OIL SHALE:

Despite Interior's resistance, R&D efforts forge ahead

Energy companies are pressing to develop technologies for coaxing usable fuels from shale in the Rocky Mountain West despite resistance to exploiting the resource from the Obama administration.

Oil shales in Colorado, Wyoming and Utah hold more petroleum than all the world's known reserves -- 1.8 trillion barrels of oil, 800 billion of which are currently recoverable -- but extraction from the fine-grained rock is tricky, expensive and technologically in its infancy despite more than 25 years of research.

Industry is determined to tap that petroleum -- regardless of regulatory pressure.

"It's critical to understand that we need all our resources," said Laura Nelson, vice president for energy and the environment at Red Leaf Resources, a Utah-based shale development company. "There are no silver bullets. We can economically and environmentally produce a number of resources, and oil shale can be a part of that going forward."

Current oil shale research and development on six federal leases in the West is proceeding despite Interior Secretary Ken Salazar's decision last month to halt additional research and development leasing for further study. He expressed hesitation about commercial oil shale regulations that the Bush administration put in place just before leaving office (E&ENews PM, Feb. 25).

But industry experts think increased regulation would be a mistake.

"Every really good, big energy opportunity takes a certain slowness," said Jeremy Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines. "We should be pursuing [development] even if we don't produce a lot of oil shale in the end. It's not wise to give up and penalize it."

Boak added, "It's a chicken-and-egg problem. We need to get leasing regulations and we need to be encouraging to this industry ... but it's not wise to demand that we write up all the rules before leasing."

While the Interior Department, environmentalists and industry officials hack out the best path for moving forward with research and development leasing and commercial development, Royal Dutch Shell PLC and the other companies currently doing research projects on private land and federal leases plan to keep moving ahead.

"The technology continues to advance. We're making good progress," said James Thurman, the manager of regulatory policy for Shell Unconventional Resources. "There's still a lot that needs to happen. ... But nothing is insurmountable."

Shell is testing an in-situ conversion process at its Mahogany Research Project on privately owned land in western Colorado. That process involves inserting electric heaters in boreholes and gradually heating rocks for years to convert organic material in the rocks into fuels that require little processing before they arrive at refineries. The company found it could successfully produce high-quality fuels using the in-situ method during the last major wave of oil shale development more than 25 years ago, Boak said.

Shell's current research is primarily an environmental study, Thurman said. The project is testing a freeze-wall method of isolating the heated-rock area to protect groundwater and other resources.

The freeze wall is created when a refrigerant is moved through a closed-loop pipe that gradually creates a wall of ice, Thurman said. The ice keeps heated kerogen -- essentially, fossilized algae that was deposited 30 million to 50 million years ago when the region was a tropical lake -- and its fuel byproducts from tainting nearby groundwater sources.

'Rock, not oil'

The environmental ramifications of producing hydrocarbons from oil shale have been a major hurdle to the technology's development in the past.

Currently, petroleum can be coaxed from oil shale in one of two ways.

The first is the in-situ conversion process that Shell uses. The other is called surface retorting. It involves removing shale from the ground using an open pit or underground mine and heating it in a specialized furnace at 750 to 900 degrees Fahrenheit to convert the kerogen into burnable fuels.

Both methods have their environmental pros and cons, experts say.

In-situ conversion involves little surface disturbance, but the heating process can take three or four years and require exorbitant amounts of energy. Surface retorting is quick -- Thurman said the heating process can occur in 90 minutes -- but fossil fuels it produces are lower-quality and require greater amounts of processing before they are ready for the refinery.

Both methods demand massive amounts of water, a resource that is highly coveted in the West.

But no one is quite sure exactly how much water is required to produce a barrel of crude from oil shale, Boak said.

While understanding the water requirement is essential, he said, it does not necessarily have to be done before leasing. Meanwhile, though, he is doing research that might determine whether oil shale production requires 1 to 3 barrels of water for every barrel of crude produced, as the industry has purported, or whether environmentalists' high figure of 5 barrels of water is more accurate. He also has not ruled out the possibility that the production process could use less than 1 barrel of water for every barrel of oil produced.

"[The Obama administration] is asserting that in order to get through the multiple stages of environmental assessment, that can't be done without knowledge of the water use," Boak said. "But if in fact, they insist on that level of detail just to give leases, then by the time the industry drills, the way they drill could be drastically different."

Environmentalists disagree.

"Oil shale is rock, not oil," said Karin Sheldon, executive director of Colorado-based Western Resource Advocates. "Water is required to produce kerogen into a usable product, and it's not water-efficient."

Her group recently produced a report highlighting the demands and impacts that commercial shale development would have on Western water. One stunning finding: Energy companies in Colorado have snatched up rights to more than 6.5 billion gallons of water and can store 1.7 million acre-feet of water in reservoirs. That amount is enough to supply metro Denver for six years, WRA says (Greenwire, March 18).

"We certainly hope this report prompts or goads or convinces energy companies and policy -- political folks of all sorts -- decision-makers to begin the process and begin examining [the impact of oil shale development on water resources in the West]," Sheldon said. "Commercial leasing regulations are currently being challenged, and Salazar is taking an interest at looking hard to determine whether they continue to make sense. We hope to help find solutions to complicated problems."

Thurman agreed that industry has been collecting water rights ahead of oil shale's commercial development, but he dismissed the advocacy group's doomsday predictions about oil shale development's effects on water in the West.

"We've been working for a number of years to acquire a broad diversity of water rights in different areas so the impacts to agricultural and other historical and traditional uses will be minimized," he said.

Challenges ahead

Other than determining the industry's water demands and environmental impact, Boak said there are a number of other technological hurdles that will have to be overcome before full-scale commercial development begins. Those, he said, could take decades, even if no regulatory hurdles are imposed.

First, he said it is essential to find an extraction and conversion technology that is simpler and cheaper than the current method. He said the industry also needs to fully explore the carbon capture and storage potential of oil shale development.

"The renewable energy industry is not ramping up as fast as we'd like," Boak said. "If we're going to have to continue relying on hydrocarbons, then the carbon capture-and-storage industry has essentially got to be the same size as the oil and gas industry. That's going to take a while to build."

But he said such developments are possible -- and likely. Energy companies are already exploring the potential of storing the greenhouse gas underground in the rock pore spaces they uncover during the extraction process.

Chevron Corp. agreed in 2006 to work with the Los Alamos National Laboratory on oil shale research, including carbon sequestration. The company is testing high-pressure carbon dioxide injection as an enhanced oil recovery method at its oil shale research and development site in Colorado.

But the Bureau of Land Management has no carbon sequestration requirement for research and development leases, a spokesman said.

"I'd like to see the industry come forward on this," Boak said. "But it's another big economical challenge that won't happen overnight."

Information about the location of Shell's Mahogany research project was updated at 3:11 p.m.

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