Oil Shale: The Future of U.S. Energy Security
Posted on: Friday, 16 November 2007, 06:00 CST
By Henry, Darrell A
Lobbyists make their case in Washington against pending energy bill provisions. Darrell Henry
The Western Business Roundtable, a group of diverse business executives operating in the West from oil, gas and mining, to agriculture to engineering and utilities, recently hosted a briefing in Washington, D.C, for more than 60 representatives of Congressional offices on the tremendous potential of oil shale. The roundtable was also there to lobby against provisions in the looming energy bill that could slow oil shale and other fossil energy development.
The roundtable works on a variety of issues, including economic development, environmental protection, regulatory reform, energy policy, public lands use, waste management, and air and water quality.
This article is a summary of the Western Business Roundtables position on oil shale and its presentations by Darrell Henry of the Roundtables Washington, D.C, office; Jim Bartis of the Rand Corp.; Scott Stewart of Shell Unconventional Resources; and Jim Bunger, an independent oil-shale consultant.
THE POTENTIAL
While oil shale occurs in much of the world, the western United States is home to the world's largest deposits. Most oil shales are fine-grained sedimentary rock containing high amounts of organic matter from which oil and gas may be extracted via a distillation (heating) process.
Oil shale was formed millions of years ago by the deposition of silt and organic debris on lake beds and sea bottoms. During time, heat and pressure transformed the materials into oil shale in a process similar to that which forms oil; however, the heat and pressure were not as great. Oil shale can contain enough oil to burn without additional processing, so it is also known as "the rock that burns."
Total world resources of oil shale are estimated at 2.6 trillion barrels of oil, with the Green River formation in Colorado, Utah and Wyoming containing an estimated 1.2 trillion to 1.8 trillion barrels- the largest deposits in the world.
Even by conservative estimates, there are 800 billion barrels of recoverable oil from oil shale in the area, an amount three times greater than the proven oil reserves of Saudi Arabia.
INCREASED DOMESTIC ENERGY SECURITY
Energy independence is essential to preserve America's economic strength and national security. A recent report by the U.S. Department of Energy is the latest reminder that reducing our dependence on foreign imports of oil and refined products is essential to achieving the energy security objective.
Import reductions can be achieved in two fundamental ways: by reducing demand for oil through conservation and efficiency, and increasing production of fuels from domestic resources, including alternatives, biofuels and unconventional fuels. Oil shale has the potential to increase domestic energy security and make the U.S. less reliant on foreign sources of energy.
"The disturbing irony is that the world epicenter of anti- American hatred and terror is also the epicenter of our number one source of energy," said former New York Governor George Pataki.
In public opinion poll after poll, an overwhelming majority of citizens-nearly 85%-express strong support for weaning the U.S. from increasing foreign energy addiction. They want America to be as energy independent as possible. Soon, new American technologies can help Western oil shale do just that.
21ST CENTURY TECHNOLOGY
The greatest challenge to realizing the vast potential of oil shale in Colorado, Utah and Wyoming has been technology, extracting the resource in an economically viable and environmentally responsible way. With U.S. demand for petroleum products topping 20 million barrels per day, oil shale could be used to meet a quarter of that demand-800 billion barrels of recoverable resources, which would last more than 400 years.
A new era has begun for Western oil shale. We are closer to finding viable techniques for extracting the resource in an economically feasible and environmentally responsible way, with cutting-edge research and development under way by private companies in the region.
Oil shale must be mined and processed to generate oil similar to that pumped from the ground, but extracting oil from oil shale is more complex than conventional oil recovery and historically, more expensive. There are several methods to extract oil from shale; some are advancements to traditional techniques while others are being tested for the first time in the Green River formation.
Some companies are using new technology to improve on the traditional method of accessing oil shale. Oil shale is first mined and then heated to a high temperature (retorting); the resulting liquid is then separated and collected.
An alternative experimental process is referred to as "in-situ retorting." This involves heating the oil shale while it is still underground and then pumping the resulting liquid to the surface.
Shell Oil Co. has U.S. Bureau of Land Management research and development leases and is moving stage-by-stage to prove up and resolve the issues around extraction of shale through a proprietary process known as "thermally conductive in-situ conversion." Shell has carried out a small field-test, the Mahogany Demonstration Project South, on its private property in Rio Blanco County, Colorado, using an in-ground heating process to recover oil and gas from the shale formation.
The process involves heating underground oil shale using electric heaters placed in deep vertical holes drilled through a section of oil shale. The volume of oil shale is heated during a period of two or three years until it reaches 650[degrees]F to 700[degrees]F, at which point oil is released from the shale. The released product is gathered in collection wells positioned within the heated zone.
The field results have given confidence in Shell's insitu conversion process. A commercial decision on using this technology is anticipated early in the next decade, though possibly later depending on the sequence and outcome of research activities.
THE EFFECT OF EPACT 2005
Without the oil-shale provisions in the Energy Policy Act of 2005 (EPACT 2005), federal oil shale land would remain unavailable to the private sector, as it has since 1930 when President Herbert Hoover issued Executive Order No. 5327, withdrawing oil shale from leasing.
Even though President Harry S. Truman issued Executive Order No. 10355 in 1952, authorizing the Secretary of the Interior to rescind the Hoover order and lift the moratorium, to date it has not been lifted. (Limited leasing agreements in the 1970s were "prototypes" constructed so as not to have the effect of lifting the moratorium.)
With EPACT 2005, Congress provided clear direction in federal energy policy by instructing the Department of the Interior to develop a commercial leasing program and lift the leasing moratorium. With the exception of Shell, which is operating on private property, there has been no significant money put into oil- shale development on federal land since the prototype program in the 1970s.
EPACT 2005 was passed in August 2005, prior to the deadline for application of the leases in September 2005, and it is generally agreed among applicants and observers that it was the passage of EPACT 2005 and the prospect of obtaining additional contiguous acreage that generated enthusiasm for the experimental lease applications.
Some members of Congress wish to restore the barriers that have been in existence for nearly a century. If Congress succeeds in re- enacting barriers, we can expect the following:
* America's commercial oil-shale production will continue to be sidelined until the federal government provides clarity in its regulatory regime and leasing program;
* industry, and, more importantly, Wall Street, will perceive the proposed legislation as hostile to oil shale. This is a dangerous direction and could slow or halt any investment until favorable government policy is expressed;
* current lessees are likely to be discouraged from making large investments. In the case of the Utah lease, the 5,120-acre preference may not be sufficient to support a full-scale operation. Without a clear path to development, investors prudently will likely hold back from investing further in oil shale; and
* loss of oil shale as one of our domestic resources will exacerbate a future supply crisis. As we've seen from hurricanes Katrina and Rita in 2005 and the conflicts in the Middle East, the U.S. is highly vulnerable to supply disruptions, and with continued competition for the world's oil supply from China, India and other burgeoning economies, there is some urgency to begin the process.
Lawmakers should recognize the danger of removing this vast resource (richer and larger than the Alberta oil sands) from our domestic energy base.
The lack of clear government policy has inhibited development of this domestic resource for nearly a century. The first serious attempt with the passage of EPACT 2005 to remove century-old, government-induced impediments to development of this resource is in jeopardy because of legislation pending in Congress.
Members of Congress must recognize that delaying, and even cutting off, the regulatory and leasing process effectively removes this resource from our domestic supply options, at least while our government policy is in limbo. Given the competition for investment in energy supply in other parts of the world and the pressures to develop the resource, it's only a matter of time before retreating on the oil-shale provisions in EPACT 2005 is seen as a colossal mistake. OIL SHALE AND THE WEST
Development of this vast domestic resource could supply the U.S. energy needs for up to 400 years. This presents an opportunity to improve the national energy security position and reduce the instability caused by dependence on foreign sources of energy.
Oil shale's economic benefits would be substantial, not just to our impacted communities, but to American consumers at large. Based on a 3-million-barrel-per-day production rate, estimates are the industry would generate:
* $20 billion annually in revenues through lease bonus payments, royalties on production and corporate income taxes. Roughly half of those profits would likely go to federal, state and local governments;
* several hundred thousand jobs in direct industry employment, plus the associated ripple effect; and
* an estimated 3% to 5% decline in, world oil prices, which would benefit consumers and business users in the U.S. by about $15 billion to $20 billion a year.
Author's note: Research content, credits and thanks go to the Rand Corp., Shell Unconventional Resources, the American Petroleum Institute and Jim Bunger, an independent oil shale consultant.
BY DARRELL A. HENRY, CONTRIBUTING EDITOR, WESTERN BUSINESS ROUNDTABLE
Copyright Hart Energy Publishing, LP Nov 2007
Source: Oil & Gas Investor
User Comments (1)
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Posted by Lee Kanon Alpert on 01/11/2008, 12:41 Please see an article forwarded to me by my son which he found to be very interesting, as do I. |
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