Eyes On Enefit LogoOver the past few weeks, we’ve examined Estonian oil shale company, Eesti Energia, known as Enefit in the U.S., to find out the real story on Estonian oil shale and how it could affect the American West. The outlook is grim.

Even though Eesti Energia is widely considered the world’s leading oil shale firm and is the largest company in the world working with oil shale, it is in a financially vulnerable position. The company has made a number of poor investments, including a new bloc for an Estonian oil shale plant – an investment the Estonian State Audit Office found to be legally questionable and “not economically feasible.” Less than a year after breaking ground on the plant, Eesti Energia abandoned the project.

Things have gotten so bad for Eesti Energia that credit benchmark Moody’s has downgraded the company’s credit rating (now rated negative) twice in the past 15 months.

Even Eesti Energia’s CEO admits that oil shale is not profitable without government subsidies. The reason is simple: oil shale fails the basic economic test. In other words, the return on oil shale doesn’t outweigh the investment.

Over here in the United States, we found Enefit has run into trouble trying to commercially develop oil shale. Despite the company’s claims that extracting Utah oil shale is a “simple mining project,” Enefit has experienced significant problems. Tests show that Enefit hasn’t been able extract oil from the oil shale ore mined in Utah as easily as executives had hoped and promised, and that it requires more energy to process Utah oil shale than expected, which results in higher carbon dioxide emissions. An internal company document called the Utah test results “not promising.” And, despite all the “around the corner” rhetoric we hear from oil shale supporters, at least one Estonian expert thinks that a method for viably extracting Utah oil shale is decades away.

Company dismissals of these concerns are, as one Colorado columnist put it: “reminiscent of previous failures to extract commercial quantities of petroleum from [oil] shale.”

Even when Eesti Energia has been able to produce subsidized energy from oil shale in Estonia, the environmental impact has been disastrous. The company’s Estonian operations have contaminated groundwater, created 600-foot high mountains of oil shale waste that spontaneously ignite, and caused the emission of “lots of carbon dioxide.” A former executive at Red Leaf Resources testified before Congress that Eesti Energia’s Estonian operations were a “nasty business.”

Given this web of problems, it shouldn’t be surprising that company officials can’t seem to keep their stories straight. What is said in the U.S. often doesn’t match up to what is said in Estonia.

Oil shale – a rock that actually contains no oil – has a 100-year track record of failure in the U.S. despite the billions in taxpayer dollars that have been risked on failed oil shale experiments.

The facts from our Eyes on Enefit series argue for taking a cautious, balanced approach to oil shale. Companies like Enefit should not be given more federal land or money for oil shale experiments until they can prove that they are able to develop oil from oil shale in a commercially and environmentally sound way.

This blog is a summation of our series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.