The Estonian connection: Or how I started worrying about oil shale

 

The last big oil shale* boom in the West busted on “Black Sunday” 1982. I was 11 years old, then, living in Western Colorado, and I can still remember my dad explaining the boom, the bust and the process necessary to get the "oil" out of the shale.

Here's a primer: Underground room and pillar or strip mining is typically used to get the rock, which is then ground up, heated to extremely high temperatures, or retorted, to get the "oil" out of the kerogen, a waxy hydrocarbon. The oil then must be processed and refined in order to make them into a mid-grade fuel. It’s a water-intensive process. The leftover shale -- laden with the same sort of nasty heavy metals and other substances as coal combustion waste -- actually expands during the process, making disposal a bit of a challenge.

It sounded as crazy back then as it does now.

And it’s that very craziness that has largely kept oil shale off my radar as a journalist covering the big issues in the West. It’s simply too costly, too inefficient and too illogical for any profit-minded company to pour billions of dollars into trying to make it work. Why waste time, I thought, worrying about something that was nothing more than some western Colorado energy booster’s waxy hydrocarbon dream?

Then, this spring, Eesti Energia, the biggest energy company in the tiny country of Estonia, bought the Oil Shale Exploration Company and its oil shale land and research lease in Eastern Utah. My views on oil shale were tipped upside down.

Here’s the thing about oil shale: There is a lot of it in the ground in Wyoming, Utah and Colorado, which has long inspired folks to try to use it, somehow. A 1922 report by M.J. Gavin et. al. noted that “remarkable interest” in Western oil shale had been sparked in 1916. “It is reasonable to say that over 100 companies have been organized, ostensibly for the purpose of developing oil-shale in some way or another,” wrote Gavin, “but really for the purpose of fattening the pocketbook of the (stock) promoters ... (who) do not hesitate to make the prospect more dazzling, by presenting all sorts of impossible estimates of assured profits in oil-shale operations.”

Gavin, working for the Bureau of Mines, led the construction of an oil shale plant in Rulison, Colo. (Rulison would later be home to another zany energy-extraction scheme in which a nuclear bomb was detonated underground in order to release natural gas from rocks -- call it extreme fracking.) The hype faded, but the mine bureau kept trying to crack the oil shale code for decades. In 1980, sparked by the energy crisis and fed by President Carter’s Synfuel subsidies, Exxon started a large-scale oil shale project in Western Colorado. Two years later, when a recession and shifts in the global market brought oil prices down and Reagan’s free-market policies wiped out the Synfuel program, Exxon bailed, laying off 2,200 employees.

Click to view full screen image.

It might have ended there. After all, how many decades must one attempt to feasibly squeeze oil from a stone and fail before one gives up? But the 2005 Energy Policy Act encouraged oil shale production, bringing the dream back to life. That’s led to a heated debate, with environmentalists warning about the potential impacts, especially in terms of water use and contamination. Conservative lawmakers see an economic bonanza for the West, (if only those damned regulations were rescinded).

Meanwhile, the energy corporations haven’t done much at all except sign up for a few research and development leases. Royal Dutch Shell has long been experimenting with an in situ technique that involves sticking heaters into the ground and heating up the shale to 700 F while freezing the earth around the shale in order to prevent groundwater contamination. The four-year-long process has produced some oil, but Shell is reportedly years away from any sort of commercial production. 

Then came the Estonians, who plan to have a 50,000 barrel production plant in Utah by the end of the decade. I know, it conjures up images of a bunch of young Eastern European computer nerds sitting around in a dark room in a tiny, former Soviet Bloc country trying to figure out ways to scam gullible Utah investors out of their cash. But here’s the thing: Estonia (aside from being the birthplace of Skype), has a thriving oil shale industry, comprised of Eesti Energia, that produces 90 percent of the nation’s power and liquid fuel (w/ transportation fuel on its way, apparently).

And Eesti Energia -- the American subsidiary is called Enefit -- is now casting its eyes on global oil shale prospects. It’s working with both Jordan and Morocco to produce electricity from oil shale. Eesti Energia and other companies, including Royal Dutch Shell, have plans to produce liquid fuel from Moroccan and Jordan oil shale deposits. And Israel wants its shale to turn it into an “oil” powerhouse like its neighbors, supposedly using some miraculous new oil shale extraction process that doesn't use water.

Just because these places (and many more, it turns out) can do oil shale, doesn’t mean we can. For one thing, we’ll never use oil shale to produce electricity because we have plenty of coal for that. Still, this global rush makes me think that maybe oil shale’s not just a Western scam that hopes to attract government subsidies in the name of that ever-elusive energy independence. (Maybe it’s a global scam!) Or, maybe, it’s actually becoming economically feasible in these peak oil times. 

Uintah County, Utah, officials seem to think so. They visited Estonia’s oil shale facilities and then proposed tax incentives for Eesti Energia’s Utah operations. Meanwhile, the economics for zany energy sources are more favorable than they’ve been since 1981. A 2005 Rand Corporation report found that oil would have to cost $75-$90 per barrel before current oil shale technologies could be profitable. Oil topped $75 in 2007, and except for brief dips, it has remained far above that ever since, hovering around $100 for the last year -- and that’s during economic hard times, when domestic demand has staggered (but global demand has continued to climb).

Oil shale is still a crazy idea, not least because it means getting hooked on yet another carbon-intensive fossil fuel. But now maybe it can be profitable, and for the corporations who will be trying to wring the hydrocarbons out of those rocks, profit always trumps logic. 

*Oil shale is not the same as what’s known as shale oil. I’m sure Goat readers know that. Unfortunately, a few energy journalists (i.e. Wall Street Journal reporters) don’t. Shale oil (a better term would be oil-bearing shale) is basically oil trapped in shale that can be released via hydraulic fracturing. Once free, the oil behaves pretty much like any other oil, complete with gushers and all. Oil shale (a better term would be kerogen-bearing rock) starts its long life in much the same way as conventional oil. But it never completely matures, getting stuck instead at a stage of hydrocarbon adolescence called kerogen. That leaves humans to finish the geological growing-up process. Shale oil drilling is a booming business in formations such as the Niobrara in Colorado and the Bakken in North Dakota. Commercial oil shale production in the U.S. remains elusive.

 Jonathan Thompson is a contributing editor at High Country News and a 2011-2012 Ted Scripps Fellow in Environmental Journalism at the University of Colorado Boulder.

Jesse Tigner
Jesse Tigner
Dec 06, 2011 09:55 PM
Interesting.

I’m not saying that Utah needs a massive in situ operation; I not sure it does. However, I did think it worthwhile to put in my two cents on the profitability of such a scheme. I’ve read varying figures on how much resource is in that Green River formation and how much a barrel of oil needs to cost to make such a play profitable. There is quite a variety on both of those figures, but the upper ends of both suggest upwards of 4x the reserve of all current Saudi proven and about $100/barrel. That’s a hell of a lot of resource even if most of it can’t be “easily” obtained and given that oil is currently priced just above $100/ barrel and projected to rise in the future, the economics are very much in place to develop. While tons of profit may not be made for each individual barrel, the estimated 1.5 trillion barrels will add up to quite a profit… Not maybe, but for sure. Though, to be fair, all 1.5 trillion are not in Utah alone, but spread across CO and WY as well.

Before I’m attacked with all the hair-brained baloney that seems more commonplace in this comment board recently, let me reiterate that I do not think a massive, water hungry, in situ operation is what the arid west needs. What I am saying is that this type of operation will be profitable, and hugely so; and as the price of oil increases so too will the profitability. Once this does come to fruition, it will not be Eesti advertising for investment opportunities to the average western, it will be Eesti (or a major) quietly building multiple billions of dollars in investment from global players. And with the muscle of billions of Chinese, Korean, and Indian dollars and the time that goes into that sort of planning before the public really catches wind of the plan, the environmental issues of concern locally will have a hell of a time getting heard. Unfortunately.

It’s pretty easy to throw rocks at the idea and the idea’s proponents. It’s (for some reason) a hell of a lot harder to turn off your dam lights and drive a smaller car; or to get politicians to do what you’ve hired them to do.

At any rate, just my two cents. A nice timely piece, mainly for being so far ahead of the curve on this.