Oil from a rock

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.

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.

Many Coloradans share their former senator's skepticism about oil shale, going back to the 1970s and 1980s. The 1973-74 Arab oil embargo drove up oil prices and prompted a federal push for domestic fuel development. Taking advantage of subsidies, energy companies began developing oil shale operations with limited regard for community or environmental impact. By 1982 oil prices were falling again, and Exxon pulled out of a $5.5 billion oil shale project, laying off 2,200 employees on what was called "Black Sunday." Coloradans still remember it, and some are wary of another industry boom and bust. As the local sarcasm goes, "Oil shale has a fantastic future-it always has, and it always will." Poll numbers show most Coloradans are against oil shale subsidies unless they involve "strict environmental controls."

A recent report by the environmental policy group Western Resource Advocates laid out the case against the oily rock: If the United States were to make an all-out run on Western oil shale, producing 2.4 million barrels of oil a day by 2030, the industry could require somewhere between 180,000 and 420,000 acre-feet of water. That's about 5 percent to 12 percent of what Colorado already draws each year from the Colorado River Basin.

And although oil shale has seven times more energy than potatoes, it has a low energy return on investment-making it anywhere from one-half to one-twentieth as efficient an energy source as conventional crude, depending on technology and how the numbers are run. Add to that increased CO2 emissions and the risks that a landscape of oil extraction plants could pose to migrating mule deer, groundwater, and a scenic view of pinyon pines and junipers, and it's nearly enough to make a concerned citizen worry that his state will become "a sacrifice zone to produce inefficient and wasteful fuels," in the words of the Advocates report.

But Jeremy Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines, believes such critics exaggerate the environmental impact. He hosts an annual conference that brings together oil shale experts from around the world to share new developments. "We know how to restore the land, and we know the footprint in the oil shale industry can be quite compact," he said. In the last decade or so, companies have made big advances with carbon capture technology, in situ mining, and efficient refining techniques that use little water. The industry could be built slowly, said Boak, with plants occupying as little as "ten square kilometers out of a thousand or more."

Fine said oil shale's obstacle isn't technology so much as politics and oil prices. An oil price spike could jolt oil shale into production, but the Nov. 2 election may help, too. The House, coming under Republican control, may push to revive oil shale-but likely with resistance from a Democratic Senate and administration. The result will likely be pressure for more development but also a continuation of what Boak calls a "kind of a perennial disgruntlement" on both sides of the oil shale debate.

Gas glut

If you find your heating bill delightfully inexpensive this winter, you can thank the ingenuity of shale gas drillers. New drilling technology in huge Eastern and Southern U.S. shale rock formations have allowed energy companies to reach natural gas resources that were inaccessible before. "We once thought we could face gas shortages and brownouts," energy analyst Fadel Gheit told the Associated Press. "Now we are facing an enormous oversupply of natural gas." Known U.S. gas resources increased around 40 percent from 2006 to 2009, according to the Colorado School of Mines.

The glut has boosted production and cut gas prices-great for homeowners and natural-gas-fired power plants but devastating for more expensive forms of electricity generation, such as wind farms and nuclear power plants. Even with the option of federal loan guarantees, many energy companies have delayed or halted nuclear reactor projects-or say they'll do so if gas remains at its low $3 to $4 per million British thermal units (down from nearly $14 in 2008). Electricity from natural gas is expected to supply a quarter of U.S. power by 2015, as coal-fired plants face pressure and regulation for their comparatively high carbon emissions.

Natural gas from shale is sometimes confused with oil shale, but it is a distinct geologic phenomenon. In this case the gas has already separated from the shale but remains trapped inside it. Energy companies release the gas by drilling holes and using hydraulic fracturing, or "fracking"-employing high-pressure blasts of water or specialized fluids-to crack the rock. Although the process was pioneered in the 1980s, only recently did engineers perfect the technique of drilling down and then sideways into hard-to-access shale deposits.

Hydraulic fracturing isn't without problems, though: The EPA has launched a two-year investigation into the environmental and health effects of fracking, looking especially hard at the chemicals in fracking fluids. In September drilling companies were required to start disclosing their fracking ingredients in Wyoming, where some residents found benzene and naphthalene in their well water. Both houses of Congress have introduced bills to establish federal oversight of fracking under the Safe Drinking Water Act, but as of early November the bills were stuck in committee.