1. Oil Shale: A viable step towards energy independence?
Author: Benjamin Reichard; Contact:

2. Overview What? Where? Why? How? Economic Appeal Environmental Concerns
Legal Barriers

3. What is oil shale?
Formed over millions of years ago by deposition of debris on lake beds and sea bottoms
Heat and pressure transformed the materials into oil shale
Known commonly as "the rock that burns"
Source:

4. Source: http://ostseis.anl.gov/guide/oilshale/index.cfm

5. What is oil shale?
Oil shale is rock that contains bituminous materials released as a petroleum-like liquid when heated
To obtain oil, shale must be heated to a high temperature (a process called retorting)
The resultant liquid must then be separated and collected
Traditional and current mining methods have been used to extract the shale before retorting
An alternative but currently experimental process referred to as in situ retorting involves heating the oil shale while it is still underground, and then pumping the resulting liquid to the surface
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

6. Where is oil shale?
A significant portion is found here in the United States, which is why it may be so important to energy independence
Much of the American oil shale is found in the Western states: Colorado, Utah, and Wyoming
Indeed, much of the world’s oil shale is located in that region
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

7. Where is oil shale?
It is estimated that the Green River Formation in the western U.S. contains nearly 2 Trillion barrels of oil
Recoverable estimates range from 500 billion to 1.1 trillion
Even a middle-of-the-road estimate of 800 billion barrels is 3 times the proven reserves of Saudi Arabia
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

8. Source: http://ostseis.anl.gov/guide/oilshale/index.cfm

9. Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

10. Source: BLM

11. Why do we care?
Present U.S. demand for petroleum products is about 20 million barrels per day
If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

12. What are we waiting for?
Cost of production has historically been prohibitive
Cost of pumping oil has always been less
Consequently, there has been little economic incentive to develop oil shale technologies
Source:

13. What are we waiting for?
Oil shocks of the 1970’s and 1980’s stimulated some interest previously, but crude prices leveled off
Also, during the oil crises, major oil companies spent several billion dollars in various unsuccessful attempts to commercially extract shale oil
Recently, rising oil prices have renewed interest in oil shale as an economically viable alternative to “traditional” oil
Source:

14. The rising price of oil
Currently, oil prices are hovering below $70 per barrel
Some forecasts predict a rise to $85 per barrel over the next year
Source:

15. The Cost of Oil Price as of 4.25.2007: 1 year projected forecast:
$67.25/barrel
1 year projected forecast:
$87.42/barrel
Source:

16. The Recurrent Themes Accessibility Technological limitations
Socio-economic factors
Environmental impacts
Legal barriers

17. How do we get it?
Mining
Open-pit
Underground
In situ conversion

18. Typical Deposit
Source: RAND Corporation, adapted from Beard, T. N., D. B. Tait, and J. W. Smith, "Nahcolite and Dawsonite Resources in the Green River Formation in Colorado," in K. D. Murray, ed., Guidebook to the Energy Resources of the Piceance Creek Basin, Colorado. Denver: Rocky Mountain Association of Geologists, 1974, pp

19. Source: DOE, NSuRM Model, http://fossil. energy

20. Extraction Issues Oil shale can be mined using one of two methods:
underground mining using the room-and-pillar method or
surface mining
After mining, the oil shale is transported to a facility for retorting
After retorting, the oil must be upgraded by further processing before it can be sent to a refinery
The spent shale must be disposed of, often by putting it back into the mine
Eventually, the mined land is reclaimed
Sources:

21. Surface Retort
Source: Lawrence Livermore National Laboratory

22. Source: Environmental assessment of Chevron proposed Oil Shale R&D;

23. In situ retorting: a new frontier?
Shell Oil is currently developing an in-situ retorting process known as thermally conductive in-situ conversion (ICP)
The process involves heating underground oil shale
The volume of oil shale is heated over a period of 2-4 years
The released product is pumped in conventional ways
Sources:

24. The Freeze Wall
Source:

25. The Freeze Wall
Source: USAToday, Oil Shale Enthusiasm Resurfaces in the West, June 1, 2006,

26. Source: DOE, Strategic Significance of America’s Oil Shale Resource Vol. II,

27. Source: http://www.co.blm.gov/wrra/documents/figure4_ICPProcess.pdf

28. Advantages of ICP No open-pit or subsurface mining
No leftover piles of tailings
Avoid combustion-related groundwater contamination
Minimize unwanted byproducts
Minimize water use
Reach deeper resources previously deemed inaccessible
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

29. Development
Shell, Chevron, and E.G.L. Resources have all submitted in situ conversion plans for the Green River fomation to the BLM
BLM has done Environmental Assessments with findings of no significant impact (!), thus paving the way for these larger scale test projects
Source:

30. The Latest Advance: Thermal Solution Processing
Unproven outside the laboratory setting, thermal solution processing would be quite a coup
It would enhance oil yields
Produce an oil more stable for shipping and storage
Improve recovery of by-products
Produce less spent shale and lessen environmental impacts
Source: DOE, Strategic Significance of America’s Oil Shale Resource Vol. II,

31. Economic Factors U.S. demand for oil is increasing
By 2025, imports are expected to account for 70% of demand
Demand worldwide is growing
OPEC is the primary supplier
When will production peak (or has it already)?
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

32. Source: DOE, Strategic Significance of America’s Oil Shale Resource,

33. Economic Factors
Production of oil shale could offset impact of rising import prices
Decreased demand on foreign sources on the part of the U.S. could also stabilize prices on the world market
Previous oil shocks have taught important lessons about the far-reaching effects of price spikes

34. Price Spikes
A threat not to be ignored as demand grows and known reserve amounts remain static
Inflation
High interest rates
High unemployment rates
A stagnant economy
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

35. Source: DOE, Strategic Significance of America’s Oil Shale Resource,

36. Economic Appeal
High quality and environmentally desirable feedstock for jet fuel, and other military and civilian fuels
Nitrogen compounds important to chemical manufacturing industry
SOMAT (shale oil modified asphalt) has proven value because it extends pavement life
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

37. Primary Benefits Reduced price in crude Increase in employment
Assured supply
Increased state and local revenues
Increased federal revenues
Technology export
Strategic benefits
Supply diversity
Favored fuel quality
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

38. Source: DOE, NSURM Model, http://fossil. energy

39. Source, DOE, NSURM Model, http://fossil. energy

40. Source, DOE, NSURM Model, http://fossil. energy

41. Source: DOE, Strategic Significance of America’s Oil Shale Resource,

42. Mitigating Economic Factors
Large capital investments required
Long lead times precede flow of revenue streams
Price volatility of conventional petroleum
Uncertainty of costs required for commercial viability
Costs of regulatory compliance
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

43. Alberta’s Tar Sands: A Model for U.S. Oil Shale Production
Commercial success of ventures in Alberta’s tar sands development has added 174 billion barrels to Canada’s proven reserves
U.S. oil shale resources are just as rich, accessible, and high quality as the Alberta tar sands. . .
But commercial investment is required
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

44. Tar Sands & Oil Shale Alberta’s sands are producing about 22 gal/ton
The richest reserves of oil shale in the U.S. are conservatively estimated to produce 30 gal/ton, with some test studies yielding 38 gal/ton of shale
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

45. Tar Sands & Oil Shale
A further advantage of oil shale is its areal density
While Alberta’s tar sands yield about 100,000 barrels of oil per acre, the Green River Formation oil shale has a density of over 1 million barrels per acre
This density translates into economic and technological benefits for companies
It also means a smaller environmental footprint
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

46. Advantages of oil shale
Tar sands produce “bitumen” whereas oil shale produces “kerogen,” a product richer in hydrogen and nitrogen, and therefore more valuable
Oil shale production does not require removal of as much overburden
Oil shale production requires less external energy (estimated 300,000 btu/bbl of oil shale syncrude vs. 350,000 btu/bbl of tar sand syncryde)
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

47. Tar Sands & Oil Shale: Getting over the hump
Technological issues
Will new methods of extraction and processing develop?
Will those methods be able to comply with environmental regulations?
Economic issues
Will a market develop?
Will capital be attracted?
What will the returns look like?
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

48. Could it be profitable? Mining techniques are not the problem
The issue is in creating a commercial-scale retorting process
Mine
Retorting plant
Upgrading plant
Supporting utilities
Spent shale reclamation
Models predict that such a complex is unlikely to be profitable unless oil prices reach $70-$95/barrel
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

49. Could it be profitable? In situ conversion may provide an answer
Less surface area required
No spent shale reclamation
Successful field test, but commercial-scale development is in its infancy
Nonetheless, Shell predicts that in situ conversion processes could be profitable with an oil market between $25-$30 per barrel
Sources: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

50. Could It Be Profitable? Playing it close to the vest:
Shell has submitted the largest patent application in U.S. history for its ICP technique
Shell representative, Terry O'Cannon states, "We try to keep them from speculating too much and keep expectations low because we don't know if this technology will be successful and viable in the long term."

51. Could it be profitable?
We are at least 10 years away from oil shale development reaching the production growth phase
More than 20 years away from 1 million barrels per day production levels
And more than 30 years away from the target production of 3 million barrels per day
But rising oil prices suggest it could be worth the initial outlay
Source: RAND Corporation, Oil Shale Development in the United States: Prospects and Policy Issues;

52. Legal Issues
Water rights
Land use
Permitting
Leasing

53. What about water? A perpetual problem in the western U.S.
Water is needed for
Plant operations
Reclamation procedures
Support infrastructure
Population growth
State legal regimes of prior appropriation conflict with federal mineral rights regimes
Sources: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004; Natural Resources Law & Policy, Rasband, Salzman, & Squillace, Foundation Press (2004)

54. Water Rights
Recently, California has returned 0.8 million acre-ft./year to the upper basin states
This is anticipated to be enough to support a 2.5 million barrels/day oil shale industry
But that figure is at least a decade away
Plus, population growth will require water
And no one knows how climate change might affect water flows in the near and long term
Short supply of water means greater cost for appropriative rights
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

55. Infrastructure?
Extensive oil and gas development in the region has created plenty of roads
Do enough power generation facilities already exist to meet external energy needs?
Population growth to support industry will require even more infrastructure upgrades and poses more environmental risks
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

56. Mining Law
1872 Mining Act opened public lands to free mineral development and patenting
1920 Minerals Leasing Act removed oil shale from coverage of the 1872 Act
A federal leasing regime such as that for oil and gas has never grown up around oil shale
FLPMA’s recording requirement cleared public lands of many stale mining claims
Source: Natural Resources Law & Policy, Rasband, Salzman, & Squillace, Foundation Press (2004)

57. Mining Law
Energy Policy Act of 1992 required holders of unpatented claims to pay a fee of $550/year
After 1992, patent applicants are limited only to ownership of the oil shale estate, while the federal government retains surface and other minerals
Nevertheless, some legal disputes are still kicking around as to pre-1920 claims that have not been perfected

58. Extracting oil shale
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands
Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base
Source:

59. Green River Formation Land Ownership
Source: DOE, NSURM Model,
Green River Formation Land Ownership

60. §369. OIL SHALE, TAR SANDS, AND OTHER STRATEGIC UNCONVENTIONAL FUELS
Energy Policy Act of 2005
§369. OIL SHALE, TAR SANDS, AND OTHER STRATEGIC UNCONVENTIONAL FUELS
Act recognizes that “oil shale, tar sands, and other unconventional fuels are strategically important domestic resources”
Emphasizes research for commercial viability in an environmentally sustainable and sound manner
Directs the Dept. of Interior to develop a research and development leasing program for the Green River Basin
Directs the Dept. of Interior to complete a prgrammatic environmental impact statement (PEIS) for a commercial leasing program
The Act requires the Dept. of Interior to promulgate regulations for a commercial oil shale and tar sands leasing program and authorizes the Secretary to conduct lease sales

61. Research and Development
Source: DOE, Strategic Significance of America’s Oil Shale Resource Vol. II,

62. RD&D Leasing Timeline
Source:

63. Proposed Test Site

64. Source: http://www.co.blm.gov/wrra/documents/figure21_VegCommunities.pdf

65. PEIS Timeline Currently, a draft PEIS is scheduled for Summer 2007
Source:

66. Environmental Concerns
Both mining and processing of oil shale involve a variety of environmental impacts, such as global warming and greenhouse gas emissions, disturbance of mined land, disposal of spent shale, use of water resources, and impacts on air and water quality
Both conventional approaches to oil shale processing use considerable water
The total energy and water requirements together with environmental and monetary costs have made production uneconomic
Sources:

67. Environmental Concerns
Conventional mining operations bring obvious changes to the topography
Air quality impacts have not been thoroughly studied
Mass. v. EPA could have a significant impact here because processing petroleum products from oil shale involves significantly higher CO2 emissions than crude oil processing
Source: RAND Corporation, Oil Shale Development in the United States Prospects and Policy Issues. J. T. Bartis, T. LaTourrette, L. Dixon, D.J. Peterson, and G. Cecchine, MG-414-NETL, 2005,

68. Environmental Concerns
Water quality and quantity in Upper Colorado River Basin
Leaching of salts and toxins from spent shale piles
3 barrels of water needed for every barrel of oil produced under conventional processes
Groundwater impacts of in situ processes

69. Environmental concerns
Shell’s current plan involves use of ground-freezing technology to establish an underground barrier created by pumping refrigerated fluid through a series of wells drilled around the extraction zone.
The “freeze wall” is supposed to keep groundwater out and hydrocarbons in
Source: RAND Corporation, Oil Shale Development in the United States Prospects and Policy Issues. J. T. Bartis, T. LaTourrette, L. Dixon, D.J. Peterson, and G. Cecchine, MG-414-NETL, 2005

70. Environmental Concerns
But. . .
The process is unproven on a commercially feasible scale as Shell is only just beginning a large-scale operation
Confirmation of the technical feasibility of the concept hinges on the resolution of two major technical issues: controlling groundwater during production and preventing subsurface environmental problems, including groundwater impacts
Shell purports to have the answer, yes or no, by 2009

71. Environmental/Energy Overlap
An operation producing 100,000 barrels of oil per day is estimated to require 1.2 gigawatts of dedicated generating capacity!
This is equivalent to a facility needed for a city of 500,000
Shell asserts it will produce 3.5 units of energy for every 1 consumed
This is predicated on use of combined cycle natural gas power plants. . . Rising price of natural gas? Use of gas produced on site?
What about coal-fired plants?
Less efficient, even more air pollution concerns
Even more mining of coal would be required to support an oil shale industry using coal-fired external power sources
Source: Udall, R. and Steve Andrews, The Illusive Bonanza: Oil Shale in Colorado,

72. Connection to Natural Gas
Oil shale can be used as a feedstock substitute in chemical processes using natural gas, thus freeing gas for other uses
Can in situ conversion processing produce a significant amount of natural gas itself?
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

73. Issues to be considered
The major issues that will be addressed in this planning effort include:
Resource management
Surface and groundwater protections
Air quality protection
Protection of wilderness, riparian, and scenic values
Transportation corridors
Multiple mineral development
Socioeconomic impacts on local economies.
Source:

74. Who is involved?
Source: DOE, Strategic Significance of America’s Oil Shale Resource,

75. Commercial Viability
The Department of Energy has created a National Strategic Unconventional Resource Module (NSURM)
This module is meant to serve as a guide for assessing issues of technical and economic feasibility
Source: DOE, NSURM model,

76. Source: DOE, NSURM model, http://fossil. energy

77. Commercial Leasing Timeline
Source: BLM Oil Shale Outlook,

78. The BLM/DOI is looking at Utah’s royalty rate structure as a model
Source: DOE, NSURM Model,

79. Other Factors
Housing, schools, health care, transportation, utilities, and waste management all will need to be planned and funded
Past experience indicates that community infrastructure development must be heavily supported by developers and governmental entities
Source: Oil & Gas Journal, Hubbert Revisited, Aug. 9, 2004

80. Conclusion: We are taking another stab at oil shale right now
Will it be profitable?
Will industry be patient enough?
Will government help or hinder (or both)?
Can the local environment bear the costs?
Like most other questions in Energy, only time will tell