Oil shale outlook: Challenges hamper commercial development

Glenn Vawter

Phil Castle, The Business Times

Glenn Vawter recalls a college field trip to Western Colorado during which a professor pointed out a rock formation and said oil shale development could solve the nation’s energy problems.

More than 50 years later, Vawter remains convinced it’ll happen. “I’m still optimistic we’ll use this large resource someday.”

The story illustrates two points: The largest and richest oil shale deposits in the world are buried in the Piceance Basin. But energy companies face a variety of challenges in their efforts to extract that resource on a commercial scale, said Vawter, executive director of the National Oil Shale Association.

Regulations, politics, public perception and growing concern about climate change all hamper development, he said. Increased production of oil and natural gas from unconventional plays has prompted some companies to divert investments in oil shale.

Nonetheless, oil shale potentially offers an important domestic source of transportation fuels, Vawter said. “It needs to be part of a long-term energy strategy.”

Vawter offered both an overview and update of oil shale development during a presentation hosted by the Grand Junction Area Chamber of Commerce.

A former executive who worked with a number of energy companies during his career, Vawter now oversees a Glenwood Springs-based association of corporations, nonprofits and individuals that encourages responsible development of oil shale.

Shale formations in Colorado, Utah and Wyoming contain more oil than the Middle East, Vawter said, and estimates keep rising.  According to the latest figures from the U.S. Geological Survey, shale formations in the three states contain 3 trillion to 4 trillion barrels of oil, of which 800 billion barrels is potentially recoverable. The largest and richest formations are found in the Piceance Basin, he said. “It’s the best oil shale resource in the world.”

Extracting that oil requires heating shale to 600 to 900 degrees either in above-ground facilities or in place underground, he said.

There have been a number of efforts over the decades to develop oil shale in the United States, including a major push in the 1970s that led to a boom and subsequent bust in Western Colorado, he said.

Since the enactment of a federal energy law in 2005, several oil shale research and development leases have been awarded, he said.

A programmatic environmental impact statement completed in 2008 would have made a total of about 2.4 million acres in Colorado, Utah and Wyoming available for potential leasing and development of oil shale and tar sands.

Under a second analysis conducted to settle a lawsuit, however, the U.S. Bureau of Land Management changed its preferred alternative and called for a reduction in the available acreage for oil shale leasing and development to a total of 462,000 acres in the three states. In Colorado, the available acreage would shrink from 346,000 acres to 35,308 acres. While much of the information in the two analyzes was the same, the conclusion was totally different, Vawter said.

Neither the 2008 or 2012 authorize oil shale leasing, Vawter said, but rather delineate those areas of interest for leasing. Oil shale remains the only mineral the BLM doesn’t lease on a commercial basis, he added.

Still, work continues on a number of oil shale research projects in Colorado and Utah, including efforts by American Shale Oil, Enefit, ExxonMobil, Natural Soda, Red Leaf Resources and Shell.

One of the first commercial scale operations could occur at the Red Leaf project near Vernal, Utah. There, mined shale is heated in closed surface impoundments called capsules that measure about 1,000 feet long and 500 feet wide. Vawter said Red Leaf could move to commercial operations within three to five years.

While commercial oil shale production  has occurred for decades in Estonia and recently has increased in Brazil and China, the U.S. lags behind, Vawter said.

Regulations alone likely would delay large-scale oil shale production in the U.S.  for eight to 10 years, he said. That’s not considering such challenges as changing politics, environmental considerations and climate change.

Public perception plays a role as well, Vawter said. Despite “myths” to the contrary, oil shale production results in three to six times more energy than what’s required for  extraction, he said. Moreover, oil shale development requires less water than many believe — by one estimate 1 barrel to 3 barrels of water for every barrel of oil produced.

Unlike the rapid oil shale development in Colorado in the 1970s spurred by government funding, development financed by private investment would occur incrementally, he said. “Things are so much different now than then.”

What hasn’t changed, Vawter said, is U.S. demand for transportation fuels — 94 percent of which come from petroleum. Even if alternative fuels are developed, the transition likely would take a long time. Oil shale could help meet that need, he said.