, Boyd stops in front of what looks like a series of small, closely spaced manhole covers. This is where Shell drilled holes 1,000 feet deep, lined them with casings, and inserted electric heaters in some. Between about 2002 and 2005, Boyd explains, the company warmed a 30-by-40-foot area, producing 1,700 barrels of liquids that could be further processed into petroleum products or natural gas. “This was the successful moment we were looking for,” he says.
With the heating tests showing promise, Shell next developed its “freeze wall” technology. Underground pipes run a cold ammonia solution through a closed-loop system along a perimeter around the heating drill holes—at once preventing groundwater from infiltrating the test area and keeping any petroleum liquids from contaminating groundwater outside the site. We stand near the football field-sized test site, taking in the vast array of pumps, pipes, compressors, and ducts that Boyd says are currently freezing a wall of rock and water 15 to 25 feet thick and up to 1,800 feet deep. I try to imagine how big the ultimate freeze wall of a commercial plant might be. A mile perimeter? “At this point we don’t know exactly for sure,” he says. In any case, a huge amount of land will be disturbed. Moreover, the amount of energy it will take to simultaneously freeze the perimeter and raise the interior to 700 degrees for the operation’s duration is almost unfathomable. Immutable laws of physics can’t be changed by legislation.
Boyd affably and evasively demurs when I pose a series of key questions raised by Shell’s critics: How much water will Shell use in the process? “Less than people think.” How much energy will be needed to heat the rock into oil? “We don’t know yet.” Will the company construct new coal-fired power plants to produce the electricity for the heating and cooling? “There are a lot of variables between now and [commercial production, probably at least 10 years away] that will help define and drive how this will work.” What is the ratio of energy required to produce oil from oil shale, compared with the amount of oil it actually produces? “No one, including us at this point, knows quite specifically what that energy balance will be.” How much money has Shell spent on oil shale R&D, compared with its renewable energy portfolio? “Many tens of millions” on oil shale; he couldn’t say on the renewables side. How expensive does oil have to be for oil shale to be profitable? “That could change dramatically.”
These unanswered questions trouble Randy Udall and others. I meet Udall in Denver, just hours before his brother Mark is to win election as a U.S. senator from Colorado, after opposing the Bush administration’s oil shale policies when he was in the House of Representatives. Udall has calculated that pound for pound, as a source of energy, oil shale compares favorably with baked potatoes but loses out by a substantial margin to cow manure, phone books, and the breakfast cereal Cap’n Crunch. He ticks off numerous problems, from intense water use for electricity generation and plant operations in an arid land to the vast climate change implications. Then there’s the amount of energy required to raise the temperature of 700 billion pounds of shale by 700 degrees Fahrenheit over 10 years, to power an operation producing 100,000 barrels per day. Simply put, he says, it would take too much energy to produce the energy, no matter how you slice it. “I don’t think ingenuity will be enough to unlock this.”
If oil shale were to be mined and retorted on an industrial scale that could produce one million barrels of oil a day, companies would need to excavate and dispose of 700 million tons of rock each year, says Udall. That would mean digging the world’s deepest open pit mines, constructing a hundred retorts, and laying out new cities to house the tens of thousands of workers required.
No matter what technology is used, developing oil shale will mean fragmenting habitat—in a big way. Frank Smith, oil shale and gas field organizer for the Western Colorado Congress, points to the scars from the 1982 oil shale bust that still mar the landscape. At the Anvil Points Superfund site, Smith displays the result of quarried lands and tunnels. Back then, he says, after the rocks were mined, trucked to another site, and heated, they were “basically tossed off the edge of a cliff,” leaving arsenic and other toxic by-products to seep into waterways.
Colorado Audubon’s Graham worries about problems from retort operations like those in Utah as well as from in situ operations like Shell proposes. He says that either technology will rip up the landscape, chopping up habitat for a long time, if not forever. (Shell insists it has reclamation plans in place for current and future development; Graham and others wonder if that’s even possible, environmentally or economically.) When energy companies like Shell purchase water rights, they generally take them from agricultural areas that, among other things, support wildlife. There is very little information about how this kind of disturbance will affect the migratory patterns of ungulates like Colorado’s famous mule deer herds—or the ever-growing threat to sage-grouse. “Oil shale, on top of all the other habitat losses from traditional oil and gas development, could be devastating to the survival of the sage-grouse,” says Graham.
For now, Boyd says Shell’s decision whether to move to commercial production with its project is still a decade away, and that “like it or not, we’re going to be tied to liquid fuels for the foreseeable future.” He maintains that the industry needs assurances about regulations and royalty rates to move forward with R&D investment—and insists that the new regulations do not give companies carte blanche to operate without further environmental reviews. Boyd says Shell and others will still have to gain approval from dozens of different state and federal agencies and adhere to strict environmental laws in order to proceed. Shell won’t go forward, he says, unless the project is “economically viable, environmentally responsible, and socially sustainable.”
Still, if history tells us anything, it’s this: When the price of oil rises, as it surely will, oil shale supporters will surface like claim jumpers after a gold strike. Whether oil shale turns the West into the “Saudi Arabia” of North America, as proponents would have it, or is a desperate attempt to scrape the “dregs” of fossil fuels, as Udall puts it, the new administration must grapple with more than a trillion tons of this burnable rock whose potential treasure comes at a tremendous cost to the region—and the planet.
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