Uncertainties of oil shale development
Glen D. Weaver
The present flurry of development activity in the Piceance Basin culminates more than sixty years of effort to commercialize the area's rich oil-shale resources (Russell, 1980). The first boom period began shortly before 1920 when dwindling supplies of domestic crude prompted the filing of 9,000 placer claims on federal oil-shale lands in the basin. Numerous companies were soon formed to exploit the deposits, on both public and private lands, but none succeeded even though the U.S. Bureau of Mines supported this early venture by operating a pilot plant near Rulison between 1925-1927. Optimism faded quickly following the discovery of large oilfields in eastern Texas.
Interest revived in 1944 when Congress passed the Synthetic Liquid Fuels Act (Matzick and others, 1966). Essentially a prototype of the Energy Security Act signed by President Carter in June 1980, this legislation authorized the construction of demonstration plants to produce synthetic fuels from oil shale, coal, agricultural crops, forestry products, and other substances. Under its authority, the Bureau of Mines established the Oil-Shale Research Labora-tory at Laramie, Wyoming, and the Oil-Shale Experiment Station at Anvil Points, located about 11 km west of Rifle, Colorado. Room-and-pillar mining, surface retorting, and shale-oil refining experiments were conducted at Anvil Points until 1956.
Private research efforts also resumed in the 1950s and 1960s, first by Union Oil Company, then by Colony Development Operation, Equity Oil Company, a consortium of companies who leased the Anvil Points facility, and others (Office Tech. Assess., 1980, p. 128-153). The Department of the Interior (1968) also moved to promote development by formulating a program to lease federal oil-shale lands, but when offered in the fall of 1968, the test pro-gram drew little participation from private industry (Anonymous, 1968).
After a short lull, development activities proceeded once again, albeit not without further interruptions (Novak, 1975, 1976a). Prospects for commercialization appeared to reach an all-time high in early 1974. OPEC had increased world oil prices dramatically, the Arab oil embargo had created public awareness of the need to increase domestic energy supplies, the Paraho Development group had reopened the Anvil Points facility, and Interior's new prototype leasing program had been enthusiastically supported by private industry. The two Colorado lease tracts, C-a and C-b, had received bonus bids of $210 and $118 million, respectively, both far higher than what Interior had anticipated. Colony Development Operation, then considered to have the most advanced technology, had become leaseholder of tract C-b and also had an-nounced plans to build a commercial facility on its Dow property at the head of Parachute Creek.
Within a few months, however, Colony unexpectedly cancelled plans for commercial production on its private lands, and in 1976 both Colony and the Rio Blanco group, operator of tract C-a, re-quested suspension of diligence requirements on their federal leases. All four of the Colony partners eventually withdrew from tract C-b, turning over control to Occidental Oil Shale, who had been developing a modified insitu process at its Logan Wash site since 1972. Oxy appeared for a time to be the only company still committed to commercial production.
Currently another boom period is in full swing, with at least 7 projects in some phase of oil-shale or sodium-mineral development (Table 1). Construction and operation workforce on these projects is expected to reach 2,253 by the end of this year (Comm. on Oil Shale, 1981). Shale-oil production is targeted at about 250,000 b/d in 1990, with the possibility of additional output by Mobil Oil Company. Several projects are also ongoing in the nearby Uinta Basin of Utah (Callahan, 1981).
If history provides insight to the future, then current optimisn-regarding development must be tempered with caution. Oil shale remains a high-risk investment because of the large and possibly unreliable plant cost estimates, technical uncertainties, uncertainty of future world oil prices, and uncertainty of government support in the form of financial assistance or other incentives. P full discussion of these issues is contained in a report recently submitted to Congress by the Office of Technology Assessment (1980). Liberal use has been made of this report in the following sections.
- Weaver, Glen D., 1981, Uncertainties of oil shale development, in: Western slope Colorado--western Colorado and eastern Utah, Epis, Rudy C.; Callender, Jonathan F., New Mexico Geological Society, Guidebook, 32nd Field Conference, pp. 229-232.