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Is Oil Shale the Next Big Energy Battle?

April 24, 2012

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The House Committee on Science, Space, and Technology held a hearing last week titled “Tapping America’s Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: Technology & Policy Pathways”. I had assumed that the hearing would highlight attacks on Obama administration policies toward shale gas, shale oil, and Keystone XL, all of which have been prominent in the news.

So I was struck to read the testimony of Karen Harbert, a former Bush administration official, Presdient & CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, and a prominent critic of the Obama administration. Most of her testimony is about something entirely different: the prospect of developing oil shale in the United States:

“We have hundreds of years of oil supply stored in unconventional formations in the United States. In fact, the three states of Colorado, Wyoming and Utah alone contain more oil from oil shale than all of the conventional oil contained in the Middle East. This resource is so vast that when made commercial, it has the real potential to completely alter the global oil markets and secure America’s energy future at the same time. Yet it is the current policy of our government to ignore the value of these resources, sacrificing the revenue, jobs and huge security dividends Americans would realize from developing them.”

First a quick explainer: “oil shale” and “shale oil” are two totally different things. “Shale oil” is what’s being produced in Texas and North Dakota using the same fracking techniques used to produce shale gas. “Oil shale” is basically rock that contains kerogen. You melt it (loosely speaking) to produce oil. It was a hot prospect in the late 1970s, but when the price of oil crashed, so did development.

It is also hugely controversial: the local environmental impacts of shale oil development are often compared to those from Canadian oil sands extraction. Indeed the two basic techniques for producing oil shale – surface mining followed by processing, or in situ conversion, parallel those used to produce synthetic crude oil. Shale oil development also puts big demands on water resources, which (at best) would need to be carefully managed. And, of course, development of U.S. oil shale would increase greenhouse gas emissions, insofar as it didn’t displace other similarly energy-intensive oil.

The biggest barrier to oil shale development, though, has long been the cost of extraction and the large amounts of up-front capital required. No one can honestly say that they know whether oil shale will make economic sense down the road. To be fair, though, denying industry an initial foothold will make finding out impossible. That’s the frame that Harbert sets up before criticizing the administration for putting oil shale resources off limits:

“BLM (Bureau of Land Management) reduced the acreages for oil shale activities in Colorado, Utah and Wyoming by over three quarters, from 2 million to 461,965 acres.”

That isn’t as consequential, though, as it sounds. We’re nowhere close to commercial-scale oil shale production yet. And research, development, and demonstration activities don’t require huge amounts of acreage. As several RAND Corporation authors explained a few years ago (in what remains the best analysis I’ve seen of oil shale), with “the ownership limit on federal oil shale leases… raised to 50,000 acres per state, private-sector investors in oil shale development have a much greater opportunity to profit from technically successful efforts.” Making nearly half a million acres available, then, would mean that at least ten or so companies could have a go. That should be plenty of opportunity to try new approaches and get a better sense of how much developing oil shale would really cost. It would also help us get a better handle on associated greenhouse gas emissions – which should inform any policy on large-scale oil shale development. And it would allow a gentle enough development pathway to avoid many of the environmental screw-ups we’ve seen in the Alberta oil sands – something that those who like and hate oil shale alike should support.

Technical issues aside, though, I wouldn’t be surprised to hear more discussion of Obama administration restrictions on oil shale development as the year progresses. In an election season marked by a surprising focus on energy issues, candidates are looking for ways to differentiate themselves. For Republicans in particular, it seems that attitudes toward oil shale may fit the bill.