Tuesday, the oil company Royal Dutch Shell dropped its long-running Colorado effort to produce oil from so-called oil shale. For anyone familiar with the history of oil shale, this was akin to a rerun of “Star Trek”: How many times have we seen this?
As the Associated Press reported, Shell has spent $30 million since 1982 in Northwest Colorado’s Piceance Basin trying to figure out how to make oil shale yield oil economically. The market, however, is fickle and working with oil shale is costly and problematic.
Beyond that, the story of oil shale illustrates how central the boom and bust cycle is to the oil business as well as the disastrous social and economic consequences that can have. All that has been detailed by Fort Lewis College’s Andrew Gulliford in his book Boomtown Blues: Colorado Oil Shale and on the University of Colorado’s website www.centerwest.org.
For starters, oil shale is not shale gas or shale oil (also known as tight oil.) Those are gas or oil found trapped in shale formations and typically freed by hydraulic fracturing or fracking. Oil shale is not oil at all, but rather rock that contains a substance called kerogen that can be converted into synthetic oil.
There are several ways to do that, typically involving heat. But the processes are environmentally challenging and typically require a great deal of water – in an area where there is not much. More to the point, no one has ever figured out how to get oil from oil shale in a way that is economically competitive in the volatile international oil market.
That is not for lack of trying. The first North American attempt at commercial production started in Canada in 1815. By the middle of the 19th century, dozens of firms were cooking oil shale, usually to make kerosene.
What happened then is what always happens. The price of oil fell after now-conventional drilling was developed and oil shale became unprofitable.
World War I pressed home the need for a secure domestic oil supply. The public got excited, the government set aside land in Colorado and Utah for oil shale production aided, of course, by lax regulation and speculators.
Then the war ended and the price of oil dropped. The companies fled or folded and in 1930 President Herbert Hoover withdrew all federal lands from oil shale leases.
During World War II Congress authorized further experimentation. President Harry Truman lifted Hoover’s order and things looked good. Except commercial producers were not interested and the expected boom never materialized.
The 1970s saw the Arab oil embargo and renewed interest in domestic energy sources. The government offered oil shale leases in 1974 and a Colorado parcel fetched the highest per-acre price then recorded for a federal energy lease. And after some ups and downs, Jimmy Carter put on his cardigan, declared the push for alternative energy the “moral equivalent of war” and billions of federal dollars went to boost synthetic fuel projects.
All the major oil companies dove in. In Colorado towns such as Parachute, Rifle and Silt, populations quadrupled with accompanying shortages of housing, schools and municipal services. Wages and prices soared as did social problems.
But oil prices fell and on May 2, 1982, Exxon, the largest of the players, announced that it was ending its oil shale operation effective immediately. The other companies followed suit and an $85 million annual payroll went along. Within a week 1,000 people left Garfield County.
Now Shell is gone, too. It seems the old saw is correct: Oil shale is the energy source of the future – and always will be.