New Push For Oil Shale Is Continued Failure

On May 1, 1982, nearly 10,000 people worked at Exxon’s Colony Oil Shale project on Colorado’s Western Slope. Twenty-four hours later, Exxon shut the Colony project down. Thousands of people were left jobless and the region’s economy was devastated. This week marks 30 years since the disaster at Colony; what was to become known as Black Sunday.

While Colony is the most dramatic example of the failure of oil shale as a commercial energy source, it’s far from the only one:

  • In 1991, Unocal closed the country’s “most successful” try at an oil shale project in Parachute Creek, Colo. After a decade of trying, the project had swallowed tens of millions of dollars in taxpayer subsidies, and Unocal lost $7 million.
  • In 1981, Chevron and Conoco Shale oil began work on their Clear Creek project, located on a private 25,000-acre site north of De Beque. Construction at the site was halted in 1984.
  • In the 1970s, four companies acquired a federal prototype C-b oil shale lease. The lease was suspended in 1987 and pumping on the production on the lease was stopped in 1991. No oil was ever produced from this lease.

Time has apparently healed oil company wounds for politicians to push this failed resource. There is a new push to drill for this unproven energy source. Spearheading this push is a handful of Congressional heels, Rep. Doug Lamborn (R-Colo.), Rep. Scott Tipton (R-Colo.) and Rep. Mike Coffman (R-Colo.). They recently teamed with Speaker John Boehner to push Lamborn’s PIONEERS Act through the House.

The giveaway is a continuation of a 100-year sink of tax dollars and public lands used to develop oil shale. All have failed. Yet today, industry lobbyists, and the politicians that take money from them are trying to throw more good taxpayer money after bad in an effort to distract from rising gas prices and increase government handouts to oil and gas companies.

Oil shale itself is a misnomer. It is actually rock containing an organic substance called kerogen. The rocks haven’t been in the ground for enough time or under enough pressure to become oil. Oil companies need to recreate geological forces to produce any energy from it. Ideas for developing oil shale have included baking acres of land at 700 degrees for three to four years and even detonating an atomic bomb underground.

The lack of an efficient way to create energy from this rock – which has the energy density of a potato – hasn’t stopped oil companies from using it as a reason to spend money to snatch up public land, or politicians from giving it to them.

If Lamborn, Tipton, and Coffman have their dithers, they would create a host of new giveaways to oil companies such as:

  • Over 2 million acres of public lands for oil shale speculation, even though the oil industry has said, on the record, that it will be at least until 2020 before they know whether commercial oil shale is even possible.
  • “Bargain basement” oil shale royalty rates of 5 percent (compared to a rate of 12.5 percent for onshore oil and gas and 18.75 percent for offshore oil) which would slash revenue to the federal treasury and for local governments, who need the funds to offset the associated costs of energy development such as new roads, utility lines, schools, and fire and police services.

Oil companies themselves have admitted that oil shale is an unready energy source. In fact, Shell Oil, which is recognized as a leader in oil shale research, says the earliest that commercial oil shale technology could be available is next decade, and possibly later: “A commercial decision would be in the middle of the next decade and possibly later depending on the sequence and outcome of research activities.”

Far more valuable to these companies than any potential profit they might receive from extracting a non-cost competitive energy source is the ability to increase their claims to Western lands. Oil companies already have permits to drill on 38.4 million acres of public BLM land, an area larger than the state of Georgia. Of that land, 57 percent remains unused. Congressmen Lamborn, Tipton and Coffman should tell their oil industry benefactors to use the land they have before pushing a bill that would give more of our public land to oil companies for a return that is the equivalent of small potatoes.

 

Oil Shale: A Century of Failure

Wednesday, May 02, 2012, marks 30 years since Black Sunday hit the Western Slope of Colorado, putting thousands of people out of work and devastating the region’s economy. Just two days prior, the Checks and Balances Project released a report, which examines 100 years of failed investment in oil shale.  

Executive summary

Since 1917, when a government official persuaded a Nevada parole board to release a prisoner so the inmate could develop his oil shale extraction idea, experts, insiders, executives and the federal government have dumped billions into efforts to tap oil shale, leaving nothing but failed projects behind.

The oil industry has had plenty of help. The federal government crafted oil shale policies that have effectively transferred thousands of acres of public land to oil companies and have created a leasing structure that could potentially transfer billions of dollars of public wealth to the oil companies. Never before have we given this much to an industry that has yet to show commercial success.

Not one single oil shale project since the first attempts in the late 1920s has ever produced commercial fuel from shale rocks. In fact, one of the few direct results of the federal support has been premature oil shale booms that have ultimately busted.

For all the efforts the American taxpayers have made toward developing oil shale for the oil industry, every effort to sustain commercial production of the resource in the last century has failed.

And the optimism for oil shale is here again, especially amid rising oil prices.

Yet oil companies that obtained research oil shale leases atop rich deposits in northwest Colorado still say it might be another decade before commercial oil shale production ever begins, echoing those headlines from the past 100 years.

Download the full report.

Chevron backs out of oil shale development

On Wednesday, The Colorado Independent reported that Chevron was pulling out of oil shale development in western Colorado.

“Chevron has notified the Bureau of Land Management (BLM) and the Department of Reclamation, Mining and Safety (DRMS) that it intends to divest its oil shale research, development and demonstration lease in the Piceance Basin in Colorado,” the company announced Tuesday. “While our research was productive, this change assures that critical resources — people and capital — will be available to the company for other priorities and projects in North America and around the globe. We will work with the BLM and DRMS to determine the best path forward, timing and other issues.”

This comes just weeks after the House passed the PIONEERS Act, which included H.R. 3408 – a bill that pushed for oil shale development and research as a method to fund the transit bill. Yet, as we all know by now, oil shale has failed to become a viable, commercially-sound energy resource and the Congressional Budget Office (CBO) said it would not produce any revenue.

[The CBO] projected that Boehner’s bill would, over 10 years, leave the highway trust fund $78 billion in the red, and the Interior Department is looking at slashing the amount of land available for oil shale research to 462,000 acres.

While Chevron recognizes that oil shale is not worth the millions of dollars in wasted research and development, others, including Rep. Doug Lamborn do not get this.

“Oil companies have been trying to pull the sword from the stone for nearly a century. Oil shale has no King Arthur,” said Matt Garrington of the Checks & Balances Project. “Chevron’s decision to pull out of oil shale is yet another reason why [U.S. Rep. Scott] Tipton [R-Colorado] and Lamborn should quit saying that melting rocks into oil will somehow fund critical repairs to our roads and bridges.”

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