The future of oil shale: Market forces still sway potential development

Curtis Moore

When it comes to projections for energy development over the next quarter of a century, oil shale remains about where it did a quarter century ago.

In 1986, when the Grand Valley reeled from the effects of an oil shale bust, oil shale held promise as an alternative to conventional oil and coal. But market forces dictated that the energy industry would continue to focus on more traditional sources.

Twenty five years later, oil shale still holds promise as an alternative energy source. Market forces still dictate the sway of traditional energy sources. Add the pressure to develop such renewable energy sources as solar, wind and biofuels, and it becomes anyone’s guess as to how quickly oil will be extracted from shale on a commercial scale.

In the end, market forces rule the day, said Curtis Moore, an executive with EIS Solutions, a company that handles government affairs and public relations for energy companies. Moore spoke at a recent energy briefing hosted by the Grand Junction Area Chamber of Commerce.

“If gas goes to $10 a gallon, people will drive a lot less,” Moore said, adding the rising price of oil also could affect the development of alternative methods to obtain oil and other energy sources. Those methods could include more offshore drilling and deep drilling in oil reserves difficult to reach on the mainland.

Given the fact the United States uses 18 million barrels of oil a day and produces only 9.6 million barrels a day within its borders, there’s reason to increase domestic production, he said. “There’s plenty of oil. It depends on how much you want to spend.”

While the future of oil shale development remains uncertain, the massive scale of the resource remains unchanged. The United States contains more known deposits of oil shale than any nation in the world. Of the estimated

10 trillion barrels of shale oil worldwide,

3 trillion barrels lie within U.S. borders. And two-thirds of that supply is located in Colorado, Utah and Wyoming.

Of the three, Colorado holds the least promise for production mainly due to strict government regulation of production, Moore said. He cited a recent decision by Enefit, an overseas company, to secure an oil shale lease in Utah instead of in Colorado. “They chose Utah because of a perceived friendlier business environment.”

Enefit is a subsidiary of Eesti Energia of Estonia, the largest energy company in the Baltic states. In published reports, the company confirmed that business climate was a factor in its decision.

The Colorado Oil and Gas Conservation Commission has imposed stricter regulations for drilling activity in Colorado in recent years. The Colorado Legislature has approved the regulations, drawing praise from environmental organizations and criticism from energy companies. Environmental organizations generally say the regulations help protect the quality of air and water in Colorado and the scenic landscape that attracts tourists. Energy companies say the added cost of compliance can constitute a tiebreaker when choosing between Colorado and another location to extract oil or natural gas.

Given the regulations, the potential environmental effects of oil shale development might be overstated, Moore said. He said people who suggest oil shale production will pillage the land needlessly push a panic button. “Oil shale will be required to comply with the same regulations as everyone else.”

Another concern about oil shale production — the use of water to produce oil — also might be overstated, Moore said. The far bigger threat to Western Colorado water comes from people living on the Front Range, he said. State water officials predict that people living east of the continental divide in Colorado will use 1.6 million acre feet of water per year by 2050, while Northwest Colorado uses 315,000 acre feet. By comparison, oil shale production is expected to consume about 45,000 acre feet of water per year.

“Is it appropriate to use some water for oil shale development?” Moore asked rhetorically, suggesting such use would be appropriate.

Still another concern within the oil shale industry is how much demand there will be for oil in coming years. Demand for other energy sources, such as biofuels, could exceed that for shale oil.

Moore said the Energy Information Administration estimates that light duty vehicle use of gasoline in the United States will increase just 1.2 percent by 2035, while ethanol use will rise 45,000 percent. He said he checked the ethanol prediction a few times to ensure the prediction was really that high.

Moore cautioned, though, that such predictions should be considered with caution. “Trying to wean the U.S. off oil is a long, drawn out process,” he said.

Should oil shale development become more economically practical, the timeline for its acceptance and use could be lengthy as well, Moore said. “It will be much more methodical than people would have you believe.”