Oil shale potential in the West rises once again

Oil shale potential in the West rises once again

Because of rising oil prices, development of oil shale on public lands in the West is coming closer to reality. The U.S. Department of the Interior has issued an "advance notice of proposed rulemaking" concerning the establishment of a commercial oil shale leasing program, reports the Wildlife Management Institute.

The advance notice published in the August 25 Federal Register requests comments and suggestions to assist the U.S. Bureau of Land Management (BLM) in its drafting a rule to establish a commercial leasing program for oil shale. The Energy Policy Act of 2005 directs the Interior Secretary to complete a Programmatic Environmental Impact Statement (PEIS) for such a program. Input is especially requested on royalty rates and leasing approaches. On completion of the PEIS, BLM would publish a final rule establishing the program.

Vast areas in Colorado, Wyoming and Utah overlay huge deposits of oil-bearing shale. It is estimated that there may be as much as 1.2 trillion barrels of oil in the Green River Formation under these three states. About 70 percent of the oil is under federal public lands, much of it administered by BLM. The trick, of course, is how to extract the oil and reclaim the land in an economical manner.

There have been various booms and busts in the quest for shale oil over the past 60 years. The latest was in the 1980s, when a supposedly lucrative approach was on the horizon. But industry suddenly pulled out, when the approach proved impractical, with the result that many communities in western Colorado suffered considerable economic hardship. Once burned, so to speak, local communities likely will demand advance payments in support of community infrastructures, such as schools, roads and social services, from oil shale companies prior to any large-scale development.

To date, no economically feasible method for large-scale development has been found. Current industry efforts seem to be focusing on an underground, or "in-situ," process using heat that would separate to oil from rock. Earlier methodologies more commonly relied on mining or above-ground retorting.

Conservationists and sportsmen have long been concerned about the negative impacts a large-scale oil shale program would have on important wildlife species, such as mule deer, elk, pronghorn and sage grouse. It is suggested that the in-situ approach would be less harmful to the environment and wildlife habitats compared with impacts of shale waste disposal in the more typical mining approach. However, there remain serious concerns about the amount of energy required to retrieve the oil and about further impact on the region's scarce water resources.

Another issue is determining how much of the economic gain should go to federal coffers. Congress currently is haggling over how big a share of royalty money taxpayers should get from oil shale produced on public lands. How this issue is decided may well decide whether or not the current efforts proceed. At the moment the royalty provisions are included in House legislation on offshore drilling and that bill seems to be pretty much held hostage by a standoff between the House and the Senate.

Given the vacillating history of oil shale development in the West, no one seems ready yet to gamble on its certainty in the immediate future. However, as long as the nation's voracious appetite for oil exceeds the supplies, the affordability gap of oil shale development becomes increasingly narrow.

More information on the advance notice and plan for the PEIS can be found in the Federal Register (Vol. 71, No.165; pp 50378-50379).


September 09, 2006