E&E Energy Wire: Investors urged to take cautious approach to development
A business investor coalition issued a report today siding with the Obama administration's cautious plan for developing oil shale reserves on federal land in Colorado, Utah and Wyoming.
Boston-based Ceres, which comprises investors and environmental, social and public interest groups that lobby for sustainable business practices, released thereport outlining five key risks that could undermine commercial-scale oil shale development and appearing to support the Bureau of Land Management's proposal to scale back the amount of public land made available for research and development.
The BLM proposal significantly downsizes a George W. Bush administration plan to develop oil shale that called for amending resource management plans in Utah, Colorado and Wyoming to make roughly 1.9 million acres of public land available for commercial oil shale development. BLM's proposal would reduce available lands for oil shale development in the three states by more than 75 percent and would allow research on the leases only until industry demonstrates that commercial development is technically viable and environmentally safe (Greenwire, Feb. 3).
The BLM plan has sparked opposition from industry groups and GOP leaders in Western states, including several counties in Colorado and Utah that have passed resolutions calling for the Bush plan to be adopted.
But large-scale development of oil shale carries many risks for investors, according to the "white paper" prepared for Ceres by David Gardiner & Associates LLC, a Washington, D.C.-based consulting firm specializing in energy and climate change issues.
Among them is the "technological uncertainty" over the largely experimental process of extracting crude from shale rock. Critics say it would require heating the kerogen, or fossilized algae, to 650 degrees Fahrenheit or more, requiring huge expenditures of energy.
Another concern is the availability of water. The report cites estimates showing that surface technologies may require as much as four barrels of water for every barrel of oil produced, while in-ground technologies may require up to 12 barrels of water per barrel produced.
To make that happen in Colorado, for example, both the White and Colorado rivers likely would be tapped to operate drilling equipment as well as to cool turbines at new power plants that would be necessary to support oil shale development projects. A Colorado Water Conservation Board report last year that analyzed state water needs through 2050 estimated that 39 billion gallons of water a year would be needed to produce 1.5 million barrels of oil a day from oil shale deposits in the state (Land Letter, Jan. 13, 2011).
That could lead to public opposition to oil shale development, which ultimately could "derail, delay, or increase the costs of such projects," according to the report.
"Given the wide array of uncertainties, BLM's proposed leasing approach on oil shale makes sense," said Mindy Lubber, Ceres' president. "Investors should be similarly cautious in evaluating future investment in this space."
Development, however, has not stopped. BLM this month released a draft environmental assessment of two oil shale research and development proposals in western Colorado proposed by Exxon Mobil Exploration Co. and Natural Soda Holdings Inc. Each proposal involves 160 acres and could be expanded to a square mile pending additional environmental review (E&ENews PM, May 18).
Developers are drawn to the Green River Formation, which covers parts of western Colorado, northeast Utah and southwest Wyoming. The formation is estimated to contain more than half the world's oil shale reserves, and some estimate it holds as much as 1.5 trillion barrels of recoverable shale oil -- more than three times the total that will ever be produced in the oil fields of Saudi Arabia.
"Oil shale technologies are still highly speculative, and proving them to be commercially viable will be difficult and require a long period of time with uncertain outcomes," said Paul Bugala, senior sustainability analyst, extractive industries, at Calvert Investments, which manages more than $11.5 billion in assets. "The little that state and federal regulators know about the environmental impacts, especially in the areas of water use and land reclamation, further indicates that caution should be exercised."
Streater writes from Colorado Springs, Colo.