OIL SHALE

New BLM research leases in Colo. could help spur commercial development

The Bureau of Land Management has approved two oil shale research and development leases on a total of 320 acres of federal land in northwest Colorado, a move that drew sharp criticism from conservation groups that say the environmental risks of large-scale oil shale development are too great.

BLM late yesterday issued a final environmental assessment (EA), along with a formal "Finding of No Significant Impact" (FONSI), that clears the way for both Houston-based ExxonMobil Exploration Co. and Rifle, Colo.-based Natural Soda Holdings Inc. to test technology that could ultimately lead to finding an economical process to extract crude oil from shale rock on a commercial scale.

Appeals to the pending leases can be filed during a formal 30-day public review period that ends Sept. 29, said David Boyd, a BLM spokesman in Silt, Colo.

The two 10-year "Research, Development and Demonstration" (RD&D) leases, with options for a five-year extension, each cover 160 acres of public land in Rio Blanco County. ExxonMobil and Natural Soda Holdings plan to test in situ technologies that heat up kerogen, or fossilized algae, and generate recoverable oil. Each lease allows for an additional 480 acres to be converted to a 20-year commercial lease if the testing proves successful, according to BLM.

"Certainly it's good news," said Glenn Vawter, executive director of the National Oil Shale Association in Glenwood Springs, Colo. "The good news is two more companies with innovative ideas with how to make oil shale economical and sustainable are now getting the opportunity to test these technologies on federal leases."

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The potential payoff is huge. Northwest Colorado, northeast Utah and southwest Wyoming sit atop a 16,000-square-mile section of the Green River Formation that is believed to contain more than half the world's oil shale reserves. Some officials estimate the formation contains as much as 1.5 trillion barrels of recoverable oil shale -- more than three times the total that will ever be produced in the oil fields of Saudi Arabia.

"Oil shale is a significant resource that could hold great potential, which is why we continue to support industry's efforts to conduct the research, development, and demonstration that's needed to develop technologies that are commercially and economically viable," said Kent Walter, field manager in BLM's White River Field Office in Meeker, Colo., which is about 35 miles northeast of the lease sites.

"These leases will not only help test and advance critical technologies," Walter added, "but will also help answer important questions regarding water use, energy use and impacts to land and wildlife."

Conservation groups, however, have long expressed concerns about the potential impacts to water quality and quantity associated with commercial oil shale development. Extracting crude from shale rock requires heating the kerogen to 650 degrees Fahrenheit or more, requiring huge expenditures of energy and water, and potentially causing large-scale environmental degradation.

With Colorado suffering drought conditions this summer, critics question whether it's worth the risk to explore large-scale development of oil shale. The Colorado Water Conservation Board last year analyzed state water needs through 2050 and estimated that 39 billion gallons of water a year would be needed to produce 1.5 million barrels of oil a day from oil shale deposits in the state (Land Letter, Jan. 13, 2011).

David Abelson, Western Resource Advocate's oil shale policy advisor in Boulder, Colo., questioned why ExxonMobil Exploration and Natural Soda Holdings need to use public lands to test and develop oil shale technologies.

"Vast acreages of privately held oil shale lands are available across the Green River Formation in Colorado, Utah and Wyoming," Abelson said. "These [private] lands provide ample opportunity for research and development projects without subjecting additional public lands and resources to the significant risks stemming from risky research projects. We therefore oppose approval of the additional proposed oil shale RD&D leases for federal lands at this time."

Ongoing effort

Natural Soda Holdings mines sodium bicarbonate by injecting hot water underground to dissolve the baking soda in a solution that is brought to the surface. Its research proposal calls for using this mining technique to remove the sodium bicarbonate found with the oil shale and then injecting a heater into the ground to unlock the liquid petroleum from the oil shale, according to BLM.

ExxonMobil Exploration proposes to fracture horizontally drilled wells, fill the fractures with an electrically conductive material, and then use electricity in the fractures to heat the oil shale into recoverable liquid petroleum, according to BLM.

BLM chose the ExxonMobil Exploration and Natural Soda Holdings proposal after a November 2009 call for nominations. BLM previously issued six leases for oil shale research following a call for nominations in 2007.

BLM said it chose the two proposals because they involve new technologies not currently being tested as part of the initial round of RD&D leases.

The two new leases come as BLM works to finalize a hotly debated plan for oil shale RD&D on federal lands.

BLM in February unveiled a draft programmatic environmental impact statement (PEIS) that would significantly downsize a 2008 George W. Bush administration plan to develop oil shale in the West (Greenwire, Feb. 3). BLM's proposal would reduce available lands for oil shale development by more than 75 percent in Colorado, Utah and Wyoming.

BLM's proposed plan has been sharply criticized by industry, GOP congressional leaders and some local government leaders.

"What would be even better news is if BLM would complete its PEIS on oil shale and really go back to the terms that were in the 2008 EIS, which really opened up to more companies the opportunity to get into oil shale," said Vawter, the oil shale industry trade group official.

Vawter attended a controversial closed-door meeting last spring with other elected leaders and industry representatives to discuss legal strategies for opposing the Obama administration plan to scale back the amount of public land available for oil shale research.

Two citizens groups in northwest Colorado this week filed a lawsuit in state district court against the members of the Garfield County Commission, alleging the March 27 meeting in Vernal, Utah, violated the Colorado Open Meetings Law because the public was not notified in advance of the meeting, which included a quorum of the three-member county commission.

Conversely, a coalition of more than 100 Colorado businesses, conservation groups and sporting groups this month sent a letter to BLM acting Director Mike Pool supporting BLM's proposal, in part because the "technology behind oil shale development is unproven and could pose an unacceptable risk to Colorado's water" (EnergyWire, Aug. 16).

Critics note there are also potential economic impacts associated with commercial oil shale development.

Exxon Mobil Corp. is often portrayed as the poster child of oil shale's boom-and-bust cycle and its impact on the region. The company pulled out of the Green River Formation overnight in 1982 after an oil price collapse and left about 2,000 people without jobs. The day is commemorated as "Black Sunday" (EnergyWire, May 21).

And Abelson notes that Chevron Corp. in February decided to forego its experimental Colorado oil shale lease in favor of other priorities (Greenwire, Feb. 29).

"Hence, there is no compelling case that more federal lands are necessary for additional RD&D," he said. "If ongoing RD&D activities on existing federal or private leases finally yield meaningful results, that will be the time to assess the need for additional research leases."

Click here for the full decision record with the final EA and FONSI and separate plans of operation for each lease proposal.

Streater writes from Colorado Springs, Colo.

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