New 'Black Gold' Looms in Western States
By Dan Luzadder, Special to Stateline
RIFLE, Colo. - Rural roads here on Colorado's Western Slope were once marked by the dusty tracks of an occasional pickup truck as farmers and ranchers went about their work on the open range. But a new energy-based reality now grips the economy in this corner of the state once dominated by hunting, fishing, recreation, tourism and agriculture.
Today, traffic jams clog secondary roads, spawned by a boom in oil and gas exploration and production on nearby federal lands. Most of the pickups that now crisscross the land are driven by energy company employees tending development of wells in the Piceance Basin.
Rifle and Northwestern Colorado are the epicenter of this boom. Although oil and gas prices are falling in the economic downturn, the Bush administration's opening of federal lands to drilling beginning in 2003 has put in place here a new infrastructure, replacing the open country and its rural ways with new roads, schools, construction and retail and expanding local government - and all the social impact that comes with that.
Yet, while oil and gas exploration here has left an indelible mark, it's nothing compared to what seems to loom on the horizon. In the Basin, as in Wyoming and Utah, a new "black gold" is catapulting toward commercial development. Known as "oil shale," it eventually could dwarf the dramatic impact of traditional oil and gas drilling seen in Western states over the last five years.
"The town of Rifle has already seen its population expand dramatically" because of the oil industry expansion, Harris Sherman, executive director of the Colorado Department of Natural Resources (DNR), told Stateline.org. "A study by the Colorado River District projecting growth … suggests it could see another 80,000 people directly related to oil shale activity."
Geologists have confirmed that the massive oil shale deposits in Colorado, Wyoming and Utah could yield the equivalent of 800 billion barrels of oil - more than all the oil reserves of Saudi Arabia. Oil shale is seen by fossil fuel advocates as holding the key to the national goal of American energy independence while also offering the possibility of vast energy industry profits.
While production of oil from shale - loosely layered rock found hundreds of feet below the surface where fossil material is trapped - has been tried for almost 100 years, only recently have technologies surfaced that avoid the controversial process of strip-mining the rock.
Developers are trying an "insitu" process that heats the rock to high temperature underground to release a substance call kerogen - a form of oil that can be pumped to the surface through traditional drilling and then converted at refineries to high-grade motor fuels. The new technology employs an experimental and, environmentalists say, yet unproven "freeze wall" - ice walls surrounding the heated core - to prevent groundwater contamination.
A decision by the U.S. Department of Interior's Bureau of Land Management (BLM) to finalize new oil shale leasing rules on Nov. 17, shortly after a moratorium on oil shale development expired, is highly controversial. Much of that controversy revolves around opening 2 million acres of federal land to exploration before the environmental and other impacts of the largely untried technologies for extracting kerogen are known.
Colorado and Wyoming state officials, members of Congress and environmental groups have argued for months that the BLM should wait for the new administration before opening the door to new energy leases on federal lands and investment in oil shale. Despite the protests, the BLM ordered the new rules to become effective on Jan. 17, three days before President-elect Barack Obama's inauguration.
States, which will have to deal with population growth and other social impacts of oil shale development, are left with a conundrum: Taxes and extraction royalties could be a financial windfall to tight state budgets, but officials have no way to measure the related costs.
Critical among these issues is the impact on the West's most precious resource - water. Whatever extraction technologies may eventually take shape, all are expected to require vast amounts of water that Western states may not be able to spare, Sherman said.
Environmental impacts like water usage have been at the heart of mining debates in the West for more than 40 years, dating to when shale was strip-mined and gas-fired boilers then separated rock from oil at 900 degrees - a process still being used in Utah, where officials have taken a more pro-industry stance on development.
Shell Oil and other potential producers like Chevron say commercial development using more environmentally sensitive techniques could be 10 or 15 years away. But the debate quickened with the finalization of BLM rules governing commercial development.
The new rules were seen as bad news by Colorado Gov. Bill Ritter (D) and Wyoming Gov. Dave Freudenthal (D), both of whom had urged the BLM to hold off.
"We obviously don't agree with this decision," Freudenthal said in an e-mail to Stateline.org . "Perhaps the most telling is, by (industry's) own admission, oil shale won't be able to be developed for another five to 10 years. So really, this was nothing but a gift to industry."
Colorado DNR's Sherman said the most surprising part of BLM's "gift" was setting royalty rates - the money companies pay to state governments for the right to extract natural resources - without adequate information on related costs that the oil shale states will face. BLM officials said royalty rates had to be set for energy companies to attract future investors but have declined to elaborate.
Getting information from oil companies on their research - there are five oil shale test plots in Colorado - has been difficult, Sherman noted, which means the state doesn't have information it needs to draft its own rules and regulations on development, wildlife protection, energy efficiency and environmental mitigation.
Sherman said another unanswered question is how energy companies will get enough electricity for oil shale extraction. "New coal or nuclear power plants could be required," he said, as estimates suggest a developed industry could require 80 percent more electrical energy than is now used throughout Colorado.
Shell said it could not provide comment for this story by deadline.
Water, both the fear of contamination and the amount needed for the process, is indeed raising the greatest anxiety for both Colorado and Wyoming as they contemplate policy responses to BLM's recent decisions.
Wyoming land management chief Don McKenzie told Stateline.org it is still unclear whether freeze-walls can protect against groundwater contamination. His office, he said, is still supervising unresolved contamination of an "insitu" oil shale project in Rock Springs, Wyo., that was tried in the 1970s - and abandoned after severe groundwater contamination.
Recent studies by the Colorado River Commission and others predict commercial oil shale production could require 400,000 acre feet of water a year, Sherman said. (Acre feet are the standard water measure in the West, described as the amount needed to cover a single acre one foot deep). That total, he notes, would account for all of the unclaimed water in the Colorado River Basin, the state's primary supply.
Those concerned about water issues related to new BLM oil shale rules, however, may take comfort in Obama's decision to nominate U.S. Sen. Ken Salazar (D) of Colorado as the new secretary of the Department of Interior. A strong advocate of water protection in the West, Salazar was also heavily involved in pushing for the moratorium on oil shale development that expired this fall.
But U.S. Rep. Doug Lamborn (R) of Colorado disagrees with state officials and environmentalists who balk at oil shale exploration, particularly over water use claims.
"They (state officials) should not be able to dictate what happens on federal lands," Lamborn said . "I'd sure hate to see that. We are living in a day and age where Americans need access to affordable energy to keep the economy going."
Lamborn, who said he recently toured Shell Oil's Mahogany Formation test site near Rifle, said he believes that claims of water resource needs are widely exaggerated. "What I saw them doing there didn't seem to me to use that much water at all," he said. "The concern is just false."
Dan Luzadder is a freelance writer in Colorado.