Study Urges Careful Development of West’s Vast Oil Shale Reserves

Tue October 04, 2005 - National Edition

WASHINGTON (AP) The United States has an oil reserve at least three times that of Saudi Arabia locked in oil shale deposits beneath federal land in Colorado, Utah and Wyoming, according to a study released recently.

But researchers at the RAND Corp. cautioned the federal government to go carefully, balancing the environmental and economic impacts with development pressure to prevent an oil shale bust later.

“We’ve got more oil in this very compact area than the entire Middle East,” said James Bartis, RAND senior policy researcher and the report’s lead author. However, he added, “If we go faster, there’s a good chance we’re going to end up at a dead end. You could end up bogged down.”

For years, the industry and the government considered oil shale –– rock that yields petroleum when heated –– too expensive to be a feasible source of oil.

However, oil prices, which spiked above $70 a barrel recently, combined with advances in technology could soon make it possible to tap the estimated 500 billion to 1.1 trillion recoverable barrels, the report found.

That could meet a quarter of the nation’s current oil needs for the next 400 years.

But the risks are high. It’s unclear how new technologies will affect the land, air and the Colorado River, Bartis said.

The study, sponsored in part by the Energy Department, comes in the wake of Hurricane Katrina, which disrupted Gulf oil production and sent crude oil prices surging.

It also comes about a month after the president signed a new energy policy, which dramatically reversed the nation’s approach to oil shale, opening the door within a few years to companies that want to tap deposits on public lands.

Bartis said he hopes lawmakers will take the study’s recommendations into consideration as they make future decisions on oil shale.

The United States has tried to develop oil shale in the West before. Sky-high oil prices in the 1970s led Congress under President Carter to create the Synthetic Fuels Corp., to find new, domestic sources of crude. Entire towns in Colorado were created –– and all but abandoned after oil prices bottomed out in the 1980s.

The RAND researchers estimate the federal, state and local governments would rake in approximately $10 billion a year from lease payments, royalties and taxes if the industry produced 3 million barrels a day.

Production would also likely cause oil prices to fall by as much as 5 percent, saving American oil consumers up to $20 billion a year and creating hundreds of thousands of jobs.

The report also says oil shale mining, above-ground processing and disposing of spent shale could cause significant environmental problems. Shell Oil is working on a process that would heat the oil shale in place, which could have less effect on the environment.

“We need to be focusing in on what are the implications,” Bartis said. “I’m not saying this is a show-stopper, I’m saying it’s important enough we have to have the answers.”

The study recommends the federal government take a few low-cost steps to move oil shale production forward, such as adding oil shale to the Energy Department’s research and development profile and archiving information on oil shale resources, technologies and impacts of development.

But it also urges the government not to make any major investments in oil shale development until private firms are willing to invest without major government subsidies.

Sen. Orrin Hatch, R-UT, a champion of oil shale development, said the report’s statistics on the amount of available oil prove the United States must move as quickly as possible.

“Our country runs on energy,” he said. “We can’t sit back and hope we’re going to get all we need from world production.”