THE RUGGED INDIVIDUALIST                     

Plenty of oil, just dril

There is plenty of oil in North America. Below are three articles that talk about untapped resources. The government has regulated this industry to the point that a lot of the small businesses have been squeezed out. And Big oil companies with departments that just deal with government regulations have found it cheaper to transport oil from the other side of the world. And everyone accepts this as normal. It is not about the environment, everyone cares about the environment. There are modern technologies that minimize the impact to the environment. And when something does happen the government uses it not to make the oil industry safer, but to increase regulation. As always the government makes the tax payers, pay. In this case, with higher gas  prices.


The U.S.' Untapped Oil Bounty

There's enough oil to power the nation for three centuries without OPEC's help -- IF we're willing to go after it.

By Jim Ostroff, Associate Editor, The Kiplinger Letter 6/8/2008



Think the U.S. is running out of oil? Think again. What is running low, given soaring demand for energy worldwide, is oil in fields that have already been tapped and are in production -- in other words, the relatively easy-to-get stuff, which oil companies have proven exists and can get at with current technology. Those reserves are clearly being drained. The U.S. has around 20 billion barrels now, down from nearly 29 billion barrels a decade ago and about half the 1970 peak of 39 billion barrels. But...

The U.S. is sitting on the world's largest, untapped oil reserves -- reservoirs which energy experts know exist, but which have not yet been tapped and may not be attainable with current technology. In fact, such untapped reserves are estimated at about 2.3 trillion barrels, nearly three times more than the reserves held by Organization of Petroleum Exporting Countries (OPEC) nations and sufficient to meet 300 years of demand -- at today's levels -- for auto, truck, aircraft, heating and industrial fuel, without importing a single barrel of oil.

What's the problem then? Why aren't oil companies jumping to pump the black gold? Contrary to what some conspiracy theorists would have you believe, there is no cabal of oil companies and foreign governments blocking the way, bottling up U.S. oil production. The reality is much more mundane. Those untapped reserves are located in places that either Uncle Sam has put off-limits for environmental reasons or are too costly to get -- or a combination of both.

Given current sky-high prices for crude oil and the likelihood that oil prices will remain high -- at or above $100 a barrel -- for the foreseeable future, it is now economically viable to tap some of those reserves. But environmental concerns -- ranging from preservation of pristine lands to worries about increasing the use of fossil fuels and accelerating global climate change -- remain a hurdle.

Here's a look at some of the largest untapped reserves.

  • Oil shales: Oil extracted from shale fields represents the mother lode of untapped reserves, at about 1.5 trillion barrels -- or 200 years worth of supply at current usage levels. Roughly two-thirds of the U.S.'s oil shale fields in Colorado, Wyoming and Utah are in federally-protected areas and closed to development. In addition, getting the oil out of the rock is a challenge, requiring cooking or chemical treatment of rock located as much as half a mile under the earth's surface.

To make oil shale production economically worthwhile, crude oil prices must remain above $50 a barrel for a protracted period. Given the outlook for continued high prices, oil companies such as ExxonMobil, Royal Dutch Shell Inc., EGL Resources, Brazil's Petrobras and others are gearing up pilot projects on nonfederal lands. The potential is to produce 1 million barrels of oil a day within a decade from lands currently open -- and several times that amount if the lawmakers give the green light to development of lands now off-limits.

  • Tar sands: Around 75 billion barrels of oil could come from tar sands, similar to Canadian fields, which now churn out a million barrels a day. The sands are located predominantly in Utah, Alaska, Texas and California, as well as in Alabama and Kentucky on federal and state lands that, by laws and administrative orders, are closed to mineral and petroleum development.
  • The outer continental shelf (OCS): Something in the neighborhood of 90 billion barrels of oil sit beneath the ocean bed 50 to 100 miles off the Atlantic, Pacific and Gulf coasts. Presidential bans and congressional prohibitions have put the tracts off-limits to oil company exploration at least until 2012, although there's a chance that Congress may lift the moratorium before then. In recent months, several key policymakers, including GOP presidential candidate John McCain and Florida Governor Charles Crist Jr. (R), have reversed their positions on drilling in the OCS. Crist's change of mind may signal a new trend. Concern about potential damage to his state's beaches and Florida's critical tourism industry had dictated his opposition to drilling off the state's coasts. But the state's growing budget woes -- and the prospect of capturing some cash from off-shore leasing -- is proving alluring.
  • The Bakken Play: With up to 100 billion barrels of oil, the reserves locked under rocks buried a mile or more beneath Montana and Saskatchewan, Canada, are more than twice the size of Alaskan's entire oil cache. New drilling and oil recovery technologies are overcoming production obstacles and petroleum companies are rushing to stake their claims. Marathon Oil recently acquired about 200,000 acres in the area and will drill about 300 oil wells within five years. Brigham Exploration and Crescent Point Energy Trust also want a piece of the action. EOG Resources alone figures it can produce 80 million barrels of oil from its Bakken field. But It will take at least five years before the oil starts flowing in large volumes.
  • The Alaska National Wildlife Refuge: About 10 billion barrels of oil are locked away here, with little possibility that federal lawmakers will open the door.

Of course, it isn't enough to simply get at the oil in these and other U.S. reserves. Providing major new supplies to U.S. consumers also requires a significant jump in refining capacity. But existing environmental regulations and community opposition make it tough to build new refineries. The last new domestic refinery was started up in 1976. And even if the technology and political will came together to allow oil companies access to the untapped reserves, they'll be reluctant to do so if the U.S. doesn't also have the capacity to refine the petroleum produced.

 

 

U.S. HAS MASSIVE OIL RESERVES

SHALE REMAINS UNTAPPED AFTER DECADES OF FAILURE

By Christopher J. Petherick (Issue #20, May 15, 2006)

There is an estimated 2 trillion barrels of oil buried beneath parts of Colorado, Utah and Wyoming. Geologists, petroleum companies and the federal government have known about these massive deposits for nearly a century. The trouble has always been: how do you get at it?

It is believed that the shale deposits in the Green River region of Colorado, Utah and Wyoming are holding the equivalent of approximately 1.5 trillion to 1.8 trillion barrels of oil. Called oil shale or shale oil, according to scientists and petroleum companies, much of it cannot be recovered with current technology due to the costly processing involved and the depth of the deposits buried beneath the Rocky Mountains.

Still, if only half can be extracted, scientists believe the amount is nearly triple the oil reserves of Saudi Arabia.

There has been quite a bit of hype surrounding the shale oil deposits of late. The problem with this, however, is that the type of oil in the western United States is contained in fine-grained sedimentary rockshence the name shale oil.

NOT REALLY OIL

Technically, it is not really oil at this stage, say geologists. Its kerogensort of an oil-like substance that, when heated in an expensive, laborious process, can be turned into a lower-grade oil, which can then be used in cars.

Walter Youngquist, a geologist from Eugene, Ore., published an article on the web site of the World Energy Council which delves into this subject. Youngquist put it this way:

The term oil shale is a misnomer. It does not contain oil nor is it commonly shale. The organic material is chiefly kerogen, and the shale is usually a relatively hard rock, called marl. Properly processed, kerogen can be converted into a substance somewhat similar to petroleum. However, it has not gone through the oil window of heat (natures way of producing oil) and therefore, to be changed into an oil-like substance, it must be heated to a high temperature. By this process the organic material is converted into a liquid, which must be further processed to produce an oil which is said to be better than the lowest grade of oil produced from conventional oil deposits, but of lower quality than the upper grades of conventional oil.

There are currently two main processes for refining shale oil, both of which are capital and labor intensive. In one method, the shale is broken down on-site and heated. The gases and liquids can then be extracted. In the second, the shale oil is removed and transported to facilities where it is then heated and refined.

NO SECRET

It is no secret that there is a potential oil bonanza in Colorado, Utah and Wyoming. The Association of Petroleum Geologists (APG) reports that in the 1900s, oil companies began looking into the deposits in this part of the United States.

In fact, in the 1920s, thousands of so-called oil placer claims
were filed on public lands following a rules change by the federal government that allowed private companies to lease government-managed land and extract the natural resources there.

Large deposits of shale oil are also not unique to the United States. In fact, there are huge reserves of the substance all around the world, from China to Australia to Scotland to South Africa. But, once again, the problem rests with the expense of getting to it and processing it. In the mid-to-late 19th century, France and Scotland extracted large deposits and processed it for their own purposes.

For the most part, the shale oil deposits in the United States were ignored in the United States up until the oil crisis of the late 1970s forced petroleum companies to begin thinking about alternative sources of oil. However, since then, the price of gas has been rock bottom so oil companiesmotivated by huge profits and not the need to ensure that the United States is energy self-sufficienthave been avoiding spending the money to research new techniques for refining shale oil.

Today, as oil prices creep up again, petroleum companies are again looking at shale oil despite its high price tag, evidenced by the fact that the Bureau of Land Management (BLM) has requests from multinational oil conglomerates to extract shale oil in the Green River region.

But even with modern technology, the difficulties associated with extracting and processing shale oil have forced even some of the largest oil companies to drop out of the game.

An April 11 article in Colorados daily newspaper, The Rocky Mountain News, noted that the BLM began accepting proposals by companies to develop the shale oil in the Western part of the United States in the summer of 2005.

But BLM officials, citing various reasons, have already rejected bids put forth by 14 out of 18 companies, including an offer by Exxon Mobil.

The BLM said it dumped Exxon Mobil because it did not appear to be dedicating enough resources to shale oil research. But Exxon is reportedly notorious in that part of the country. According to The Rocky Mountain News, many Coloradans still remember Black Sunday, or May 2, 1982, when Exxon execs announced the closure of a shale oil processing facility that had been running for decades in western Colorado. The closure put 2,200 people out of work in that part of the state, resulting in a rash of bankruptcies and foreclosures, which hurt the locals for many years after.

Shell has reportedly been studying ways to extract oil shale on land in Colorado since the 1990s. The company said it hopes to have a full-blown operation by 2010.

Two others reportedly still in the running include Chevron and the Texas-based EGL Resources. Industry experts are optimistic that, with help from the government, new techniques can be developed to economically extract oil from the shale deposits and process it with relative ease.





 

America’s Untapped Oil

Could the Rockies out-produce Saudi Arabia?

(Page 1 of 3)

Royal Dutch Shell, the international oil giant, thinks the solution to America's oil crisis may lie in the heart of Colorado. Since 1981, the company has quietly funded a multi-million dollar research project that many call a quest for energy's Holy Grail. The mission: to discover a way to safely and economically extract fuel from oil shale, a type of sedimentary rock found in Wyoming, Utah, and especially Colorado's Western Slope. The potential windfall is staggering. Studies over the years by industry and government alike estimate that there may be between 800 billion and more than one trillion barrels of oil locked up in these rocks--nearly three times the known reserves in Saudi Arabia. That would be enough oil to supply America for the next 400 years. "It's coming eventually. It's just a matter of when," say Roy McClung, mayor of Parachute, Colorado, a community in the heart of oil shale country. "Should all the stuff come into place, this area is going to--well, I don't know if anyone is ready for that kind of growth."

With oil bubbling over $140 a barrel, the political push is heating up. On Monday, President Bush announced that he is lifting an executive ban on offshore drilling. In June, he also championed oil shale, calling it "a highly promising resource," and asked Congress to lift a year-old national moratorium that critics say prohibits the industry from tapping oil-rich shale deposits.

But are McClung and Bush being overly optimistic about shale? Yes, say some oil industry executives, government officials and environmentalists. They point to a 2005 RAND Corporation study that suggests a commercially viable means of extracting oil from shale may be at least 12 years off, if ever. Shell, a leader in the research effort for the past 25 years, has not sold a single barrel of fuel from shale. In fact, no one has ever commercialized oil shale in the United States. The extraction process carries with it significant environmental risks as well-a political stumbling block in a region of the country where water is an extremely precious commodity.


 

 

For generations, oil shale has been more a source of frustration than actual energy. Early Western homesteaders unwittingly used the rocks to build their chimneys, only to find that they were fire hazards. During the 19th century, the stones were squeezed for kerosene and lamp oil. And by the mid-20th century, government and industry were eyeing shale as a source of gasoline and jet fuel. "The question has always been how to recover it and at what cost," says Glenn Vawter, executive director of the National Oil Shale Association (NOSA), an industry-funded advocacy group that was reborn this year after being defunct for nearly two decades.

With analysts predicting oil could hit $170 a barrel by the end of the year, the rush is on for shale oil again. But Colorado's been through booms before, only to be burned. After prices spiked in the late 1970s, big oil poured into Colorado's Western Slope, the world's biggest oil shale deposit. Flush with money and jobs, towns like Rifle and Grand Junction thrived. "People were living in tents, under bridges. There was nowhere to put all the workers," says Parachute's mayor, McClung.

But by the early 80s, oil prices fell and extraction technology never panned out. On Sunday, May 2, 1982, the bubble burst. Exxon announced it was closing its $5 billion Colony oil-shale operation. Overnight, Colorado's entire Western Slope economy collapsed. "Police were put on riot alert," McClung recalls. "Thousand of people arrived to work on Monday and were met with armed guards and the last pay check. Buildings partly erected sat for years until they were tore down. It was awful." To this day, many Coloradoans still blame "Black Sunday" as the trigger that put the state in a near decade-long recession.

Twenty-six years later, with gas at more than $4 a gallon, oil-shale prospectors think it can still work. Most eyes are on Royal Dutch Shell's "in situ" process. The company's idea is to heat oil shale underground to temperatures of about 700 degrees for three years or longer. In turn, the oil oozes out of the rock and can then be extracted. To avoid contaminating underground water, areas surrounding the heated rock are frozen to create "freeze walls", theoretically preventing the oil from migrating. "We have demonstrated that our technology works. We have produced oil and gas," says Terry O'Connor, vice president external and regulatory affairs for Shell Exploration and Production Company, Unconventional Oil.

In all, O'Connor says, the company has produced only 1,800 barrels, and, won't commercially produce for another 10 years at least. "Our challenge now is whether we can do it on a larger, commercial basis," adding Shell has yet to prove groundwater can be protected. "If we are not able to do that, I can assure you that we will not proceed to commercialization." When will Shell decide? Says O'Connor: "We hope to have enough knowledge by 2009 or 2010."

Still, Shell and other players, like Chevron, Exxon and a handful of oil-shale prospecting companies, want some answers now. Companies researching oil shale have been relegated to testing on privately-owned land or a few specially-leased plots on federal land. The reason? While the Federal Energy Policy Act of 2005 directed the Bureau of Land Management--which manages 80 percent of the oil-shale territory--to begin paving the way for commercial production, a 2007 environmentally-concerned Congress narrowly voted to put a one-year moratorium on developing commercial regulations, a restriction that expires on October 1. "We need a little more certainty the industry will be supported," says Vawter, who argues the moratorium should not be renewed. Shell's O'Connor says without any federal direction, it could have a "chilling effect" on the company's desire to continue investments.

Environmentalists, meanwhile, are taking a cautious line. They voice concern about the impact extraction would have on water quality. Some also worry that the production of oil shale could release greenhouse gases, though the oil companies say that is not a proven side effect. But even the most vocal environmental critics seem wary of being painted as anti-development in the current climate-especially since the energy industry is so vital to the local economy. "Across the board you have people who remember the Black Sunday event," says Frank Smith, the oil shale community organizer for the Western Colorado Congress. "This issue still resonates in their minds and souls."

Last month, Colorado's Governor Bill Ritter testified in Congress he wants to preserve the moratorium, a position supported by Wyoming's Democratic governor, Dave Freudenthal. Soon after, and just across the state border from the Royal Dutch Shell plant, Utah's Republican governor, Jon Huntsman Jr., and the state's two Republican senators, Bob Bennett and Orrin Hatch, called publicly for an end to the moratorium.

The heart of Colorado's oil shale country was once a Republican stronghold, in a loyal red state. No longer. Colorado is a key 2008 swing state, and four years ago the residents of oil shale country elected John Salazar, a Democrat, to the House. "He won because he defended the Western Slope's water," says Kenneth Bickers, professor of political science and the department chair at the University of Colorado, Boulder. In fact, in 2007, Salazar, along with his brother, Colorado Democratic Sen. Ken Salazar and Democratic Rep. Mark Udall, sponsored the efforts that led to the current oil-shale moratorium. Udall is today the Democratic candidate for an open Colorado Senate seat, in a tight race with former oil executive, Bob Schaffer. It's anybody's guess at this point whether the Bush administration's push to end the moratorium will help-or hurt-Republicans in down-ticket contests this fall.

Back in Parachute, the townspeople are mindful of history, the mayor says, adding that he is concerned about another oil shale boom and bust cycle. "Is there a split in town? Pretty badly," says McClung, who won his mayoral seat as a registered independent in 2006. "It's amazing how small issues, like the moratorium, can become such a big focal point. But it's going to be a very hot-button issue."