September 27, 2013 09:22 AM UTC
When History Repeats: Another In the Long Line of Failures to Unlock ‘The Fuel of the Future.’
14 Comments- by: ClubTwitty
(Promoted by Colorado Pols)
Oil shale is the ‘fuel of the future,’ and it always will be.
-Some Colorado Wise Guy from Way, Way Back When
This past Tuesday Royal Dutch Shell—for decades considered the leader in oil shale research—made a surprising, although familiar, announcement regarding its ‘unconventional resources’ priorities moving forward. It would not include oil shale in Colorado. From the industry blog 'FuelFix:'
Shell is abandoning its decade-long quest to commercially extract shale oil from Colorado, leaving just one major company betting big on the future of that unconventional crude in America. Shell Oil Co. late Tuesday confirmed it was giving up its Mahogany project in Colorado after investing tens of millions of dollars and 31 years on the endeavor, to focus on other opportunities and producing assets. Chevron Corp., made a similar decision in February 2012, when it said it would abandon its own federal oil shale lease in Colorado’s Piceance Basin.
And from Upstream Online:
Shell ends Mahogany oil shale project
Shell has decided to end its Mahogany oil shale research project in Colorado after more than 15 years and a capital outlay of “many tens of millions of dollars”.
"More Oil Than Saudi Arabia"
Oil shale is not oil. It is not 'shale oil' (pdf) like what is fracked for in the Eagle Ford, Niobrara or Bakken. It is not conventional oil that you get with a vertical well and pumpjack. Its a rock. A precursor to petroleum. With millions of years to go in the geologic ovens of the Earth, it may one day turn into the much sought liquid to frack and extract. But despite a century of effort–and a history of scandal, grand promises (pdf) and devastating let-downs–it has never ever been a profitable fuel source.
Nonetheless, dreams of everlasting oil are enticing to both those that want more public resources, and to those that want to hand them out, as proudly explained by one of them (or his staff, at taxpayer expense) on his congressional (i.e. taxpayer funded) website:
Rep. Doug Lamborn’s proposal to open up 125,000 acres of public land to oil shale development passed the full U.S. House of Representatives Thursday.
Lamborn, R-Colorado Springs, introduced the PIONEERs Act because he says the Obama administration has slowed oil and gas exploration in public lands. The bill passed 237 to 187 and 20 Democrats voted yes, though none from Colorado.
(Rep. Jared Polis, D-Boulder, tried to strike Lamborn’s bill yesterday but that amendment failed late last night.)
Lamborn’s bill was earlier packaged with a couple of other pieces of legislation as pathways to fund the transportation bill, but the non-partisan CBO said oil shale is not yet developed and Lamborn’s legislation has zero revenue value.
Lamborn believes it’s important anyway.
Snake Oil Shale-men & Their Gullible Friends
And it was just not even a couple of short years ago that the Garfield County Board of County Commissioners passed a resolution spawned from a secret back door meeting in Vernal Utah between oil shale insiders and local government officials. The public and the media were not invited. Mesa County passed a nearly identical resolution in the same timeframe. One of the organizers of that effort in Colorado was Tom Jankovsky the eagerest of an over-eager bunch of drill-, dig-, and develop-happy- commissioners from Garfield County.
When astute citizens discovered the unlawful shenanigans and filed a lawsuit against the GarCo commission, a hasty retreat and retrenching occurred. But the message that the oil shale insiders wanted conveyed—transmitted faithfully through western Colorado (and Utah) elected officials—was still made: that (along with all manner of other silly claims) oil shale “has been proven beyond a doubt to be technologically and economically feasible.”
Silly claims: Given the history of this rock—not oil—that includes unknown environmental risks and which has never been economically developed despite a hundred years of effort. But it’s not surprising. Because there have always been true believers in oil shale, just as there have always been those that seek to profit from them.
There have also been numerous companies like Exxon, and Chevron and Shell that have given it a serious, highly scientific and technologically adept effort; only to each and every one pull up stakes, pack up, and leave. Thus the true believers have had their hopes repeatedly crushed like marlstone in a retort by repeated failures of entrepreneurs, governments, and energy companies (large and small) to ‘unlock’ liquid oil from the ‘rock that burns.’ (ExxonMobile–of 'Black Sunday' infamy has recently re-engaged in oil shale research on one of the BLM's R & D leases, so at least one major is keeping some hope alive, at least for the time-being).
But just as the more rational analysts have been steadily skeptical of oil shale and its slick salesmen over the years (even as they carefully watch serious efforts to solve the enigma of how to profitably perform the alchemy that turns rock to oil); its starry-eyed boosters have remained plentiful nonetheless, if for no other reason than there is a lot of rock in the Green River Formation. So the first articles that hit—on Tuesday, expressed the dismay of oil shale's most ardent acolytes, such as Dennis Webb's in the Grand Junction Sentinel:
Shell shock:
Rio Blanco oil shale project axed
“It’s very discouraging to see Shell leave because they’ve been the stalwarts in this business for a couple of decades really,” said Glenn Vawter, executive director of the National Oil Shale Association industry group.
“Whether it’s the death knell for the oil shale industry we’ll have to wait and see,” he said
But by Wednesday the Snake Oil Shale-men had already moved in, to re-spin the story and reassure the boosters and true-believers: "Yes! Your faith, investment and innocent belief are all still warranted and needed—if we are to defeat the scary people and live in that bright Promised Land of Unlimited Petroleum."
So on Day 2, the Sentinel ran the other side of the story, also by Dennis Webb. With the message that we should 'Fear Not!'
Shell shutdown doesn’t shake oil shale industry
Jeremy Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines, said the last he heard Shell has more than 200 people working on oil shale in Jordan. Worldwide, it has spent hundreds of millions of dollars on oil shale, he said.
“They’re clearly not abandoning oil shale as a concept. They’re just deciding that Colorado is not the place they want to do it right now even though it’s (home to) the world-class resource.”
Forcing the Invisible Hand
Nothing in Royal Dutch Shell's statement, or from others that have decided to quit pursuing oil shale, blames anything but business for the decision. There are more economical resources to develop that offer better returns on capital. Shell has been readjusting its holdings worldwide, to focus more on shale oil–the liquid fracked from rock–because its more profitable. Chevron made the same decision, for the same reasons, a few years ago, as the second Sentinel article notes:
Chevron spokeswoman Cary Baird said she doesn’t believe her company raised regulatory concerns as an issue when it made its oil shale decision. Rather, it was just a matter of prioritizing what opportunities to invest financial and human resources in at a global level, she said, somewhat echoing Shell’s reasoning.
“There are difficulties occasionally in getting good, qualified people to work on different projects and when you have a global portfolio it makes it more complicated,” she said.
Shell’s decision comes as companies are using hydraulic fracturing to produce growing amounts of natural gas and oil. Shell just this week identified a location for a $12.5 billion natural-gas-to-liquids facility it hopes to build in Louisiana.
The industry blog FuelFix tells the same story:
The moves come against the backdrop of a surge in recoverable oil reserves that are easier to extract from dense rock formations in North Dakota, Texas and other states using horizontal drilling and hydraulic fracturing. By contrast, oil shale has defied decades of industry efforts to find a commercially viable way to distill crude from the oily fine-grained sedimentary rock found primarily on federal land in Colorado, Utah and Wyoming.
“The energy market has evolved since we first started this research in 1981,” said Shell spokeswoman Kelly op de Weegh, noting the company’s pursuit of liquids-rich shale opportunities and its long-term interests in natural gas, including potential plans to build a $12.5 billion plant in Louisiana to transform natural gas into transportation fuels.
“Shell has a large portfolio of opportunities, and each one competes for capital,” she added. “Managing the portfolio means decisions will be taken to ensure the right balance of both near-term and long-term opportunities.”
All the same, and despite verbal fealty to the 'Unfettered Free Market' when crafting talking points to inspire the gullible, the suspect shale's shills have no interest in telling the obvious, even if the principals themselves admit it. Instead, on cue, the Snake Oil Shale-men cry out that the government has been over-regulating:
Salazar Rules Blamed for Shell’s Departure
Royal Dutch Shell was one of the most successful companies in the state in its efforts to develop a cost-efficient technique to extract oil from shale rock. But the final act of Ken Salazar as Interior secretary earlier this year to rewrite industry rules left companies in limbo with undeterminable royalty rates, and blocked them from obtaining leases for a majority of federal lands that hold two trillion barrels of recoverable oil.
Dan Kish, senior vice president for policy at the Institute for Energy Research and a former senior staff aide on Capitol Hill, said Salazar consistently opposed every effort to extract oil shale from the rich fields of Colorado, when Salazar served as Colorado’s Senator and after joining the Obama administration as Interior Secretary.
“Mission accomplished, Ken Salazar,” Kish said.
And on Day 3, right on schedule, the astroturf echoes begin. Some nearly touting the gentle regulatory framework of the Monarchy of Jordan as reason the poor multinational, world's third largest oil company, had to up and leave Obama's Green-Occupied Colorado. And one letter writer even ominously concludes:
Guess we better keep that aircraft carrier in the eastern med to protect the energy supply that the BLM just exported there.
So although the companies themselves are clear that market forces are encouraging them to move on, the hacks shill otherwise, that environmentalists and Obama are to blame. Other Snake Oil Shale-men point to the millions in national treasure that the King of Jordan is giving to oil companies to subsidize oil shale as policy the U.S. should emulate.
The Dirtiest Energy
Its hard for oil shale to shake its image as the dirtiest of energies. It requires massive amounts of energy in production, and unknown quantities of water; it involves wide-scale surface impacts and scarring; and it would result in lots of carbon emissions at every stage, including coming out of the tailpipe should it ever actually make it into a gas-tank.
But there is a lot of it. And so oil shale research goes on in Colorado. And projects are continuing in Utah—where the resource is shallower (but less rich). One of these is being developed by the Estonian government-owned (i.e. 'socialistic') Eesti Energia, which has been working on a pilot project on Utah state-owned lands for several years. Despite numerous set backs, Enefit American Oil the Eesti American subsidiary, claims it remains optimistic.
Estonia has burned oil shale for heat and electricity for a century—and their scarred landscape covered with mountains of slag, and the poor air quality threatening large parts of Europe are a result. A poor record and history of bad government investments in oil shale has a trail of scandal of its own. Undaunted, Eesti hopes to export its 'expertise' to America and show it has the technology that can somehow turn this stone into a more valuable fuel than just burning it in stacks as 'poor man's coal.'
And maybe the Estonians can and will. Or the Kingdom of Jordan. Maybe it will be a small U.S. company, the French, the Chinese, or Canadians.
A lot have tried and so far all have failed. But the lure of possibility means that the effort will undoubtedly go on.
Still the fact remains that Royal Dutch Shell was a leader, and they have made a rational market-based decision that turning rock into oil just isn’t worth it. And of course that’s exactly what the oil shale skeptics, energy economists, and the environmentally aware have been saying for years.
This isnt ready to publish! How can I unpublish it??
ok. done…
Thanks for the trailer. The parts I read were definitely worth the time.
Over fifty years ago, I took Geology 104 at CU and I remember the professor telling us any day that oil would be pouring out of that shale. I even think it was on the final. Geology 104 was "rocks for jocks"….of which I was neither….but it was also heavily enrolled by future poli sci majors.
Shale oil is like a lost gold mine.
Great post, CT. And timely, as I'm sitting here in DC in the middle of Boehner-palooza, which now includes a demand to permit KeystoneXL as part of the hostage taking of Capitol Hill.
A recent update of the DOE "Billion Ton Study" shows that we have such enormous, domestic amounts of biomass from waste, generated annually, that if we simply converted 17% of our annual total into advanced biofuels we would produce three times more fuel right here in America than what is proposed to come down the Keystone. Think about that contrast for one moment: a few, flash-in-the-pan construction jobs for the pipeline [which by the way has nothing to do with US energy independence and everything to do with China domestic consumption] or hundreds of thousands of US jobs and domestic tax base.
We would do Canada and the US a favor by taking all of the money wasted on this plan and commercialize a North American advanced biofuel industry. And require China to burn our biofuels. Not bitumen from the Boreal forests.
Mr. Bowman, thanks for being in the Gallery and thanks for keeping us in the loop.
To your point on Keystone, my understanding is that first of all, the oil entering the US through Montana is a very nasty, sticky, bottom of the barrel type called "tar sands" or something very close to that. I guess it's what's left when the good sweet crude is gone. Nasty, dirty, the worst polluter of a highly polluting substance.
My understanding is that while the oil will travel the length of the country south to exit via ship in Texas, it won't be for sale here. (My feelings won't be hurt if someone hits me on any of this.) So we'll run the risk of a natural disaster if the pipelline blows, but the oil's not even good enough for consumers here.
I'm told the employment factor's nil. A few people on construction employed by the Canadians building it. Temporary jobs.
I fully agree with you Stop this nonsense. And the biofuels industry has seemed a really good way to go for 15 years and counting.
More waste of time on the House floor by incometent quacks.
Great diary, Mr. Twitty…likewise on the follow up, Michael.
The point that struck me is the reality that it's just damned hard to get investors and stockholders to continue to throw money at this dead horse when when the "Super-Big Gaga Money" is in the export market.
I mentioned this to a crowd in Whitewater a while back and had to debate with a very fiery LOL (little old lady),who insisted I was lying and there is no interest in an export market. Stunning isn't it?
We haven't heard the APIs' "Lady in the Black Pantsuit" talking about "Americas' Energy for Americans" in a while, have we?
Making oil from rock rivals the genius of "Nuclear Fracking" (Rulison, 1969)
Our two biggest challenges in the biofuels world have been 1)financing and 2) surety of the marketplace [will the Republicans, in concert with the petroleum interest's lawyers roll back the renewable fuels standard?]. On the first challenge there are two emerging sub-components:
Rocco – you are right. The number of jobs created by KXL is minimal. The industry made several changes in the tax code in anticipation of this project in the Bush Administration that exempts this oil, refined for export, from taxes. This is not a good deal for us. Much better if we would focus our investments on next genertion fuels. We have a bright future – and that future isn't hiding in the bitumen reserves north of the border. It's right here. Under our nose.
And on the Renewable Fuels Standard claim, the Supreme Court whacked the American Petroleum Institute on their effort to stop E-15. Of course, that hasn't stopped the Republicans in the House from their ad nausem war on the issue.
CD4 could be a national energy power house: our biomass, wind and solar resources are vast. If Cory worked half as hard on the needed changes to the Master Limited Partnership Act and assure funding for USDA programs like BCAP [giving our farmers the tools to be on the forefront of advanced biofuel production], as he does on gutting federal regs affecting on the north slope of Alaska – we'd be big winners.
Excellent diary and discussion. The grim history of "nuclear fracking" at Rulison should be taught to every Coloradan along with the history of Rocky Flats and a few other disasters. And where is the woman in the black pantsuit anyway? What's she selling now?
Thanks for all the information here, CT. As someone who was raised and educated outside of Colorado your course of "Geology 104" is highly informative.
One other kudo that I would like to pass along, on the off chance that The Colorado Observer article was even partially correct — (I'm sure it wasn't but, still . . .) — my thanks, and debt of gratitude, to Ken Salazar for whatever it was he was alleged to have done that beat this nasty beast back down its hidey-hole for at least another several years.
Ken Salazar understood that it made sense to take a cautious approach where companies proved up their technologies before the American people handed vast resources over to private interests. The Colorado Observer, of course, wants you–the American people–to hand vast resources over to oil and gas companies– from Holland, Canada, China–no matter, let's call them John Galt and grovel before their imaginary greatness.
Turns out it didn't matter as people with sense have said all along, because you can't squeeze blood out of a turnip, or in this case oil out of a rock.
Way to go, CT! Informative and funny, odd adjectives applied to oil shale promotion. Energy companies keep searching for the ultimately profitable fuel, ignoring renewable potentials in Colorado.
I saw that item about Shell pulling out of shale production in CO, didn't know what to make of it. Thanks for 'splainin it all.
http://paper.li/PiceanceDog/1362105183