Oil shale’s future still locked in rocks
The slow dance away from oil shale by major energy companies this time around is much preferrable to the quick exit, slam-the-door-behind-you steps Exxon and some other companies executed in the 1980s.
Of course, there was never anything like the boom that occurred in the 1980s associated with the most recent enthusiasm for oil shale. Most of the companies involved, especially Shell, with its Mahogany Project in northwestern Colorado, took a patient, methodical approach to researching and developing new techniques for extracting oil from rock, techniques they hoped would one day provide the basis for a commercial oil shale business in this part of Colorado.
But that careful, methodical approach makes Shell’s announcement this week that it is pulling the plug on its oil shale work in Colorado all the more devastating. This was no flash-in-the-pan project. It was the accumulated research and experience of nearly 20 years of continuous efforts. Yet the international company ultimately decided it wasn’t worth it to continue those efforts.
No one should view this to mean oil shale is dead forever as an industry. That’s hardly the case.
But there is something unfortunately familiar in the situation today when compared with earlier spurts in the industry. You can read about it in the early 1900s accounts of the first oil shale push or hear about it from people who were in Western Colorado during the 1980s boom:
First, there has been quiet industry research, followed by public realization of the economic activity and energy abundance that could occur if the secrets of efficiently obtaining oil from rock could be discovered and a commercial oil shale industry were to actually develop here. Then there is a frenzy of public enthusiasm and overhyped rhetoric about the potential of the industry.
But, at some point, the energy companies themselves begin re-evaluating their technologies and the economics of the industry, especially in light of new developments in the production of conventional oil. That happened with Chevron earlier this year and has been gradually occurring with Shell over the past few years.
Inevitably, the oil shale backers say: “Yes, but so-and-so company is still proceeding with its plans.” In this case, those companies are a pair of firms operating in Utah with what they claim are promising technologies and AMSO in Colorado.
Perhaps those companies will be the ones who finally find an economic means of getting fuel from shale rock. The formations in Utah are much shallower, but not as extensive as those in Colorado.
In the meantime, for Colorado, we continue to believe that the BLM should offer relatively small parcels of land for companies that want to conduct research and development into oil shale technology, as it has done for Shell, Chevron and others.
But, as the Shell news this week demonstrates, it’s premature to begin leasing large swaths of public land for commercial oil shale development when the industry is far from shovel-ready.