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Associated Press/Photo by Michael Dwyer

Oil from a rock

Energy | Political trends and commodity prices are pushing forward a controversial way to produce domestic energy

Issue: "A second chance," Nov. 20, 2010

Beneath the hills and cattle hoofs of Colorado lies a vast energy resource that gets locals a bit up in arms. It's oil shale, a dark, flaky rock that oozes oil when heated. Enthusiasts want to mine it, but others in the state say the stuff is more trouble than it's worth.

When former oil executive Glenn Vawter of Glenwood Springs heard an especially vocal critic repeatedly insist that oil shale's energy content was as low as a baked potato, he decided to take some potatoes to a nearby lab to have their energy content checked.

"Typical oil shale will [yield] 25 gallons of oil per ton of shale," he told me. When Vawter substituted his potatoes for the shale, the energy yield plummeted-down to "about 3.5 gallons of oil per ton of potatoes." Clearly, tubers won't be powering cars anytime soon.

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But oil shale will have to outmaneuver more than just potatoes to reach U.S. gas pumps. Its opponents in the Rocky Mountain states and in Washington are worried that industrial mining operations will waste limited Western water and damage the environment. Proponents say it can reduce U.S. dependence on foreign oil: Miners in Brazil and Estonia have worked the sedimentary rock for decades, but 72 percent of the world's supply is found within 150 miles of Grand Junction, Colo. Political trends and a recent surge in oil-extraction technology will help determine how serious a player oil shale becomes in America's energy future.

Colorado, Utah, and Wyoming straddle the best oil shale reserve in the world-the equivalent of nearly 2 trillion barrels of oil, an estimated 800 billion of which is recoverable. By comparison, Saudi Arabia's proven crude oil reserves total 263 billion barrels. Oil shale contains kerogen-essentially a solid fossil fuel that nature never had a chance to convert to liquid. Americans have seen it for decades as an energy source: The government extracted 3,600 barrels of petroleum from shale in the 1920s, but the discovery of large oil fields in California and elsewhere stifled interest. The industry has surged and ebbed in the years since.

"The cost of getting it out is obviously higher than pumping oil out of the ground," said Vawter, who is the executive director of the National Oil Shale Association, an educational group with members from within the industry. "That's been the stumbling block all these years."

But when the price of oil spikes, as it did in July 2008 ($147 per barrel then), oil shale suddenly becomes cost effective. With U.S. crude expected to average a healthy $80 this year, oil giants and smaller energy companies alike are competing to see whose technology can squeeze oil out of the rocks the most cheaply.

Some are taking the traditional approach-which is to mine the shale, load it into a kiln, and cook the oil out-and making it cleaner and more efficient. Other companies are testing in situ techniques, in which the shale is cooked while still in the ground, eliminating open pit mining. Shell Oil is a leader in this technology. The company plans to drill holes up to 2,000 feet deep and insert electric heaters to slowly raise the shale temperature to around 700 degrees Fahrenheit, collecting oil and natural gas as the heat forces them out. To prevent the operation from contaminating groundwater, Shell will use underground refrigeration systems to freeze the perimeter of the site, creating a wall of ice. In its initial tests in Colorado's Rio Blanco County, Shell yielded 1,700 barrels of oil from a 30-by-40-foot area.

Other companies hope to go commercial with their own unique technologies, but politics has slowed the pace of development. During the Bush administration, the Bureau of Land Management (BLM) crafted terms to lease federal land so companies could demonstrate feasible oil shale extraction methods. Twenty energy companies applied, and four were awarded leases in 2007. But with a new administration came new priorities: President Obama appointed Ken Salazar, a U.S. senator from Colorado, to be secretary of the Interior. One of Salazar's first moves was to cancel the Bush lease rules, rewriting them to be less generous for oil companies. The new secretary said those who view oil shale as a "panacea for America's energy needs have been living in fantasy land."

"[Salazar] was very sensitive to land and water issues and environmental concerns, and carried that with him to Washington," said Daniel Fine, a strategic adviser for the New Mexico Center for Energy Policy. "The policy is basically to contain it-contain oil shale development, which has been done in terms of the change in leases." When Salazar offered his revised BLM leases in 2009, only three companies applied.

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