A Vast Reservoir

Ways to Extract the Oil

Nathan Bilow for The New York Times

Shell’s Mahogany field in western Colorado, where the company is testing plans to heat shale underground for two or three years to recover the oil.

 

The New York Times

 

 
December 21, 2006
 

The Cautious U.S. Boom in Oil Shale

By CLIFFORD KRAUSS
GRAND JUNCTION, Colo. — Oil shale has never made an American company more than a nickel or two; quite a few, in fact, have lost countless millions over the last century trying to cook oil out of the rock. R. Glenn Vawter, who has worked as an executive for many of the losers, knows all that only too well.

Oil shale’s many starts and stops have driven Mr. Vawter’s career but have also unsettled his family life, forcing 37 moves during one 25-year spell early in his career.

But Mr. Vawter is still a true believer. His rock garden is adorned with huge shale boulders weighing over a hundred pounds, which he has lugged from job to job. His house is filled with shale bookends and shale paperweights engraved with names of companies he has worked for, including one that he had to shut down, laying himself off, during the last shale bust, in the 1980s.

Some may think Mr. Vawter a glutton for punishment. But suddenly at age 68, Mr. Vawter and his holy grail are back. Last month, the Bush administration opened up five large parcels of land in the Piceance Creek Basin in Colorado for oil shale research and development projects, and Mr. Vawter has bounded out of retirement to manage the efforts of EGL Resources, which will begin pilot tests early in 2007.

Government estimates of recoverable shale oil in Colorado, Utah and Wyoming put the reserves at 800 billion barrels — more than triple the proven oil reserves of Saudi Arabia. So aside from Mr. Vawter, now many in Washington have their eyes on a big prize, not in small part for the promise it might hold to ease national security concerns. “It could literally shake the world,” Senator Pete V. Domenici, a Republican from New Mexico, told a recent Senate hearing.

But there are plenty of good reasons no one has ever come up with a profitable, environmentally acceptable method for extracting oil from shale. Not only were the previous efforts too expensive and too energy- intensive to compete with conventional oil resources, they also laid waste to the land, produced lots of air pollution and threatened scarce groundwater in one of the driest regions of the country.

So it is no surprise that Shell, Chevron and Mr. Vawter’s EGL Resources, the three companies that won the 160-acre leases, say they are going to go slow with their experiments before they begin considering commercial production of synthetic fuel. The initial outlays are small, in the millions or tens of millions.

They are all looking over each others shoulders, wondering if any of their new techniques, aimed at overcoming the previous obstacles, can hit the jackpot. Each is refining its own method, but they say they are cautiously optimistic that they can succeed where so many others have failed.

“The resource scale is enormous,” said Donald L. Paul, vice president and chief technical officer at Chevron. “We believe there are opportunities for it to become commercial. Otherwise, we wouldn’t do the R&D.”

Despite the fresh starts, skeptics abound.

“The jury is still out whether oil shale can make it,” said James T. Bartis, an energy policy expert at the RAND Corporation, an independent research firm. “Right now we have no idea what one of these plants will look like. There are no designs on the books, no one has given detailed estimates on the pollution, the footprint, the ecological impact or even for that matter, the economic value to any company that is to build one of these plants. So there is a lot of uncertainty.”

The three companies are rejecting old mining techniques that failed in the past in favor of experiments that heat the shale underground. The idea is to melt the organic material into a form of oil and gas and then pump it to the surface for refining into fuel.

The companies hope that approach — known as in situ, or on site — will be more efficient and produce fewer carbon dioxide emissions than previous efforts, although some of their experts acknowledge that a method still must be developed to capture and store carbon emissions to ensure that shale oil does not become a large producer of greenhouse gases.

“I didn’t think I would live long enough to see a rebirth of oil shale development in our country,” Mr. Vawter said. “It feels great.”

Given the modest size of the experiments planned so far, shale oil will not be arriving anytime soon, until at least the 2020s. But this is still the biggest push for shale oil since the Carter administration handed out hundreds of millions of dollars in tax breaks and other subsidies to shale developers a few years after the 1973-74 Arab oil embargo drove up prices and inspired one of the first of several failed drives to achieve the post-embargo dream of American energy independence.

The Los Alamos National Laboratory, the Energy Department operation best known for its development of the atomic bomb during World War II, also worked on shale mining technologies in the 1970s and is also jumping back into the oil shale research business in partnership with Chevron.

Los Alamos scientists are applying modeling and monitoring technologies developed from carbon sequestration experiments and underground testing of nuclear weapons, storage of nuclear waste and cleaning of nuclear weapon components.

For any underground technique to work, scientists say they must find a way to prevent the leaching of shale remnants into groundwater. Even small releases of toxic substances like arsenic and selenium could cause great harm to the Colorado River drainage basin, a lifeline for the entire Southwest.

The Los Alamos scientists said they would also try to find ways to safely and efficiently handle hazardous gases and explosives that might be used by Chevron to break down kerogen, the fossilized material in shale that can be converted into oil.

EGL says it is ready to commit at least $30 million to its 10-year experimental effort, and the larger companies are expected to pony up considerably more money. Shell says it hopes to decide whether to begin commercial production by the end of this decade.

Shale holds much promise for American companies, because it is abundant and most of it is found in the United States. A RAND Corporation study says that the bounty could fuel American cars and homes for more than 400 years, if shale could meet a quarter of the current American demand, which is about 20 million barrels a day.

“It gets to the national security question,” said Duncan W. McBranch, a senior scientist at the Los Alamos National Laboratory who is working with Chevron. “What if you didn’t have to rely on the Middle East or other volatile parts of the world for energy?”

Such visions of synthetic shale fuel have been around a long time, at least since before World War I, when the Taft administration decided that shale was so potentially important for fueling the nation’s growing Navy that it created the Naval Oil Shale reserve.

Dozens of oil shale companies were formed and went bust during and after both World Wars. At various times from the early 1950s through the mid-1980s many of the largest oil companies invested up to $2 billion on various experimental techniques in the American Rockies but hardly a drop of oil was ever sold.

Ruins of old mines and drills and water pumps from long-forgotten projects litter the western Colorado mountain valleys. One entire housing development Exxon began building to house 25,000 people is now a retirement community.

Exxon and the Tosco Corporation invested the most money — more than half a billion dollars — in their joint Colony shale mining plant, now abandoned, a few miles north of Parachute, Colo. Twenty years later Mr. Vawter and about 20 Tosco colleagues and their wives tried to hold a reunion at the old Colony site, but Exxon Mobil denied them entrance for liability reasons at the site the company still owns.

“We felt put out, so we went as close as we could get outside the locked gate of the property,” said Mr. Vawter as he drove through a canyon near the old Colony site recently. “We hired a caterer to take us on a wagon ride and a cookout and sat around telling old stories.”

This time Mr. Vawter is starting well behind Shell, which has never completely given up hope in shale since the last bust. From tests going back to the early 1980s in Houston and on their own Mahogany test field in Colorado, Shell researchers have come up with a more complex but seemingly ingenious in situ approach.

On the new lease, Shell plans to drill vertical holes 2,000 feet into the shale and heat the rock below ground with electric heaters. The shale will be slow-cooked at about 650 degrees Fahrenheit for two to three years with the hope of producing a far higher-quality oil and gas product than the faster cooking techniques of the 1980s.

To protect groundwater, Shell is testing a “freeze wall” in which ice walls will be created by circulating refrigerant liquids through a closed system of pipes.

“We’re getting close and closer to a financial investment decision, hopefully by 2010,” John D. Hofmeister, president of Shell Oil, told the National Press Club in Washington in October. “We hope that the technology works.”

Chevron’s approach is still a work in progress. One possible method would use injection wells to circulate hot carbon-dioxide-rich gases through the fractured shale formation. For efficiency purposes, the heated gases from initial chemical reactions would be reused repeatedly to help process new shale.

Chevron is hoping to aim at smaller portions of shale than Shell to minimize the environmental footprint, and use shale formations themselves as walls to avert seepage into groundwater through monitoring techniques developed at Los Alamos.

“We are going to be smarter this time,” said Robert Lestz, Chevron’s oil shale technology manager. “If you are using yesterday’s technologies you can expect yesterday’s results. Using today’s technology, you should expect totally different results.”

The EGL method, the simplest of the three, is roughly akin to a boiler putting 700 degree Fahrenheit steam or other hot fluids through an intricate radiator system dug underneath the shale formation. Pipes will pump to the surface the vapors and liquid hydrocarbons that are emitted from the rock.

To alleviate the underground water problem, the company plans perimeter wells to pump water continuously out of the area.

“We’re just beginning and of course you have to reflect upon what happened the last time,” Mr. Vawter said. “That so many good people have broken their picks on this is humbling.”