Oil Shale - a really bad idea for a serious problem

Oil shale is kind of like the the lunatics of the Project For A New American Century - just when you think you've beaten them back they come back with a vengeance. I have been meaning to write on this guest post over at Joe Gandelman's The Moderate Voice a few days ago by J. Thomas Andrews,
Oil Shale to the Rescue?
The only thing oil shale might rescue is the multi-national energy companies. Now Mr Andrews begins with some things I agree with:

1. Ethanol from corn or anything else in not a solution.
2. Hybrid vehicles are not a solution.
3. ANWR is not a solution.

But then he tries to sell energy from oil shale.

However, we have another source of domestic petroleum that has the potential to make a big difference: oil shale.

Oil shale is a type of rock that has a petroleum precursor called kerogen trapped inside of it. Using a variety of mechanical and chemical processes, this kergoen can be extracted and upgraded into liquid fuels like synthetic gasoline and synthetic diesel. The United States has the largest oil shale resources in the world. Most of America’s oil shale deposits are located in the undeveloped Green River Formation, which straddles Colorado, Wyoming, and Utah. According to the Rand Corporation, as much as 1.1 trillion—yes, trillion— barrels of synthetic petroleum could be recovered from the Green River Formation. According to the U.S. Department of Energy, that is four times the size of Saudi Arabia’s proved reserves of conventional oil, and approximately equal to all of the proved reserves of conventional oil on earth!


Oil shale has received little attention in recent decades, but some Americans probably remember hearing about the resource during the Arab oil embargoes. In 1980, at the height of the embargoes, the U.S. Congress created the Synthetic Fuels Corporation, which was, in part, intended to develop America’s oil shale industry. When the Synthetic Fuels Corporation was created it was incredibly expensive to squeeze petroleum out of oil shale, and the plan was to invest in research and development to pioneer cheaper methods to produce shale oil. House Majority Leader, Rep. Jim Wright of Texas, thought so highly of the bill that created the Synthetic Fuels Corporation that he described it as “the most important bill we’ll act on during this decade, beginning an initiative we should have started in the 1950s.” However, by 1985, after the Arab embargoes ended and the price of oil plummeted, the incentive to invest in oil shale plummeted as well. Nearly every oil shale project in America was abandoned. With conventional oil selling at less than $25/Bbl, why would anyone want to invest in oil shale, which looked like it would never break the $80/Bbl profitability threshold?

Over the past few years though, a few things have changed. First, the price of oil has again skyrocketed. And, unlike in the 1980s, the price of oil does not look like it will come down again. This is because the peak in global production is fast approaching while demand is surging: limited supply and higher demand can only mean higher prices. Moreover, the Persian Gulf oil powers will likely continue to inflate oil prices as their stranglehold over the petroleum market tightens. As a 2005 Citigroup report noted, “…the days of $25 oil are long gone and unlikely to return any time soon.” Governments and businesses around the world are now forecasting long-term oil prices above $40, $50, and even $60 a barrel. These could all be conservative estimates.

The second major change relevant to oil shale is that several companies operating under the radar screen have developed radically cheaper oil shale production methods over the past few years. Shell is confident that a new technology it is pioneering could produce shale oil profitably if the price of crude settles above ~$25/Bbl.

There are of course several problems with oil shale production.

1. It is still a hydrocarbon and will do nothing to reduce our carbon footprint.
2. The environmental impact over several thousand square miles will be devastating.
3. The production requires water - lots of it.

I'm going to concentrate on number three today - that is enough to make it impractical.

The oil shale is located in the Green River formation which is located in Colorado, Utah and Wyoming. Colorado, which has most of the shale, already has a serious water problem which will only get worse over time.
Oil Shale Development Will Threaten Water Supplies

A commercial oil shale industry is projected to have a dramatic effect on Colorado’s water supplies and potentially its water quality. Water requirements for traditional mining and surface retort oil shale development are well documented, but estimates for in-situ production, which is being proposed at five sites in the Piceance Basin of Colorado, haven’t been made public. This water would have to come from a combination of Colorado’s unused share of the Colorado River– if any remains – and from existing users such as the agricultural and ranching operations.

“Drought and population growth are already affecting valuable water supplies across the West,said David Atkins, an independent hydrologist with Watershed Environmental. Adding the substantial requirements for a commercial-scale oil shale industry to this mix might bring the region to the tipping point.

”Producing oil from shale uses water on site both during and after production (to cleanse the production zone after the oil has been extracted). For example, Shell recently disclosed in a permit application for its small research and demonstration site that it will have to rinse its underground production area over 20 times, requiring up to 4 acre-feet each day for over two years and resulting in massive water disposal challenges.

[.....]

The oil shale deposits of the Green River Basin lie in one of the country’s most arid regions, one whose vulnerability to drought was laid bare in the past six years. The availability of new water to meet the needs of a commercial oil-shale industry is far from certain. Decisions made about oil shale leasing today could have ramifications for the next 400 years, the period of time that western oil shale resources are expected to provide a significant portion of our nation’s energy needs.

Oil shale is not a solution.

More SOTU post mortems

Yes, some are still dissecting George W. Bush's State of the Union and yes few are impressed. Joseph Sobrane saw a man at the end of his rope not unlike Saddam Hussein a few weeks earlier.

As I watched President Bush Tuesday night, for the first time I felt pity for him, in the same way you can’t help feeling sorry for any man at the end of his rope, even if he has brought it on himself. It isn’t a matter of desert; it’s beyond that.

I felt a similar emotion when Saddam Hussein was hanged: A man was finally being crushed by the natural result of his own acts. He was cornered at last, with no way out. It was painful to witness.

For once Bush spoke without conviction. He was trying to salvage a desperate position. The message was no longer that we are winning in Iraq; it was that all is not quite lost.

Paul Krugman takes a look at Bush's empty rhetoric on climate change and energy independence in The Sum of All Ears .

For those hoping for real action on global warming and energy policy, the State of the Union address was a downer. There had been hints and hopes that the speech would be a Nixon-goes-to-China moment, with President Bush turning conservationist. But it ended up being more of a Nixon-bombs-Cambodia moment.

Too bad: the rumors were tantalizing. Al Hubbard, the chairman of the National Economic Council, predicted “headlines above the fold that will knock your socks off in terms of our commitment to energy independence.” British officials told the newspaper The Observer that Mr. Bush would “make a historic shift in his position on global warming.”

None of it happened. Mr. Bush acknowledged that climate change is a problem, but you missed it if you sneezed. He said something vague about fuel economy, but the White House fact sheet on energy makes it clear that there was even less there than met the ear.

The only idea was a really bad one.

The only real substance was Mr. Bush’s call for a huge increase in the supply of “alternative fuels.” Mainly that means using ethanol to replace gasoline. Unfortunately, that’s a really bad idea.

There is a place for ethanol in the world’s energy future — but that place is in the tropics. Brazil has managed to replace a lot of its gasoline consumption with ethanol. But Brazil’s ethanol comes from sugar cane.

In the United States, ethanol comes overwhelmingly from corn, a much less suitable raw material. In fact, corn is such a poor source of ethanol that researchers at the University of Minnesota estimate that converting the entire U.S. corn crop — the sum of all our ears — into ethanol would replace only 12 percent of our gasoline consumption.

Still, doesn’t every little bit help? Well, this little bit would come at a very high price compared with the obvious alternative — conservation. The Congressional Budget Office estimates that reducing gasoline consumption 10 percent through an increase in fuel economy standards would cost producers and consumers about $3.6 billion a year. Achieving the same result by expanding ethanol production would cost taxpayers at least $10 billion a year, based on the subsidies ethanol already receives — and probably much more, because expanding production would require higher subsidies.

What’s more, ethanol production has hidden costs. Even the Department of Energy, which is relatively optimistic, says that the net energy savings from replacing a gallon of gasoline with ethanol are only the equivalent of about a quarter of a gallon, because of the energy used to grow corn, transport it, run ethanol plants, and so on. And these energy inputs come almost entirely from fossil fuels, so it’s not clear whether promoting ethanol does anything to reduce carbon dioxide emissions.

So why ethanol from corn? Three letters, ADM.

Subsidizing ethanol benefits two well-organized groups: corn growers and ethanol producers (especially the corporate giant Archer Daniels Midland). As a result, it’s bad policy with bipartisan support. For example, earlier this month legislation calling for a huge increase in ethanol use was introduced by five senators, of whom four, including presidential aspirants Barack Obama and Joseph Biden, were Democrats. In a recent town meeting in Iowa, Hillary Clinton managed to mention ethanol twice, according to The Politico.

So who or what is ADM? Arthur Daniels Midland Corporation is "the most prominent recipient of corporate welfare in recent U.S. history".

ADM and its chairman Dwayne Andreas have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers. Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.

And it's not just the Bushies.

But even after the Bushies are gone, bad energy policy ideas will have powerful constituencies, while good ideas won’t.

Subsidizing ethanol benefits two well-organized groups: corn growers and ethanol producers (especially the corporate giant Archer Daniels Midland). As a result, it’s bad policy with bipartisan support. For example, earlier this month legislation calling for a huge increase in ethanol use was introduced by five senators, of whom four, including presidential aspirants Barack Obama and Joseph Biden, were Democrats. In a recent town meeting in Iowa, Hillary Clinton managed to mention ethanol twice, according to The Politico.

The only real answer is conservation but it has no powerful friends. Less consumption won't increase profits.

Meanwhile, conservation doesn’t have anything like the same natural political mojo. Where’s the organized, powerful constituency for tougher fuel economy standards, a higher gasoline tax, or a cap-and-trade system on carbon dioxide emissions?

Can anything be done to promote good energy policy? Public education is a necessary first step, which is why Al Gore deserves all the praise he’s getting. It would also help to have a president who gets scientific advice from scientists, not oil company executives and novelists.

But there’s still a huge gap between what obviously should be done and what seems politically possible. And I don’t know how to close that gap.

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