Oil Shale: Back in Business

The residents of Northwest Colorado, who remember the oil shale boom and bust of the 1980’s, have been eyeing the media headlines with trepidation. If news about oil shale from the last quarter of 2006 is any indication, this area should be bracing for another round. Mindful, this potential oil shale expansion will be on top of the oil and gas drilling boom now going on in areas around Grand Junction, Meeker and Rifle.

Although technology to extract oil from shale may be years away, the pre-development process is going full speed ahead.Here’s a synopsis of recent oil shale news:

Chevron Developing Oil Shale Extraction Process
Chevron announced it will team up with scientists at Los Alamos National Laboratory in New Mexico in developing new technology to extract oil from oil shale. Now, with rising oil prices and instability with overseas supplies making such endeavors more attractive, Chevron is turning to chemists at Los Alamos to determine how this fuel can be extracted at the molecular level. Chevron’s chief technology officer said it could be decades before any meaningful production begins.

Shell Experimenting with New Oil Shale Technology
Shell is spending $30 million to create and test a massive “freeze wall” that would extend from the surface to 1,700 feet below the ground. The walls would be 30 feet thick in a shape 300 feet wide by 350 feet long.  It is designed for a dual purpose: to keep groundwater from infiltrating Shell’s oil-shale wells and to prevent produced oil from contaminating nearby groundwater.

A crew of 200 construction workers will complete the larger freeze wall in the spring by drilling a series of 150 well bores that will be pumped full of ammonia-based coolant. It will take about 18 months for the adjacent water and rock to freeze to minus-60 degrees Fahrenheit, creating the massive ice wall.

Perfecting the technology ultimately could lead Shell to commercial production of shale oil on 40,000 acres it owns in the Piceance Basin and thousands more acres it may lease from the federal government. Commercial production is unlikely to begin until 2015.

BLM Approves Oil Shale Development
The Department’s Bureau of Land Management completed the Environmental Assessments under the National Environmental Policy Act that examine each oil shale project proposed by Chevron USA, EGL Resources, Inc., and Shell Frontier Oil & Gas, Inc.  The BLM examined the potential impacts as well as the cumulative impacts of all five projects combined with other oil and gas development in the area and issued A Finding of No Significant Impact (FONSI) for each of the proposed projects.

Each FONSI is supported by extensive mitigation measures that will be added as stipulations to the RD&D leases. Before any on-site activities can begin, companies must submit detailed plans of development for approval and obtain all required local, state and federal permits to safeguard resources, such as air and water quality.

Environmental Concerns in the oils shale industry
The Colorado Department of Public Health and Environment, the U.S. Forest Service and a coalition of environmental groups all urged further study before the Bureau of Land Management announced it had approved research and development leases to Chevron Corp., EGL Resources and Shell for sites in Rio Blanco County.

Leasing oil-shale sites in western Colorado could cause more severe environmental damage than the federal government acknowledges, environmental groups and government regulators said. But BLM and the Bush administration decided to go forward with the leases, saying an in-depth study of what a large oil-shale industry would mean for the Rocky Mountain West is underway and it will look at the issues those regulators are bringing up.

Interior Dept Grants Shale Oil Leases
The Department of the Interior issued 10-year leases to Chevron USA, EGL Resources, Inc., and Shell Frontier Oil & Gas, Inc. for oil shale research, development and demonstration (RD&D). The projects are on 160-acre public land parcels in Northwest Colorado’s Piceance Basin managed by the Bureau of Land Management. The tracts were identified in proposals submitted by the companies in June 2005.

These are the first RD&D leases issued for public lands and the first federal oil shale leases issued in more than 30 years since the 1980’s oil shale boom and bust in the Rifle/Parachute/Meeker area. The department said the projects begin as early as the summer.

The initial term of the leases is 10 years, and the companies have the option of extending the leases up to five years if they can prove they are making progress toward producing oil at a commercial level. The leases also indicate the lessee has the right to convert the acreage plus adjacent land up to 4,960 acres to a 20-year commercial lease once commercial production levels have been achieved and all other requirements have been met.

Gail Norton Hired By Shell
Former Interior Secretary Gale Norton will join oil giant Royal Dutch Shell as a general counsel in its exploration and production business in mid-January. Norton stepped down from the Interior in March and during her tenure, she received support from industry groups and criticism from environmentalists. Before her tenure at the Interior, Norton was senior counsel at Denver law firm Brownstein, Hyatt & Farber.

Shell said in a statement that Norton, a Colorado resident, will “provide and coordinate legal services” for its unconventional-resources unit, which is developing and testing proprietary technology to recover oil from shale.