The group was made up of sportsmen, energy experts, farmers and former politicians. They met with members of Congress and Obama administration officials to push for tougher regulations as the Interior Department reviews Bush-era rules for leasing public lands and collecting royalties.

Shell in-situ oil shale research project in Colorado’s Rio Blanco County (USGS photo).

On its way out of the White House in 2008, the Bush administration expanded leasing for oil shale research and development and set a sliding royalty rate. Conservation groups at the time argued such policies were premature given the fact that oil shale production has never been proven commercially viable in the United States and many questions remained unanswered.

“Oil shale research should be more than a science project regarding technology,” said fly-in participant Jim Spehar, a former Grand Junction mayor. “Someone needs to be figuring out how communities in northwest Colorado can handle up to six times their current population, as forecast in the most recent impacts analysis for local governments, and who’s going to pay the costs of dealing with that kind of growth.”

Oil shale, not to be confused with shale oil, is most prevalent in the Green River Formation of northwestern Colorado, southwestern Wyoming and eastern Utah. Extracting it involves heating up rocks to pump out the organic kerogen and then converting it into commercial oil. Exxon spent millions in the late 1970s trying to ramp up commercial production on Colorado’s Western Slope, but the Colony Oil Shale Project went bust in 1982.

Shell Oil is widely believed to be the farthest along in terms of current work on its RD&D (Research, Development and Demonstration) leases, but even Shell officials admit commercial production is years, if not decades, away.

“We aim to advance the technology systematically to the point at which an application could be made to convert the 160-acre RD&D tracts to commercial leases,” the company’s website states. “A commercial decision would be middle of the next decade and possibly later depending on the sequence and outcome of research activities.”

Shell officials have confirmed that research at its Mahogany Project in Rio Blanco County shows it will take at least three barrels of water for every barrel of oil produced from oil shale. Critics say such research should be completed and the process proven commercially viable before the federal government sets royalty rates and leasing parameters.

But Shell official Dan Whitney, during a congressional oversight field hearing conducted by Colorado Republican Reps. Scott Tipton and Doug Lamborn in Grand Junction this summer, called the Obama administration review of Bush-era rules “a waste of taxpayer money” that is hindering oil shale development.

Shell has spent an estimated $200 million so far on its Mahogany Project without ever recouping any of that investment with commercial sales of oil. Asked about its “middle of the next decade” statement on its website, a spokeswoman had this to say:

“The exact timing and size of a commercial oil shale operation is dependent upon many factors, including the economic and regulatory environment, project economics and consultations with key stakeholders,” said Shell’s Kelly op de Weegh.

“We are deliberately taking a cautious approach to oil shale technology development. Our research to date has demonstrated that our In-Situ Conversion Process works technically on a small scale. What remains is to prove that it can work commercially.”

Members of Colorado’s conservation community who participated in this week’s fly-in say the state’s outdoor-recreation and tourism-based economy should not be sacrificed for the promise of jobs that still may be decades away.

“The outdoor industry sustains thousands of jobs that depend on outdoor recreation in Colorado and throughout the West,” said Suzanne O’Neill, executive director of the Colorado Wildlife Federation. “With all of the questions surrounding oil shale’s financial viability, it would be irresponsible to trade any of those jobs for promised, but never delivered, employment from oil shale.”

Designed to carry oil from the tar sands production fields of Canada to oil refineries on the Gulf Coast, the nearest the pipeline comes to Colorado is Nebraska, but activists point out that tar sands oil already comes into Commerce City by pipeline and is then refined by Suncor Energy and sold as gasoline across Colorado at nearly 270 Shell and Phillips 66 stations.

Climatologist Jim Hansen, also traveling with the cross-country No Tar Sands Caravan from Davis, Calif., to Washington, D.C. Aug. 21-26, said it’s “essentially game over for the climate” if the XL pipeline wins U.S. State Department approval and allows full exploitation of tar sands reserves in Canada. The extraction process uses huge quantities of water and conventional power and is responsible for enormous amounts of carbon dioxide and other emissions, critics say.

Activists, including actor Danny Glover, plan to travel the nation to spread the word on the folly of expanding tar sands production via the XL pipeline, which has been under increased scrutiny following an ExxonMobil pipeline spill in Montana’s Yellowstone River earlier this summer.

In a release regarding the No Tar Sands Caravan Colorado stops, the group drew parallels between tar sands production and efforts in this state to revive oil shale production on the Western Slope.

“The rising dollar value of oil has got Western slope communities bracing for a revival of destructive oil shale development,” the release reads. “Oil shale, like tar sand, requires tremendous amounts of water, habitat destruction, and deadly emissions to produce each barrel of oil.”

Not so be confused with recent shale oil plays (traditional oil and gas drilling in shale formations using hydraulic fracturing), oil shale production died in Colorado in the early 1980s before it ever even got started commercially. It involves super-hearting shale rock and sand to extract organic kerogen and then refine it into oil. Research on vast untapped reserves in the Green River Formation of Colorado, Utah and Wyoming has been under way for decades.

Proponents of oil shale production say the Obama administration has been dragging its feet on the potential fuel source while fast-tracking tar sands. And there is growing interest from some businesses and Republican politicians on the Western Slope to revive the long-dormant but still-unproven industry.

The No Tar Sands Caravan stops in Boulder Monday evening, Aug. 22, and overnights at the Masala Community House. Demonstrators then head to Denver for a 9 a.m. rally on the west steps of the State Capitol. The ultimate destination is a “sustained presence from over 2,000 citizens on the White House gates.”

One of those citizens will be recent Fairview High School [Boulder] graduate Alex Budd, who said in a release: “Tar sands development will be the final nail in the climate coffin. If we are to have any hope of preserving a world worth living in, this is a line we absolutely must not cross! Knowing what’s at stake, I will do what is necessary to defend what I love. Enough is enough.”

But why then has Shell spent an estimated $200 million so far on research, development and demonstration (RD&D) at its Mahogany Research Project in western Colorado? And at what point will gas prices rise so high that the cost of producing shale oil suddenly makes sense?

Jeremy Boak

“All of the major companies are doing oil shale because they think it’s an interesting and high-potential area, but they’re not in a hurry to make it productive,” said Jeremy Boak, director of the Center for Oil Shale Technology and Research (COSTAR) at the Colorado School of Mines in Golden. COSTAR’s research is described on its website as “industry-driven and science-guided.”

“With [oil] prices going back up through the roof again,” Boak said, “[companies have] an awful lot of things to spend their money on and some of them more near-term than oil shale. The big budgets tend to move toward things that are a little closer in.” Still, Boak maintains the state and federal governments should be doing far more to encourage oil shale production than the current administrations.

The OPEC oil embargo during the Yom Kippur War saw gas prices in the United States spike from 38 cents a gallon in 1973 to 55 cents a gallon in 1974, in part prompting an oil shale boom in Colorado that culminated in the “Black Sunday” crash of 1982. Exxon literally pulled up stakes overnight and turned communities like Parachute, Rifle and Battlement Mesa into ghost towns.

Exxon is one of the companies pursuing a more scaled-back RD&D lease being offered by the Obama administration, which announced in February it was taking a “fresh look” at the Bush administration’s so-called “midnight regulations” in 2008 that established a royalty structure and opened up 2 million acres of U.S. Bureau of Land Management land in Colorado, Utah and Wyoming for potential oil shale leasing.

“The previous 2008 regulations made critical decisions such as royalty rate before the RD&D program had a chance to deliver information and answers,” U.S. Interior Secretary and former Colorado Sen. Ken Salazar said in February. “They put the cart before the horse, and in so doing they heightened the risk of speculation and bad decisions and yet another oil shale bust.”

But Exxon officials say they’re keenly aware of past mistakes and determined not to repeat them.

“It sounds to me like there was a lot more hype back then, but it’s always hard to tell where the hype came from,” Boak said. “Was it really the companies that were hyping it or was it the people out there who thought they could buy 5,000 acres and make a killing? Land speculators. Was it the large corporations or was it the Bernie Madoffs of their era that were really trying to cash in on this?”

Ramped up in the late 70s with the embargo fresh in everyone’s minds, oil shale crashed once Middle East oil began flowing freely and the labor-intensive process of surface mining and retorting oil shale was no longer cost-effective. But 30 years later oil prices are skyrocketing again in the wake of ongoing political upheaval in the Middle East and Northern Africa.

The U.S. Energy Information Administration on Monday put the average price for a gallon of regular gasoline at $3.79, closing in on the peak of $4.11 a gallon set on July 17, 2008. In Europe, gasoline broke the $8.60 a gallon barrier this spring as events unfolded in Tunisia, Egypt and Libya.

But even at those prices, commercial oil shale production is of limited interest to Europeans. While still part of the Soviet Union, Estonia developed a commercial oil shale industry, but there have been growing environmental concerns since that nation became part of the European Union.

Boak says companies in Estonia, Brazil and China continue to blaze the oil shale trail, with one Estonian firm “hunting for properties” appropriate for oil shale development in the United States. Still, none of the foreign firms have been able to produce much more than a few thousand barrels of oil a day – a drop in the bucket in terms of global demand. And now the European Union is considering banning oil shale and tar sands development because of studies showing higher greenhouse gas emissions than from conventional fuels.

Meanwhile, Republican members of Colorado’s congressional delegation continue to beat the oil shale drum. Just last month in a guest column in the Grand Junction Daily Sentinel, 3rd Congressional District Rep. Scott Tipton wrote: “The development of [oil shale] resources would lead to tens of thousands of good paying jobs and help stabilize our energy supply – putting an end to spikes in gas prices.”

Juxtapose that statement with what Tom Yelverton of ExxonMobil told the Daily Sentinel late last year: “At best, commercial production is a decade away and most likely more.”

Rep. Doug Lamborn of Colorado’s 4th Congressional District is a big backer of stepping up domestic oil and gas production, including oil shale, on the state’s Western Slope.

“It is all well and good to propose measures that may pay off decades in the future, such as alternative energy research and higher CAFÉ standards for vehicles,” Lamborn states on his website. “The most urgent and immediate solution though is to ramp up domestic production of oil and gas right now.”

Even the companies deeply involved on oil shale research say it’s years from becoming a commercial reality: “In fact, it could take up to 10 to 12 years of additional research, environmental analysis and permitting before a company could develop a federal oil shale lease,” Tracy Boyd of Shell told the Glenwood Post Independent in late 2008.

Editor’s note: This is the second in a two-part series on the future of oil shale in Colorado in the wake of rising gas prices and mounting unrest in the Middle East and North Africa. Click here for part one.

Sen. Steve King

Dr. Jeremy Boak, a leading expert on oil shale technology at the Colorado School of Mines, says the Obama administration is dragging its feet on oil shale production in the United States much the way the Bush administration stalled on climate change policy.

Dr. Jeremy Boak

Boak, the director of the Center for Oil Shale Technology and Research at the Golden-based school, recently blasted Interior Secretary Ken Salazar’s plan to take a “fresh look” at Bush administration rules for oil shale leasing on U.S. Bureau of Land Management (BLM) land in Colorado, Utah and Wyoming. Salazar in February said the BLM needs to have a better idea of the “amount of power needed, water needed and the impact to wildlife habitat and watersheds.”

“It’s curious to hear the same sort of arguments being made by this administration that were made by the Bush administration for not doing anything on climate change,” Boak told the Colorado Independent. “We’ve got to have all the answers before we can move.”

Citing the “driest period on record in the Colorado River basin, Lake Mead water levels at historic low levels and impacts on the agricultural economy,” Salazar has said the Bush oil shale rulemaking “put the cart before the horse” by setting royalty rates at 5 percent for the first five years of oil shale production and opening up 2 million acres of BLM land to leasing before more research and development was completed.

Oil shale production has never been proven commercially viable in the United States because the process of heating shale rock to extract organic kerogen and then refine it into oil consumes a great deal of water and conventional power. A Shell official in 2009 confirmed to the Colorado Independent that his company’s process consumes at least three barrels of water for every one barrel of oil – a significant amount in the arid Colorado River basin.

Boak says that figure may wind up being closer to a one-to-one ratio, but regardless, he says the administration has its answer and needs to move oil shale research and production forward in light of rising global fuel costs and the increasing need for domestic energy production.

“It is a distortion to say we have to have an answer about water use because we have an answer about water use and either that answer is good enough – that three barrels per barrel is something we can live with – or it isn’t,” Boak said. “If it isn’t, then it’s incumbent on both the government of Colorado and the federal government to say why it isn’t and to say what is OK, and they have completely evaded that responsibility.”

State Sen. Steve King, R-Grand Junction, recently sent a letter to Colorado Sens. Mark Udall and Michael Bennet seeking support for a provision in a U.S. House funding resolution that would have blocked Salazar’s bid to revisit the Bush oil shale rules. Those rules were passed in the waning days of the administration in 2008 and promptly challenged by environmental groups.

Sen. Steve King

“Salazar’s decision to enter into a wink-and-a-nod settlement with the environmentalist opponents of oil shale and appease them by scoping out a new round of restrictions and royalty requirements is exactly the wrong policy for the Western Slope, for Colorado and indeed for America,” King wrote.

Boak also refutes a Rand Corporation report predicting it will take up to 10 new coal-fired power plants to generate the heat needed to produce just 1 million barrels a day of the estimated 2 trillion barrels of oil equivalent trapped under an approximately 16,000-square-mile area under northwestern Colorado, eastern Utah and southeastern Wyoming called the Green River Formation. New research by Shell and other oil companies indicates the heat will come from gas, he said.

“Their primary option is to use the natural gas that comes along with the oil,” Boak said. “That’s a significant fraction, especially for these companies that are doing in-situ. When you cook it more slowly you get a higher gas-oil ratio, so you get a higher fraction of it as natural gas.”

Shell’s in-situ process involves heating the rock deep underground rather than mining the shale rock and retorting it on the surface.

Still, conservationists and alternative energy advocates say it’s prudent to take a slower approach on leasing and royalty rates until more research is completed.

Randy Udall

“It is reasonable for companies like Shell that are having great difficulty increasing their own oil production – in fact Shell’s oil production of crude oil has been trending down over the last decade – so there are lots of oil companies that kind of wonder what comes next,” Udall said. “At least some of them think it’s reasonable for them to spend some of their RD&D money looking at oil shale, even though all of them – experienced petroleum geologists – understand what a big lift it will be ever to commercialize oil shale.”

Exactly why Boak says the initial 5 percent royalty rate set by the Bush administration makes sense. After five years that rate climbs 1 percent a year until it reaches a 12.5 percent cap for the 20 to 30-year life of the lease. The discounted rate up front allows companies to recoup capital costs that will likely be much higher than conventional oil and gas drilling, Boak says.

The size of the area opened for leasing is also under review by the BLM.

“We’re not sure that 2 million acres should be allocated for this type of use, but nonetheless we’re willing to go back and revisit that issue and through an amendment to our land-use planning process make that determination,” BLM Director Bob Abbey said in February.

Asked why such a large swath is needed, Boak said, “Because it’s where the oil shale is. Otherwise you’re making judgments about which oil shale is OK to lease out and which is not instead of letting industry decide which it would like to lease out and which it would not.”

Editor’s note: This is the first in a two-part series on the future of the oil shale industry in Colorado in the wake of recent Middle East unrest and steadily rising oil prices. Part two will run Wednesday.

$1 million for Shipment and storage of oil shale core samples

Oil shale research is wasteful? I don’t know many Republicans who agree with this. Does McCain think the word “shale” is funny or is he a skeptic?