Oil shale project in Colorado delayed, but Shell Oil isn't giving up

The withdrawal of an application to the Department of Reclamation and Mining Safety for research and development doesn't mean that Shell Oil has given up efforts to wrest oil from the rocks of the Green River Formation.

Shell submitted the application a year ago, but withdrew it when the company realized that research was going to lead in another direction, said Tracy Boyd, spokesman for the Mahogany Project, the name for the oil shale research work being conducted on 17 acres in the Colorado back country near Rifle.

"But that doesn't mean that we've stopped anything," he said. "It's a delay, but other things are going on at the site. We've finished building the freeze wall test and it's 100 percent online now. They're working on heating tests elsewhere on the site."

The next step, which requires combining both the freezing and heating elements into one big test to see if Shell can really wring oil from the rocks, is causing the delay.

"It takes about a year to process the application, and things in this research are changing so fast that knowing exactly what you want to do in a year is difficult," Boyd said. "We're learning a lot more all the time. We'll resubmit the application a year or so down the road when we have better information to know exactly what kind of integrated test we want to do."

Shell is the only major oil company performing oil shale research on such a large scale. The company has produced 1,700 barrels of oil at its research site, and believes it can wring millions more from the formation that stretches from Utah to Wyoming.

Despite the delay, Shell is optimistic about the feasibility -- and profitability -- of oil shale. But the company is being cautious, refusing to estimate how many barrels of oil could eventually be produced from area.

"We don't want to say, because it's still a ways out from commercialization," Boyd said. "But our tests are showing some very favorable results."

Shell expects that the oil shale project will reach commercial stage in about 10 years, Boyd said. While that might seem like the far-distant future for motorists paying nearly $3 for gallon for gas, Boyd said the project is moving swiftly.

If Shell can solve the oil shale puzzle -- determining how to pull oil from the rocks by means that are efficient and inexpensive - - the formation could become the largest unconventional oil reserve in the world.

But critics are skeptical, saying that the process is expensive, inefficient and environmentally hazardous.

"Despite a century of trying, and $10 billion in investment, oil shale currently provides an infinitesimal .0001 percent of world energy," said Randy Udall, director of the Community Office for Resource Efficiency in Aspen. "The technology is incredible -- incredible in an insane way, incredible in a fantastic way, maybe both."

Other analysts say that the fiasco of the 1970s and 1980s -- when oil companies abruptly pulled out of the Rifle region and oil shale exploration, leaving thousands of people unemployed -- means that investors should be cautious when viewing shale as the solution to the country's energy woes.

"That history raises a feasibility issue," said Dan Hattrup, an instructor in economics and finance at Regis University who is researching alternative energies as his Ph.D. thesis. "Looking at the new technology, however, it seems to be cost-effective. I've seen some estimates that say it can be effective even if oil is at $30 a barrel."

Shell plans to extract the oil from the shale by freezing the perimeter of the field to a depth of about 2,000 feet, removing the water, drilling wells and inserting long electric heaters.

The heaters will increase the temperature of the rock to about 700 degrees Fahrenheit and keep it heated for about four years -- completing the work that nature would have done if the oil shale had been buried deeper.

However, that process, Hattrup said, would involve serious environmental concerns.

"The project -- if it expands to the BLM -- could affect the groundwater," he said. "It's a real possibility that groundwater will be contaminated as they're removing it or putting it back into the area. It's an area that still needs to be researched."

While Hattrup acknowledges that the oil from the in-situ process could solve the country's energy problems -- he's more concerned about environmental issues.

"When people talk about new ways of finding oil or using oil resources, they don't talk about the environmental aspect," he said. "And if you're concerned about that, what we need is a radical change of mind -- and switch to something that doesn't use fossil fuels."

Shell has been granted more than 200 patents for its technology, and has received some of the necessary approvals from state and federal government agencies to continue its research.

Despite favorable results in small projects, Boyd said that the research takes time -- so it could be years before oil is pumping from the Green River Formation.