U.S. Oil Shale Deposits May Be Tapped Soon

Published December 1, 2005

Encouraged by successful and economical extraction of Canada’s oil sands, several major oil companies are considering similar ventures to extract oil from large oil shale deposits in Colorado, Utah, and Wyoming.

As much as 1.8 trillion barrels of oil–more than the total oil reserves contained in Canada’s oil sands–may exist in the tri-state oil shale deposits. “Depending on who’s counting,” reported the October 2 Rocky Mountain News, “that’s as much as the world’s proven reserves, or several times as much oil as in Saudi Arabia.”

Steady, High Prices Necessary

The deciding issue is whether it is economical to extract the oil from the shale. Extracting oil from shale is more expensive than, for example, tapping Middle Eastern reserves. When oil prices are low, companies cannot recover their oil shale production costs. However, oil shale can be economically feasible when oil prices remain high over the long run.

Terry O’Connor, a vice president with Shell Oil, estimates crude oil must consistently trade above $30 per barrel for oil shale production to prove economical. Until very recently, oil prices consistently remained below that level. Price spikes have occurred, but they have always been followed by a return to lower prices.

A quarter-century ago, as the United States suffered the oil price spikes of the 1970s, Exxon transformed the town of Parachute, Colorado from a small, sleepy village into the headquarters of U.S. oil shale production. However, when oil prices tumbled in the early 1980s, Exxon was forced to abandon production.

Beginning to Invest

Has the time come to tap the nation’s huge oil shale reserves? Companies such as Shell and Houston-based Anadarko Petroleum Corporation believe the time may be soon approaching. They are investing in projects to make oil shale extraction more efficient.

The oil shale deposits are in an area that already contains mining and transportation infrastructure, a significant advantage, said Anadarko spokesperson Rick Robitaille.

“In southwest Wyoming there is a very definitive mining culture,” Robitaille told the Casper Star-Tribune for a September 23 story, regarding one of Anadarko’s oil shale holdings. “Those folks have mined coal and trona [sodium carbonate, used for making glass and a variety of chemicals] for years. The infrastructure is there for moving production to market. So there are a lot of positives.”

“We must not artificially constrain oil-shale production if the market warrants its production,” observed Sterling Burnett, senior fellow for the National Center for Policy Analysis. “While it may be more costly to produce a barrel of oil from oil shale than from, for example, the Arctic National Wildlife Refuge, it is still far more economical and in many ways environmentally friendly to produce oil from shale than electricity from wind turbines or other so-called renewable sources.”

James M. Taylor ([email protected]) is managing editor of Environment & Climate News.