Re: Energy Bill Encourages Oil Shale Development

Another oil shale story:

Oil shale again enters the picture

By MIKE SORAGHAN
The Denver Post
WASHINGTON -- The energy bill signed by President Bush on Monday calls
for a quick return to the oil-shale fields of the West as a way out of
the nation's energy troubles.

Key congressional Republicans, alarmed by oil prices that already
exceed $60 a barrel, say distilling oil out of Western shale is a way
for the United States to start weaning itself from foreign oil.

"We actually have some of the world's largest potential oil resources
within our borders," said Rep. Jim Gibbons, R-Nev. "If my math is
correct, we have 12 times as much oil as Saudi Arabia."

But even the Bush administration says the move back to shale
development is years if not decades away from producing significant
amounts of oil.

"The general feeling is that we have not yet reached a price level
where shale can compete," Energy Secretary Samuel Bodman said last
month. "It's somewhere between here and $100 a barrel."

And others, recalling the "Black Sunday" shale bust of 1982 that
staggered the Colorado economy, worry that the bill is speeding the
West into dangerous economic and environmental territory.

"I think it's moving forward too quickly. There are lots of questions
that need to be asked about oil-shale development," said Sen. Ken
Salazar, D-Colo., who helped write the energy bill.

Nevertheless, lawmakers such as Gibbons, who held hearings this summer
promoting the speed-it-up approach to shale development, say now is the
time to start cranking up the industry to prevent prices from reaching
$100 a barrel.

"When oil is at $100 a barrel, there will be no jobs, no opportunity,"
Gibbons said.

The United States has an estimated 1.8 trillion barrels of oil trapped
in shale, most of it concentrated in the Green River Formation, which
covers northwest Colorado and parts of Utah and Wyoming. That's more
than all the proven reserves of crude oil in the world today.

The federal government plays a crucial role in developing it because 72
percent of the land is administered by the Interior Department.

The oil-shale deposits have been known about for decades, but unlocking
oil from rock is a difficult and expensive proposition. So interest
rises only when oil prices shoot skyward, like now.

The energy bill passed by Congress orders Interior to hurry up and open
access to its land so companies can exploit the shale underneath.

The bill raises the amount of land that companies can lease from 8
square miles to roughly 80, and it orders regulators to ease shale
development with land swaps.

It also tells the Bush administration to create a leasing program and
have everything ready to lease land in 2.5 years. But before officials
offer any land in a given state, they would have to consult with
governors and local leaders to determine whether there's "sufficient
support and interest."

Officials started a shale-leasing program more than 20 years ago but
dropped it for lack of interest.

Under a provision demanded by Democrats, the administration would have
to do an accelerated but far-reaching study of the social, economic and
environmental effects of a full-scale shale program.

The West, and particularly Colorado, has ridden the shale boom before.
As oil prices shot skyward in the 1970s, oil companies invested
billions of dollars in Colorado, promising huge numbers of jobs.

But it came crashing down when oil prices faltered. Even before
delivering a body blow to Colorado's economy, shale development wreaked
havoc on the environment. Companies dug the shale from huge open-pit
mines, created massive piles of tailings and used giant furnaces called
retorts to cook the oil out of the rock. They used tremendous amounts
of water to tamp down dust and restore the land they dug up.

But now that prices are rising again, Shell Oil has gone public with
its Mahogany research project near Rangely, Colo., where it's creating
a new way to turn rock into oil.

Shell's "in-situ" process would cook the rock while it's still in the
ground, then pump it out, eliminating the giant retorts, tailing sites
and open-pit mining.

But Shell won't even be ready to make a decision on whether its process
is commercially viable until roughly 2010.

Congress, though, wants the leasing program to begin long before that.
And some are talking about going after shale with technology that,
while upgraded, is very similar to the retort method used in the 1980s.

For example, one of the star witnesses of Gibbons' hearings was Jack
Savage, president of Utah-based Oil-Tech Inc. He said the company is
ready to start cooking oil out of shale with a retort it has built near
Vernal, Utah.

"We have been working on this for 15 years," Savage said. "Now we're
ready to go."

Savage, once president of companies that manufactured golf bags and
other sporting goods, said he can turn shale into oil for $10 to $22 a
barrel, depending on market conditions. Savage pushed for an
accelerated federal leasing program, but he's already leased 38,000
acres of state land in Utah and says he's working on a
research-and-development bid to continue work on his project.

Meanwhile, even the new process Shell is trying won't be light on the
land.

"While you are drilling, that acreage is being used pretty
substantially," said Dag Nummedal, a geologist at the Colorado School
of Mines. "You will have intense industrial development in patches."

Shell executive Terry O'Connor compares the impact with that of coal
strip-mining but says there's a long history of restoring land dug up
for coal. "Time has proven that coal-mining operations in the Rocky
Mountain West have an excellent record of handling reclamation,"
O'Connor said.

.

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