Three decades post-bust, debate over oil shale rages

Kenneth Brown, manager of Colorado operations for Shell Exploration and Production, looks over a test site at the Mahogany Research project in the Piceance Basin in 2005.


Oil shale, defined

“Oil shale is actually the rock marlstone, which contains kerogen, a precursor to oil. The kerogen must be heated to more than 750 (degrees) to convert it into oil because it was never buried deeply enough for nature to convert the kerogen to oil. Oil shale should not be confused with shale oil. In shale oil, the strata were buried deeply enough that the temperature was sufficiently high to naturally convert the kerogen into oil. Currently, a major exploration effort is being carried out in Colorado to produce oil from the Niobrara shales, primarily in eastern Colorado. In shale oil plays such as the Bakken in North Dakota and Montana, the objective is to find brittle layers in the shale, drill horizontal holes along those brittle layers, artificially fracture the rock, and produce the resulting oil.”

Source: Bureau of Land Management’s Draft Programmatic Environmental Impact Statement on possible land allocations for possible oil shale and tar sands development, Chapter 2, page 15.


Note: Despite the BLM’s efforts to clarify things, “shale oil” sometimes is used to describe oil shale as well, as in the name of American Shale Oil LLC, a company that owns a federal oil shale research, development and demonstration lease in Rio Blanco County.

Three decades after Black Sunday, energy companies remain interested in developing the region’s world-class store of oil shale resources.

But Glenn Vawter of Glenwood Springs, executive director of the National Oil Shale Association, sees the situation as far different from in the early 1980s.

“I don’t see the frenzy of this push that we had from the federal government at that time to get out and build commercial facilities and get into production,” Vawter said, referring to the billions of dollars in federal incentives that helped feed the shale boom preceding Black Sunday.

But David Abelson, oil shale policy advisor for the Western Resource Advocates conservation group, thinks the government has shown far too much willingness to make federal land available for an industry that has yet to prove itself after a century of trying.

“Why make land available for an industry that does not exist? Where’s the precedent for that?” Abelson said. “These companies have been trying for generations, and they’re smart people, but it continues to be the rock and the economics of the rock that confounds them, and yet (federal officials) want to turn over more public resources. That doesn’t make sense.”

A central question involving the resource remains: Is the energy needed to produce oil from the kerogen locked in shale, through heating or other means, too great to make it worthwhile? Meanwhile, oil shale has generated a lot of heat on the political side in recent years, being hotly debated more than a generation after Exxon’s 1982 pullout.

The temperature started to rise with the congressional passage of the Energy Policy Act of 2005. Prompted to act by that law, the Bureau of Land Management in 2008 decided to make 2 million acres of land in Colorado, Wyoming and Utah available for potential oil shale leasing, and 431,000 acres for tar sands leasing in Utah.

Conservation groups the next year, in the final days of the Bush administration, filed a lawsuit challenging the acreage amounts and the rules, including initial royalty rates of just 5 percent.

Last year, the Obama administration agreed to a settlement in which it would reconsider the rules and land allocations. It is scheduled to announce a new rules proposal in May. Earlier this year it proposed reducing the oil shale land allocations by more than three-quarters, and by about 90 percent in Colorado, and sharply cutting tar sand acreage as well. Any leases would be initially limited to research and development, with commercial leases issued only after certain conditions are met.

Numerous counties in oil shale country have objected, including Garfield and Mesa counties, wanting to see the current acreage kept open.

The new BLM proposal is designed partly to protect important sage-grouse habitat and lands identified by the BLM as having wilderness characteristics. The counties contend the proposal violates a congressional moratorium on spending on a recent BLM “wild lands” program. The BLM says that’s not the case, and under federal law it has an ongoing obligation to inventory public lands and their resources and other values, and it simply is proposing to protect areas identified as having wilderness characteristics.

Most of the proposed reduction in Colorado acreage is for other reasons, including protection of habitat for big game and rare plants and other sensitive areas, BLM spokesman David Boyd said.

Notably, much of the acreage associated with five existing research, development and demonstration leases in Colorado isn’t part of the acreage the BLM proposes making available for leasing. However, that acreage would be grandfathered in because of the existing rights associated with it, as long as the existing leases remain valid.

Shell owns three, 160-acre RD&D leases. Two of them fall entirely out of the area in the BLM proposal, as do an additional 5,000 or so preference-right-lease acres associated with each of those leases that Shell might be able to acquire if its project succeeds and it meets certain conditions.

In addition, part of the acreage in an RD&D lease proposal by Natural Soda falls outside the BLM proposal, but it also would be grandfathered in if approved.

As a result, while the BLM proposes allocating about 35,300 acres in Colorado for potential oil shale development, the actual amount of acreage that might end up being developed could be significantly more.

And according to a draft study by the agency analyzing its proposal and three other acreage alternatives, because of the existing five leases and preference-right-lease acres attached to them, “there could be an intensive area of oil shale development within the Piceance Basin under all four alternatives.”

Public comments on the study and BLM proposal are due Friday.

In what oil shale critics consider a continuing sign of the dubious future of oil shale, Chevron recently said it planned to divest itself of its lease and focus on other priorities. However, it could transfer the lease to another company.

The resolution being endorsed by area counties argues the BLM is being steered “by a host of anti-oil shale, pro-wilderness groups.” But Abelson said most conservation groups favor a more restrictive oil shale alternative under which the BLM would limit acreage only to the six existing and three proposed RD&D leases in Colorado and Utah.

“If the research yields results that warrants additional lands being opened, let’s look at the research and let’s do the analysis at that time,” he said. “From everything we can tell, oil shale remains stuck in neutral, and that’s the history of it.”

He said the region’s economy is more diverse than before Black Sunday, with more dependence on sectors that rely on access to clean air and water and public lands.

“What these (oil shale) companies want to say now in essence is just like 30 years ago, ‘Trust us,’ but now more is at stake,” Abelson said.

Vawter said the industry is frustrated by being given one framework to work under in 2008, and now having it change.

“I think it’s this lack of continuity from administration to administration that’s the real issue,” he said.

Shell had opposed the conservation groups’ position in the litigation and has argued for the need for regulatory certainty from the government.

Said local Shell spokeswoman Carolyn Tucker, “We believe that the regulatory structure in place as it is is very strong in being a complete process and a way to get to commercial development.”

ExxonMobil (Exxon was involved in a merger after Black Sunday) has applied for one of the BLM’s second round of RD&D leases. The company previously said it plans to take a careful, phased approach to the technology it is considering for a Rio Blanco County site.

The existing and proposed RD&D projects in Colorado all involve trying to develop oil shale in-situ, or in place underground, rather than through mining it and processing it on the surface as in the past. The companies hope the environmental impacts will be reduced.

Shell long has said its project would need to be economically viable and environmentally and socially sustainable.

“We’ve learned a lot from past legacy issues, and we’re very aware of the consequences of Black Sunday. Our desire is to do things the right way as we move forward,” Tucker said.

One concern for some local officials, such as the Rifle City Council, is whether any oil shale development would include enough upfront money to deal with infrastructure needs and other communities. John Loschke of Parachute is a Black Sunday survivor there who later became mayor and recently rejoined the town council. He said a lack of upfront funds was a problem in Parachute before Black Sunday and during the ramp-up in oil and gas development in the mid-2000s, and it is a problem in connection with a current drilling boom in North Dakota.

“It’s still not happening. It’s really frustrating to sit back and listen to those people and what they’re dealing with and have it fall on deaf ears,” he said.

Vawter said an oil shale trust fund prior to Black Sunday was responsible for a lot of infrastructure development,which was one positive thing to come out of that oil shale era. But Jim Spehar, a former Mesa County commissioner and Grand Junction mayor, said it wasn’t in place when oil shale activities first were ramping up.

“It was a valuable tool. It came late in the game,” he said.

He said what’s needed are partnerships with the oil shale industry to allow for credits against things such as future royalty payments, to help cover upfront costs.

That idea may be an island of agreement amid a sea of debate over oil shale today. Tucker said Shell supports the concept of a credit for upfront payments, and Vawter said he’s talked to a number of industry representatives who like the idea.


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