[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
AMERICAN JOBS AND ENERGY
SECURITY: DOMESTIC OIL SHALE--
THE STATUS OF RESEARCH,
REGULATION AND ROADBLOCKS
=======================================================================
OVERSIGHT FIELD HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Wednesday, August 24, 2011, in Grand Junction, Colorado
__________
Serial No. 112-56
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
David Watkins, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
DOUG LAMBORN, CO, Chairman
RUSH D. HOLT, NJ, Ranking Democrat Member
Louie Gohmert, TX Peter A. DeFazio, OR
Paul C. Broun, GA Madeleine Z. Bordallo, GU
John Fleming, LA Jim Costa, CA
Mike Coffman, CO Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Dan Benishek, MI CNMI
David Rivera, FL Martin Heinrich, NM
Jeff Duncan, SC John P. Sarbanes, MD
Paul A. Gosar, AZ Betty Sutton, OH
Bill Flores, TX Niki Tsongas, MA
Jeffrey M. Landry, LA Vacancy
Charles J. ``Chuck'' Fleischmann, Edward J. Markey, MA, ex officio
TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
------
CONTENTS
----------
Page
Hearing held on Wednesday, August 24, 2011....................... 1
Statement of Members:
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 1
Prepared statement of.................................... 3
Tipton, Hon. Scott R., a Representative in Congress from the
State of Colorado.......................................... 4
Prepared statement of.................................... 5
Statement of Witnesses:
Aho, Gary D., Board Member/Former Chairman, National Oil
Shale Association.......................................... 56
Prepared statement of.................................... 58
Hagood, Michael C., Director, Program and Regional
Development, Energy and Environment Science & Technology,
Idaho National Laboratory.................................. 17
Prepared statement of.................................... 19
Hankins, Helen, Colorado State Director, Bureau of Land
Management, U.S. Department of the Interior................ 6
Prepared statement of.................................... 8
McCloud, Brad, Executive Director, Environmentally Conscious
Consumers for Oil Shale.................................... 59
Prepared statement of.................................... 61
Mittal, Anu K., Director, Natural Resources and Environment
Team, U.S. Government Accountability Office................ 35
Prepared statement of.................................... 36
Highlights............................................... 44
Sladek, Thomas A., PhD, Director, Ockham Energy Services..... 21
Prepared statement of.................................... 23
Response to questions submitted for the record........... 27
Spehar, Hon. James G., Former Mayor, Grand Junction,
Colorado, and Past President, Colorado Municipal League.... 62
Prepared statement of.................................... 64
Letter to Secretary of the Interior Ken Salazar dated
November 18, 2009, submitted for the record............ 68
Letter to Secretary of the Interior Ken Salazar dated
December 17, 2010, submitted for the record............ 70
Letter to Senator Mark Udall dated March 24, 2011,
submitted for the record............................... 72
Spinti, Jennifer P., Research Associate Professor, Department
of Chemical Engineering, and Assistant Director, Institute
for Clean and Secure Energy, The University of Utah........ 28
Prepared statement of.................................... 30
Whitney, Dan, Heavy Oil Development Manager, Shell
Exploration and Production Company......................... 52
Prepared statement of.................................... 53
Additional materials supplied:
Burnham, Alan, PhD, Chief Technology Officer, American Shale
Oil (AMSO), LLC, Statement submitted for the record........ 80
List of documents retained in the Committee's official files. 81
OVERSIGHT FIELD HEARING ON ``AMERICAN JOBS AND ENERGY SECURITY:
DOMESTIC OIL SHALE--THE STATUS OF RESEARCH, REGULATION AND ROADBLOCKS."
----------
Wednesday, August 24, 2011
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Grand Junction, Colorado
----------
The Subcommittee met, pursuant to call, at 9:05 a.m., at
Grand Junction City Hall, 250 North 5th Street, Grand Junction,
Colorado, Hon. Doug Lamborn [Chairman of the Subcommittee]
presiding.
Present: Representatives Lamborn and Tipton.
STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Lamborn. The Committee will come to order. The Chairman
notes the presence of a quorum, which under Committee Rule 3(e)
is two Members. The Subcommittee on Energy and Mineral
Resources is meeting today to hear testimony on an oversight
hearing on American Jobs and Energy Security: Domestic Oil
Shale--The Status of Research, Regulation, and Roadblocks.
Under Committee Rule 4(f), opening statements are limited
to the Chairman and Ranking Member of the Subcommittee.
However, I ask unanimous consent that Mr. Tipton be permitted
to give an opening statement and to include any other Members'
opening statements in the hearing record if submitted to the
clerk by close of business today.
Hearing no objection, so ordered.
Mr. Lamborn. I now recognize myself for 5 minutes.
Thank you all for being here today. This is a very
important topic.
I am Congressman Doug Lamborn, and I have the privilege of
not only representing Colorado in the Congress, but I am also
Chairman of the House Natural Resources' Subcommittee on Energy
and Mineral Resources.
I am especially pleased that my colleague, Scott Tipton, is
here. Representative Tipton has made a big impression in just
the few months he has been in Congress and on this Committee in
particular, and he is known as a staunch defender of the
interests of the 3rd Congressional District.
And in honor of being in the 3rd Congressional District, I
wore my Mesa Verde tie----
[Laughter.]
Mr. Lamborn. Which is one of the highlights of the vast and
beautiful 3rd District, a manmade wonderful place to visit. I
urge everyone here to go there if you haven't already,
especially visitors here. I am sure hometown people have
already been there.
But there are so many wonderful things in the 3rd District
to do and to see, and that is one of the things that we need to
talk about here at this meeting today. I think that we can
balance all of the competing needs that are so important.
We have the environment with protected species. We have
environmentally sensitive fish and other wildlife that need to
be protected for tourism. We need to have water protected. That
is such a tremendous and important resource here in the West.
We need an opportunity for jobs to be created and for the
economy to grow. So I think that we, as Americans, can
accomplish all of these things at the same time.
Our Subcommittee has broad jurisdiction over onshore and
offshore energy production on public lands. Obviously, much of
that we have here in the West. And these are issues that affect
every one of us here in Colorado.
Today, we are here specifically to discuss one of the most
challenging, tantalizing, and promising sources of energy our
country has to offer, oil shale. The United States is blessed
with tremendous oil shale resources. Nearly 75 percent of the
world's recoverable oil shale is estimated to be located in
this country, and we have been called by some the ``Saudi
Arabia of oil shale.''
Much of that is located right here around us in this three-
State region, where, according to the U.S. Geological Survey,
the Western United States may hold more than 1.5 trillion
barrels of oil, enough to provide us, if it were to be used and
produced, with energy for the next 200 years.
Unfortunately, the oil shale development has historically
been characterized by boom and bust, industrial surges due to
inconsistent and sometimes contentious Federal policies
regarding leasing and land development. As Federal land
contains about 80 percent of the known recoverable resources in
the West, these policies are sometimes significantly hindering
the research and development projects that could lead to
commercial oil shale production.
In 2005, the House of Representatives passed the Energy
Policy Act of 2005, which directed the Department of Energy and
the Bureau of Land Management to expand their work on oil
shale. Accordingly, in 2007, six areas of land were leased for
oil shale projects.
However, since then, the Obama Administration has shown
little support or interest in the advancement of these
projects. Shortly after taking office, they delayed RD&D leases
and offered a second round of leases with new, revised, and
restrictive lease terms that were so uninviting to oil shale
production that industry showed almost no interest in procuring
this valuable land.
Although they did receive some applications, the leases
have yet to be issued. To add further burdens to the process,
in February, the Obama Administration announced that they would
be reviewing the current rules for commercial oil shale
leasing, adding further delays to an already unreasonably
prolonged process.
While oil shale development is still in its infancy in the
United States, other countries, such as Brazil, Estonia,
Jordan, and China, support substantial oil shale industries
without having nearly the same amount of oil shale resources
that we have here. Instead of promoting American jobs and
developing cutting-edge, clean technologies to utilize these
resources and lead the way in global development of this
resource, the Obama Administration has stone-walled its
production, diverted resources that could be used for oil shale
RD&D, and continues to put up roadblocks for companies that
want to utilize Federal land for energy production. I find this
extremely troubling.
I am especially looking forward to our witnesses' thoughts
on how we can successfully expand the oil shale industry while
preserving a resource that we in the West work hard to
conserve--water. Striking a balance between energy production
and water management is, and continues to be, an extremely
important issue for our region. It is vital that we continue to
safeguard this precious natural resource while at the same time
creating jobs for our citizens and producing homegrown energy
for all Americans.
Again, I want to thank our witnesses for taking time out of
your busy schedules to be with us today. Thank you all for
being here, and I look forward to hearing from the testimony
shortly.
At this point, I would now like to recognize Representative
Scott Tipton for an opening statement.
[The prepared statement of Mr. Lamborn follows:]
Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources
Thank you everyone for being here today. I'm Congressman Doug
Lamborn and I not only have the privilege of serving you all in my home
state of Colorado, but I am also the Chairman of the House Natural
Resources Subcommittee on Energy and Mineral Resources. Our
subcommittee has broad jurisdiction over onshore and offshore energy
production on public lands, much of which we have here in the West--and
issues that affects every single one of us in from the state of
Colorado.
Today we are here to discuss one of the most challenging,
tantalizing, and promising sources of energy our country has to offer--
oil shale. The United States is blessed with tremendous oil shale
resources--nearly 75% of the world's recoverable oil shale is estimated
to be located in this country and we have appropriately been called the
``Saudi Arabia of oil shale.'' Most of that shale is located right here
around us, where according to the U.S. Geological Survey, the Western
United States may hold more than 1.5 trillion barrels of oil -enough to
provide the United States with energy for the next 200 years.
Unfortunately, oil shale development has historically been
characterized by ``boom and bust'' industrial surges due to
inconsistent and combative federal policies regarding leasing and land
development. As federal land contains about 80 percent of the known
recoverable resources in the West, these policies are significantly
hindering the research and development projects that could lead to
commercial oil shale production.
In 2005, the House of Representatives passed the Energy Policy Act
of 2005 which directed the Department of Energy and the Bureau of Land
Management to expand their work on oil shale. Accordingly, in 2007 six
areas of land were leased for oil shale projects. However, since then,
the Obama Administration has shown little support or interest in the
advancement of these projects. Shortly after taking office they delayed
RD&D leases, and offered a second round of leases with new, revised
lease terms that were so uninviting to oil shale production that
industry showed nearly no interest in procuring this valuable land.
Although they did receive applications, the leases have yet to be
issued. To add further burdens to the process, in February the Obama
Administration announced they would be re-reviewing the current rules
for commercial oil shale leasing, adding further delays to an already
unreasonably prolonged process.
While oil shale development is still in its infancy in the United
States, other countries such as Brazil, Estonia, Jordan, and China
support substantial oil shale industries without nearly the amount of
oil shale resources we have in our country. Instead of promoting
American jobs and developing cutting edge clean technologies to utilize
these resources and lead the way in global development of this
resource, the Obama Administration has stonewalled its production,
diverted resources that could be used for oil shale RD&D, and continues
to put up roadblocks for companies that want to utilize federal land
for energy production. This is extremely concerning.
I am especially looking forward to our witnesses' thoughts on how
we can successfully expand the oil shale industry while preserving a
resource that we in the West work hard to conserve--water. Striking a
balance between energy production and water management is, and
continues to be an extremely important issue for our region. It is
vital that we continue to safeguard this precious natural resource
while at the same time creating jobs for our citizens and producing
homegrown energy for all Americans.
Again, I want to thank our visitors for taking time out of your
busy schedules to be with us today and look forward to hearing from our
witnesses.
______
STATEMENT OF THE HON. SCOTT TIPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Tipton. Thank you, Congressman Lamborn. I would like to
thank you for conducting this hearing.
I want to join with him as well in thanking all of our
witnesses for taking the time out of your busy schedules to
come in and talk about a very important issue and for everyone
else in attendance as well.
We have some real challenges that we are facing as a Nation
when we look at what is going on right now in the Middle East,
the turmoil in Egypt, in Libya, Syria, Jordan, and the
challenge of Iran perhaps getting a nuclear weapon, which will
further destabilize the Middle East.
When we look at the importance of the flow of oil coming
out of the Suez Canal not only for the American economy, but
for the world economy as well, the time is appropriate for the
United States to grasp the reins of its own economic future,
its own energy future. The 3rd Congressional District of
Colorado can play a very important role.
Recently, President Obama made an announcement favoring $1
billion going to Brazil to be able to develop their resources
off of their shores and proclaimed that we wanted to be one of
their best customers. The question that crossed my mind is, if
we are going to be making an investment, wouldn't it be better
to invest dollars on American soil, developing American
resources, putting Americans back to work, creating an
opportunity to get the American economy moving once again?
For me, that is an easy answer. As I travel throughout the
3rd Congressional District--so far during this break, I have
been from Cortez to Grand Junction. I will be in Steamboat down
to Pueblo, down to Trinidad, over to Alamosa. As we go through
every one of our communities, I think many of us who live here,
it breaks our hearts as we drive through our communities, and
we are seeing closed stores. We are seeing businesses that are
facing a challenge.
As I have walked down Main Street, Grand Junction, I have
shaken hands with people that are worried about their economic
future. Mothers that are worried about being able to provide
for their children.
We have to get this economy moving. Energy plays an
important role in that. But we are also very cognizant here in
the 3rd Congressional District of the valuable resource that we
have called our public lands. The beauty of our landscapes, the
value of our water, the value of the air that we breathe.
Well, it has been my experience going out, the people that
are working in developing our natural resources breathe that
same air, drink that same water. We can develop these resources
responsibly. We can create a win-win. It does not have to be a
win-lose scenario in the United States of America.
We are truly talking about the future of our Nation. If we
are going to capitulate our ability to be able to provide
energy, to be able to drive the economic engine, which means
providing for our families, putting roofs over our head and
food on our table, we have that opportunity. The 3rd
Congressional District can play a very important role in doing
that.
We will all stand guard to make sure that it is done
responsibly. We will hold the industry accountable to make sure
that that is done. But it is important that we take this
opportunity at this point in time to make sure that we are
developing responsibly American resources on American soil and
getting Americans back to work.
I am very appreciative of Congressman Lamborn holding this
hearing in regards to oil shale. As he noted, we have the
potential to have 1.5 trillion barrels of oil. That doesn't
even include the natural resources that we have in natural gas
as well.
I am an ``all of the above'' sort of a guy. I think that we
need to be developing wind, solar, geothermal. It is going to
be the entire package to be able to move to economic certainty
and an energy certainty for America.
This district can play a very important role, and I thank
you for conducting I believe this very important hearing.
Again, I thank all of our witnesses for taking the time to be
here, as we explore this and see where we can create those
opportunities to create a win-win for America and to be able to
get our people back to work and get the American economy moving
once again.
Thank you.
[The prepared statement of Mr. Tipton follows:]
Statement of The Honorable Scott Tipton, a Representative in Congress
from the State of Colorado
Thank you Mr. Chairman for convening today's hearing, and thanks to
the panelists and the folks from the Third District for being with us
today in Grand Junction to examine this very important issue.
The USGS indicates that there are as many as 1.5 trillion barrels
of recoverable oil shale in the United States, the vast majority of
which is in Colorado, Wyoming, and Utah. Of this, some of the most
promising reserves are in the Pineance Basin in northwest Colorado. As
a result, the Third Congressional District of Colorado, along with our
neighboring western states, are in a unique position to contribute to
our nation's energy security, ensure that the United States remains
competitive in the world market, and to create much needed jobs here at
home.
The world's primary energy demand has grown by more than 50% since
the year 1980 and this growth is expected to continue at an annual rate
of 1.6% during the 30 years. Over 70& of this growth is expected to
come from developing countries and fossil fuels are estimated to
provide the vast majority of the energy during this period, even with
increased efforts towards production of renewable energy sources and
new technological advancements in the renewable energy sector. While we
must continue to support the development of all our domestic energy
resources, it is naive to think that renewable resources can replace
hydrocarbons in the near future. For the sake of our national security,
our economic stability, and our ability to remain competitive in the
world market, we must continue to move towards new innovations in
unconventional oil production, most notably, oil shale here in the
Western United States.
Because 72 percent of the oil shale in this area is beneath lands
governed by the Department of the Interior, the policies of this
administration and those to come play a significant role in whether or
not we are able to make wise use of these resources. The road to
viability for the oil shale industry is reliant on a predictable
regulatory structure and an environment in which companies can invest
in research and development and create jobs. To this end, it is
critical that the federal government remove duplicative approval
processes and help, rather than hinder development in the United
States. The proper implementation of our environmental and safety
regulations already on the books is a far better strategy than adding
additional layers of bureaucracy to the process. By establishing a
common sense regulatory framework and embracing research and
development of oil shale, we can continue to remain competitive, ensure
national security, and provide an environment for job creation here in
western Colorado and in our neighboring western states.
______
Mr. Lamborn. All right. And thank you.
I also should note for the record that the Ranking Member,
Representative Rush Holt of New Jersey, very much wanted to be
here. We talked on the phone. He just couldn't rearrange his
schedule enough to make it work to be here.
It did not help matters when we had originally scheduled
this for late July at a time when we were going to be back in
our districts and not in Washington, but we had to change
everything because of those important debt ceiling negotiations
that required us to be in Washington after all during that
week. So everything got turned around.
I would like to now hear from the invited witnesses, and I
want to ask forward Ms. Helen Hankins, Colorado State Director
of the Bureau of Land Management, and Mr. Ronald C. Johnson,
Oil Shale Assessment Project Chief for the U.S. Geological
Survey. This is our first panel.
We were going to have one more larger panel, but what we
are going to actually do is have two smaller panels because of
space limitations. So we will have a total of about 10
witnesses that we are going to hear from who are experts in
various facets of this important subject.
But now we will start with these two in particular. Like
all witnesses, your written testimony will appear in full in
the hearing record. So I ask that you keep your oral statements
to 5 minutes, as outlined in the invitation letter to you and
under Committee Rule 4(a).
Our microphones are automatic. So you do not need to turn
them on when you are ready to begin, and you will see the
timing light, which will go on. After 4 minutes, it will turn
yellow and then, after 5 minutes, will turn red.
Ms. Hankins, you may begin. Thank you for being here.
STATEMENT OF HELEN HANKINS, COLORADO STATE DIRECTOR, BUREAU OF
LAND MANAGEMENT, ACCOMPANIED BY RONALD C. JOHNSON, OIL SHALE
ASSESSMENT PROJECT CHIEF, U.S. GEOLOGICAL SURVEY
Ms. Hankins. Thank you very much for the invitation to
speak before this Subcommittee hearing.
As stated, my name is Helen Hankins. I am the State
Director for the Bureau of Land Management in Colorado.
Mr. Lamborn. And Ms. Hankins, if you can make sure that you
talk into the microphone so everyone can hear you. Thank you.
Ms. Hankins. It is my pleasure to discuss the oil shale
program of BLM and the Department of the Interior this morning.
As we know, oil shale is a very abundant resource in the
Western United States, particularly Colorado, Wyoming, and
Utah. A recent assessment, actually several assessments by the
U.S. Geological Survey indicate that there are 4.3 trillion
barrels of oil present in place in these States.
We have had a long history of interest in oil shale dating
back to the late 1800s, when anecdotal information tells us
that a homesteader built a fireplace of oil shale and during a
housewarming party not only saw his fireplace, but his home go
up in flames.
Even since those days and particularly in the last three or
four decades, people have continued to have an interest in oil
shale development. But to date, we do not yet have a
commercially viable, environmentally responsible approach here
in the United States.
The Energy Policy Act of 2005 provided that the Department
of the Interior establish a program for research, development,
and demonstration leases; that we complete a programmatic
environmental impact statement for identification of available
lands for oil shale and tar sand development; and that we
launch a commercial leasing program for oil shale and tar
sands.
In 2008, a programmatic EIS was completed as required by
this Act, and 8 of BLM's land use plans were amended to provide
for 1.9 million acres being available potentially for oil shale
development. In 2006 and '07, in what is referred to as ``round
one,'' six leases were issued for research, development, and
demonstration projects. Work is actively going on on all of
these leases.
In 2010, based on industry's request, the Secretary
determined to initiate a second round of RD&D nominations.
Three of those nominations have been advanced, and those
companies are currently completing environmental assessment
work, which must be completed before leases can be issued.
The BLM's goal, as we manage this important program on the
public lands, is to provide an opportunity for companies to
develop new generation of technology that ensures that we have
environmentally responsible development, commercially viable
operations, and that we can provide a fair return to the
American public for the extraction of this resource and the use
of these public lands.
We are currently beginning a new planning process with the
development of a programmatic environmental impact statement to
reexamine lands that are suitable for oil shale leasing and
potential development. We also, at the same time, are
undertaking a review of the regulations that were developed
previously to make sure that we have an environmentally
responsible and sound management approach to oil shale
development.
Many of us here can recall the oil shale leases that were
issued in the 1970s and some of the concerns associated with
those. Those lessons have helped us remember that we must have
an understanding of environmentally acceptable development and
commercially viable operations before we approve leases of
large acreages for the development of this resource.
Research, development, and demonstration projects are key
to advancing oil shale development on public lands. They help
companies test their bench-scale technologies at the field
level, and they provide an opportunity to evaluate various
aspects of development, including environmental concerns.
There are several questions that we all need to be thinking
about and which Representative Lamborn and Representative
Tipton alluded to in their opening remarks. One of the key
things is, are the current technologies going to be
commercially viable and environmentally responsible?
We also need to make sure that we have an understanding of
the potential impacts on our Western lands, wildlife--habitat
and wildlife, and water as we proceed with the development of
this industry. As was addressed by both of our Representatives,
water is a key factor here in the West, and it is, of course,
not of boundless supply. So part of our analysis needs to
consider water availability in the arid West in which we live.
These are fundamental questions which we need to be sure
that we address as we proceed with our efforts. BLM is
interested in a balanced and orderly approach, but we want to
ensure that we address these environmental concerns, water
issues, and commercially viable operations.
Thank you for the opportunity to appear before your
Subcommittee today. And at the appropriate time, I will be
happy to answer any questions you may have.
[The prepared statement of Ms. Hankins follows:]
Statement of Helen Hankins, Colorado State Director,
Bureau of Land Management, United States Department of the Interior
Good morning. My name is Helen Hankins, and I am the state director
of the Bureau of Land Management's Colorado office. It is my pleasure
to testify before you on the Department of the Interior's Oil Shale
Program here in the Centennial State, which, along with Utah and
Wyoming, is home to the nation's largest reserves of oil shale.
Background
Oil shale is a type of rock that contains kerogen, a waxy organic
material that can be refined to make oil. It is a resource that the
nation has been trying to unlock for the past century because it is so
abundant. U.S. resources are approximately 4.3 trillion barrels of oil
in place, a significant portion of the world's resources, according to
the U.S. Geological Survey (USGS). However, after many attempts to
develop the resource, no one has yet discovered how to extract it
economically on a commercial scale.
The Energy Policy Act of 2005 directed the Department of the
Interior to establish a leasing program for oil shale research and
development, publish a programmatic environmental impact statement
(PEIS), and launch a commercial leasing program. In 2008, the BLM
published the PEIS that amended eight resource management plans in
Colorado, Utah, and Wyoming to make approximately 1.9 million acres of
public lands potentially available for commercial oil shale development
and 431,224 acres for tar sands leasing and development.
In 2006 and 2007, the BLM issued six oil shale Research,
Development, and Demonstration (RD&D) leases. The BLM's goal is to
provide an opportunity for companies to develop a new generation of oil
shale technologies by establishing an orderly and environmentally
responsible program that provides a fair return for taxpayers. In 2010,
the BLM advanced three nominations for a second round of RD&D leases.
For a variety of reasons, the BLM began a new planning process this
year that would take a fresh look at what public lands are best suited
for oil shale and tar sands development. This planning process will not
disturb RD&D activities already under way; rather, any information
developed from RD&D activities may help inform this planning process.
In addition, the BLM anticipates taking a fresh look at the regulations
governing oil shale development to ensure they reflect a sound
management approach.
The BLM's RD&D program is essential to encouraging companies to
test their bench-scale technologies and to help answer fundamental
questions about how oil shale might be safely and economically
developed on a commercial scale. The RD&D program began with the intent
of avoiding the mistakes of the 1960s and 1970s, which left a legacy of
spent shale piles, contaminated runoff, and multimillion dollar
cleanups. One need not look further than the Naval Petroleum Oil Shale
Reserves 1 and 3 here in Colorado to know that the oil is extractable,
but at a significant cost to the environment and taxpayers.
Approximately $25 million has been spent on clean-up and monitoring
that continues to this day. The work has included excavating spent
shale and preparing a storage vault to protect a tributary of the
Colorado River from potentially hazardous runoff.
The BLM learned from four leases issued in Utah and Colorado in the
1970s that companies must first demonstrate that their technology is
economically viable and environmentally sound before approving a
development process that could potentially disturb thousands of acres
of public lands. On ``Black Sunday'' in 1982, a major oil shale player
shutdown its oil shale development efforts, called the Colony Project,
putting 2,000 people out of work in single day, and demonstrating the
potential harm when communities count on an industry that hasn't proved
the sustainability of its proposed development.
USGS Resource Assessments
The Green River Formation in the Piceance Basin (Colorado), the
Uinta Basin (Utah and Colorado), and the Greater Green River Basin
(Wyoming, Colorado, and Utah) contains one of the largest known oil
shale deposits in the world. Recent USGS assessments estimate an in-
place oil volume of 1.53 trillion barrels in the Piceance Basin (http:/
/pubs.usgs.gov/dds/dds-069/dds-069-y/), 1.32 trillion barrels in the
Uinta Basin (http://pubs.usgs.gov/dds/dds-069/dds-069-bb/), and 1.44
trillion barrels in the Greater Green River Basin (http://
pubs.usgs.gov/fs/2011/3063/). The oil shale deposit in the Piceance
Basin is probably the world's most concentrated oil shale resource with
as much as 400,000 barrels of oil in place per acre. It is important to
note that these resource assessments are in-place resources rather than
technically recoverable resources because there is currently no
commercial oil shale development in the United States.
The mineral nahcolite is associated with high-grade oil shale
deposits in the Piceance Basin, and because it is important as a
leasable mineral, the USGS assessed its resource potential as well.
Nahcolite has an in-place resource estimate of 43 billion short tons.
The nahcolite is intimately associated with the oil shale horizons in
the richest part of the basin and therefore will be affected by any oil
shale development in that area.
The U.S. Geological Survey recently subdivided the 1.53 trillion
barrels of in-place oil shale in the Piceance Basin into several
subsets (http://pubs.usgs.gov/fs/2010/3041/). Of the 1.53 trillion
barrels total, about 920 billion barrels (60 percent) exceed 15 gallons
of oil per ton of oil shale (GPT), and about 352 billion barrels (23
percent) exceed 25 GPT. More than 67 percent of the total in-place
resource, or 1.027 trillion barrels, is located under Federal lands.
About 689 billion barrels (75 percent) of the 15 GPT total and about
285 billion barrels (81 percent) of the 25 GPT total are under Federal
mineral (subsurface) ownership. An evaluation of the Federal oil shale
resources in Wyoming is nearing completion and should be available in
the near future.
Development Questions
There are several issues that need to be addressed before a
successful commercial oil shale program will be economically viable.
The first is whether the technologies that are currently being
developed can become viable on a commercial scale. Some of the
technologies under development would require vast amounts of energy,
increasing production costs and creating a burden on the power grid.
The companies working on these challenges report generally that they
are several years away from knowing whether their technologies will
work on a commercial scale.
The second is to understand the potential impacts of commercial oil
shale development on Western lands, wildlife, and watersheds.
Historically, the techniques of retorting or milling the shale have
caused serious environmental consequences, creating large
concentrations of contaminants in areas not designed to contain them.
In the arid West where water supplies are extremely limited, much
hinges on the question of water. Accordingly, we must have a better
understanding of the impacts of oil shale development on the water
supply.
The Government Accountability Office studied the issue of oil shale
development impacts on water resources, and determined in an October
2010 report that: ``Oil shale development could have significant
impacts on the quality and quantity of water resources, but the
magnitude of these impacts is unknown because technologies are years
from being commercially proven, the size of a future oil shale industry
is uncertain, and knowledge of current water conditions and groundwater
flow is limited.'' To address these important water questions, the USGS
has begun to gather baseline data that would be used to analyze
groundwater and surface water systems that could be affected by
commercial-scale oil shale development.
In light of the many fundamental questions about oil shale that
need to be answered, it is vital that the BLM administer a balanced,
carefully planned RD&D program. As the BLM takes a fresh look at the
regulations governing oil shale development, it will ensure that the
regulations reflect the latest information about water, potential
environmental considerations, and uphold its responsibility to deliver
taxpayers a fair return on the development of this resource.
Moving Forward with RD&D
Of the six leases issued in 2006 and 2007, five are in Colorado and
one is in Utah. Activity is under way on the RD&D lease sites. American
Shale Oil, which owns one of the leases, reports that its processing
facilities are 90% complete with plans to initiate pilot testing soon.
Other leaseholders also report progress in establishing extraction
techniques.
In the second round of RD&D leases, three nominations, two in
Colorado and one in Utah, advanced in October 2010. Analysis under the
National Environmental Protection Act (NEPA) is under way to examine
how the proposed technologies will affect the environment. Issuance of
those leases will depend largely on the results of the NEPA analyses
and other factors as the nominees refine their individual processes for
developing oil shale.
This is an exciting time as these companies move forward, testing
new technologies to harness this abundant resource. At the Department
of the Interior, we are pleased to be part of the effort to keep the
oil shale program on an orderly and successful path, encouraging
development while ensuring environmental protection.
Conclusion
Thank you again for the opportunity to testify on the Oil Shale
Program. I would be glad to answer your questions.
______
Mr. Lamborn. All right. Thank you so much.
I should note for clarification that Mr. Johnson won't be
directly testifying but is available to answer technical
questions as needed.
I will go ahead and start with questions. I will recognize
myself. First of all, a very quick question, then a couple of
longer questions.
Ms. Hankins, as you know, the Administration is currently
reviewing a second round of oil shale RD&D leases. Can you tell
us when we can expect a final decision on this second round of
potential leases?
Ms. Hankins. The timeframe on when the bureau will make
decisions on those RD&D leases depends on when the companies
involved complete the environmental assessment work and those
environmental assessments are reviewed. Right now, each of
those three companies are in the midst of doing that
environmental review.
So I am not able to give you a precise estimate. But I can
tell you that the companies are diligently pursuing that
effort, and as soon as we receive their environmental
documents, we will very carefully and diligently look at them
and proceed as quickly as possible with the next steps.
Mr. Lamborn. OK. Now a little bit lengthier question. In
2009, BLM announced a second round of 160-acre oil shale RD&D
leases. However, while the first round of leases allowed for
the potential expansion of 5,120 acres of commercial
development, in the second round of leases, the terms were
decreased, and only 480 acres were available for potential
expansion.
We have heard that this decrease of land available was one
of the main reasons for industry's apparent lack of interest in
the second round of leases. Can you tell us the reason for this
large decrease in potential land expansion and what new
information that BLM relied on that led them to change the
original terms?
Ms. Hankins. Unfortunately, Representative Lamborn, I
cannot address that question because I was not involved in
those discussions. However, I will be happy to provide a
written response to the Committee on that question.
Mr. Lamborn. OK. I would really appreciate that answer in
writing later.
Mr. Johnson, would you have anything to add to that?
Mr. Johnson. No, I don't.
Mr. Lamborn. OK. Well, Ms. Hankins, going on to the next
question, in April of this year, BLM announced plans to re-
review the 2008 programmatic environmental impact statement--we
referred to that earlier--for the development of oil shale
resources. Can you tell us what substantive new information has
been brought to your attention that warrants an entire re-
review of a barely 3-year-old document that is very lengthy--
2,000 pages already and--well, I will have a follow-up. But
first of all, that part of the question. What new information
came to you that you felt it necessary to re-review the PEIS?
Ms. Hankins. The Secretary of the Interior has the
discretion at any time to review previous decisions--in this
case, an allocation decision relating to which lands might be
available for development of oil shale. And it is an authority
that he has.
In this particular case, I think there are a number of
factors that were considered. One is that because this is an
industry that is still in its infancy, it was thought to be a
good idea to evaluate whether we have new information about new
technology, about economic viability of some of that
technology.
Also there has been a report released about the need to
look at some of the water issues, which I alluded to in my
testimony. That report was published by the General Accounting
Office. And there are other concerns relating to sage grouse
and great concern about their potential listing as an
endangered species range wide across 11 Western States. New
information has come forward on some of their habitat and
priority use areas.
In addition, new information is available on some plants
that are potentially threatened and endangered. So, for all of
those factors, as well as concerns raised in litigation in 2009
challenging the 2008 PEIS and regulations, all of those things
are factors in why the Secretary has decided to take a second,
fresh look at these issues while the industry is still in its
infancy.
I might add that this new look will not affect the six
existing leases. They will still proceed on the course that
they are on.
Mr. Lamborn. All right. Thank you.
At this point, I would like to recognize Representative
Tipton for questions.
Mr. Tipton. Thank you, Congressman Lamborn.
And Ms. Hankins, thank you for being here. Good to see you
again.
Ms. Hankins. Always.
Mr. Tipton. Appreciate your testimony. When we look at some
of the real challenges we face as a country, it is energy. We
also have some of the issues in terms of what are called rare
earths. And perhaps Mr. Johnson, with a little bit of backup on
this, may be able to speak to that.
Has the BLM explored some of the rare earths that may also
be available out of the oil shale?
Ms. Hankins. I don't have information to address that
question. But I would be happy to provide information after the
hearing. --
Mr. Johnson. There have been studies in the past of
elements within the oil shale itself, and I don't have those
with me. But there may be some minor amounts of rare earth in
oil shale. We could provide that later.
Mr. Tipton. You know, that might be something that we
really want to explore in terms of looking at the entire
package of resource development. It is my understanding and
there is the potential to have aluminum, lithium, a variety of
different elements that may be in there in addition to the oil
shale, and those are all, obviously, some important issues for
America as well, since we are now relying primarily on the
Chinese for a lot of the rare earths since we have closed down
a lot of the mining industry in this country, to be able to
develop those resources.
So I would appreciate some follow-up information on that. I
think that that is important in terms of having the entire
universe of information and looking at where we are heading.
Ms. Hankins, maybe you can give us just a little bit of
background. I grew up here on the West Slope, and I remember
looking out at Grand Junction, we saw some of the boom and bust
cycle when we had Unocal, when we had Occidental Petroleum, I
think, coming in and trying to establish some of that early
development for oil shale.
Can you tell me what steps that you are observing, since
you are working with the industry and we have six leases that
seem to be proceeding right now in the process, what are some
of the steps that are being taken to be able to avoid that
boom/bust cycle?
Ms. Hankins. I think one of the reasons that we are
undertaking this new programmatic environmental impact
statement is to provide us yet another opportunity to look at
not only the resource and how it might be developed, but also
to look at concerns related to socioeconomic impacts,
infrastructure development, et cetera, of such a possible
development. One of the opportunities that we have in this sort
of process is to make recommendations for what might assist
with making sure that we minimize the boom/bust cycle.
Of course, that is not entirely within the control of the
Bureau of Land Management. But we have an opportunity to look
for mitigation options as we look at economics as part of our
analysis, and I think it remains to be seen what those
recommendations will be. But we can address that in our
process.
Mr. Tipton. OK. Great. You know, really, one of the
problems we are seeing, and we have discussed it before, one of
the big challenges, it seems, to having real economic
development and we will again underscore, as you noted in your
testimony, and we want to make sure that things are being done
responsibly. But we have heard that regulatory uncertainty is
really one of the main factors that is delaying research and
technological development of oil shale.
Could you maybe speak to that? And has BLM or others that
you may be aware of, have we done any sort of cost-benefit
analysis in terms of continually moving the goal posts, if you
will, in terms of addressing developing resources responsibly?
Ms. Hankins. Well, as I mentioned a few minutes ago, the
current effort to relook at the land allocation decisions in
2008, the PEIS in 2008, and the regulatory efforts that were
also completed at the same time, look at economics and they
consider a lot of these various things. But one thing that they
don't do in our new effort is our new effort does not affect
the current research and development that is going on on these
six leases, five in Colorado and one in Utah.
And the purpose of these leases is, of course, for research
and development. Nor are things that we are doing on Federal
land affect the ability of companies to do research and
development and evaluate various techniques on private land. So
I think that our current efforts to look at land allocation and
to look at the rules that we have in place to make sure they
are environmentally responsible really don't preclude research
and development on either the existing Federal leases or on
private land.
Mr. Tipton. Well, yet when we are talking about those five
leases that are currently in Colorado, one in Utah, and they
have some certainty, can you give me some kind of a timetable
that they are working off of, actually, for that RD&D?
Ms. Hankins. I believe that they are 10-year leases. But
each company has to determine its own timetable based on its
development, plan of development and the steps that are in that
plan. Each one, of course, is unique, so there is not a set
timeframe for when that development will occur.
Mr. Tipton. So I guess it is my understanding then that,
obviously, we can introduce some sort of caveat in there that
may change a bit over this 10-year period. The BLM is giving
some certitude in terms of the regulatory process for these
companies in terms of developing the oil shale. Is that
correct?
Ms. Hankins. The companies that have the six leases--five
in Colorado and one in Utah--will be given a choice. At such
time, if they arrive at the time, when they want to convert
these RD&D leases to commercial leases, they will have the
opportunity to choose whether they wish to operate under the
existing regulations. Or if there is a different set of
regulations at that time, they can opt to choose that. But the
choice is theirs which way they want to go.
Mr. Tipton. Thank you. I yield back.
Mr. Lamborn. OK. And then, if you would indulge us for some
follow-up questions?
Ms. Hankins, you said you were not part of the decision-
making on the lease changes. Can you tell me, do you think that
the changes made for RD&D leases are more--would make the goals
of the RD&D leases more or less difficult to achieve?
Ms. Hankins. You know, I think it is important that I talk
about what--the areas where I have authority to make decisions
and to operate. And as the State Director of BLM, my
responsibilities are to evaluate proposals that come forward
for any types of energy development, and of course, I do that
through our field managers and district managers.
That is really my role in terms of oil shale. BLM
participated in both round one and round two with other
agencies, including representatives of State government from
the three States--Colorado, Wyoming, and Utah--to look at
proposals for RD&D nominations and participated in the approval
of those leases for the first six, as we will in the next
three. My responsibility is to deal with field issues and
permitting or leasing of field activities.
Mr. Lamborn. Well, along those lines, is BLM doing anything
to make sure that there is some kind of regulatory certainty
for the companies that may wish to invest large sums of money,
and this could affect many jobs here in Colorado as well, as
well as possible energy production that would help the whole
country? So what is BLM doing to ensure that there is some kind
of stability or certainty going forward?
Ms. Hankins. I think it is important to talk about that in
the context of where we are with the oil shale industry, and
you know, we are yet many years away from a commercially
viable, environmentally approved oil shale development project.
And why I mention that is that it provides us some time to
evaluate carefully not only which lands we make available, but
which rules we choose to employ as a nation to manage our oil
shale development.
In the case of the existing RD&D leases, there is
certainty. As I mentioned, those companies know what the
regulations are under which they are currently operating. They
know what the royalty rates are. They know what the
environmental concerns are of the Government. And so, I believe
that they have certainty, and they can choose to stay on the
path they are on with the existing regulations and royalty
rates.
For those companies that are in the--potentially in the
pipeline to receive other leases in round two, of course, they
will have to evaluate how to move forward based on what comes
out in the rulemaking next year. But that is not uncommon in
how the Bureau of Land Management and the Department of the
Interior manages minerals in general.
We have been addressing mineral exploration and development
on public land since the mid 1800s, and since that time--150
years, more or less--there have been many examples of us
evaluating whether or not we have appropriate environmental
protection measures in place, whether we have appropriate
royalties in place to ensure appropriate return to the American
people.
So the process of reviewing and evaluating how we regulate
industry is not new. It is part of our responsibilities as we
take care of these public lands for all American people. But I
think there is certainty for those who have existing RD&D
leases. I think that the three that are in process, certainly
they do know that we are in this review process, and it is part
of how we manage minerals.
Mr. Lamborn. Now, Ms. Hankins--and thank you for your
answers--you are here as the BLM Director for Colorado. You are
the Administration's witness, in effect, and you are also
speaking indirectly for the Secretary of the Department of the
Interior. Are you saying that you really don't have an opinion
on how these recent changes will have an impact on the possible
commercial use of oil shale in the future?
Ms. Hankins. I think, as I said, the Secretary of the
Interior has broad authorities, and he has the discretion,
based on a variety of inputs that he gets, on when he feels it
is appropriate to reevaluate, reexamine, or take a new look at
both land allocation decisions and regulatory requirements that
an agency--in this case, the BLM--might wish to impose.
I believe that he is well within his prerogative to ask us
to do this additional review, and I think as part of that, we
need to look at environmental issues, economic issues, and make
sure that the look we did 3 years ago is--a little bit longer
than that--is still valid or whether we want to make some
adjustments. So I believe we are on the right track, and I
think it is important that we be open to new information about
new technology, new environmental issues, water concerns, et
cetera.
Mr. Lamborn. Well, Ms. Hankins, I have no doubt that he has
the authority to do this. You have stated that several times. I
totally agree. I am curious as to whether this decision is
going to have a negative impact on the research and development
that we are hoping takes place so that we all know what is
going to happen in the future, if anything.
Ms. Hankins. Well, as I said, the existing RD&D leases are
not affected by this ongoing planning effort or by the
regulatory review. And so, those companies can continue, as
they have been for some time, on their Federal leases and on
private holdings that they have.
I cannot predict how this new effort might affect future
endeavors because we are still very early in the process. We
are some time away from even having a draft document. So, it is
not possible for me to speak to what it might address or what
an ultimate decision might be more than a year from now.
Mr. Lamborn. OK. My last question is in your discussions
with your colleagues in Utah, is there any different approach
on the Utah side of this basin to RD&D leasing, compared to
Colorado?
Ms. Hankins. I am not intimately familiar with the
activities in Utah. They are looking at a more, if you will, a
traditional approach. My understanding is they are looking at
more traditional mining methods as a means of extracting the
oil shale and then using surface retort. Whereas, in Colorado,
the proposed methods relate more to in-situ heating of the oil
shale and then extracting the mineral after that point.
However, the leases in Utah, the RD&D leases, are under the
same requirements as they are here in Colorado in terms of
Federal law and regulation. So I would not expect them to be
different in that regard. The regulations in the State of Utah
under State law are different than Colorado, but I can't speak
to that.
Mr. Lamborn. OK. Thank you.
Representative Tipton?
Mr. Tipton. Thank you, Congressman Lamborn.
I just have, I think, one follow-up question. Can you kind
of clarify for me when you noted in your opening comments that
there was, I believe you stated, 4.3 trillion barrels of oil
potentially between Colorado, Utah, and Wyoming. Is it the BLM
and the Administration's position that this is a resource that
ought to be developed?
Ms. Hankins. You know, I don't have detailed knowledge of
the grade, character, ability for extraction, and many other
factors about all of those deposits. So it is difficult for me
to really say should they all be developed because there are
many, many variables in terms of surface resources that might
have to do with endangered species. It might have to do with
water quality and quantity. It might have to do with, is it
reasonably and economically extractable because of the
topography, the amount of overburden, and other variables?
So I don't think I really can definitively say for that 4.3
trillion barrels of oil in place how much is readily available
or should be available at this point in time because there are
too many factors I don't know the answer to.
Mr. Tipton. I guess my question, actually, it is a little
more refined than the broader context of it. It is just on a
philosophical basis, recognizing the energy needs of this
Nation--the energy challenges that we face, what is happening
on the worldwide level--is it the Administration's belief that
this is a resource that we should be developing in this
country?
Ms. Hankins. I think that there are a couple of responses
to that. Secretary Salazar has said in his policy statements
and his areas that he expects the agencies to emphasize that
energy development is one of his key priorities, and it is
going to be some time before we have a viable renewable energy
industry in the United States that produces significant amounts
of energy for us.
I believe I read recently that the President's goal is that
by 2025, we are able to get 25 percent of our energy from
renewable sources. But even if we are able to meet that goal,
the amount of energy that we are going to need to get from
conventional sources--particularly oil, natural gas, and coal--
will still be significant for years to come. When we are able
to have commercially viable and environmentally responsible
development of oil shale leases at some point in the future,
which I understand from industry is still some years away, that
also will be able to be one of our sources for domestic energy.
However, having said that, it is important to talk about
BLM's underlying mission, and that is a mission of multiple
use. And so, the public lands that BLM manages generally are
used based on decisions that we make in our land use plans, and
those land use plans consider a variety of management
objectives, which include watershed health, wildlife habitat,
as well as energy development.
So, in general, we would likely not make a determination
about energy development without taking into account other
surface values and resources that are important to all of us
and that you all addressed in your opening remarks. Clearly,
energy is on the Secretary's agenda. It is a top priority for
him, as it is for BLM. Oil shale is one component of that, but
not the only component.
Mr. Tipton. Great. Well, appreciate that. Well, I think we
certainly ought to be probably submitting the question to the
Secretary's office as well because we were kind of on both
sides of that. We want to develop it, but maybe not--and I
understand where you are coming from in that regard.
But I think that what it probably also speaks to when we
are talking about economic viability, as I was listening to
your answer, I heard probably from a development standpoint, a
lot of uncertainty that is going to be accompanying in terms of
the significant investment that developing a resource actually
takes, to be able to do that. I don't know if you are going to
be in contact with the Secretary. We will certainly submit a
letter.
But I think we do need to have some real clarity if there
is going to be a real commitment to developing resources, given
the challenges that we have because I think the industry
deserves to be able to understand what those economic
challenges are going to be as well.
So thank you, and I yield back.
Mr. Lamborn. All right. I want to thank Ms. Hankins for
being here.
The members of the Committee may have additional questions
for you. We would ask that if we submit those to you in
writing, that you respond to us in writing.
Mr. Lamborn. Thank you for being here today, and thank you
for giving us your valuable time.
Ms. Hankins. Well, thank you for the opportunity to be
here.
Mr. Lamborn. You are welcome.
Now I would like to invite the second panel to come
forward. It consists of Mr. Michael Hagood, Director of Program
and Regional Development of the Idaho National Laboratory; Dr.
Thomas Sladek, Director of Ockham Energy Services; Ms. Jennifer
Spinti, Research Associate Professor, Department of Chemical
Engineering and Institute for Clean and Secure Energy of the
University of Utah; and Ms. Anu Mittal, Director of Natural
Resources and Environmental Division of the Government
Accountability Office.
Thank you all for being here. As you are getting situated,
I would just like to remind you that like all of our other
witnesses, your written testimony will appear in full in the
hearing record. So I ask that you keep your comments to 5
minutes, as outlined in the invitation letter.
The microphones are automatic. So you don't have to turn
them on. You will see the lights turn yellow at 4 minutes and
red at 5 minutes.
I want to thank you for being here. And we will start in
the order of which I introduced you earlier.
So, Mr. Hagood, you may begin. Thank you.
STATEMENT OF MICHAEL HAGOOD, DIRECTOR, PROGRAM AND REGIONAL
DEVELOPMENT, IDAHO NATIONAL LABORATORY
Mr. Hagood. Chairman Lamborn, Congressman Tipton, and
members of the Subcommittee, thank you for the opportunity to
testify before the Subcommittee.
My name is Michael Hagood, and I represent the Idaho
National Laboratory as the Director of Program and Regional
Development.
Idaho National Laboratory is one of several U.S. Department
of Energy laboratories. We are an applied research energy
systems laboratory with interest in looking at the development
of a number of energy sources, including nuclear, fossil, and
renewables. And we also work with advanced transportation, such
as electric vehicles.
And as part of this portfolio, we also engage in research
associated with unconventional fossil energy sources, including
oil shale. I will limit my comments today more along the lines
of the research associated with oil shale development. It is
based on history, technological innovation and associated
investment will emerge to more effectively develop oil shale
resources.
Research has been and will continue to be a critical
component in successful development of such unconventional
fossil energy resources, including oil shale. An example is the
recent impact of horizontal drilling, fracking, and use of
proppants in accessing and recovering natural gas from shale.
Another example is the innovative subsurface steam
injection recovery process implemented to help unlock Alberta
oil sands at depth. And on that foundation, a number of other
innovations have been developed associated with the development
of those resources, as well as dealing with environmental
consequences.
Increasingly, research is also playing a role in better
understanding the interdependencies between energy and the
environment, the impacts of energy development on the
environment, and ultimately the development of innovation that
helps mitigate environmental impact. So relative to the
concerns on water, research plays a role in understanding the
baseline conditions with groundwater, surface water in the area
associated with oil shale. It also looks at the potential
impacts, but it is also associated with developing innovation
that helps address and mitigate some of those impacts.
The United States should continue to pursue smart and
environmentally responsible development of oil shale. Realizing
a sizable oil shale industry can contribute significantly to
U.S. energy security, but its establishment and impact could
take several years. Along these lines, it is recommended that
in the near term, steps be taken to implement recommendations
made by the Unconventional Fuels Task Force, which was put
together as a result of the Energy Policy Act of 2005, Section
369.
As a result of the findings from that task force, a
strategy was developed by an ad hoc group to create an
unconventional fuel strategy, which included addressing some of
the challenges associated with the environment, including
looking at the groundwater and surface water issues associated
with oil shale.
Relative to supporting this endeavor, it is recommended to
establish a regionally based, long-term integrated and focused
applied research program that helps accelerate identification
of the challenges and issues and implementation of solutions
that would be impactful in a smart and environmentally
responsible development of oil shale resources. It is also
recommended that such a program leverage the rich research
capabilities within the region and internationally.
The size of the oil shale resources, the magnitude, the
richness, and the impact on the energy security of the United
States is such that this deserves greater attention.
Thank you.
[The prepared statement of Mr. Hagood follows:]
Statement of Michael C. Hagood, Director, Program and Regional
Development, Energy and Environment Science & Technology, Idaho
National Laboratory
Introduction. Chairman Lambourn, Congressman Tipton, and members of
the subcommittee, thank you for the opportunity to testify before the
subcommittee. My name is Michael Hagood and I represent the Idaho
National Laboratory. I have over thirty years of experience working in
the fields of energy and environment, including participating in
associated research, development and demonstration programs. I have BS
and MS degrees in the field of geology and am a licensed geologist and
hydrogeologist. I have been with Idaho National Laboratory since 2003
and am responsible for developing science and technology and regional
programs for the Energy and Environment Directorate. My testimony today
will touch upon western oil shale development and its potential impact
on U.S. energy security and economy, however, the emphasis of my
testimony will be on relevant research.
Idaho National Laboratory Background. Idaho National Laboratory
(INL) is a science-based, applied engineering U.S. Department of Energy
(DOE) laboratory dedicated to supporting missions in energy research,
science, and national defense. INL has a long history in energy
resource evaluation, energy systems analysis and integration, and
system-of-systems engineering, coupled with a technical focus on
advanced modeling and simulation, computational engineering and
analyses, instrumentation and controls, and materials development and
testing. INL addresses research in nuclear, fossil and renewable
energy, advanced transportation and energy storage, as well as critical
energy infrastructure protection. In particular, INL is known for
conducting demonstrations to help reduce risks associated with
deployment of technology and being an honest, independent broker of
technical information.
Idaho National Laboratory also has a goal to assist in addressing
regional U.S. energy and environment challenges. From this perspective,
INL has taken a particular interest in energy resource development in
the Western Energy Corridor, including the rich oil shale resources
located in Colorado, Utah and Wyoming. INL has been engaging in oil
shale research, supporting the U.S. Department of Energy and industry
for several years, as well as investing in unconventional fossil energy
research internally. INL partners with regional universities relative
to energy and environment research, including with Colorado School of
Mines, University of Utah, Utah State University Bingham Research
Center, and University of Wyoming. INL has also developed technical
relationships with Canadian research institutions in Alberta and
Saskatchewan, which have challenges and capabilities relevant to oil
shale development.
Western Oil Shale and Energy Security. The world class nature of
western oil shale resources is measured in magnitude, longevity and
strategic import to U.S. energy security. It is the largest hydrocarbon
resource on earth and on a per acre basis is the most concentrated oil
bearing resource on earth. The United States is expected to continue to
rely heavily on oil through at least 2035 according to the U.S. Energy
Information Administration and one would expect U.S. dependence to
extend much beyond this. In the meantime, the U.S. will need to pursue
securing access to reliable supplies of energy and at the same time
lessen its dependence on politically and economically unstable sources
of oil imports. Given this situation, western oil shale can play a
substantial role in contributing to U.S. energy security.
Western Oil Shale and the Economy. Development of a substantial
industry around western oil shale can lead to significant regional job
creation as well as help reduce the flow of dollars being sent overseas
to purchase oil. As western oil shale becomes officially recognized as
a secure, known and long-term source of oil reserves, the creation of
an oil shale industry would result in significant national and
international investment. As an example, I would point to what has
transpired in Alberta associated with oil sands development.
Western Oil Shale and Research. As world oil demand and prices
continue to rise there will be increasing efforts to develop more of
the unconventional fossil energy resources, such as oil shale. In
parallel, technological innovation and associated investment will
emerge to more effectively develop these resources. Research has been,
and will continue to be, a critical component in successful development
of these unconventional fossil energy resources. An example is the
recent impact of horizontal drilling, fracking and use of proppants in
accessing and recovering natural gas from shale. Another example is the
innovative subsurface steam injection and recovery process implemented
to help unlock Alberta oil sands at depth. Increasingly, research is
also playing a role in better understanding the interdependencies
between energy and the environment, the impacts of energy development
on the environment and ultimately the development of innovation that
helps mitigate environmental impact.
Congress recognized the importance of unconventional fossil energy
research when they passed the Energy Policy Act of 2005 (Act). In
particular, Sec 369 of that Act focused directly on promoting the
development of liquid fuels from the Nation's vast unconventional
hydrocarbon resources, including oil shale, and directed the study and
mitigation of technical impediments to unconventional fuels
development.
Oil shale research being conducted today addresses a variety of
topics, many of which are profiled in U.S. DOE's ``Oil Shale Research
in the United States''. Research is being conducted to better
understand the nature of the oil shale resource itself as well as its
setting. A number of these projects are also focused on realizing a
better understanding of specific and cumulative impacts on the
environment. A significant need in the future is to further address oil
shale development impacts on green house gas emissions, water use and
quality, and air quality concerns. For example, INL is conducting
modeling and bench-scale tests in an effort to better understand
potential impacts of in situ heating of oil shale on groundwater
quality.
Oil shale recovery and retort processes are also a major research
focus, and there are several approaches being advanced. These processes
exist at various levels of maturity and many are still in the research
and development phase. A summary profile of these approaches can be
found in U.S. DOE's report ``Secure Fuels from Domestic Resources: The
Continuing Evolution of America's Oil Shale and Tar Sands Industries''.
A particular trend in such research is addressing in situ oil shale
retorts at depth. Another emerging research interest relates to
reducing the energy requirements associated with oil shale development
and the potential integration of renewable and nuclear energy, which
have the potential to help extend the lifetime of the oil shale
resource and reduce green house gases.
Research on western oil shale is being conducted by a number of
regional universities, state and federal agencies, national
laboratories and private industry. University and research laboratories
working in this area include Colorado School of Mines, University of
Utah's Institute for Clean and Secure Energy, Utah State University
Bingham Research Center, Los Alamos National Laboratory and Idaho
National Laboratory, along with sponsorship through the National Energy
Technology Laboratory. Regional federal offices and state agencies such
as U.S. Geological Survey and Utah Geological Survey are also
contributing to assessing oil shale resources and their environmental
setting. Private industry, primarily comprising larger companies, is
investing significantly in research built around recovery and
processing techniques. Relative to industry between 2007 and 2010 DOE
identified twenty-nine private companies engaged in research and
development.
Of special note, the Department of the Interior's Bureau of Land
Management (DOI/BLM) has been advancing opportunities for oil shale
(and tar sands) technology research and demonstration on Federal lands
in the West through the Oil Shale Research Development and
Demonstration (RD&D) Leasing Program. A first set of leases have been
allocated to Shell, Chevron, American Shale Oil and Enefit American Oil
(formerly OSEC). Nominations for a second set of RD&D leases are
currently under review, with BLM recently announcing their reviews of
three candidates for leases in Colorado and Utah.
Relevant research on oil shale is also occurring internationally.
Companies which are assessing the application of their technologies to
western oil shale are also conducting technology demonstrations
elsewhere in the world. Technology transfer associated with already
demonstrated, conventional oil shale retort operations have also
emerged with the intent that these may be applied to western oil shale,
including technologies derived from Estonia, Brazil, and even China. In
this spirit, the U.S. has recently signed a cooperative research
agreement with the republic of Estonia.
International technology transfer was recognized by Congress, as
per Section 369 (h) of the Energy Policy Act of 2005, in which the
Congress directed the Secretary of Energy to establish the
Unconventional Fuels Task Force to ``make recommendations with respect
to initiating a partnership with the Province of Alberta, Canada for
the purpose of sharing information relating to tar sands. Although
focused on tar sands (oil sands), the associated innovation and
``lessons learned'' in Alberta is useful in addressing oil shale
development approaches and impacts.
Oil shale research can result in direct job creation in private
industry, regional research institutions and government agencies. The
greater long-term positive impact on the economy, however, will be
realized through the ultimate deployment of innovation that in turn
helps realize substantial oil production in an environmentally
responsible manner. Once a substantial oil shale industry is
established in the region, accompanied by a healthy market place, one
would also expect greater investment in, and contribution from, aligned
research efforts that would bring additional economic benefits. For
example, with a set of more mature R&D relationships in the region,
innovation would result in creation of spinoff companies and services,
which would lead to creation of jobs. A rich environment comprising
industry, education, research and sound policy will lead to large
international investment, similar to what is being experienced with the
oil shale industry in the United States.
Recommendations. In view of its size, value and longevity, western
oil shale deserves greater attention. It is of international scale. The
United States should continue to pursue smart and environmentally
responsible development of these resources. Realizing a sizeable oil
shale industry can contribute significantly to U.S. energy security,
but its establishment and impact could take several years. Along these
lines, it is recommended that in the near term, steps be taken to
implement recommendations made by Unconventional Fuels Task Force. A
strategy was proposed by the Unconventional Fuels Ad Hoc Working Group
in 2008 to address these recommendations, and developed an approach for
further advancing development within the Western Energy Corridor, with
an initial emphasis placed on oil shale.
Relative to oil shale research, it is recommended to establish a
regionally based, long-term integrated and focused applied research
program that helps accelerate identification and implementation of
solutions that would be impactful in the smart and environmentally
responsible development of oil shale resources. It is also recommended
that such a program leverage the rich research capabilities within the
region and internationally.
When aligned with a healthy oil shale industry, research on western
oil shale can lead to even greater economic development within the
region, sustainable over this century. As witnessed in similar
circumstances elsewhere, research can also lead to strengthening
existing U.S. competitiveness, nationally and internationally. Beyond
this, there is also the opportunity to identify and establish value
added industrial enterprises built upon the oil shale energy platform.
REFERENCES
Idaho National Laboratory. June, 2011. Western Energy Corridor
Task Force on Strategic Unconventional Fuels. Annual Report, December
2009
Task Force on Strategic Unconventional Fuels. September 2006.
Development of America's Strategic Unconventional Fuels
Resources. Initial Report to the President and the Congress of
the United States
U.S. Department of Energy, Office of Petroleum Reserves, Office of
Reserve Lands Management, September 2010. Oil Shale Research in
the United States: Profiles of Oil Shale Research and
Development Activities in Universities, National Laboratories,
and Public Agencies, Second Edition: September 2010
U.S. Department of Energy Office of Petroleum Reserves Office of
Reserve Lands Management, Fourth Edition: September 2010.
Secure Fuels from Domestic Resources: The Continuing Evolution
of America's Oil Shale and Tar Sands Industries--Profiles of
Companies Engaged in Domestic Oil Shale and Tar Sands Resource
and Technology Development: 4th Edition: September 2010
Ad Hoc Unconventional Fuels Working Group: U.S. Department of Energy,
Office of Naval Petroleum and Oil Shale Reserves, November
2008: Strategic Plan--Unconventional Fuels Development within
the Western Energy Corridor
National Oil Shale Association. Oil Shale Update, May 2010: http://
www.oilshaleassoc.org/documents/FinalUpdateMay2010.pdf
______
Mr. Lamborn. I want to thank you for your testimony.
Dr. Sladek?
STATEMENT OF THOMAS SLADEK, PH.D.,
DIRECTOR, OCKHAM ENERGY SERVICES
Dr. Sladek. Thank you. Thank you, Congressman. I appreciate
the opportunity to be here.
I always look forward to coming to Grand Junction,
especially during the peach season. I intend to go back to
Lakewood this afternoon pursued by a cloud of fruit flies.
[Laughter.]
Dr. Sladek. I have been involved in oil shale off and on
since 1967. And although much has changed in the world since
then, oil shale development in the United States still
confronts many of the same concerns--access to resources,
production costs, environmental and social effects, water
availability, and uncertainties about future oil prices. Other
countries are facing most of the same issues as their
industries emerge.
I would like to summarize the work underway in those
countries and attempt to relate that experience to the
potential emergence of an American industry. There are oil
shale-producing industries in three countries right now--China,
Estonia, and Brazil--and another country, Jordan, is moving
very rapidly toward creating an oil shale industry. Rapidly,
but somewhat erratically. Their recent progress has been
impeded by the political unrest in the Middle East, and when
they get by that, they'll get back to business, I guess.
China has produced shale oil since the 1930s, when Japan
invaded Manchuria and began to extract oil to fuel their
military machine. China now has one large oil plant and six
small ones and two plants that make electricity from oil shale.
Four oil plants and two power plants are under development.
Estonia has utilized oil shale as a source of power and oil
since the early 20th century, and today, nearly all of
Estonia's electricity is produced from oil shale. They also
export large quantities of electricity to the surrounding
countries and their power grids. Two Estonian companies
currently produce oil and power from oil shale, and their
plants are being expanded.
One company, Eesti Energia, is also active in Jordan and
the United States. The Hashemite Kingdom of Jordan has
agreements with eight prospective developers to produce cement,
shale oil, and electric power from oil shale. Eesti Energia's
agreement could result in the largest shale oil plant in
history, plus the plant to make most of the country's
electricity.
Although Brazil is not expanding its domestic oil shale
industry, the national oil company Petrobras is involved in
projects in Jordan, the USA, Morocco, and China. Turkey imports
more than 90 percent of its fuel oil and gas and has considered
developing its oil shale to reduce that dependence.
There are some interesting opportunities. One small deposit
yields up to three barrels of oil per ton of rock. Very unusual
material in the world.
Morocco has a memorandum of understanding with Petrobras
and Total. Syria, before their political unrest, had signed an
agreement with Jordan to share expertise in the development of
electricity from oil shale. Egypt was examining the feasibility
of developing its oil shale to conserve the country's
economically important oil and natural gas reserves. I suspect
that has been suspended as well.
Resource surveys and field exploration studies are underway
in Canada, Thailand, and other places. There is a cement plant
in Germany that makes cement from oil shale. And in Sweden,
tests on the alum shale continue to determine the feasibility
of recovering oil, uranium, nickel, molybdenum, vanadium, and
probably rare earths if they are there.
Some very interesting work is underway in Australia, where
a company from Rifle, about 60 miles east of us, called Shale
Tech International, recently completed a large pilot plant
which will use the Paraho returning process to make liquid
fuels from Queensland oil shale. Paraho is American technology.
It was developed in Colorado to use oil shale from the Green
River formation, and now it is being used in Australia.
All of these activities are very relevant to the future of
an oil shale industry in the United States. Like the U.S.,
nearly all of the other countries that are working on oil shale
consume much more oil than they produce. A few have essentially
no indigenous fuel production and are totally dependent on
imports with the attendant economic dislocations and security
problems.
Many have small populations and economies and would have
difficulty raising billions of dollars to pay for integrated
oil shale plants, despite their potential economic benefits in
the long term. The oil shale projects in other countries are
relevant to the U.S. because they will advance understanding of
the processing technologies and reduce risks associated with
their deployment.
A very important benefit will be the validation of high-
level engineering designs and cost estimates. Although the
plants in the current and proposed industries are relatively
small compared with what might be supported by the Green River
oil shales, they are large enough to address many of the
unknowns that must be confronted by promoters of the commercial
industry. This is especially important for the retorting
facilities, which are expensive to build and operate.
The growing body of operating experience and information
will greatly reduce the risks associated with the
commercialization phase. This progress will facilitate
financing and permitting of a facility, which will ultimately
mean lower product cost.
These advancements are especially important, regardless of
where oil shale technology is deployed next and especially if
it is deployed in the United States.
That completes my prepared statement. Any questions?
[The prepared statement of Dr. Sladek follows:]
Statement of Thomas A. Sladek, PhD, Director, Ockham Energy Services
Introduction
I started my first oil shale project in the fall of 1967, at the
Colorado School of Mines, as part of my master's program in the
Department of Chemical and Petroleum Refining Engineering. I set out to
measure thermal conductivity factors for oil shale in the Green River
formation, the huge geological entity that underlies much of
northwestern Colorado, northeastern Utah, and southwestern Wyoming. My
work was sponsored by Sinclair Oil Company, which wanted to simulate
the transmission of heat through beds of oil shale at their property
overlooking the Parachute Valley in Colorado. Sinclair's field tests in
the 1950s were somewhat successful, and they were encouraged by high
oil prices (almost $3 per barrel and holding) to try again. Sinclair
called its process ``underground retorting'' or ``retorting in place.''
The currently popular phrase in situ was provided later, by Latin
scholars.
After graduate school, I worked in a steel mill and then on oil
shale, coal conversion and tar sands processing, fuel alcohol from
corn, oil shale, resource recovery from municipal waste, management of
scrap tires and other special wastes, domestic independent power
projects, waste-to-energy facilities, recycling and solid waste
composting, international power projects, gas-to-liquids technology,
recovery of energy from agricultural residues, hybrid power plants, and
oil shale.
In 2007 and 2008, I was principal investigator and director of the
Jordan Oil Shale Technical Assistance project. My colleagues and I
conducted a feasibility study for development of the oil shale
resources in The Hashemite Kingdom of Jordan and prepared a strategic
plan for their commercialization. Work included reviewing the mining
and processing technologies and industries under development in other
countries and updating cost engineering studies from the 1970s to allow
forecasting of the product prices required to support an oil shale
industry in Jordan. The client was Jordan's Ministry of Energy and
Mineral Resources. The prime contractor was Behre Dolbear and Company
(USA) Inc. Funds came from the U.S. Trade and Development Agency, a
branch of the Department of Commerce.
In 2008 and 2009, I was engaged by the European Union to support
the Euro-Mediterranean Energy Market Integration Project, or MED EMIP.
My job was to develop a concept paper for creation of an oil shale
council for the countries of Turkey, Syria, Jordan, Egypt, and Morocco.
All of these countries have oil shale deposits and not much else in the
way of indigenous fossil fuels. The council would allow them to share
their experience, influence, and expertise and develop their resources
in an orderly and beneficial manner. My work again included reviewing
the status of oil shale technologies and projects in the Middle East,
North Africa, and other regions and assessing the significance of that
work for the council's members. The project was successful in that an
Oil Shale Cooperation Center was established in Amman in April of 2010.
The future of that center is unclear, given the social unrest in its
member countries.
I would now like to describe what I learned about oil shale
projects around the world and to highlight some of the implications of
that work for the emerging oil shale industry in the United States.
Oil Shale Projects in Other Countries
People's Republic of China
In Liaoning Province, the Fushun Mining Group plant uses a large
number of small retorts to make about 2 million barrels of oil per year
from lump oil shale, plus bricks and cement from the ash. Installation
of a large retort to handle fine oil shale was completed in 2010. The
plant uses the Alberta Taciuk Process (ATP) technology which was
developed for soil cleaning in Canada. FMG has announced plans to
expand their capacity by 3 million barrels per year.
In Jilin Province, Jilin Energy & Communication Corporation
produces 12 MW of electricity by burning oil shale in fluidized bed
boilers. Jilin Energy is developing a plant that will use Petrosix
retorts to produce 1.5 million barrels per year of shale oil, 100 MW of
electricity, and cement. Six other companies produce shale oil in Jilin
Province. Quantities are relatively small. And Royal Dutch Shell has
established a joint venture to evaluate the potential of Shell's in-
situ conversion process in the province.
SINOPEC has proposed to build an oil shale power plant in Guangdong
province. A retorting plant has been proposed for Heinan Province. In
Heilongjiang Province, PetroChina is building a plant that will make
about 700,000 barrels of shale oil per year, and a larger plant has
been proposed by China National Coal Company and Harbin Coal Chemical
Company. Several other minerals companies have proposed oil shale
projects, some involving co-processing of oil shale and coal.
Estonia
Serious development of Estonia's resources began after World War I,
and today more than 12 million tonnes of oil shale is mined per year.
More than 85% is burned to generate electric power. Retorting plants
produce 1.6 million barrels of shale oil per year, mostly in
descendents of the Kiviter and UTT retorts that were developed when
Estonia was part of the Soviet empire. One of the big players is Viru
Keemia Grupp AS (VKG), which operates a power station and two shale oil
plants which process lump oil shale in Kiviter retorts. In December
2009, VKG commissioned a Petroter retort (a descendent of the UTT
process) which produces 730,000 barrels of shale oil per year plus fuel
gas and steam. VKG has a permit to pursue oil shale development in
Ukraine.
The other big player is Eesti Energia AS, the national power
utility. Eesti Energia operates the Narva Oil Factory, which produces
about 950,000 barrels of shale oil per year in two TSK140 retorts.
These process fine oil shale and are also descendents of the UTT
retorts developed in Soviet times. In 2009, Eesti Energia announced
plans to expand its retorting capacity by more than 2 million barrels
per year by 2012. Production of fuel gas, steam, and electricity will
also rise. In 2008, Eesti Energia and Finnish minerals processing
company Outotec formed a joint company--Enefit--to develop oil shale
processes and projects, especially in other countries. Enefit's
subsidiary Oil Shale Energy Jordan is developing a retorting plant and
a large power station in Jordan. Enefit American Oil has acquired the
Oil Shale Exploration Company project in Utah, which could, in time,
produce 57,000 barrels of shale oil per day.
The Hashemite Kingdom Jordan
Jordan's deposits are located 60 to 90 miles south of Amman. They
are large, have medium yield, and might be extracted with low-cost
surface mining. The oil shale and the shale oil are very high in
sulfur, which complicates combustion and retorting and makes refining
difficult and expensive. These defects could be offset by selling the
sulfur recovered during refining, because sulfur is a valuable
commodity. In January 2000, sulfur sold for $3 per long ton along the
west coast of the USA; in January 2011, the price was $180 per long
ton.
The Kingdom has no other significant resources of fossil fuel, and
the government is committed to oil shale development. Since November
2005, the government has executed memoranda of understanding (MOUs):
With Jordan Cement Factories Company to manufacture
cement from oil shale in the El Lajjun deposit
With Royal Dutch Shell to evaluate applying Shell's
in-situ process to deeply buried oil shale in central and
southern Jordan
With Eesti Energia to evaluate using Enefit retorts
to make at least 37,000 barrels per day of shale oil and its
boilers to generate at least 440 MW of electricity
With Jordan Energy and Mining Ltd. to investigate
shale oil production using the ATP technology
With the International Corporation for Oil Shale
Investment to evaluate retorting of oil shale from the El
Lajjun resource in successors to the fine-shale and coarse-
shale retorts developed in Estonia during the Soviet era
With Brazil's national oil company Petrobras to
examine application of the Petrosix retorting technology. The
global energy company Total S.A. is participating.
With Russian firm Inter Rao and Jordan's Aqaba
Petroleum to examine using Russian technology for oil shale
mining and shale oil extraction
With the International Company for Oil Shale
Investment to evaluate development of the Attarat Umm Ghudran
resource.
The agreements cover both in situ retorting and aboveground
processing in a diverse selection of retorts, with a range of potential
production capacities, in several of Jordan's oil shale areas. One
agreement could produce a major power generating facility capable of
meeting most of Jordan's electrical demand, and one agreement provides
for recovery of a valuable byproduct--Portland cement. With these
agreements, Jordan is well positioned to become a major producer of
shale oil. However there are restraints. In addition to the usual issue
areas--economic feasibility, land disturbance, waste management, water
requirements, and environmental, social, and cultural concerns--there
is competition for access to the rock, some of which may contain
uranium.
Australia
Australia has very large oil shale resources, principally in
Queensland, and had oil shale industries of substantial size between
1865 and 1952. In June 1997, the Stuart Project was begun near the town
of Gladstone in Queensland as a joint venture between Suncor Inc. of
Canada and the affiliated Australian companies Southern Pacific
Petroleum (SPP) and Central Pacific Minerals (CPM). Suncor subsequently
departed, and SPP absorbed CPM. A demonstration plant using an ATP
retort was constructed. The plant operated intermittently from 2000 to
2004, despite resistance from environmental, tourism, and fishing
groups. Although the project had significant accomplishments, it had
ongoing technical problems because dryer was too small. In February
2004, Queensland Energy Resources Ltd. acquired most of SPP's assets,
and Stuart was suspended. In August 2008, QERL announced that it was
abandoning the ATP technology in favor of the Paraho II technology. The
ATP plant was dismantled.
QER processed 8,000 tonnes of Australian oil shale in the Paraho
pilot plants maintained by Shale Technology International in Rifle,
Colorado. In October 2009, QERL completed a feasibility study and began
a campaign to restart Stuart with Paraho retorts. The first phase of
that development was completed in August 2011, with commissioning of a
small processing plant containing a single Paraho retort and its cadre
of ancillary equipment, on the Stuart site. The plant can process about
2.5 metric tons of oil shale per hour (vs. the 250 tonnes per hour
capacity of the ATP retort). When it is fully operational, the plant
will manufacture ultra-low-sulfur diesel fuel, jet fuel, fuel oil, and
synthetic crude oil.
Demonstration of the Paraho retorting process is particularly
significant for oil shale initiatives in the American West. Reasons
include:
Paraho is American technology, developed in Colorado
to use oil shale from the Green River formation.
Paraho's history extends back nearly 70 years to the
Synthetic Liquid Fuels Act of 1944, by which the U.S. Congress,
in its wisdom, involved the Federal Government in development
of the western oil shale resources. The Act led to a long
series of pioneering tests on oil shale mining and retorting at
Anvil Points in Colorado. The Gas Combustion retort was
developed there. Its successor was the Paraho retort.
The Paraho retort was developed with emphasis on
energy self-sufficiency and water conservation. These
requirements are important in the remote, arid west.
Some of Paraho's operating principles were embodied
in the Petrosix retort and have been thoroughly tested in
Brazil with the difficult Irati oil shale and with other
unforgiving materials, such as scrap tires.
The QER project will rise on the site of a failed oil
shale project which failed, in part, because of environmental
controversy. QER is aware of the challenges in this area and
seems to be dealing with them constructively. Similar
controversy is likely to accompany any oil shale project in the
U.S.
Others
Although Brazil is not expanding its domestic oil shale industry,
the national oil company Petrobras is involved in projects in Jordan,
the U.S.A., Morocco, and China. Turkey imports more than 90% of its
fuel oil and gas and has considered developing its oil shale to reduce
that dependence. There are some interesting opportunities (oil shale in
one small deposit yields up to 3 barrels of oil per ton), but only a
few deposits have been investigated in significant detail. Morocco has
executed an MOU with Petrobras and Total to evaluate aboveground
retorting of oil shale from the Tarfaya and Timhadit deposits and an
MOU with San Leon Energy to investigate in situ development of portions
of Tarfaya. Syria exports oil, but production is declining and the
country is looking to its gas and oil shale deposits to maintain energy
revenues. In 2009, Syria signed an MOU with Jordan to exchange
expertise in producing electricity from oil shale. Before the Arab
Spring of 2011, Egypt was examining the feasibility of developing its
oil shale to conserve the country's economically important oil and
natural gas. Resource surveys and limited field exploration studies are
underway in Canada, Thailand, and other places. The Holcim Cement plant
in Dotternhausen, Germany, continues to make cement from oil shale.
Tests continue on the alum oil shale in Sweden to determine feasibility
of recovering oil, uranium, nickel, molybdenum, and vanadium.
Significance for Oil Shale Development in the USA
Oil shale activities in other countries are very relevant to the
future of an oil shale industry in the United States. Like the U.S.,
nearly all of the other countries that are working on oil shale consume
much more oil than they produce. A few (Jordan, Morocco, Turkey) have
essentially no indigenous liquid fuel production and are totally
dependent on imports, with the attendant economic dislocations and
security concerns. Many have sensitive physical environments that could
be damaged by poorly controlled and inadequately regulated mining and
processing facilities. Many are water-poor and cannot divert water to
supply oil shale plants and their associated populations without
depriving other people and activities, especially agriculture. Many
have small populations and economies and would have difficulty raising
billions of dollars to pay for integrated oil shale plants, despite
their potential economic benefits in the long term.
Oil shale projects in other countries are also relevant to the U.S.
because they will advance understanding of the processing technologies
and reduce risks associated with their deployment. A very important
benefit of the projects will be validation of high-level engineering
designs and cost estimates. Although plants in the current and proposed
industries are relatively small compared with what might be supported
by the Green River oil shales, they are large enough to address many of
the unknowns that must be confronted by promoters of a commercial
industry. This is especially important for the retorting facilities,
which are expensive to build and operate. In 2006, China's Fushun
Mining Group estimated it cost $18.46 to deliver a barrel of shale oil,
with 75% of the cost associated with retorting, 23% with
transportation, and less than 1% with mining. A failed retort could
bring an entire plant down, and it could be very expensive to repair or
replace.
The growing body of operating experience and information will
greatly reduce the risks associated with a commercialization phase.
This progress will facilitate financing and permitting of a facility,
which will ultimately mean lower product costs. These advancements are
important regardless of where oil shale technology is deployed next,
and especially if it is deployed in the U.S.A.
In short, the challenges faced by oil shale proponents in other
countries are similar to those encountered in the United States: how to
develop a practical, efficient, beneficial industry while protecting
the environment and avoiding unacceptable social dislocations. It
hasn't been easy over there; it won't be easy here.
______
Ockham Energy Services
Energy Efficiency Economy Ecology
8820 W. Francis Place
Lakewood, Colorado 80215 USA
303 238 0785 [email protected]
September 17, 2011
Mr. Tim Charters, Staff Director
Subcommittee on Energy & Mineral Resources
1324 Longworth House Office Building
Washington, DC 20515
Dear Mr. Charters:
I appeared before the Subcommittee's oversight hearing on
``American Jobs and Energy Security: Domestic Oil Shale the Status of
Research, Regulation and Roadblocks'' which was held in Grand Junction,
Colorado, on August 24. On September 9, Representative Lamborn asked
me, as a followup question, ``Is there any more information on the
important subject of rare earth elements in oil shale that was not
discussed at the hearing?'' This is my response.
The rare earth elements (REEs) constitute 17 elements in the
periodic table: the 15 members of the lanthanide series--lanthanum,
cerium, praseodymium, neodymium, promethium, samarium, europium,
gadolinium, terbium, dysprosium, holmium, terbium, thulium, ytterbium,
lutetium--plus the elements scandium and yttrium. Many of the rare
earths are important industrial materials. They are used as colorants
and oxidizers and in lasers; batteries; permanent magnets; catalytic
converters in automobiles; phosphors in televisions, monitors,
lighting, and radar; metallurgical alloys; glass; catalysts for
chemical production and petroleum refining; and medical technology such
as X-ray, MRI, NMR, and PET. They have essential roles to play in the
deployment of renewable energy technologies, especially wind and solar.
Advanced storage batteries made with REEs help make electric cars more
practical.
REEs are a current concern because they are no longer produced in
the United States. China is the principal supplier worldwide, and the
reliability of the supply is uncertain. Interruptions could cause
serious problems for numerous U.S. manufacturers.
Few of the REEs are actually ``rare'' as such. The average
abundance of cerium, for example, is about the same as for copper, and
all of the REEs except promethium are much more abundant than gold or
silver. However the REEs are dispersed through the earth's crust and
are seldom concentrated in easily exploitable deposits, as is often the
case with other metals, including copper, gold, and silver. The rare
earths are easy to find, because they are occur nearly everywhere.
However they are hard to extract, because they are so diffuse, which
makes them expensive. A pound of high-purity scandium, for example,
currently sells for nearly $7,000.
If some of the REEs were relatively abundant in the oil shale,
their recovery as co-products with shale oil might make an oil shale
project more economically attractive. With that possibility in mind, I
examined a report on trace elements in the oil shale of Colorado's
Piceance Basin that was prepared in 1981 for USEPA by Lawrence Berkeley
Laboratory and USDOE's Laramie Energy Technology Center. Results are
summarized in the attached table, which compares the maximum REE
concentrations measured in the oil shale with average concentrations in
the earth's upper crust.
Not all the REEs were assayed in the oil shale. Of those that were
assayed, cerium is the only element with a higher concentration in the
oil shale than in the crust, and that margin is only about 15%.
Concentrations of the other rare earths are similar to concentrations
reported for average rocks. These findings do not suggest the existence
of a rare-earth bonanza in Colorado oil shale.
I hope this very limited study will help you in your work. Please
contact me if I can be of further assistance to you or your associates.
Sincerely,
Thomas A. Sladek, PhD
[GRAPHIC] [TIFF OMITTED] T8237.009
.eps__
Mr. Lamborn. All right. I am sure we will have some
questions shortly.
Thank you.
Ms. Spinti? Professor Spinti?
STATEMENT OF JENNIFER SPINTI, RESEARCH ASSOCIATE PROFESSOR,
DEPARTMENT OF CHEMICAL ENGINEERING AND INSTITUTE FOR CLEAN AND
SECURE ENERGY, UNIVERSITY OF UTAH
Ms. Spinti. Yes, Chairman Lamborn, Congressman Tipton,
thank you for this opportunity.
I am here representing the Institute for Clean and Secure
Energy at the University of Utah. We have had a program in oil
shale and sands research for approximately the last 5 years.
I would like to talk about chemical engineering since that
is what I am, and in chemical engineering, you first draw a
control volume around the problem you want to solve. And that
means you are just putting boundaries on the problem.
So, I want to consider a control volume for a wind turbine
that sits on a windy ridge. But this control volume doesn't
just include the windy ridge, but it includes the mine where
the ores are processed that are needed for the wind turbine
manufacture. And one of those ores that is needed is neodymium
ore. Approximately 1 ton of metal is needed for the manufacture
of a 1 megawatt turbine.
Most of that manufacturing, as you indicated, I believe,
Congressman Tipton, is occurring in China, where they have very
lax environmental laws. And there are toxic lakes of acidic
processing waste right now because of the ore processing that
is going on.
We can also consider a control volume around a solar power
installation in California. Most of the proposed facilities
have involved water cooling, which is a very water-intensive
process. You have higher plant efficiency than air cooling, but
it requires lots of water.
If you go look at the California Web site where they apply
for these or they have applications for these types of
facilities, a recently proposed 250 megawatt facility would
require 536 million gallons of water per year.
What about mining and water use impacts from oil shale
development? Let's draw a control volume that includes these
issues. In Utah, the Division of Oil, Gas, and Mining issues
permits for oil and gas drilling, coal mining, and minerals.
Oil shale is regulated as a mineral and is subject to
minerals regulatory permits. Annual permit fees are required.
Operation and reclamation plans must be maintained, and
approval must be sought for modification.
As for water, a recent analysis by our institute, a
previously published estimate shows an average water
consumption rate for oil shale applications that have--where we
have public information is 2.5 barrels of water per barrel of
shale produced. In order to compare that to the water usage of
the solar power plant, we have to convert from energy content
to unit of power.
So, I made some assumptions about oil shale's energy
content and that you would be burning it in a 30 percent
efficiency engine. And that comes out to a 50,000-barrel-a-day
oil shale facility, 1.8 million gallons of water per megawatt.
That is compared to 2.1 million gallons per megawatt for the
solar power plant.
So my question is, is oil shale development orders of
magnitude worse than any other kind of development that
involves extraction or use of resources on a large scale? There
are certainly other issues associated with oil shale
development that we can't ignore in our control volume,
including the power plant that provides electricity to the oil
shale processing plant, the air shed around the facility, the
nearby town that will be impacted by development, the
endangered species and habitat that will be affected, et
cetera.
Do we currently have the information we need to predict
with some degree of certainty what will happen in our control
volume? I argue yes and no. So we do have quite a bit of
information available in the public arena from previous decades
of oil shale research, from oil shale booms and busts, and from
current international production.
The University of Utah, as I mentioned, has had an oil
shale and sands research center that built on several decades
of research at the university. We have a report that I brought
a copy of for each of you that we published in 2007, assessing
some of the technical, economic, and legal issues associated
with oil shale and sands production. We have a current research
program looking at quite a few issues ranging from policy to
economic to technical. I would be happy to discuss those
research initiatives with you.
Given all this information, what do we need? We need
domestic energy resources to fulfill our domestic needs, and
the development of all resources should be held to the same
high standards.
We need to move all forms of energy development forward so
that we don't miss a solution to the problem. Poor solutions
will be eliminated by the market, by the weight of scientific
and economic data, or by their failure to meet environmental
thresholds set by regulation.
We need a regulatory regime in place that will allow oil
shale to stand or fall on its own merits. We need opportunities
for oil shale companies to move their technologies up scale
from the laboratory to the field, to move from research to
application.
We need companies willing to share information with
Government, academia, and the general public. Transparency will
be the key to success in the arena of public opinion.
We need a multidisciplinary U.S. oil shale research center
to address the unforeseen problems--engineering, socioeconomic,
environmental, et cetera--that will arise as processes move up
scale. Lessons learned at the larger scale can then be used to
refine research directions and initiatives.
In conclusion, at the university, we have a couple of
models for perhaps moving forward in these arenas. We are
working with several oil shale companies, with some simulation
tools we have developed, and the idea there is that we want to
be able to have quantified predictivity about effects of
different technologies.
We also have a lot of public outreach events, conferences
that we sponsor that we feel are important to address some of
these issues. And the common theme with all of the things that
we are doing are collaboration with a wide range of
constituencies and data and information sharing. The issues are
too large to be discussed and solved in isolation.
Thank you.
[The prepared statement of Ms. Spinti follows:]
Statement of Jennifer P. Spinti, Research Associate Professor,
Department of Chemical Engineering, Assistant Director, Clean & Secure
Energy from Domestic Oil Shale/Sands Program, Institute for Clean and
Secure Energy, The University of Utah
According to the U.S. Environmental Protection Agency, renewable
energy comes from sources that ``restore themselves over short periods
of time and do not diminish'' (1). Wind energy is one of the renewable
energy sources that the U.S. government has supported through direct
spending and tax credits and that states have pushed through renewable
energy targets. At the end of 2010, thanks to rapid expansion in
capacity, wind power provided 2.3 percent ( 40,000 MW of the energy
generated in the U.S. (2,3). According to a metals industry analyst, a
wind turbine with an electric power generating capacity of 1 MW
requires one metric ton of the rare earth metal neodymium for making a
permanent magnet (4). That neodymium is most likely mined in Inner
Mongolia, a region in China with more than 90 percent of the world's
reserves. One of China's most polluted cities, Batou, is located in
this region adjacent to a 5-mile wide lake of toxic waste containing
acids, heavy metals, and other chemicals left over from the processing
of the neodymium ore (5). Studies show high rates of cancer,
osteoporosis and skin and respiratory diseases in villages around the
lake (5). Does the legacy of this environmental impact diminish the
status of ``renewable'' for wind power?
Another renewable energy source, concentrated solar power, can come
with a high price tag for water. Wet cooling, where water is evaporated
to remove excess heat, is preferred by developers. Dry cooling, where
fans and heat exchangers are used for heat removal, consumes about 90
percent less water but reduces plant efficiency, thus reducing
profitability (6). The California Energy Commission has received
numerous applications for large-scale solar energy projects in
California, and many have large water requirements due to their use of
wet cooling technology (7). For example, the Genesis Solar Energy
Project would consume an estimated 536 million gallons of water a year
for power plant cooling, process water makeup, mirror washing, etc. to
produce 250 MW of electricity (8), a rate of 2.1 million gallons of
water per megawatt of power generated by this renewable energy source.
Is this a sustainable level of water consumption in the arid
southwestern deserts where concentrated solar plants are targeted for
development?
What about mining and water use impacts from oil shale development?
In Utah, the Division of Oil, Gas, and Mining (DOGM) issues permits for
oil and gas drilling, coal mining, and minerals mining using guidelines
established in the Utah Oil and Gas Conservation Act, the Utah Mined
Land Reclamation Act, and the Utah Coal Mining and Reclamation Act (9).
Oil shale is regulated as a mineral and is subject to minerals
regulatory permits. A large mine, defined as greater than 10 acres,
requires a 50+ page application that includes detailed calculations for
the bond based upon specific operations. In addition, annual permit
fees are required, operation and reclamation plans must be maintained,
and approval must be sought for modification (9).
DOGM currently oversees 670 permitted mines in the state of Utah
(10). Coal, oil sands, and oil shale mines are particularly
controversial. In 2010, after a lengthy appeals process, DOGM issued a
permanent program permit to a new surface coal mine, the Coal Hollow
Mine, which allows 635 acres of surface disturbance. Earth Energy
Resources has applied for a permit to mine 213 acres of oil sands. That
permit is currently in appeal (9). Red Leaf Resources is in the process
of applying for a large mine permit for development of its oil shale
resources.
It is unclear what water consumption rates for oil shale
development will be. A recent analysis of previously published
estimates shows an average water consumption rate of 2.5 barrels of
water per barrel of oil produced (11). An ethanol plant requires four
barrels of water to produce one barrel of ethanol, and this amount does
not include the water needed for the cultivation of corn (12). How does
water usage for oil shale compare to that for the solar energy plant?
The energy content of a barrel of oil is measured in units of energy
while power plant output is reported in units of power. To compare the
two, one must make several assumptions. If one assumes the energy
content of a barrel of shale oil to be approximately 1.7 MWh (13) and
that it is burned in an engine that has an efficiency of 30 percent,
then a 50,000 barrels per day oil shale operation would produce a power
equivalent of approximately 1060 MW. At 2.5 barrels of makeup water
required per barrel of oil produced, yearly water consumption would be
in the 1,900 million gallon range, or 1.8 million gallons of water per
megawatt of power produced.
Is oil shale development orders of magnitude worse than any other
kind of development that involves extraction or use of resources on a
large scale? The above paragraphs address two common critiques used to
single out oil shale development, e.g. land disturbance and water
usage. There are also critiques related to energy usage, air quality,
carbon footprint, capital cost, socioeconomic impacts, etc. All of
these concerns are valid given the potential scale of oil shale
development in the Uinta and Piceance Basins of Utah and Colorado (see
Figure 1). However, there is currently a dearth of data on which to
base projections for large-scale impacts because the last active U.S.
oil shale facility, the Union Oil operation located in Parachute, CO,
was shut down in 1991 (14), and the current round of Research,
Development, and Demonstration (RD&D) leases has yet to provide
publicly available information on the economic feasibility of various
oil shale extraction technologies.
What information on oil shale development and its impacts do we
have in the public arena? We have reports and papers from decades of
research by academia, national laboratories, companies, and other
entities, the experience of oil shale companies currently producing in
other countries, and the lessons learned from previous oil shale booms.
The University of Utah has been a contributor to this body of
knowledge for many years, beginning with the work of Professor H. Y.
Sohn during the oil shale boom of the 1970s and early 1980s and
continuing with contributions from Professor J. D. Miller, Dr. James
Bunger, and Professor M. D. Deo. In late 2005, the Institute for Clean
and Secure Energy (ICSE) at the University of Utah announced the
creation of the Utah Heavy Oil Program (UHOP). UHOP's original mission
was to provide research support to federal and state constituents for
addressing the wide-ranging issues surrounding the creation of an
industry for oil shale, oil sands and heavy oil production in the U.S.
The scope of the mission was later reduced to focus exclusively on oil
shale and oil sands production. The research sponsored by UHOP was
broad and interdisciplinary in nature, involving researchers from the
Colleges of Engineering, Science, Law, and Business. Funding for UHOP
came as the result of a Congressionally Directed Program; the FY2006
budget was $1.8 million. At the time it was funded, there had been no
federal support for oil shale/sands research for well over a decade.
Part of the renewed interest in oil shale and oil sands was the passage
of the Energy Policy Act of 2005 (EPAct 2005).
UHOP was given two directives in EPAct 2005. The first was to
prepare an update to the 1988 technical and economic assessment of
domestic heavy oil resources (15) and to the 1996 Department of Energy
feasibility study of heavy oil recovery (16). UHOP published ``A
Technical, Economic, and Legal Assessment of North American Heavy Oil,
Oil Sands, and Oil Shale Resources'' in 2007. This report evaluated the
size of the North American unconventional fuel resource, the production
technologies available, the upgrading and refining steps needed, and
the economic, social, legal, and environmental issues related to
unconventional fuels production (17). The second directive was to
sponsor research that related to the objective of Section 369 of EPAct
2005. Four of the sponsored projects were directly related to oil shale
and included reservoir modeling for in situ production of oil shale,
oil shale pyrolysis kinetics, a analysis of how a federal oil shale
program might be implemented, water usage estimates for oil shale
development in Utah's Uinta Basin, and produced water treatment
options. A final report was submitted to the Department of Energy (DOE)
in early 2010 (18).
ICSE received additional funding in FY2008, FY2009, and FY2010 for
the Clean and Secure Energy from Domestic Oil Shale and Oil Sands
Resources Program. Current research initiatives include the simulation
of a modified in situ production process, the development of improved
models for kerogen pyrolysis, the development of a predictive geologic
model for the Uinta Basin, an analysis of the geomechanical reservoir
state (including subsidence issues associated with in situ production),
basin scale simulation of the economic and environmental impacts of oil
shale development, and conjunctive management of surface water and
groundwater resources in Utah. An economic assessment of various oil
shale and oil sands development scenarios in Utah's Uinta Basin is also
being prepared for publication this fall.
Given that we have all this information, what do we need? We need
domestic energy resources to fulfill our domestic needs, and the
development of all resources should be held to the same high standards.
If we don't like the tailings ponds and open pit oil sands mines in
Alberta or the toxic wastes generated by rare earth mines in China for
wind turbine components, we need domestic development adherent to more
stringent U.S. environmental laws. We need to move all forms of energy
development forward so that we don't miss a solution to the problem.
Poor solutions will be eliminated by the market, by the weight of
scientific and economic data, or by their failure to meet environmental
thresholds set by regulation. We need a regulatory regime in place that
will allow oil shale to stand or fall on its own merits. For example,
oil shale development is and should be held to the same standard as all
other types of mining operations in the state of Utah. It should not be
singled out for approval or disapproval just because of the resource
type that is being mined. We need opportunities for companies to move
their technologies upscale. As a 2005 Rand report on oil shale
development notes, ``Reliable estimates of water requirements will not
be available until the technology reaches the scale-up and confirmation
stage'' (19). We need companies willing to share information with
government and academia. It is difficult to employ tools such as high
performance computing that could lead to more rapid deployment of
technologies without data for validation and uncertainty
quantification. We need a multidisciplinary U.S. oil shale research
center. Unforeseen problems will arise, and additional research will be
required to address those problems. All of those problems will not have
an engineering solution, so such a research center will require experts
in the fields of policy, environmental science, law, and economics in
addition to engineering and science. Finally, we need research to be
moved out of the laboratory and/or the policy think tank and into
application. Lessons learned at the larger scale can then be used to
refine research directions and initiatives.
ICSE has several models for moving forward with respect to the
engineering, policy/legal, and economic sides of oil shale development.
On the engineering side, ICSE has partnered with several oil shale
technology companies to produce simulation tools with quantified
predictivity that can be used by industry to assist in the assessment
of the technological, economic and environmental consequences of the
production of new gas and liquid fuels from U.S. oil shale/sands
deposits. The first model is the application of the simulation tools to
Red Leaf Resources' patented EcoShale process. In this model, Red Leaf
is providing temperature data so that the thermal heating of oil shale
can be evaluated. The simulation tools will also be used to study
product yield as a function of operating conditions for indirectly
heated, rubblized oil shale beds.
The second model is a capstone project that is intended to draw
together the results of many years of ICSE research to demonstrate
computational simulation capability for the assessment and deployment
of the shale oil production process commercialized by American Shale
Oil, LLC (AMSO). In this integrated project, we are coupling simulation
capabilities with experimental data from key small-scale experiments in
a formal validation process where the controlling uncertainties are
accounted for and quantified. Our goal is to demonstrate that optimal
risk assessment and decision-making regarding deployment of this new
technology is most efficiently accomplished by this formal validation
and uncertainty quantification process. In this model, AMSO is
providing funding for the small-scale experiments.
The third model is a joint research project with Los Alamos
National Laboratory (LANL) to develop a predictive tool for assessing
the basin- or regional-scale environmental and economic impacts of
unconventional fuel development. LANL developed a dynamic, integrated
assessment tool several years ago that is being updated, improved, and
subjected to a rigorous validation and uncertainty quantification
process through the cooperative efforts of ICSE and LANL researchers.
On the policy/legal side, ICSE is collaborating with the Wallace
Stegner Center for Land, Resources, and the Environment at the
University of Utah. Professor Robert Keiter, the director of the
Stegner Center, is also the Associate Director of ICSE for Legal and
Policy. Together, ICSE and the Stener Center have hosted the Energy
Forum the past two years. The Energy Forum 2011 will feature former
U.S. Senator Bob Bennett and former Wyoming Governor Dave Freudenthal
in a panel discussion of energy policy challenges including climate
change, regional energy demand, natural resources, and national energy
security.
Outreach efforts by ICSE also include hosting the annual University
of Utah Unconventional Fuels Conference. This year's conference
featured speakers from the Bureau of Land Management Office in
Washington, D.C., a member of the Ute Tribe whose lands encompass
significant conventional and unconventional fuel resources,
representatives from AMSO, Red Leaf, and Enefit, and the director of
the Division of Oil, Gas, and Mining for the state of Utah. ICSE has
also teamed with the Utah Geological Survey and the Bingham
Entreprenseurship and Energy Research Center in Vernal, UT, to lead
field trips to oil shale and sands sites in the Uinta Basin.
I will be happy to answer any questions you might have about
specific research results, overall program directions, or information
contained in our reports at the hearing.
References
1. U.S. Environmental Protection Agenday. (n.d.). Green power
market. Retrieved Augsut 19. 2011, from http://www.epa.gov/greenpower/
gpmarket/.
2. American Wind Energy Association. (n.d.) Industry statistics.
Retrieved August 19, 2011, from http://www.awea.org/learnabout/
industry_stats/index.cfm.
3. Science Daily (2011, April 27). Wind turbines: In the wake of
the wind. Retrieved August 21, 2011, from http://www.sciencedaily.com/
releases/2011/04/110426151040.htm).
4. Lifton, J. (2009, March 4). Braking wind: Where's the
neodymium going to come from? Technology Metals Research. Retrieved
August 21, 2011, from http://www.techmetalsresearch.com/2009/03/
braking-wind-wheres-the-neodymium-going-to-come-from/.
5. Parry, S. & Douglas, E. (2011, January 29). In China, the true
cost of Britain's clean, green wind power experiment: Pollution on a
disastrous scale. Mail Online. Retrieved August 20, 2011, from http://
www.dailymail.co.uk/home/moslive/article-1350811/In-China-true-cost-
Britains-clean-green-wind-power-experiment-Pollution-disastrous-
scale.html.
6. Woody, T. (2009, September 29). Alternative energy projects
stumble on a need for water. The New York Times. Retrieved August 22,
2011, from http://www.nytimes.com/2009/09/30/business/energy-
environment/30water.htm.
7. Woody, T. (2009, October 27). Water use by solar projects
intensifies. The New York Times. Retrieved August 21, 2011, from http:/
/green.blogs.nytimes.com/2009/10/27/water-use-by-solar-projects-
intensifies/.
8. California Energy Commission (n.d.). Genesis solar energy
project. Retrieved August 21, 2011, from http://www.energy.ca.gov/
sitingcases/genesis_solar/index.html.
9. Baza, J. (2011, May). Division of Oil, Gas, and Mining
permitting processes. Paper presented at the 2011 University of Utah
Unconventional Fuels Conference, Salt Lake City, UT. Retrieved August
19, 2011, from http://www.icse.utah.edu/assets/archive/2011/
ucf_agenda.htm.
10. Division of Oil, Gas, and Mining. (n.d.). Associate directors.
Retrieved August 22, 2011, from http://linux1.ogm.utah.gov/WebStuff/
wwwroot/tabs.html.
11. Ruple, J. & Keiter, R. (2010). Policy Analysis of Water
Availability and Use Issues For Domestic Oil Shale and Oil Sands
Development. Salt Lake City, UT: Institute for Clean & Secure Energy,
University of Utah. Retrieved from http://repository.icse.utah.edu/
dspace/handle/123456789/11017.
12. Rapier, R. (2007, March 20). Water usage in an oil refinery.
Consumer Energy Report. Retrieved August 22, 2011, from http://
www.consumerenergyreport.com/2007/03/20/water-usage-in-an-oil-
refinery/.
13. Wikipedia (n.d.). Barrel of oil equivalent. Retrieved August
22, 2011, from http://en.wikipedia.org/wiki/Barrel_of_oil_equivalent
14. Russell, P. L. (1990). Oil shales of the world, their origin,
occurrence, and exploitation. Pergamon Press: New York.
15. Dowd, W. T., Kuuskraa, V. A., & Godec, M. L. (1988). A
technical and economic assessment of domestic heavy oil: Final report
(DOE/BC/10840-1). Interstate Oil Compact Commission: Oklahoma City, OK.
16. Strycker, A. R., Wadkins, R., Olsen, D. K., Sarkar, A. K.
Ramzel, E. B., Johnson, W. I., & Pautz, J. (1996). Feasibility study of
heavy oil recovery in the United States (NIPER.BDM-0225). BDM-Oklahoma,
Inc.: Bartlesville, OK.
17. Institute for Clean and Secure Energy. (2007). A technical,
economic, and legal assessment of North American heavy oil, oil sands,
and oil shale resources. Salt Lake City, UT: Author. Retrieved from
http://repository.icse.utah.edu/dspace/handle/123456789/10823.
18. Institute for Clean and Secure Energy. (2010). Utah Heavy Oil
Program: Final scientific/technical report, project period June 21,
2006 to October 20, 2009. Salt Lake City, UT: Author. Retrieved from
http://repository.icse.utah.edu/dspace/handle/123456789/11086.
19. Bartis, J. T., LaTourrette, T., Dixon, L. Peterson, D. J., &
Cecchine, G. (2005). Oil shale development in the United States (MG-
414-NETL). RAND Corporation: Santa Monica, CA.
[GRAPHIC] [TIFF OMITTED] T8237.001
.eps__
Mr. Lamborn. All right, thank you.
Ms. Mittal?
STATEMENT OF ANU MITTAL, DIRECTOR, NATURAL RESOURCES AND
ENVIRONMENT DIVISION, GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Mittal. Chairman Lamborn and Congressman Tipton, I am
pleased to be here today to participate in your field hearing
on oil shale development.
As you know, interest in developing a domestic oil shale
industry can be traced back to the early 1900s. However, the
industry has been hampered by technological challenges, average
oil prices that have been too low to consistently justify
investment in this resource, and concerns about the potential
impacts on the environment.
In October 2010, GAO issued a report that focused on one
area of particular concern--the amount of water that could be
needed to develop an oil shale industry. My testimony today
will summarize the findings of that report and focus on what is
known about the potential impacts of oil shale development on
water resources, what is known about the amount of water that
may be needed for the commercial development of oil shale, the
extent to which water could be a potential limiting factor in
the industry's development, and the need for Federal research
efforts to help mitigate these potential impacts.
First, we found that oil shale development could have
significant impacts on the quantity and quality of water
resources in Colorado and Utah, but the magnitude of these
impacts is largely unknown. This is because the technologies
that would be used have not yet been commercially proven, the
size of the future oil shale industry is currently uncertain,
and there is limited knowledge of current water conditions and
groundwater flows in the area.
While it is difficult to definitively determine the
quantitative impacts of oil shale development on water
resources, it is possible to identify the potential qualitative
impacts of this development. For example, oil shale development
could impact water quality through surface disturbances from
the construction of roads and production facilities.
Water quality could also be impacted by large water
withdrawals from streams and aquifers and from discharges of
contaminants through operations. It will, therefore, be
critical for the industry to implement effective measures to
mitigate these potential impacts.
With regard to the amount of water that could be needed to
develop a commercial oil shale industry, we found that the
estimates varied widely, depending on the characteristics of
the processes used. We also found that there is greater
uncertainty in how much water could be needed by an in-situ
operation versus a surface retorting operation.
Nonetheless, it is expected that the average total water
needs for the entire oil shale production life cycle could be
about three barrels of water for each barrel of oil produced
for surface retorting operations and five barrels for in-situ
operations. Most of the companies that we contacted said that
they are looking for ways to reduce their water use, for
example, by reusing or recycling water at their operations.
We also found that while the amount of water needed for the
initial development of an oil shale industry is most likely
available, the growth of the industry may be limited by a
number of factors that could impact future water availability.
Most of the companies we contacted were confident that they
held enough water rights for their initial shale development
projects, and they would most likely be able to purchase more
rights in the future as needed.
However, these companies could face challenges in acquiring
additional water rights in the future because of expected
increases in water demands from municipal and industrial users
in these areas, because of potential reductions in water
supplies from a warming climate, and because of greater need
for water to fulfill interstate compact obligations and protect
endangered species.
Finally, since 2006, the Federal Government had spent over
$22 million on oil shale development research, and only about
$5 million of this amount was spent to study water-related
issues. However, most Government officials and water experts
that we spoke to agree that there are insufficient data on the
baseline conditions of water resources in the oil shale regions
of Colorado and Utah and that additional research is needed to
understand the movement of groundwater and its interaction with
surface water.
We also found that Federal officials at DOE and Interior
seldom coordinate their water-related oil shale research with
each other or with State water officials. As a result of these
findings, we made three recommendations to Interior to
proactively begin preparing for the potential impacts of a
future oil shale industry. Interior generally concurred with
our recommendations and noted that it has and will continue to
take actions to implement them.
In conclusion, Mr. Chairman, for nearly a century,
industry, with some Government support, has focused on
overcoming the technological challenges of developing a
commercially viable oil shale industry. However, there are a
number of other associated impacts that should not be
overlooked, and now is the time for Federal agencies to
proactively begin focusing on these issues.
This concludes my prepared statement. I would be happy to
answer any questions.
[The prepared statement of Ms. Mittal follows:]
Statement of Anu K. Mittal, Director, Natural Resources and Environment
Team, United States Government Accountability Office
Chairman Lamborn, Ranking Member Holt, and Members of the
Subcommittee:
I am pleased to be here today to participate in your field hearing
on oil shale development. As you know, being able to tap the vast
amounts of oil locked within U.S. oil shale could go a long way toward
satisfying our nation's future oil demands. The Green River Formation--
an assemblage of over 1,000 feet of sedimentary rocks that lie beneath
parts of Colorado, Utah, and Wyoming--contains the world's largest
deposits of oil shale. The U.S. Geological Survey (USGS) estimates that
the Green River Formation contains about 3 trillion barrels of oil and
that about half of this may be recoverable, depending on available
technology and economic conditions. This is an amount about equal to
the entire world's proven oil reserves. The thickest and richest oil
shale within the Green River Formation exists in the Piceance Basin of
northwest Colorado and the Uintah Basin of northeast Utah (see app. I).
The federal government is in a unique position to influence the
development of oil shale because 72 percent of the oil shale within the
Green River Formation is beneath federal lands managed by the
Department of the Interior's (Interior) Bureau of Land Management
(BLM). The Department of Energy (DOE) has provided technological and
financial support for oil shale development through its research and
development efforts, but oil shale development has been hampered by
technological challenges, average oil prices that have been too low to
consistently justify investment, and concerns over potential impacts on
the environment.
One area of particular concern is that developing oil shale will
require large amounts of water--a resource that is already in scarce
supply in the arid West where an expanding population is placing
additional demands on water. Some analysts project that large scale oil
shale development within Colorado could require more water than is
currently supplied to over 1 million residents of the Denver metro area
and that water diverted for oil shale operations would restrict
agricultural and urban development. The potential demand for water is
further complicated by the past decade of drought in the West and
projections of a warming climate in the future. In October 2010, we
issued a report that examined the nexus between oil shale development
and water impacts. \1\
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\1\ GAO, Energy-Water Nexus: A Better and Coordinated Understanding
of Water Resources Could Help Mitigate the Impacts of Potential Oil
Shale Development, GAO-11-35 (Washington, D.C.; Oct. 29, 2010).
---------------------------------------------------------------------------
My testimony today will summarize the findings of that report.
Specifically, I will discuss (1) what is known about the potential
impacts of oil shale development on surface water and groundwater, (2)
what is known about the amount of water that may be needed for the
commercial development of oil shale, (3) the extent to which water will
likely be available for commercial oil shale development and its
source, and (4) federal research efforts to address impacts on water
resources from commercial oil shale development. To perform this work
we, among other things, reviewed an environmental impact statement on
oil shale development prepared by BLM and various studies from private
and public groups; we also interviewed officials at DOE, USGS, BLM;
state regulatory agencies in Colorado and Utah; oil shale industry
representatives; water experts; and organizations performing research,
including universities and national laboratories, and reviewed relevant
documents describing their research. We conducted this work in
accordance with generally accepted government auditing standards.
Background
Interest in oil shale as a domestic energy source has waxed and
waned since the early 1900s. More recently, the Energy Policy Act of
2005 directed BLM to lease its lands for oil shale research and
development. In June 2005, BLM initiated a leasing program for
research, development, and demonstration (RD&D) of oil shale recovery
technologies. By early 2007, it granted six small RD&D leases: five in
the Piceance Basin of northwest Colorado and one in Uintah Basin of
northeast Utah. The leases are for a 10-year period, and if the
technologies are proven commercially viable, the lessees can
significantly expand the size of the leases for commercial production
into adjacent areas known as preference right lease areas. The Energy
Policy Act of 2005 also directed BLM to develop a programmatic
environmental impact statement (PEIS) for a commercial oil shale
leasing program. During the drafting of the PEIS, however, BLM realized
that, without proven commercial technologies, it could not adequately
assess the environmental impacts of oil shale development and dropped
from consideration the decision to offer additional specific parcels
for lease. Instead, the PEIS analyzed making lands available for
potential leasing and allowing industry to express interest in lands to
be leased. Environmental groups then filed lawsuits, challenging
various aspects of the PEIS and the RD&D program. Since then, BLM has
initiated another round of oil shale RD&D leasing.
Stakeholders in the future development of oil shale are numerous
and include the federal government, state government agencies, the oil
shale industry, academic institutions, environmental groups, and
private citizens. Among federal agencies, BLM manages the land and the
oil shale beneath it and develops regulations for its development. USGS
describes the nature and extent of oil shale deposits and collects and
disseminates information on the nation's water resources. DOE, through
its various offices, national laboratories, and arrangements with
universities, advances energy technologies, including oil shale
technology. The Environmental Protection Agency (EPA) sets standards
for pollutants that could be released by oil shale development and
reviews environmental impact statements, such as the PEIS. Interior's
Bureau of Reclamation (BOR) manages federally built water projects that
store and distribute water in 17 western states and provides this water
to users. BOR monitors the amount of water in storage and the amount of
water flowing in the major streams and rivers, including the Colorado
River, which flows through oil shale country and feeds these projects.
BOR provides its monitoring data to federal and state agencies that are
parties to three major federal, state, and international agreements
that together with other federal laws, court decisions, and agreements,
govern how water within the Colorado River and its tributaries is to be
shared with Mexico and among the states in which the river or its
tributaries are located. \2\
---------------------------------------------------------------------------
\2\ These three major agreements are the Colorado River Compact of
1922, the Upper Colorado River Basin Compact of 1948, and the Mexican
Water Treaty of 1944.
---------------------------------------------------------------------------
The states of Colorado and Utah have regulatory responsibilities
over various activities that occur during oil shale development,
including activities that impact water. Through authority delegated by
EPA under the Clean Water Act, Colorado and Utah regulate discharges
into surface waters. Colorado and Utah also have authority over the use
of most water resources within their respective state boundaries. They
have established extensive legal and administrative systems for the
orderly use of water resources, granting water rights to individuals
and groups. Water rights in these states are not automatically attached
to the land upon which the water is located. Instead, companies or
individuals must apply to the state for a water right and specify the
amount of water to be used, its intended use, and the specific point
from where the water will be diverted for use, such as a specific point
on a river or stream. Utah approves the application for a water right
through an administrative process, and Colorado approves the
application for a water right through a court proceeding. The date of
the application establishes its priority--earlier applicants have
preferential entitlement to water over later applicants if water
availability decreases during a drought. These earlier applicants are
said to have senior water rights. When an applicant puts a water right
to beneficial use, it is referred to as an absolute water right. Until
the water is used, however, the applicant is said to have a conditional
water right. Even if the applicant has not yet put the water to use,
such as when the applicant is waiting on the construction of a
reservoir, the date of the application still establishes priority.
Water rights in both Colorado and Utah can be bought and sold, and
strong demand for water in these western states facilitates their sale.
A significant challenge to the development of oil shale lies in the
current technology to economically extract oil from oil shale. To
extract the oil, the rock needs to be heated to very high
temperatures--ranging from about 650 to 1,000 degrees Fahrenheit--in a
process known as retorting. Retorting can be accomplished primarily by
two methods. One method involves mining the oil shale, bringing it to
the surface, and heating it in a vessel known as a retort. Mining oil
shale and retorting it has been demonstrated in the United States and
is currently done to a limited extent in Estonia, China, and Brazil.
However, a commercial mining operation with surface retorts has never
been developed in the United States because the oil it produces
competes directly with conventional crude oil, which historically has
been less expensive to produce. The other method, known as an in-situ
process, involves drilling holes into the oil shale, inserting heaters
to heat the rock, and then collecting the oil as it is freed from the
rock. Some in-situ technologies have been demonstrated on very small
scales, but other technologies have yet to be proven, and none has been
shown to be economically or environmentally viable.
Nevertheless, according to some energy experts, the key to
developing our country's oil shale is the development of an in-situ
process because most of the richest oil shale is buried beneath
hundreds to thousands of feet of rock, making mining difficult or
impossible. Additional economic challenges include transporting the oil
produced from oil shale to refineries because pipelines and major
highways are not prolific in the remote areas where the oil shale is
located, and the large-scale infrastructure that would be needed to
supply power to heat oil shale is lacking. In addition, average crude
oil prices have been lower than the threshold necessary to make oil
shale development profitable over time.
Large-scale oil shale development also brings socioeconomic
impacts. There are obvious positive impacts such as the creation of
jobs, increase in wealth, and tax and royalty payments to governments,
but there are also negative impacts to local communities. Oil shale
development can bring a sizeable influx of workers, who along with
their families, put additional stress on local infrastructure such as
roads, housing, municipal water systems, and schools. Development from
expansion of extractive industries, such as oil shale or oil and gas,
has typically followed a ``boom and bust'' cycle in the West, making
planning for growth difficult. Furthermore, traditional rural uses
could be replaced by the industrial development of the landscape, and
tourism that relies on natural resources, such as hunting, fishing, and
wildlife viewing, could be negatively impacted.
Developing oil shale resources also faces significant environmental
challenges. For example, construction and mining activities can
temporarily degrade air quality in local areas. There can also be long-
term regional increases in air pollutants from oil shale processing,
upgrading, pipelines, and the generation of additional electricity.
Pollutants, such as dust, nitrogen oxides, and sulfur dioxide, can
contribute to the formation of regional haze that can affect adjacent
wilderness areas, national parks, and national monuments, which can
have very strict air quality standards. Because oil shale operations
clear large surface areas of topsoil and vegetation, some wildlife
habitat will be lost. Important species likely to be negatively
impacted from loss of wildlife habitat include mule deer, elk, sage
grouse, and raptors. Noise from oil shale operations, access roads,
transmission lines, and pipelines can further disturb wildlife and
fragment their habitat. Environmental impacts could be compounded by
the impacts of coal mining, construction, and extensive oil and gas
development in the area. Air quality and wildlife habitat appear to be
particularly susceptible to the cumulative effect of these impacts, and
according to some environmental experts, air quality impacts may be the
limiting factor for the development of a large oil shale industry in
the future. Lastly, the withdrawal of large quantities of surface water
for oil shale operations could negatively impact aquatic life
downstream of the oil shale development. My testimony today will
discuss impacts to water resources in more detail.
Oil Shale Development Could Adversely Impact Water Resources, but the
Magnitude of These Impacts Is Unknown
In our October report, we found that oil shale development could
have significant impacts on the quantity and quality of surface and
groundwater resources, but the magnitude of these impacts is unknown.
For example, we found that it is not possible to quantify impacts on
water resources with reasonable certainty because it is not yet
possible to predict how large an oil shale industry may develop. The
size of the industry would have a direct relationship to water impacts.
We noted that, according to BLM, the level and degree of the potential
impacts of oil shale development cannot be quantified because this
would require making many speculative assumptions regarding the
potential of the oil shale, unproven technologies, project size, and
production levels.
Hydrologists and engineers, while not able to quantify the impacts
from oil shale development, have been able to determine the qualitative
nature of its impacts because other types of mining, construction, and
oil and gas development cause disturbances similar to impacts that
would be expected from oil shale development. According to these
experts, in the absence of effective mitigation measures, impacts from
oil shale development to water resources could result from disturbing
the ground surface during the construction of roads and production
facilities, withdrawing water from streams and aquifers for oil shale
operations, underground mining and extraction, and discharging waste
waters from oil shale operations. For example, we reported that oil
shale operations need water for a number of activities, including
mining, constructing facilities, drilling wells, generating electricity
for operations, and reclamation of disturbed sites. Water for most of
these activities is likely to come from nearby streams and rivers
because it is more easily accessible and less costly to obtain than
groundwater. Withdrawing water from streams and rivers would decrease
flows downstream and could temporarily degrade downstream water quality
by depositing sediment within the stream channels as flows decrease.
The resulting decrease in water would also make the stream or river
more susceptible to temperature changes--increases in the summer and
decreases in the winter. These elevated temperatures could have adverse
impacts on aquatic life, which need specific temperatures for proper
reproduction and development and could also decrease dissolved oxygen,
which is needed by aquatic animals.
We also reported that both underground mining and in-situ
operations would permanently impact aquifers. For example, underground
mining would permanently alter the properties of the zones that are
mined, thereby affecting groundwater flow through these zones. The
process of removing oil shale from underground mines would create large
tunnels from which water would need to be removed during mining
operations. The removal of this water through pumping would decrease
water levels in shallow aquifers and decrease flows to streams and
springs that are connected. When mining operations cease, the tunnels
would most likely be filled with waste rock, which would have a higher
degree of porosity and permeability than the original oil shale that
was removed. Groundwater flow through this material would increase
permanently, and the direction and pattern of flows could change
permanently. Similarly, in-situ extraction would also permanently alter
aquifers because it would heat the rock to temperatures that transform
the solid organic compounds within the rock into liquid hydrocarbons
and gas that would fracture the rock upon escape. The long-term effects
of groundwater flows through these retorted zones are unknown. Some in-
situ operations envision using a barrier to isolate thick zones of oil
shale with intervening aquifers from any adjacent aquifers and pumping
out all the groundwater from this isolated area before retorting.
The discharge of waste waters from operations would also
temporarily increase water flows in receiving streams. These discharges
could also decrease the quality of downstream water if the discharged
water is of lower quality, has a higher temperature, or contains less
oxygen. Lower-quality water containing toxic substances could increase
fish and invertebrate mortality. Also, increased flow into receiving
streams could cause downstream erosion. However, if companies recycle
waste water and water produced during operations, these discharges and
their impacts could be substantially reduced.
Estimates of Water Needs for Commercial Oil Shale Development Vary
Widely
Commercial oil shale development requires water for numerous
activities throughout its life cycle; however, we found that estimates
vary widely for the amount of water needed to produce oil shale. These
variations stem primarily from the uncertainty associated with
reclamation technologies for in-situ oil shale development and because
of the various ways to generate power for oil shale operations, which
use different amounts of water.
In our October report, we stated that water is needed for five
distinct groups of activities that occur during the life cycle of oil
shale development: (1) extraction and retorting, (2) upgrading of shale
oil, (3) reclamation, (4) power generation, and (5) population growth
associated with oil shale development. However, we found that few
studies that we examined included estimates for the amount of water
used by each of these activities. Consequently, we calculated estimates
of the minimum, maximum, and average amounts of water that could be
needed for each of the five groups of activities that comprise the life
cycle of oil shale development. Based on our calculations, we estimated
that about 1 to 12 barrels of water could be needed for each barrel of
oil produced from in-situ operations, with an average of about 5
barrels (see table 1); and about 2 to 4 barrels of water could be
needed for each barrel of oil produced from mining operations with a
surface retort operation, with an average of about 3 barrels (see table
2).
[GRAPHIC] [TIFF OMITTED] T8237.010
[GRAPHIC] [TIFF OMITTED] T8237.011
Water Is Likely to Be Available Initially from Local Sources, but
the Size of an Oil Shale Industry May Eventually Be Limited by
Water Availability
In October 2010, we reported that water is likely to be available
for the initial development of an oil shale industry, but the eventual
size of the industry may be limited by the availability of water and
demands for water to meet other needs. Oil shale companies operating in
Colorado and Utah will need to have water rights to develop oil shale,
and representatives from all of the companies with whom we spoke were
confident that they held at least enough water rights for their initial
projects and will likely be able to purchase more rights in the future.
According to a study by the Western Resource Advocates, a nonprofit
environmental law and policy organization, of water rights ownership in
the Colorado and White River Basins of Colorado companies have
significant water rights in the area. For example, the study found that
Shell owns three conditional water rights for a combined diversion of
about 600 cubic feet per second from the White River and one of its
tributaries and has conditional rights for the combined storage of
about 145,000 acre-feet in two proposed nearby reservoirs.
In addition to exercising existing water rights and agreements,
there are other options for companies to obtain more water rights in
the future, according to state officials in Colorado and Utah. In
Colorado, companies can apply for additional water rights in the
Piceance Basin on the Yampa and White Rivers. For example, Shell
recently applied--but subsequently withdrew the application--for
conditional rights to divert up to 375 cubic feet per second from the
Yampa River for storage in a proposed reservoir that would hold up to
45,000 acre-feet for future oil shale development. In Utah, however,
officials with the State Engineer's office said that additional water
rights are not available, but that if companies want additional rights,
they could purchase them from other owners.
Most of the water needed for oil shale development is likely to
come first from surface flows, as groundwater is more costly to extract
and generally of poorer quality in the Piceance and Uintah Basins.
However, companies may use groundwater in the future should they
experience difficulties in obtaining rights to surface water.
Furthermore, water is likely to come initially from surface sources
immediately adjacent to development, such as the White River and its
tributaries that flow through the heart of oil shale country in
Colorado and Utah, because the cost of pumping water over long
distances and rugged terrain would be high, according to water experts.
Developing a sizable oil shale industry may take many years--
perhaps 15 or 20 years by some industry and government estimates--and
such an industry may have to contend with increased demands for water
to meet other needs. For example, substantial population growth and its
correlative demand for water are expected in the oil shale regions of
Colorado and Utah. State officials expect that the population within
the region surrounding the Yampa, White, and Green Rivers in Colorado
will triple between 2005 and 2050. These officials expect that this
added population and corresponding economic growth by 2030 will
increase municipal and industrial demands for water, exclusive of oil
shale development, by about 22,000 acre-feet per year, or a 76 percent
increase from 2000. Similarly in Utah, state officials expect the
population of the Uintah Basin to more than double its 1998 size by
2050 and that correlative municipal and industrial water demands will
increase by 7,000 acre-feet per year, or an increase of about 30
percent since the mid-1990s. Municipal officials in two communities
adjacent to proposed oil shale development in Colorado said that they
were confident of meeting their future municipal and industrial demands
from their existing senior water rights and as such will probably not
be affected by the water needs of a future oil shale industry. However,
large withdrawals could impact agricultural interests and other
downstream water users in both states, as oil shale companies may
purchase existing irrigation and agricultural rights for their oil
shale operations. State water officials in Colorado told us that some
holders of senior agricultural rights have already sold their rights to
oil shale companies. A future oil shale industry may also need to
contend with a general decreased physical supply of water regionwide
due to climate change; Colorado's and Utah's obligations under
interstate compacts that could further reduce the amount of water
available for development; and limitations on withdrawals from the
Colorado River system to meet the requirements to protect certain fish
species under the Endangered Species Act.
Oil shale companies own rights to a large amount of water in the
oil shale regions of Colorado and Utah, but we concluded that there are
physical and legal limits on how much water they can ultimately
withdraw from the region's waterways, which will limit the eventual
size of the overall industry. Physical limits are set by the amount of
water that is present in the river, and the legal limit is the sum of
the water that can be legally withdrawn from the river as specified in
the water rights held by downstream users. Our analysis of the
development of an oil shale industry at Meeker, Colorado, based on the
water available in the White River, suggests that there is much more
water than is needed to support the water needs for all the sizes of an
industry that would rely on mining and surface retorting that we
considered. However, if an industry that uses in-situ extraction
develops, water could be a limiting factor just by the amount of water
physically available in the White River.
Federal Research Efforts on the Impacts of Oil Shale Development on
Water Resources Do Not Provide Sufficient Data for Future
Monitoring
Since 2006, the federal government has sponsored over $22 million
of research on oil shale development and of this amount about $5
million was spent on research related to the nexus between oil shale
development and water. Even with this research, we reported that there
is a lack of comprehensive data on the condition of surface water and
groundwater and their interaction, which limits efforts to monitor and
mitigate the future impacts of oil shale development. Currently DOE
funds most of the research related to oil shale and water resources,
including research on water rights, water needs, and the impacts of oil
shale development on water quality. Interior also performs limited
research on characterizing surface and groundwater resources in oil
shale areas and is planning some limited monitoring of water resources.
However, there is general agreement among those we contacted--including
state personnel who regulate water resources, federal agency officials
responsible for studying water, water researchers, and water experts--
that this ongoing research is insufficient to monitor and then
subsequently mitigate the potential impacts of oil shale development on
water resources. Specifically, they identified the need for additional
research in the following areas:
Comprehensive baseline conditions for surface water
and groundwater quality and quantity. Experts we spoke with
said that more data are needed on the chemistry of surface
water and groundwater, properties of aquifers, age of
groundwater, flow rates and patterns of groundwater, and
groundwater levels in wells.
Groundwater movement and its interaction with surface
water. Experts we spoke with said that additional research is
needed to develop a better understanding of the interactions
between groundwater and surface water and of groundwater
movement for modeling possible transport of contaminants. In
this context, more subsurface imaging and visualization are
needed to build geologic and hydrologic models and to study how
quickly groundwater migrates. Such tools will aid in monitoring
and providing data that does not currently exist.
In addition, we found that DOE and Interior officials seldom
formally share the information on their water-related research with
each other. USGS officials who conduct water-related research at
Interior and DOE officials at the National Energy Technology Laboratory
(NETL), which sponsors the majority of the water and oil shale research
at DOE, stated they have not talked with each other about such research
in almost 3 years. USGS staff noted that although DOE is currently
sponsoring most of the water-related research, USGS researchers were
unaware of most of these projects. In addition, staff at DOE's Los
Alamos National Laboratory who are conducting some water-related
research for DOE noted that various researchers are not always aware of
studies conducted by others and stated that there needs to be a better
mechanism for sharing this research. Based on our review, we found
there does not appear to be any formal mechanism for sharing water-
related research activities and results among Interior, DOE, and state
regulatory agencies in Colorado and Utah. The last general meeting to
discuss oil shale research among these agencies was in October 2007,
but there have been opportunities to informally share research at the
annual Oil Shale Symposium, such as the one that was conducted at the
Colorado School of Mines in October 2010. Of the various officials with
the federal and state agencies, representatives from research
organizations, and water experts we contacted, many noted that federal
and state agencies could benefit from collaboration with each other on
water-related research involving oil shale. Representatives from NETL
stated that collaboration should occur at least every 6 months.
As a result of our findings, we made three recommendations in our
October 2010 report to the Secretary of the Interior. Specifically, we
stated that to prepare for possible impacts from the future development
of oil shale, the Secretary should direct the appropriate managers in
the Bureau of Land Management and the U.S. Geological Survey to
establish comprehensive baseline conditions for
groundwater and surface water quality, including their
chemistry, and quantity in the Piceance and Uintah Basins to
aid in the future monitoring of impacts from oil shale
development in the Green River Formation;
model regional groundwater movement and the
interaction between groundwater and surface water, in light of
aquifer properties and the age of groundwater, so as to help in
understanding the transport of possible contaminants derived
from the development of oil shale; and
coordinate with the Department of Energy and state
agencies with regulatory authority over water resources in
implementing these recommendations, and to provide a mechanism
for water-related research collaboration and sharing of
results.
Interior generally concurred with our recommendations. In response
to our first recommendation, Interior commented that there are ongoing
USGS efforts to analyze existing water quality data in the Piceance
Basin and to monitor surface water quality and quantity in both basins
but that it also plans to conduct more comprehensive assessments in the
future. With regard to our second recommendation, Interior stated that
BLM and USGS are working on identifying shared needs for modeling.
Interior underscored the importance of modeling prior to the approval
of large-scale oil shale development and cited the importance of the
industry's testing of various technologies on federal RD&D leases to
determine if production can occur in commercial quantities and to
develop an accurate determination of potential water uses for each
technology. In support of our third recommendation to coordinate with
DOE and state agencies with regulatory authority over water resources,
Interior stated that BLM and USGS are working to improve such
coordination and noted current ongoing efforts with state and local
authorities.
In conclusion, Mr. Chairman, attempts to commercially develop oil
shale in the United States have spanned nearly a century. During this
time, the industry has focused primarily on overcoming technological
challenges and trying to develop a commercially viable operation.
However, there are a number of uncertainties associated with the
impacts that a commercially viable oil shale industry could have on
water availability and quality that should be an important focus for
federal agencies and policymakers going forward.
Chairman Lamborn, Ranking Member Holt, and Members of the
Committee, this completes my prepared statement. I would be pleased to
respond to any questions that you may have at this time.
[GRAPHIC] [TIFF OMITTED] T8237.002
Contact and Staff Acknowledgments
Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this testimony. For
further information about this testimony, please contact Anu K. Mittal,
Director, Natural Resources and Environment team, (202) 512-3841 or
[email protected]. In addition to the individual named above, key
contributors to this testimony were Dan Haas (Assistant Director),
Quindi Franco, Alison O'Neill, Barbara Timmerman, and Lisa Vojta.
GAO's Mission
The Government Accountability Office, the audit, evaluation, and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
______
GAO HIGHLIGHTS
August 24, 2011
ENERGY DEVELOPMENT AND WATER USE
Impacts of Potential Oil Shale Development on Water Resources
Why GAO Did This Study
Oil shale deposits in Colorado, Utah, and Wyoming are estimated to
contain up to 3 trillion barrels of oil--or an amount equal to the
world's proven oil reserves. About 72 percent of this oil shale is
located beneath federal lands managed by the Department of the
Interior's Bureau of Land Management, making the federal government a
key player in its potential development. Extracting this oil is
expected to require substantial amounts of water and could impact
groundwater and surface water.
GAO's testimony is based on its October 2010 report on the impacts
of oil shale development (GAO-11-35). This testimony summarizes (1)
what is known about the potential impacts of oil shale development on
surface water and groundwater, (2) what is known about the amount of
water that may be needed for commercial oil shale development, (3) the
extent to which water will likely be available for such development and
its source, and (4) federal research efforts to address impacts to
water resources from commercial oil shale development. For its October
2010 report, GAO reviewed studies and interviewed water experts,
officials from federal and state agencies, and oil shale industry
representatives.
What GAO Found
Oil shale development could have significant impacts on the quality
and quantity of water resources, but the magnitude is unknown because
technologies are not yet commercially proven, the size of a future
industry is uncertain, and knowledge of current water conditions is
limited. In the absence of effective mitigation measures, water
resources could be impacted by disturbing the ground surface during the
construction of roads and production facilities, withdrawing water from
streams and aquifers for oil shale operations, underground mining and
extraction, and discharging waste waters produced from or used in such
operations.
Commercial oil shale development requires water for numerous
activities throughout its life cycle, but estimates vary widely for the
amount of water needed to commercially produce oil shale primarily
because of the unproven nature of some technologies and because the
various ways of generating power for operations use differing
quantities of water. GAO's review of available studies indicated that
the expected total water needs for the entire life cycle of oil shale
production range from about 1 barrel (or 42 gallons) to 12 barrels of
water per barrel of oil produced from in-situ (underground heating)
operations, with an average of about 5 barrels, and from about 2 to 4
barrels of water per barrel of oil produced from mining operations with
surface heating, with an average of about 3 barrels.
GAO reported that water is likely to be available for the initial
development of an oil shale industry but that the size of an industry
in Colorado or Utah may eventually be limited by water availability.
Water limitations may arise from increases in water demand from
municipal and industrial users, the potential of reduced water supplies
from a warming climate, the need to fulfill obligations under
interstate water compacts, and decreases on withdrawals from the
Colorado River system to meet the requirements to protect threatened
and endangered fish species.
The federal government sponsors research on the impacts of oil
shale on water resources through the Departments of Energy (DOE) and
Interior. Even with this research, nearly all of the officials and
experts that GAO contacted said that there are insufficient data to
understand baseline conditions of water resources in the oil shale
regions of Colorado and Utah and that additional research is needed to
understand the movement of groundwater and its interaction with surface
water. Federal agency officials also told GAO that they seldom
coordinate water-related oil shale research among themselves or with
state agencies that regulate water.
In its October report, GAO made three recommendations to the
Secretary of the Interior to prepare for the possible impacts of oil
shale development, including the establishment of comprehensive
baseline conditions for water resources in the oil shale regions of
Colorado and Utah, modeling regional groundwater movement, and
coordinating on water-related research with DOE and state agencies
involved in water regulation. The Department of the Interior generally
concurred with the recommendations. GAO is making no new
recommendations at this time.
______
Mr. Lamborn. All right. Thank you.
Thank each one of you for your good testimony, for the
facts that you brought to our attention.
I would now like to recognize myself to begin the first
round of questions. Professor Spinti, you gave, I believe, a
different estimate of the per barrel use of water for barrel of
extracted petrochemicals. Is that correct? I think you said one
and a half?
Ms. Spinti. Equals 2.5 barrels of water per barrel of oil
produced. That number is from previously published research. We
published that report about a year ago. We did not query the
operating companies.
Mr. Lamborn. OK. Now does that take into account recycling?
Ms. Spinti. Yes. That is--in chemical engineering terms,
that is what we call makeup water. So that is the what we will
call water usage per barrel is actually more----
Mr. Lamborn. Could you speak into the microphone?
Ms. Spinti. The overall water use is actually more than
that, but you are recycling a lot of that. And so, the water
that you have to add, the makeup water, is 2.5 barrels per
barrel of water.
Mr. Lamborn. OK. How much of that is direct use versus
indirect use? Like if there is a facility that is newly built
that brings in water for people to live as a small village,
let's say, to me, that would be an indirect use.
Ms. Spinti. Yes. So that number is only direct use.
Mr. Lamborn. Direct use. Good.
Ms. Spinti. That doesn't include the additional water
demand from the town and the number of employees that are
there.
Mr. Lamborn. All right, thank you.
Dr. Sladek, what are some of these other countries doing to
bring in innovative technology that could be of use here in the
United States to reduce the environmental impact of oil shale
production?
Dr. Sladek. Well, one of China's projects is to add a large
Canadian retort, which has been tested fairly thoroughly in
Australia with some disappointing results. So the developers of
that technology are familiar with the environmental
consequences of doing things unwisely. So I think that
experience will be reflected.
Of the other countries, Jordan is a very small country, and
their hope, I believe, is to finance a lot of their oil shale
development with funding from international banks, such as the
World Bank and big commercial banks. Those banks are
constrained in their lending practices by the Equator
principles, which is a set of environmental and social
standards which the banks agree to maintain in any project that
they support with their financing. And if the projects do not
meet those requirements, then the loans will not be made.
So Jordan in particular is under the gun to make sure that
the industry is developed in a responsible manner in compliance
with world standards for environmental and social protection.
Now the specifics of what they are doing, what types of
equipment they are adding to their plants to ensure that that
compliance occurs, I don't know. One suggestion I have for the
Government is that they try and find out by engaging in those
projects by sharing experience and expertise with countries
like Jordan that would be very glad to get it.
Mr. Lamborn. All right. Thank you.
Professor Spinti, what is the difference between the use of
water for a surface mining basic approach, like the retort
method, versus the in-situ processes that companies in Colorado
are researching, from a chemical engineering standpoint?
Ms. Spinti. Yes. So, actually, most of the development in
Utah, which I am most familiar with, is surface mining. And so,
it is ex situ. Because of the resources that are available,
non-Federal resources, the resource is actually more amenable
to mining. And so, and most of those companies are not using
that much water, per se, in the process itself.
So they have some sort of retort, but they require water
for ancillary uses and for dust control for--so they have the
spent shale when they are done, and so they use water--well,
nobody has got commercial production. But you would use water
to cool off the shale and for dust control. It turns out that
those can be fairly large uses, the dust control.
For in-situ production processes, one of the concerns there
is what is left over once you are done. So, what is in the
ground, and does it have a potential to contaminate
groundwater? So how much flushing do you have to do once you
are done producing?
And then also the other issue in Colorado is just that some
of the rich oil shale zones are in the aquifer, and so you have
to worry about issues of water contamination of the aquifer
with in-situ production if you are in that particular zone. In
Utah, some of the richest zones actually don't have that
problem because they are below the level of one of the main
aquifers.
Mr. Lamborn. All right. Thank you all.
Representative Tipton?
Mr. Tipton. Thank you, Congressman Lamborn.
And Mr. Sladek, I may not have caught--you mentioned rare
earths in part of your testimony. Have there been some studies,
when you were talking about Estonia, Jordan, Egypt, Syria, of
extraction of some of the rare earths?
Dr. Sladek. I am not aware of any specifically aimed toward
rare earths. Jordan has spent a great deal of time looking for
uranium in their oil shale region, and they have found some. In
fact, that introduced a substantial delay in their oil shale
program because the leasing program was suspended while they
attempted to find out if the uranium was of commercial
interest.
The rare earths are a relatively new topic in world
commerce, but an increasingly important one. I know that there
have been very detailed studies done of the geochemistry of the
Green River formation oil shales, and I know that data have
been published on concentrations of rare earths in specific
samples that were analyzed. That has been a long, long time
ago, and I doubt that the data are current and probably not
terribly reliable. But it is a useful thing to look at.
You mentioned aluminum in your question to Mr. Johnson.
There is a lot of aluminum in oil shale, and some of it is
potentially recoverable.
Mr. Tipton. Since you have a little bit of background on
this because it is the entire package, is lithium pretty
prevalent, depending on some of the formations?
Dr. Sladek. Not to my knowledge, I am afraid. I do not
know.
Mr. Tipton. OK. All right. Important issue, I think,
obviously, because, as Ms. Spinti was noting, some of the
production techniques over in China are not the best.
Dr. Sladek. Yes, I agree.
Mr. Tipton. And on the reliability end of that.
Mr. Hagood, could you maybe give us a little bit of
background in terms of maybe just an estimate? Obviously,
listening to a lot of the testimony, there is a lot to take
into consideration that when we are looking back on even an
employment issue, if we were able to get this industry moving,
were able to have that cost effective, what are some of the job
estimates in regard to this?
Mr. Hagood. Yes, I am not familiar with the job estimates,
but I can point to maybe an analog, and that is with the oil
sands industry up in Alberta. And if you consider that it has
taken them several decades to get to a production of 1.5
million barrels per day, but that has resulted in a tremendous
amount of employment in the area of Calgary and Edmonton and
Fort McMurray, and also the side benefits associated with that,
which has led to creation of world-class universities and
research institutes, which, in turn, employ a number of
individuals.
But I can't give you an actual estimate on that.
Mr. Tipton. It is probably unfair to even ask you, but do
you know what the unemployment rate is up there?
Mr. Hagood. No, I don't. It is very low, and----
Mr. Tipton. It is low?
Mr. Hagood.--the cost of housing, by the way, which is
another socioeconomic impact, but it is pretty high.
Mr. Tipton. Right.
Mr. Hagood. In fact, Calgary, and this is just in general,
associated with the entire oil and gas industry, is the largest
U.S. ex-pat community in the world. And they actually do
recruit quite heavily down the United States to attract welders
and other folks to work up in Fort McMurray.
But it is quite a healthy environment for employment.
Mr. Tipton. Great. Thank you.
And Ms. Mittal, you had mentioned something that I think is
very important as well. We seem to have a lot of entities
within Government that fail to speak to each other or to be
able to share some of that information. And you were talking
about DOE and Interior not currently sharing some of that
information.
You made a recommendation. Are you aware of any moves to
actually make that happen?
Ms. Mittal. We did recommend that Interior and DOE, as well
as the State regulatory officials, because they are a really
important part of this process, be involved and they develop
some sort of a formal mechanism to share information about
research that they have currently ongoing.
Right now, what we have found is they do not have a formal
mechanism. So they have to rely on informal mechanisms, and
those don't always get the job done.
Mr. Tipton. And that creates uncertainty?
Ms. Mittal. Yes.
Mr. Tipton. Yes, I am sure it does. I just wanted to get it
clarified because I made the same note that Congressman Lamborn
did in that we have in terms of large volume, a pretty
significant discrepancy between your estimate in terms of water
usage versus Ms. Spinti's estimate of water usage.
Ms. Mittal. I think the big difference between our estimate
and some of the studies that are out there is we looked at the
whole life cycle of oil shale production. There are some
studies that only look at the direct impacts. So that is the
actual production of the oil versus we looked at the whole life
cycle.
So you are starting with--we took every single activity
that is involved in the oil shale life cycle production, direct
activities as well as indirect activities. We grouped them into
five groups, and then we looked at the most optimistic water
use scenarios and the most pessimistic water use scenarios, and
we added all of those up.
Because what we wanted to do was provide a comprehensive,
consistent, and complete package of information. Obviously,
when we talked to industry and water experts, they told us that
the extremes in our ranges probably will not get met. So, it
will be somewhere in the middle.
So that is why the three to five range that I mentioned in
my statement, that is probably going to be where we end up.
Mr. Tipton. And it would probably be hard to measure, but
it sounds, from what you are describing to me, at least, that
it is kind of a static model as opposed to a dynamic model that
you were really looking at?
Ms. Mittal. Right.
Mr. Tipton. Not anticipating with current technology,
without development processes, that maybe it will actually
reduce water consumption. Is that accurate?
Ms. Mittal. Absolutely. Absolutely. That was one thing that
was very clear when we talked to the industry. Reducing water
use is very high on their radar screen. They are looking for
ways to reduce that. The more they can come up with new
technologies that limit that use, the more we will go toward
that lower range.
But the bottom line is there is a lot of uncertainty right
now, as Ms. Spinti said, about the reclamation and the in-situ
process. We don't know how many times we are going to have to
rinse the retort zone. It could be two or three times like some
researchers expect. That is about a barrel of water. If we have
to do 20 rinses, that could be over 5 barrels of water, and
that is the uncertainty that is part of the equation right now.
Mr. Tipton. Great. Thank you.
Mr. Lamborn. All right. Thank you.
Mr. Hagood, in preparing for this hearing, we invited the
Department of Energy to also come and testify, but they did not
want to do so because they have no current oil shale programs.
So they didn't feel they had a lot to offer.
Do you believe that basic research and investment in
domestic oil shale development would be a good thing for the
Department of Energy to be doing? And larger than that, will
this help--and I think I know what you are going to say. But
will that help us reduce our dependence on foreign sources of
energy?
Mr. Hagood. Relative to your first comment, indeed, basic
research is very important to this topic. And given, as I
mentioned before, the size of the resource I think is essential
and a tremendously good investment.
But also add that it needs to be more than just basic
research. It needs to be applied and moving toward
demonstration and, as mentioned earlier, toward reducing the
risks associated with deployment.
Second question again?
Mr. Lamborn. How would this help reduce our dependence on
foreign energy?
Mr. Hagood. So, currently, we import between 50 to 60
percent of our oil primarily directed toward transportation.
The current use today in the United States is roughly between
18 million and 19 million barrels per day. Five million of that
is produced domestically.
Therefore, if you look at the top providers of our oil from
import, they basically consist of Canada, Nigeria, Saudi
Arabia, Venezuela, and I forgot the last one.
Voice. Mexico.
Mr. Hagood. Thank you very much. Mexico.
[Laughter.]
Mr. Hagood. And which, by the way, has a declining reserve.
So if you look at all of that, and 2.5 million barrels come
from Canada--most of that actually from the oil sands,
increasingly so--it would be very important for the United
States to reduce its vulnerability on accepting imports from
those other sources. So it is really a risk management aspect
to me toward developing our own resources and managing that
risk more smartly over the long term.
Mr. Lamborn. As a follow-up, is the particular products
that are produced by certain techniques, the blend of
petrochemical, the resulting blend, is that of significance?
Like if it is more weighted toward what would normally take
more refining because some of the refining, in effect, is
already done in the process?
Mr. Hagood. I am not sure I am capturing the question,
Chairman.
Mr. Lamborn. Like if you get more jet fuel, for instance,
than you would if from a heavy like tar sand?
Mr. Hagood. Yes, I can't speak to that, Chairman.
Mr. Lamborn. OK.
Mr. Hagood. But indeed, I think in general you can take a
number of these types of resources, whether it is oil sands or
tar sands or oil shale, and convert them into a number of
different types of products. Currently, the U.S. does have
significant refining capacity to take a lot of that import or
domestic resource to refine to a number of different products.
Mr. Lamborn. OK. And then my last question for you or
anyone on the panel is what can Congress be doing in a
responsible way to make sure that we are continuing to look at
this potentially valuable resource and not drop the ball?
I am going to start with you, Mr. Hagood.
Mr. Hagood. Well, I think my recommendation is, and again,
it goes back to this is a world-class resource. It is going to
be long-lived. It will be with us through this entire century,
and it is important for us to steward that in an
environmentally responsible way, but to use it and develop it
for our energy security, but also for our economy.
So I do believe that this deserves--at least from the
research perspective, deserves a more focused and integrated
approach to address the challenges associated with development
of these resources. It is being done, albeit with oil sands, in
Alberta, but it is a proactive, can-do attitude to develop
those resources. And if they find a problem, they put their
money where their mouth is to address the problem through both
Government and industry.
I think that same type of attitude may be exercised through
a program focused in western oil shale is needed.
Mr. Lamborn. OK. Thank you.
Anyone else on the panel? Doctor?
Dr. Sladek. Yes, I would like to second that, and also this
outreach program that I alluded to earlier to put the
Department of Energy back in the oil shale business and
specifically to track what is going on in other countries and
to join in those projects.
Not just because it is nice to help other people, but
because you can bring information back to this country that
will be very helpful in the emergence of our industry. Water
conservation, for example, is even more of an issue in Jordan
than it is in the Western United States. They have no water.
And what they do have in the ground is committed not only to
their own people, but the surrounding countries.
They must reduce water consumption in oil shale production.
They could use some help in doing that, and the help that is
provided could come back to help us.
I would also like to supplement Dr. Hagood's response about
whether shale oil is a better source of jet fuel and diesel
fuel than it is of other petrochemicals. The Green River
formation of crude oil shale is a better source of the middle
distillates, jet fuel and diesel fuel specifically, than it is
of gasoline. So, in terms of providing our motor fleet and our
trains, it is a good source of energy for doing that.
Mr. Lamborn. OK. Thank you.
Either one of you?
Ms. Spinti. I always have something to say.
Mr. Lamborn. Good.
Ms. Spinti. OK. So just to comment, there was actually a
really good policy paper that came out that I can send to your
assistants that talks about some of these policy issues and how
they affect the markets.
Mr. Lamborn. Please do.
Ms. Spinti. And one of those issues is that we were just--I
was actually traveling in Scandinavia this summer, driving a
nine-passenger diesel van and gasoline there is very expensive,
or diesel. We were dreading every time we had to go fill up.
But we were getting like 45 to 50 miles per gallon.
And you get a much higher efficiency with a diesel engine,
but the problem is the way certain laws have been written in
the U.S. favor gasoline. Anyway, that paper has a very good
explanation of that.
So it depends on what you want to drive demand for. But if
you want to drive demand for diesel fuel, then you need to look
at the laws that are driving demand for gasoline because there
are certainly technical advantages to having a diesel engine.
OK. So there are two other comments I wanted to make. Our
funding comes through DOE, the National Energy Technology
Laboratory so I guess I am a little surprised at their
response. Maybe they are not aware of us?
We have been working for about the last 5 years, and we are
the only funded program in the U.S. So, the problem in academia
is, of course, as a professor, a research professor especially,
you are only working on what you are funded for. Now that we
are at the end of 5 years and we are nearing the end of our
funding, we have assembled what we feel a very strong group of
researchers in law, economics, science, and engineering.
And the problem is if there is no more money, all those
people go off and work on other problems. So if you want smart
people working on problems, then there has to be a funding
source so that you are not jumping from one thing to another
every 4- or 5-year cycle.
Then, finally, I come from the simulation group,
computational fluid dynamics, and we feel strongly that the
future is simulation, and that if we want to have these
simulation tools that will give us quantified predictivity. So
what is our uncertainty, and how well do we know that
uncertainty? So that we can say not just, well, this might
happen if you build this. But we can say, you know what, we
have done these simulations, and we can tell you that this is
the uncertainty of what will happen, and here is your answer.
To be able to do that, we need to have data. That means we
have to be able to have companies and national laboratories and
other people doing research willing to share their data so that
we can do this validation.
Thank you.
Mr. Lamborn. And briefly, Ms. Mittal?
Ms. Mittal. Just very briefly, I would ask that Congress
hold Interior accountable for collecting the baseline water
data that we need. Because if we don't have that baseline
information now before the industry starts, we will not be able
to attribute any changes in water resources back to the oil
shale industry.
So it really impacts their ability to monitor and mitigate
future impacts. So hold them accountable for gathering that
data.
Mr. Lamborn. OK. Thank each one of you.
Representative Tipton?
Mr. Tipton. Thank you. I am good.
Mr. Lamborn. OK. I would like to ask all the witnesses to
please respond in writing if any of the members of the
Committee submit questions to you.
Mr. Lamborn. Thank you for being here, and we appreciate
it.
I will now call the last panel up, and that consists of Mr.
Dan Whitney, the Upstream Americas Heavy Oil Development
Manager for Shell Exploration and Production Company; Mr. Gary
Aho, Board Member and former Chairman of the National Oil Shale
Association; Mr. Brad McCloud, Executive Director of
Environmentally Conscious Consumers for Oil Shale; and Mr. Jim
Spehar, probably no stranger here, former Mayor of Grand
Junction and former Mesa County Commissioner.
Thank you all for being here.
As I mentioned earlier with the two previous panels, your
written testimony will appear in full in the hearing record. So
I ask that you keep your oral statements to 5 minutes, as
outlined in our invitation letter to you.
The microphones are automatic. You don't have to press any
buttons. The timing lights will turn yellow after 4 minutes and
red after 5 minutes.
We will now begin with our first witness, and that would be
Mr. Whitney.
STATEMENT OF DAN WHITNEY, UPSTREAM AMERICAS HEAVY OIL
DEVELOPMENT MANAGER, SHELL EXPLORATION AND PRODUCTION COMPANY
Mr. Whitney. Chairman Lamborn, Representative Tipton, thank
you for having me here today.
I am pleased to have the opportunity to speak with you
about oil shale development. Today, I would like to focus on
three points. First is the growing world energy demand and our
Nation's need for secure supplies, Shell's commitment to a
cautious approach on oil shale, and finally, the importance of
future regulatory stability in assuring new energy development.
Global energy demand is high and rising constantly. So is
competition for energy resources and the investment needed to
develop them. Growing populations and economies in China,
India, and elsewhere will at least double demand by 2050.
Today, about 80 percent of the world's energy comes from
coal, oil, and natural gas. At most, nuclear and renewable
sources might meet a third of the world's needs by mid century.
Fossil fuels will supply the rest. While the mixed percentage
will be a little bit lower, demand growth means that the world
will actually be burning more fossil fuel at mid century than
it does today.
Most of that increase will have to come from sources
undeveloped and even undiscovered today and often in remote and
challenging locations, such as the Arctic and ultra deep water,
but not always. As you know, there are vast unconventional oil
resources here in Colorado in the form of oil shale, some of
the world's richest hydrocarbon deposits. Properly developed,
they could play a major role in U.S. energy security.
The U.S. Geological Survey and others estimate recoverable
U.S. oil shale reserves at more than 800 billion barrels,
enough to supply the U.S. for more than a century. Shell is
committed to a cautious approach in our oil shale efforts.
Since the early 1980s, Shell has pursued steady research and
development of the in-situ conversion process as a means to
produce from oil shale in an environmentally responsible and
socially sustainable manner.
This has required dedicated scientific application and a
significant financial investment, many tens of millions of
dollars. Oil shale's long research cycle time and high upfront
capital costs need consistent Government policy and regulatory
certainty. Gaining experience and building industry capacity
must occur before new technology can contribute meaningfully to
energy supply. This requires billions of dollars and patient
investment spread over decades.
Predictable rules, created in a thorough, well understood,
and legally established process, are critical to that type of
long-term commitment. Unfortunately, weakening regulatory
certainty is the trend and a negative for U.S. energy
development.
A case in point is the BLM's reopening of the 2008 PEIS
covering oil shale in the Piceance Basin. The existing, fully
vetted, comprehensive 1,800-page PEIS is less than 3 years old.
No material new information has emerged to merit this revisit
in so short a time. The entire exercise ignores the
comprehensive framework of regulatory checks and balances
already in place, including site-specific NEPA reviews that
will apply to every future oil shale project under Federal
jurisdiction.
Since the stated concerns are already covered, this PEIS
fresh look is a waste of taxpayer money and a deterrent to
industry confidence and future capital investment. Shell firmly
believes that if foreign technology and those being tested by
other energy companies can be proven through the RD&D program,
we can unlock a significant long-term domestic energy source
for the U.S. To do this, industry needs a regulatory regime
that fosters innovation and encourages production growth.
An environmentally driven, no development policy in the
Piceance is unwise. Social and economic benefits, national
energy needs, and other realities must be considered.
Our country is in resource competition with the world. We
need energy in every form, and we are sitting on the world's
largest and most concentrated energy resource. It can be
developed responsibly, and it will be needed maybe sooner
rather than later.
Thank you for listening to my testimony.
[The prepared statement of Mr. Whitney follows:]
Statement of Dan Whitney, Heavy Oil Development Manager,
Shell Exploration and Production Company
Chairman Lamborn, members of the Subcommittee on Energy and
Minerals. I am pleased to have this opportunity to speak with you today
on the topic of oil shale development.
I will focus on three points:
1. Growing world energy demand and our nation's need for
secure supplies,
2. Shell's commitment to a cautious approach on oil shale, and
3. The importance of future regulatory stability in assuring
new energy development.
Global energy demand is high and increasing constantly. So is
international competition for limited energy resources and the
investments needed to develop them.
Growing populations and economies in China, India, and elsewhere
will at least double energy demand by 2050. Some analysts say it could
triple.
One thing certain is we will need a lot more energy. The world will
depend on fossil fuels for decades until technology and economics can
deliver a larger contribution by alternative energy sources.
Today about 80% of the world's energy comes from coal, oil and
natural gas. At most, nuclear and renewable energy sources might meet a
third of the world's needs by mid-century--fossil fuels will supply the
rest. And, while the percentage will be a little lower, demand growth
means the world will actually be burning more fossil fuel at mid-
century than it does today
Most of that increase will have to come from sources undeveloped
and even undiscovered today. We will need every available energy
source--renewable, alternative and conventional--and greater efficiency
too.
As you know, there are vast unconventional oil resources here in
Colorado, in the form of oil shale--some of the world's richest
hydrocarbon deposits. Properly developed, they could be a major
component of US energy security.
The U.S. Geological Survey (USGS) estimates recoverable reserves at
more than 800 billion barrels, enough to supply the US for more than a
century at current consumption rates.
The challenge of developing a commercial oil shale industry starts
with its geologic state. The Green River Formation is a carbonate rock,
generally marlstone that is very rich in kerogen. This source of oil
has not had the natural forces of pressure and temperature over the
millennia to convert it to oil and gas. So, unlike conventional oil and
gas operations, oil shale cannot be pumped directly from the ground.
Oil Shale must be processed either above ground or in place (in situ)
to convert the kerogen into oil.
Shell is committed to a cautious approach in oil shale research and
development. Shell has pursued the technical and commercial development
of the In situ Conversion Process (ICP) for oil shale since the early
1980s as a means to produce from oil shale--in an environmentally
responsible and socially sustainable manner. This has required
considerable dedicated scientific application and significant financial
investment--many tens of millions of dollars.
To date, through persistence and much effort, a logical progression
of work has been completed from desk top studies, to laboratory scale
testing, to prototype scale testing, and finally to field pilot testing
in Colorado.
Shell's seven previous Colorado pilot projects have tested broad
technology themes, including:
(1) Demonstrating that the technology works,
(2) Measuring energy balance and recovery efficiency necessary
to estimate commercial project economics,
(3) Producing and measuring the properties of ICP oil and gas,
(4) Proving that the groundwater can be protected, and
(5) Testing the effectiveness of a variety of heat delivery
methods.
In the process, Shell has carried out extensive pre-operational
environmental assessments. Shell has given careful attention to
archaeologically sensitive areas by completely assessing and avoiding
such areas, and has cooperated fully with agencies such as the State
Historical Preservation Office and BLM to identify and avoid areas of
critical environmental concern, including establishing conservation
easements to provide permanent protection of certain areas.
Shell also funds research into environmental restoration and
recently established a professorial chair in the subject at Colorado
State University. Shell has also demonstrated, through its own research
and field trials, that disturbed lands can be returned to beneficial
uses that are equivalent to the pre-disturbance conditions, and was
recognized by the BLM for these efforts.
The long cycle time of research and high up-front capital
requirements of an oil shale project, need broad and consistent
government support to establish a commercial industry. Supporting
government policy and regulatory certainty are necessary for private
industry to reasonably assess risks and economics, and be confident in
that assessment, so that the billions of dollars in required investment
can be made.
Commercial scale technologies with economically attractive recovery
efficiency and acceptable environmental impacts are prerequisite for
success. The road to commercialization is likely to be measured in
decades not years--a long time horizon is necessary to allow
development to occur through the ``bust and boom'' oil and gas price
cycles.
This extended time frame for supply growth and commercial viability
is not unique to unconventional oil. Looking back through history, it
consistently takes around 30 years for new forms of energy to achieve 1
percent market share after a commercial business is established.
Biofuels are just now reaching 1 percent of the world oil market, or
about 0.5 percent of total energy, after decades of development and
government support. Wind may get to the 1 percent mark in the next few
years, nearly three decades after the first large wind farms were built
in Denmark and here in the United States.
Gaining experience and building industry capacity must occur before
a new technology can contribute meaningfully to energy supply--and this
requires billions of dollars in patient investment over decades in the
hope of eventual growth. Regulatory stability is critical. This kind of
commitment depends on predictable rules created in a well understood,
legally established and exhaustive process.
Weakening regulatory certainty is a negative trend for US energy
development.
A key case in point is the BLM's re-opening of the 2008 PEIS
covering Piceance Basin oil shale on the basis of ``concerns'' already
fully covered by existing regulatory programs.
Potential ramifications of re-writing the existing regulations
include:
lower capital investment,
lower domestic oil production,
higher oil imports--(costing hundreds billions that
might otherwise be invested within the US,)
higher unemployment (a natural consequence of reduced
investment,)
lower tax revenues from royalties, federal and state
corporate and individual incomes taxes, severance tax, and
property and sales taxes, and
lower overall economic growth.
The existing, fully vetted, comprehensive, 1800 page PEIS is less
than three years old. No substantive new information has emerged that
merits this revisit in such a short time.
The entire exercise ignores the comprehensive framework of
regulatory checks and balances already in place in the form of
environmental (and other) laws, including site specific NEPA review,
that will apply to every future oil shale project under federal
jurisdiction.
Remarkably, all five areas proposed for removal from development as
identified in the Notice (i.e. those with wilderness characteristics,
``very rare or uncommon'' designation, sage grouse habitat, ``areas of
critical environmental concern'', and areas made off limits in the
original PEIS) are already either
(a) precluded from development by Federal or State statutes,
(b) precluded from development under the original PEIS, or
(c) may be precluded under the existing leasing authority
assigned to BLM land managers.
Given that there are already adequate checks and balances provided
in existing regulatory programs to accomplish the stated basis for this
PEIS, Shell views the ``fresh look'' at the PEIS as an inefficient and
unnecessary use of taxpayer money and as a significant deterrent to
capital investment by Shell and others in the energy industry.
While questions and challenges remain regarding the future
implementation of oil shale technology, Shell believes that commitment
by the Federal Government to maintaining a regulatory environment that
encourages investment in oil shale RD&D, as defined in the 2005 Energy
Act and the subsequent regulations including the 2008 PEIS, is critical
to long term success.
The lack of policy and regulatory consistency from one
administration to another makes the investment climate even more risky
and potentially untenable.
For Shell to make informed investment decisions, we must be able to
predict the likely costs of future development. This includes
royalties, bonds, reclamation requirements, lease duration, diligent
development requirements, commercial leas conversion process and other
aspects of permitting, lease administration, and commercial operation.
Given the substantial investments necessary for oil shale pilots,
research and commercial facilities, regulatory uncertainty has
significant adverse impact on Shell's interests. To put it another way,
the 2008 Oil Shale Rules and associated regulatory processes provide
certainty and basis for investment decision. Reopening elements, of
which the PEIS is one, and the prospect of future changes removes that
certainty.
Shell firmly believes that if our technology and those being tested
by other energy companies can be proven through RD&D testing, we can
unlock a significant long term domestic energy source for the US. To do
this, industry needs a regulatory environment that fosters innovation
and results in production growth. This is accomplished by providing
access to acreage with sufficient oil shale resources combined with
long-term stable fiscal regimes and regulatory processes that provide
industry the certainty and time needed to develop oil shale.
Our country is in competition with the world for energy resources.
We need energy in every form, and we are sitting on the largest and
most concentrated energy resource on the planet. And it will be needed,
potentially sooner rather than later.
The benefits are huge. Consider this: an acre disturbed for corn
production might generate the energy equivalent of 10 barrels of oil
per year, and an acre of conventional oil and gas production might
generate the equivalent of 10,000 barrels of oil, but an acre of oil
shale in the Piceance Basin of Colorado has the potential to produce
well over 1,000,000 barrels of oil. So the energy produced per acre
disturbed is well over 100 times greater than any other known form of
energy development. Colorado's oil shale is literally the richest and
most concentrated hydrocarbon energy resource on the planet.
Shell has often said, we intend to develop oil shale in a manner
that is economically viable, environmentally responsible and socially
sustainable. If one only focuses on environmental concerns without also
considering the socioeconomics, national energy needs, and the facts
and realities of the situation, it becomes clear that a ``no
development'' policy is unsustainable. As NEPA requires, the
environmental and social impacts and benefits of any proposed action
need to be considered. Our country needs energy in every form. There is
clearly a path forward where our energy needs are supplemented with oil
shale, while managing and mitigating impacts of development.
Thank you for considering my testimony.
______
Mr. Lamborn. All right. Thank you.
Mr. Aho?
STATEMENT OF GARY AHO, BOARD MEMBER/FORMER CHAIRMAN, NATIONAL
OIL SHALE ASSOCIATION
Mr. Aho. Thank you, Mr. Chairman and Mr. Tipton, for the
opportunity to speak here today.
My name is Gary Aho. I am here today representing the
National Oil Shale Association. I am an industry
representative. I have over 35 years of experience with oil
shale, starting out as a chief engineering, becoming a manager,
vice president, and eventually the president of two of the oil
shale companies that have been active in the Western States.
The National Oil Shale Association is a not-for-profit
organization with the goal of educating the public and
providing factual information on oil shale. Our members consist
of corporations, university and research groups, national
laboratories, and individuals. We print written materials that
are carefully scrutinized to assure that all statements are
accurate and supported by factual data and sound references. We
are not a lobbying organization.
Today, I would like to enter for the record our most recent
2010 publication, entitled ``Oil Shale: America's Untapped
Energy Source.'' The purpose for this newest publication is to
present facts about oil shale, lay out the benefits to the
Nation and to this region, present challenges facing the
development of oil shale, and discuss a way to arrest many of
the misconceptions that persistently surround oil shale.
This NOSA publication was carefully prepared and edited by
experienced oil shale veterans, each with many years of
experience in trying to get an oil shale industry started in
the United States. Today, there are just a few key points for
the time I have allotted that I would like to make from this
particular publication.
First of all, as we have heard, the U.S. has nearly 70
percent of the world's oil shale resources, and the deposits in
the Western United States contain more oil than the world's
proven reserves of conventional oil. At a time like this, when
our Nation is going through tremendous economic uncertainty,
developing oil shale in the Western United States would create
tens of thousands of high-paying jobs, reduce the Nation's
dependency on foreign oil, improve the balance of trade,
enhance national security, provide stimulus to the economy, and
generate tax revenues for all levels of Government.
There are already a number of proven and unproven
technologies to produce shale oil, and production is occurring,
as we have heard here today, in the countries of Estonia,
Brazil, and China. We believe that shale oil can be produced in
the United States safely and in an environmentally responsible
manner. Industry and research organizations will figure out the
best technologies if the incentives to do so exist and if the
roadblocks are minimized.
The Federal Government through the BLM controls only 70
percent of the Western oil shale resources and some of the best
resources. However, there is currently no Federal oil shale
leasing program. Despite the fact that oil shale was placed
under the Mineral Leasing Act of 1920 and was to be made
available for public leasing, here it is 90 years later and,
shame on us, we still don't have a leasing program in this
country.
As a nation, we have made a number of efforts to develop
oil shale, and there have been many successful research
programs completed over the past 90 years. However, we seem to
lack the national resolve to keep a sustained oil shale program
moving forward, and we have heard that again today with the
lack of budgets, and these programs within the DOE, for
example, start and stop.
The most recent unconventional fuels legislation was the
Energy Security Act of 2005 that laid out a program and
mandated certain research and leasing activities. While that
program got off to a great start, it, too, appears to be
floundering, despite the fact that the actions required therein
are very explicit.
NOSA believes that the BLM should make lands available for
lease. These lands should have terms, including rents and
royalties, which are favorable for this capital-intensive,
high-risk, unconventional fuels industry. Sufficient
regulations and environmental rules and regulations already
exist on the books. Industry should be allowed to select the
technologies since it is industry that takes the investment
risks.
It should be up to industry to conduct the research and
develop the best technologies, realizing that the technologies
will evolve with time and experience. Just because the BLM
leases oil shale property to a corporation, there is no
assurance that the project will develop. Industry must still
design the project, secure its permits, comply with NEPA,
secure water and other services, get the buy-in of the
stakeholders, arrange financing, and so forth.
The burden falls on industry. BLM must simply make leases
available. If it is in the Nation's best interest to develop
oil shale, and we believe it is, then the Government should
make the land available, expedite the permitting process in
cooperation with State and local agencies, and then let
industry make it happen.
Industry needs a clear, consistent Federal program and a
national commitment to develop oil shale. Access to lands and
regulatory certainty are crucial to corporations starting a new
capital-intensive industry such as oil shale.
I thank you for the opportunity to appear here today. The
National Oil Shale Association feels this hearing is very
timely, and we thank you for your vision and your willingness
to address the impeding development of oil shale, America's
untapped energy source.
Thank you.
[The prepared statement of Mr. Aho follows:]
Statement of Gary D. Aho on behalf of the National Oil Shale
Association
Mr. Chairman and Members of the Subcommittee, my name is Gary D.
Aho and I am here today representing the National Oil Shale
Association, a not-for-profit organization with the goal of educating
the public and providing factual information on oil shale. Our members
consist of corporations, university research groups, national
laboratories and individuals. We print written materials that are
carefully scrutinized to assure that all statements are accurate and
supported by factual data and sound references. We are not a lobbying
organization.
Today I would like to enter for the record our most recent 2010
publication entitled ``Oil Shale, America's Untapped Energy Source''.
This publication is intended to (1) present facts about oil shale, (2)
layout benefits to the nation and the region, (3) present the
challenges facing the development of oil shale, and (4) discuss and lay
to rest the misconceptions that persistently surround oil shale. This
NOSA publication was carefully prepared and edited by experienced oil
shale veterans, each with years of experience in trying to get an oil
industry started in the United States.
There are a few key points that I would like to focus on today:
The US has the nearly 70% of the world's oil shale
resources and the deposits in the western US contain more oil
than the world's proven oil supplies.
Developing oil shale in the western US would create
tens of thousands of high paying jobs, reduce the nation's
dependency on foreign oil, improve the balance of trade,
enhance national security, provide a stimulus to the economy,
and generate tax revenues for all levels of government.
There are already a number of proven and unproven
technologies to produce shale oil and production is occurring
now in other nations, such as Estonia, Brazil and China.
We believe that shale oil can be produced in the US,
safely and in an environmental responsible manner. Industry and
research organizations will figure out the best technologies,
if the incentives exist to do so and if the roadblocks can be
reduced.
However, the federal government, through the BLM,
controls nearly 80% of the oil shale lands and there is
currently no oil shale leasing program, despite the fact that
leasing was provided for under the Mineral Leasing Act of 1920.
As a nation, we have made a number of efforts to develop oil
shale and there have been many successful research programs
completed over the past 90 years. However, we seem to lack the
national resolve to keep a sustained oil shale program moving
forward. The most recent unconventional fuels legislation was
the Energy Security Act of 2005 that laid out a program and
mandated certain research and leasing activities. While that
program got off to a great start, it too appears to be
floundering, despite the fact that the actions required therein
are very explicit.
NOSA believes that the BLM should make lands
available for lease. Sufficient regulations and environmental
laws already exist. Industry should be allowed to select the
best technologies, realizing that industry takes the investment
risks. It should be up to industry to conduct the research and
develop the best technologies, realizing that the technologies
will evolve with time and experience.
Just because the BLM leases an oil shale property,
there is no assurance that the project will develop. Industry
must still design the project, secure permits, comply with
NEPA, secure water and other services, arrange financing, etc.
The burden falls on industry. BLM must simply make the land
available.
If it is the nation's interest to develop oil shale,
and we believe it is, then the government should make the land
available, expedite the permitting process, and then let
industry make it happen, while working with the numerous
stakeholders in the local region.
Industry needs a clear, consistent federal program
and a national commitment to develop oil shale. Access to lands
and regulatory certainty are crucial to companies starting a
new, capital intensive industry.
Thank you for the opportunity to appear here today. NOSA feels this
hearing is very timely and we thank you for your vision and your
willingness to address the issues impeding the development of ``Oil
Shale, America's Untapped Energy Source''.
National Oil Shale Association
P.O. Box 3080
Glenwood Springs, CO 81602
Phone 970-389-0879
Website: www.oilshaleassoc.org
______
Mr. Lamborn. OK. Thank you, Mr. Aho.
Mr. McCloud?
STATEMENT OF BRAD McCLOUD, EXECUTIVE DIRECTOR, ENVIRONMENTALLY
CONSCIOUS CONSUMERS FOR OIL SHALE
Mr. McCloud. Good morning. As stated, my name is Brad
McCloud. I am the Executive Director for ECCOS, or otherwise
known as Environmentally Conscious Consumers for Oil Shale.
First, on behalf of myself and ECCOS, thank you to both
Representatives Tipton and Lamborn for conducting these
hearings and keeping the lines of communication open on an
issue that we feel will impact the future security and economic
prosperity for the United States.
The ECCOS is a grassroots, nonprofit group. We have members
in Colorado and Utah, and we have plans to expand into Wyoming.
We are one voice for consumers--consumers of groceries,
consumers of cars, consumers of fishing and hunting and camping
equipment, and consumers of homes. We are taxpayers, and we are
voters.
We are not technical experts on oil shale. You have a
roomful of many representatives today from the industry who can
discuss in depth the ongoing development and research projects
that are going on. Our mission is to educate the public and
elected officials about oil shale energy and issues to promote
the development of oil shale in order to decrease our Nation's
dependency on foreign fossil fuels. We also feel that a strong
energy policy--clear, consistent, and environmentally
responsible--is necessary for both energy security and to
maintain and grow good-paying jobs here in the United States.
The development of oil shale and other domestic energy fuel
sources will lead to energy independence for the United States,
but the current policy of regulatory uncertainty in the United
States will systematically dismantle the progress being made by
the oil shale industry in recent years and further delay or
halt the projects in the future.
The Energy Policy Act of 2005 that has been referred to
often today was a clear policy with clear direction and
indicated the importance of oil shale development. The process
was comprehensive. It was open, and it was rigorous. It
achieved the resource development goals of the Energy Policy
Act of 2005 and, along with follow-up amendments in 2008,
protected the environment and recreational uses of those public
lands.
However, in December of 2007, then-Senator Ken Salazar
inserted a moratorium on enacting rules for oil shale
development on Federal lands in an omnibus spending bill. Come
forward to 2011, not quite 3 years after the initial PEIS was
finished in 2008, under a new administration and now Secretary
of the Interior Ken Salazar, the BLM issued another notice to
prepare a new PEIS. The only thing that changed roughly in
about that 3 years is that technology in the oil shale industry
had improved.
Initiating a new PEIS on the same topic was not only a
redundant waste of time and resources, but it caused concern
and instability for an industry by once again arbitrarily
changing the rules of the game.
Currently, the unemployment rate in Grand Junction is
around 10.5 percent. Up valley, you can go to Garfield County,
it is about 10.7 percent. Colorado overall is about 9.2
percent. And if we go just east--we will go to Utah--it is
about 7.5 percent. Nationally, I probably don't have to tell
you that we are shockingly high. It is still around 9.1 percent
for unemployment.
Recently, very recently, actually, an independent business
information service called Visiongain released a report--and I
can give you more information on it if you like. But the report
calculates what it calls the global oil shale market. It does
this by estimating spending on upgrading existing oil shale
facilities, new infrastructure, and spending on R&D.
The report calculates that the value on that global oil
shale market to be worth just over $2.8 billion alone in 2011.
Now it seems that it would make--it seems that finding a way to
capitalize on just a portion of those billions of dollars in
the Visiongain report that they mention could go a long ways
into lowering unemployment rates, improving our roads and our
schools and our national and local economies.
If the United States wants companies to invest in oil shale
research and development, as it claims, then companies must be
provided a path to commercialization. The U.S. is sitting on a
massive oil reserve. We are a stable nation with excellent
safety and environmentally protective laws.
The world would be well served by having a stable supply of
oil from the United States, and our local and national
economies would benefit immensely. America can be the world's
leader in oil shale, but industry will not continue to invest
in environmentally responsible technologies without consistent
regulation and stable oversight from the Federal Government.
ECCOS feels it necessary to point out inconsistencies in
the policies of the Federal Government between administrations
and the very political nature of these exercises that over the
years have discouraged the development of oil shale production
and potential energy independence for the United States.
To help stabilize gasoline prices, create good-paying jobs,
and make the U.S. less reliant on foreign governments for our
energy needs, the U.S. must maintain an environment of
regulatory consistency. Policy cannot be allowed to be
arbitrarily changed every 3 to 4 years. If the U.S. can
implement such a policy, we ensure a brighter future for our
energy security, our national economy, and our local economies.
And once again, I respectfully thank you for your time
today.
[The prepared statement of Mr. McCloud follows:]
Statement of Brad McCloud, Executive Director,
Environmentally Conscious Consumers for Oil Shale (E.C.C.O.S.)
On behalf of Environmentally Conscious Consumers for Oil Shale (or
ECCOS) we want to thank Representatives Tipton and Lamborn as well as
the Subcommittee on Energy and Mineral Resources for conducting this
oil shale hearing and keeping the lines of communication open on an
issue that has potentially prodigious and lasting impacts on the future
energy security and economic prosperity of the United States.
ECCOS is a grassroots, nonprofit group based in Grand Junction,
Colorado. We have members in Colorado and Utah. Our mission is to
educate the public and elected officials about oil shale and energy
issues. We are not an advocacy group. However, we would like to see
research into oil shale continue.
The title of today's hearing strikes directly at the issue of what
is at stake with the current policies and attitudes coming from the
current administration and the U.S. Department of the Interior. A
strong energy policy is necessary for both energy security and to
maintain and grow good paying jobs in the United States.
Many believe development of oil shale and other domestic energy
fuel sources could very well lead to energy independence for the United
States, but the current policy of regulatory uncertainty in the U.S.
will systematically dismantle the progress made by the oil shale
industry in recent years and further delay or halt projects in the
future.
For a recent example of instability in policies affecting the
industry one only needs to look at the Energy Policy Act of 2005. It
provided a clear policy direction that indicated the paramount
importance of oil shale development to contribute to a viable,
realistic path to meet urgent national energy needs and carefully
balance the economic realities of oil shale development with
appropriate environmental and socioeconomic safeguards. It, in addition
to the 2008 Oil Shale Rule and 2008 RMP (``Approved Resources
Management Plan Amendments/Record of Decision for Oil Shale and Tar
Sands Resources to Address Land Use Allocations in CO, UT and WY'')
Amendments established legal parameters for oil shale leasing in
northwestern CO, southwestern WY, and northeastern UT. The
administrative process was comprehensive, open, and rigorous. Most
importantly, it achieved the resource development goals of the Energy
Policy Act of 2005 and protected the environment and recreational uses
of public lands.
A good example of this instability came in December of 2007 when
then Senator Ken Salazar inserted a moratorium on enacting rules for
oil shale development on federal lands into an omnibus spending bill,
then pushed in May of 2008 to extend the moratorium for another year
and then less than three years after the initial PEIS was completed in
2008 (April of 2011) the BLM, under a new administration and now
Secretary of the Interior Ken Salazar, issued a ``Notice of Intent to
Prepare a Programmatic Environmental Impact Statement (PEIS).'' Why?
The redundancy of initiating a new PEIS on the same topic that was
addressed three years ago is not only waste of time and resources, but
it also causes concern and instability for an industry by once again
arbitrarily changing the rules. If a project is forced to start and
stop over and over, and is given no indication as to when clear
policies will be provided and maintained, a company starts to wonder if
it will ever see the light at the end of the tunnel. When issuing its
notice of intent the BLM stated as its rationale ``. . .there are not
economically viable ways yet known to extract and process oil shale for
commercial purposes...''
We feel that in many ways due to the redundancy of this process the
BLM's rationale is a self-fulfilling prophecy. How can we expect
companies to invest in oil shale research and development when the
federal government creates uncertainty and stands in the way?
The only thing that has changed in the past three years is oil
shale technologies have improved. There are several nations around the
world that are aggressively pursuing oil shale development. We are in
the midst of another energy crisis with gasoline prices approaching $4
per gallon. The unemployment rate in Grand Junction, Colorado and the
United States is still staggeringly high, and there is even more unrest
in the Middle East
The largest and richest reserves of recoverable oil shale
(estimated at more than five times the amount of oil located in Saudi
Arabia) are found in Colorado, Utah and Wyoming. If the United States
wants companies to invest in oil shale research and development, as the
current administration and those before it have claimed, then these
companies must be provided a path to commercialization. Why would a
company invest hundreds of millions of dollars into research, if they
have no clear path to recouping that investment?
Companies like Shell, Chevron, American Shale Oil and Red Leaf
Resources are continuing to develop exciting and new technologies that
someday may lead to commercial viability and meet growing national and
international energy needs. However, regulatory uncertainty has slowed
research and development projects of oil shale dramatically and forced
most investment dollars and the good paying jobs associated with those
projects flowing in the direction of more development-friendly nations.
The fact is the U.S. will be reliant on oil for decades to come.
Even with the aggressive deployment of hybrid, electric vehicle,
natural gas, and biofuels technologies, the U.S. Energy Information
Administration reported that by 2035 93% of vehicles in the U.S. will
still run on oil and, world oil consumption will increase 30%. Our
dependence on oil and non-renewable resources is going to remain an
issue for generations.
The U.S. is sitting on a massive reserve of oil. We are a stable
nation with excellent safety and environmental protection laws and a
strong recognition of private property rights. The World would be well-
served by having a stable supply of oil from the United States. And,
our local and national economies stand to benefit immensely.
America can be a world leader in oil shale technology, but the
private sector will not continue to invest in environmentally
responsible oil shale technologies without consistent regulations and
stable oversight from the federal government. This new PEIS process is
just one example of how even more uncertainty is added into the
equation for those companies trying to find an answer to our domestic
energy needs.
In closing, I would like to reiterate ECCOS is not an advocacy
group. However, we feel it necessary to point out inconsistencies in
the policies of the federal government between administrations and the
very political nature of these exercises that over the years has
discouraged the development of oil shale production and the potential
energy independence of the United States. If you truly want to help
stabilize gasoline prices, create good paying jobs, and make the U.S.
less reliant on unstable foreign governments for our energy as has been
stated by administration after administration then the U.S. must
maintain a consistent regulatory policy. Policy cannot be allowed to
arbitrarily change every three to four years. If the U.S. can implement
such a policy we can secure a brighter future for our energy security,
our national economy, and our communities.
______
Mr. Lamborn. All right. Thank you.
And Commissioner Spehar?
STATEMENT OF JIM SPEHAR, FORMER MAYOR OF GRAND JUNCTION,
COLORADO, FORMER MESA COUNTY COMMISSIONER
Mr. Spehar. Thank you, Mr. Chairman.
I appreciate the opportunity to testify today before the
Subcommittee and to submit the more formal written testimony
with more detail for the record, which I have also done.
I was pleased, Mr. Chairman, to hear your emphasis on
balance as we began this hearing and to hear Representative
Tipton talk about creating win-win situations. My purpose here
today is to talk a little bit about that from the standpoint of
a former elected official and as a former member of the
Colorado Economic Development Commission.
Six generations ago, my family came to western Colorado, to
Crested Butte, to work on the extraction industries, mining
coal and precious metals. Three times this month, my wife and I
have traveled there, encountering various roadblocks on Highway
15 on Kebler Pass.
While those delays frustrated me, my much more patient wife
explained to me that there is sometimes a positive purpose to
roadblocks. They warn of potential danger, the need for special
attention and caution, and they provide information to
successfully navigate a change for a changing situation. And
they protect us and others, including those working to make the
changes.
The same could be true of the roadblocks some complain
about regarding oil shale. I am reminded of the well-known
saying that the four most expensive words in the English
language are, ``This time it's different.''
From my experience working in and observing this latest
development cycle, I know this is not the industry of 30 years
ago. Many different technologies are being researched this
time. The pace and timing is more cautious and deliberate.
But some lessons from the time between disproven
expectations and the devastation that followed last time do
apply, and I wonder if we have learned them. Where is the
necessary preparation to host this industry if it does emerge?
Do we prudently plan, identify impacts and how to handle them,
or struggle and suffer as northwest Colorado did three decades
ago, a time, when, according to then-Governor Dick Lamm, it was
like trying to change a tire on a car that was moving.
There is no need to risk making northwest Colorado and
neighboring oil shale areas a national sacrifice zone once
again. There is still time to be strategic without compromising
development of an oil shale industry. We have been chasing this
rock that burns, this fuel of the future for more than a
century now, 10 years at a time.
It was 10 years when I began consulting with Shell in 1997.
It was 10 years when that work ended for me in 2003, and it was
still 10 years when I heard a presentation at the Mahogany test
site last fall. In presentations, hearings, and symposiums in
Utah and Colorado over the past few months, I still heard
industry representatives estimate it will be 7 to 12 years
before a commercial-scale oil shale industry might develop.
That means there is time for the comprehensive impact
studies that are as important as the science projects underway
at research, development, and demonstration sites. These
studies are vital if development is to be, as Shell and others
have repeatedly promised, economically viable, environmentally
responsible, and socially sustainable.
Decades of creating nurturing and diversified economies
need to be honored and supported. Taxpayers and their
communities are just as deserving of certainty as the industry
is. Whether we support or oppose oil shale development, it is
irresponsible not to be planning now for that potential
development and its impacts. To do that, we need comprehensive
planning and preparation. However, the BLM's own 2008
programmatic environmental impact statement confirmed the lack
of adequate current information to do that.
We need the resources to manage upfront impacts and help
provide a soft landing if, once again, things don't pan out.
But there has been no discussion of creating an oil shale trust
fund, which did both last time.
We need to assure current taxpayers they are not expected
to increase their burden to finance the needs of the industry.
But instead, we see proposed reduced royalty rates that would
deprive communities of funding. As you know, just under half of
those royalties flow back to State and local governments. I
suspect Congress will not be anxious to defer its 51 percent
and let all of the communities remain whole.
We need to assure a reasonable return to taxpayers on the
use of Federal lands but, instead, propose commercial leasing
before technical research proves the need and the market helps
establish an appropriate lease rate. We need to protect and
provide for current sustainable economic drivers, such as
agriculture, hunting and fishing, tourism and recreation, each
with multimillion dollar positive current impacts and thousands
of existing jobs.
We need to all have realistic expectations for a potential
industry, which, in my experience, is just as anxious to manage
exuberant promises as anyone.
In 2000, while I was on the city council, Grand Junction
and other local partners funded an effort to define our future.
That was known as Vision 2020. Among other things, 1,200 face-
to-face interviews were conducted here in Mesa County. Nearly
20 years after the fact, ``black Sunday'' was still seen as the
defining moment in this community's history.
We need to cooperate in developing a ``no regrets''
strategy if the oil shale industry is to be successful this
time, gather the full range of necessary information, and
provide financial and other resources to implement prudent
planning, all that if we are to make certain we have learned
the lessons of that painful past. We should consider that an
opportunity and a challenge, not a roadblock.
Thank you for the opportunity to talk about the needs of
our communities, and I look forward to answering any questions
you may have.
[The prepared statement of Mr. Spehar follows:]
Statement of The Honorable James G. Spehar, Former Mayor, Grand
Junction, Colorado, Past President, Colorado Municipal League
This written submission and my oral comments before the U.S. House
of Representatives Subcommittee on Energy and Mineral Resources at its
field hearing on ``American Jobs and Energy Security: Domestic Oil
Shale the status of Research, Regulation and Roadblocks'' in Grand
Junction, on August 24, 2011, are informed by several perspectives.
They include coming from a six-generation western Colorado family
that originally emigrated to the Western Slope to work in extraction
industries; former responsibilities as an elected Mesa County
Commissioner and as a city council member and Mayor of Grand Junction;
work with other communities as a past president of the Colorado
Municipal League and former board member of Associated Governments of
NW Colorado; work within state government on growth and development
issues and as a former member of the Colorado Economic Development
Commission; and helping direct local economic development efforts as a
past board member of the Mesa County Economic Development Commission
(now the Grand Junction Economic Partnership).
It also results from 15 years of consulting work on growth, energy
and economic development, and job creation issues w/local governments,
their regional associations, state agencies, multi-national energy
companies and others. That includes six years of contract work on oil
shale and community issues for one of the early lessees in the federal
government's oil shale research, demonstration and development program.
I have worked with the Colorado Department of Labor and Employment on
workforce issues in rural Colorado and helped directed a collaborative
multi-county effort on regional socio-economic issues that included
portions of NW Colorado that will be directly impacted should a
commercial oil shale industry develop.
Given that background, I applaud the efforts of Congress and the
subcommittee to investigate the role an emerging oil shale industry
might play in job creation and providing the ``home grown'' energy
resources to fuel employment growth and to help move our nation toward
energy self-sufficiency. The purpose of my oral and written testimony
is to make certain other important parts of that equation are given
equal consideration as we move forward.
Whether you oppose or support oil shale development, it's
irresponsible not to be planning now for potential development and the
possible impacts.
That examination of impacts demands more than just a science
project. But current research is focused primarily on technology, not
the broad range of social, economic, environmental and other community
impacts that will result if the technical research is ultimately
successful.
Just as the industry desires certainty in what's required of it, so
do communities deserve that same degree of certainty as to what the
expectations of will be of their local governments, non profits and
other agencies, schools, hospitals, for infrastructure and services
associated with the development of this industry.
Similarly, this added use on public and private lands, its water
and power requirements and potential impacts to air quality, will
impact many existing multi-million dollar industries that also provide
important jobs, including but not limited to agriculture and other
water users, tourism and outdoor recreation, even natural gas and other
existing extractive industries. We should be careful that we are not
merely swapping jobs and that new employment does not come at the
expense of existing job providers in already active and sustaining
industries important to the economic well-being of the region.
The BLM's own 2008 Programmatic Environmental Impact Statement
(PEIS) acknowledges the lack of then-current information available
regarding many of these issues. Subsequent analysis has served both to
inform and confuse matters identified as uncertainties in the PEIS and
the current review and potential update of that document ordered by
Interior Secretary Ken Salazar will hopefully fill in some of the
blanks.
For several years now, I've been part of an informal NW Colorado
group of current and former local elected officials, wildlife and
agriculture interests, water organizations and others who've been
working with our congressional delegation since the summer of 2009 to
see that these sorts of impacts are quantified and addressed prior to
any commercial leasing. We most recently met with Representative Tipton
in February of this year and hope to continue these discussions with
him, with Senator Mark Udall and with Senator Michael Bennet.
The Colorado delegation, on our behalf, has twice forwarded to the
DOI our request that an independent study of cumulative impacts of oil
shale development be completed prior to any commercial leasing. (See
Attachment A).
A written reply to Sen. Mark Udall dated March 24, 2011, sent on
behalf of BLM Director Bob Abbey, indicates that sort of investigation
will be part of the PEIS review now in progress and is a welcome next
step in the process of prudently planning for the possibility of an oil
shale industry. (See Attachment B).
The Associated Governments of NW Colorado, a regional association
of municipal and county governments in the region, a few years ago
commissioned a cumulative impacts study of development and population
growth in the same geographic area that is ground zero for this
potential industry. (See Attachment C.)
That study, entitled ``Northwest Colorado Socio-Economic Analysis
and Forecasts '' and released in 2008, likely already needs updating
but provides an excellent outline of the sort of information local
communities need in order to plan intelligently if they are to host
commercial oil shale development, whether a decade or more from now or
in some shorter time frame.
There is still time to answer the important outstanding questions
regarding how local communities expected to host oil shale development
can manage associated impacts. As outlined in the attached report
``Secure Fuels from Domestic Resources: The Continuing Evolution of
America's Oil Shale and Tar Sands Industries'' prepared by INTEK, Inc.,
for the U.S. Department of Energy Office of Petroleum Reserves and
released in September, 2010, all of the players active in oil shale
development envision multi-year research and development scenarios. In
recent months and in various settings, major players in this region
have estimated time frames of 7-12 years for development of commercial-
scale technologies. (See Attachment D).
If that time frame is shorter, or if some sort of new crisis in the
Middle East or elsewhere accelerates the schedule, it's even more
imperative that this sort of additional information over and above the
``science project'' technology be made available and appropriate steps
to mitigate impacts be put in place before commercial leasing and
development take place.
Here are some of the questions that need to be answered in the
context of the subject matter of this hearing:
(1) Should development of an oil shale industry be subsidized
either directly, via government funding or product purchases,
as has been done in previous cycles, or indirectly, via reduced
royalty rates as anticipated in the Energy Policy Act of 2005?
(2) Should large-scale leasing of federal lands for commercial
oil shale production proceed, as anticipated in the Energy
Policy Act of 2005, prior to successful demonstration of
commercial-scale processes for production of fuel from oil
shale?
(3) How can the federal, state and local governments, the
industry, and other partners make certain impacts of oil shale
development do not fall unreasonably on current taxpayers and
not negatively impact important sustaining industries?
(4) What role does the federal government play in maintaining
realistic expectations of companies involved in oil shale
research and development and in creating realistic expectations
on the part of a public justifiably anxious about U.S. energy
security and concerned about job creation.?
It is important to remember the lessons of the past, when
understandable haste and federal subsidies fostered the oil shale boom
of the late 1970s-early 1980s. Thousands of workers followed that boom
to northwestern Colorado, overwhelming infrastructure, taxing services,
and artificially inflated the economy. Just a few years later came the
infamous ``Black Sunday'' when thousands lost their jobs, communities
became ghost towns, and a decade or more of struggle began to regain
economic balance.
Helpful in dealing with that previous boom and bust was the Oil
Shale Trust Fund, designed to assist industry in helping communities
front the up-front impact costs that come prior to receipt of tax
revenues. That fund, filled by advance payments against future
royalties, also helped provide a somewhat softer landing after the
bust, maintaining payments on infrastructure built in anticipation of a
long-term industry and funding economic development aimed at
diversifying jobs and industry in the region.
There's been no talk of such a trust fund as we again look at what
Rep. Tipton cites as the potential for 350,000 new jobs in a new oil
shale industry.
Equally concerning is the provision in the Energy Policy Act of
2005 cutting initial oil shale royalty rates by more than half. As
subcommittee members know, slightly less than half of royalty payments
are returned to states and local governments where the activity occurs.
Reducing those rates diminishes the ability of local communities to
provide infrastructure and services a new industry finds necessary to
create and sustain jobs.
Congress needs to understand that direct correlation and become an
active partner with the states and their local governments in dealing
with impacts should a new oil shale industry come to fruition.
Now we are hearing calls for large-scale commercial leasing as
another incentive for kick-starting the industry. Two mayors of the
region's largest cities raised important questions regarding that issue
just a few days ago on the op ed page of the Grand Junction Daily
Sentinel. ``If there is no proven commercial process, wouldn't this
foster speculation,'' they asked. ``Should research be successful,
won't it then be easier to make certain lease rates reflect the
appropriate value to the public?''
Equally concerning is the lack of comprehensive analysis of the
impact of this potential new industry on existing jobs and industry.
Air quality, water demands, land use changes have the potential to, as
the BLM states in the operative PEIS for oil shale research and
development, to cause the region to morph from its traditional
agricultural, tourism, hunting and fishing and recreation economies,
all of which provide important sustaining jobs, to an industrial zone.
As an example, water issues alone raise enough issues to demand a
thorough examination before rushing development of an oil shale
industry. Estimates of potential water demands vary by a factor of
three, from 120,000 acre-feet per year to nearly 380,000 acre-feet.
Even if industry utilizes water it already owns, exercising those
senior rights could have a dramatic effect on junior users in other
industries.
If additional water is necessary, it comes from a Colorado River
Basin some say is already at maximum capacity. Others who count on some
unallocated water in the river say that, even at the lowest estimated
demand for oil shale, that would take up half of Colorado's allocation
of the water remaining in the Colorado River.
No one likes to consider these sorts of things as a ``worst case''
scenario when we are all in favor of good jobs, energy independence and
a more promising future.
Seeking definitive answers to these important questions should not
been seen as a roadblock to oil shale development but instead as
necessary strategic planning to insure a viable and sustainable future.
But prudence would seem to dictate we develop a ``no regrets''
strategy that, as much as humanly possible, avoids the well-documented
mistakes of the past, and assures local communities are prepared and
adequately funded to deal with associated impacts of oil shale
development.
In conclusion, I would urge this subcommittee to expand its agenda
to also include examination of the steps necessary to make certain the
entire range of questions concerning development of a successful oil
shale industry that might contribute to both job creation and energy
independence. Only in that manner can we all be assured that oil shale
will be a welcome and meaningful component our energy security and
create new jobs without compromising existing economic drivers and our
treasured way of life in northwest Colorado, northeast Utah and
southeast Wyoming.
______
[NOTE: Letters submitted for the record by Mr. Spehar
follow:]
[A letter to Secretary of the Interior Ken Salazar dated
November 18, 2009, follows:]
[GRAPHIC] [TIFF OMITTED] T8237.003
[GRAPHIC] [TIFF OMITTED] T8237.004
[A letter to Secretary of the Interior Ken Salazar
dated December 17, 2010, follows:]
[GRAPHIC] [TIFF OMITTED] T8237.005
[GRAPHIC] [TIFF OMITTED] T8237.006
[A letter to Senator Mark Udall dated March 24, 2011,
follows:]
[GRAPHIC] [TIFF OMITTED] T8237.007
[GRAPHIC] [TIFF OMITTED] T8237.008
Mr. Lamborn. Well, thank you all for being here. You
have provided various kinds of illumination and education for
us, and I appreciate that. We are going to launch into the
first round of questions.
Mr. Whitney, you talked about the PEIS, the preliminary
environmental impact statement, and you gave a very
diametrically different description of that than Ms. Hankins
did earlier this morning. She said there had been all these new
things going on that had come to light that justified it,
whereas you say that--and Mr. Aho, you said the same thing--
that there has not been anything that has changed in 3 years.
And Mr. McCloud, you may have said that as well--other than
political changes in Washington. So which is it? I mean, I am
confused here. I am mystified.
Mr. Whitney. Well, as I said, we do believe there is no
reason to revisit the PEIS. Shell believes in a transparent and
regulated NEPA process, the National Environmental Policy Act
process for potential commercial projects.
When a successful RD&D pilot is completed, an application
for conversion would be submitted that would include a
description of a commercial project that would be used to work
through the NEPA process. And that is when specific
environmental concerns and socially sustainable issues can be
addressed.
Shell's ultimate goal is to create a commercial oil shale
recovery operation that is economically viable, environmentally
responsible, and socially sustainable. The exact scale and
timing for development will depend on a number of factors,
including regulatory stability.
The PEIS is just a key element of the regulatory framework
that oil shale industry needs to move forward.
Mr. Lamborn. Yes, and I meant to say programmatic EIS.
This issue of it is always 10 years out in the future, your
company has one of the major demonstration projects, research
projects going on here, which I have visited in the past. And I
have had discussions--I don't want you to feel compelled to
give anything that is proprietary to your company. But cost
effectiveness is obviously a big issue.
And with the rising and then lowering and then rising price
of oil, an expensive technology because it is more complicated,
more time intensive and everything else, at some cycles in the
oil prices will not be profitable. At other times in the cycle,
it will be profitable.
Is this a technology that is always going to be 10 years
away and never, ever materialize? I have heard that many times
today and in the past. Or will we reach a point at some point
with oil around the world becoming harder to access, more
expensive to produce because we are going into deeper waters or
troubled areas politically, or other things like that? What
does your company think about the ultimate viability of oil
shale oil production?
Mr. Whitney. Shell supports the RD&D program. In general,
if a regulatory environment exists that awards numerous
companies leases and a framework exists where a stable, long-
term regulatory environment is well understood, then industry
has the best chance of truly assessing how economically viable,
environmentally responsible, and socially sustainable it can
create--the projects that they can create.
So, there is no definitive answer. The framework just needs
to exist for industry to put its shoulder against it and see if
we can solve the problem and make oil shale a robust business
for the future.
Mr. Lamborn. So you are convinced that at some point, the
break-even point will be reached and exceeded to make this an
ongoing proposition?
Mr. Whitney. Yes, sir.
Mr. Lamborn. I will just state for the record, I, for one,
would rather have a private company making this investment, as
opposed to taxpayers being on the hook. As long as the
environment is being protected, I would rather see private
corporate dollars being invested, and you and I, as taxpayers,
don't have to make that investment, as has been the approach in
the past.
That is my time for now. Representative Tipton?
Mr. Tipton. Thank you, Congressman Lamborn.
Listening to some of the testimony, and Commissioner Spehar
and I have probably some of the longer history on this side of
the West Slope, it is kind of like ``Groundhog Day,'' that old
movie?
[Laughter.]
Mr. Tipton. You know, it is the same thing being played
over and over again many times. When we are talking about it is
always 10 years out, I recall back with the development under
President Carter, the Department of Energy, a lot of our moves
to move, to the best of our ability, to energy self-sufficiency
in this country, it was always 10 years out.
I would just like to have you maybe perhaps comment. Has
part of that been political failure out of Washington, D.C., in
particular, to be able to have that political will, to be able
to actually achieve the goal? And if you would just maybe
comment on that, I would appreciate it.
You are up first, Mr. Whitney.
Mr. Whitney. All right. Like I said, Shell supports the
RD&D program. The way that that program works, of course, is,
like I said, based on a successful pilot, an application for a
conversion is submitted that describes the commercial project
that would be moved forward through the NEPA process.
So, indeed, the process will work. We just need to give it
time and make sure that the business environment and regulatory
environment allows things to move forward in a systematic,
clear way. The more companies are awarded leases, the more
companies are progressing their research and development, the
more likely we are to be successful in finding a commercial
path forward for oil shale.
Mr. Tipton. Anyone else care to comment on that?
Mr. Aho. Well, you know, the idea that shale is always 10
years away, some of that is driven by low supply and demand for
oil. And obviously, as the world population grows and the
increased demand is now on the world scene and our oil supplies
are gradually decreasing, we are reaching a point where our
supply will not be able to meet demand, and we will see
increased pricing of oil. Of course, we are seeing that today.
So it comes to a point where there is a break-even point
for the production of shale oil where it does become economic.
And some of the companies are talking $50-$70 range. From the
country of Estonia that just moved into Utah, they look at
their break-even, including their return on investment, is at
$70 a barrel.
So they are making great strides to begin that project in
Utah with the idea that they have a technology that works in
Estonia. They intend to bring that to the United States and
look at commercial development on that project.
So, I think we are reaching the point where on the world
scene, we don't expect the price of oil to drop much below--
certainly not below $70 a barrel. Some people think it could go
back there for short periods of time.
But the lead time involved in these projects is crucial for
people to understand. Even the project that we are working on
in Utah, that project which is aligning conventional surface
retorting, they are looking at 4 to 6 years of permitting and
environmental work in advance of construction. And their
question becomes the uncertainty of the Federal regulations.
We are all stuck with this. What are the rules going to be
5 or 6 years from now? We don't know because they are not what
they were 5 years ago, and they are not what they were 30 years
ago when I started in this business. This uncertainty is what
is driving us crazy.
Also, and we have talked about today all these Federal
programs that need to get lined up. But frankly, when a
corporation gets a lease, and they begin the permitting
process, we always have to put together a detailed development
plan and go through a detailed permitting process that will
address water supply. Corporations are not going to invest
millions of dollars without an assured water supply.
They are not going to get into a project where they haven't
dealt with all of the local stakeholders in order to get the
permits. There is a whole process that corporations have to go
through. So just assigning somebody a lease doesn't give them
the green light to build a plant.
Thank you.
Mr. Spehar. Representative Tipton, I agree with you. I
think none of us could say over decades that we have had a
consistent energy policy, and certainly, that is, I think, part
of the problem. But I think it is also true that I expect this
industry will be developed. That is why I am concerned about a
head start on dealing with impacts and so on.
As it has been explained to me in my work over the years,
particularly the major energy companies know that new supplies
of conventional oil are harder to find and more expensive to
develop and produce. That is why they are investing admirably
in alternative technologies, and one of them even helped do the
energy conservation in the government buildings on this block.
But I think there will need to be a bridge between the new
technologies and conventional resources and that these what are
called unconventional fuels, like tar sands and oil shale, are
one opportunity to provide that bridge.
I worry, though, because even at a mid-range scale, at a
500,000-barrel-a-day industry, the study done by Associated
Governments of Northwest Colorado that I refer to in and
attached to my written testimony, anticipates population growth
in excess of normal population growth of about 50,000 in just
the three counties in northwest Colorado. That is a huge bite
for these communities to take on.
Current taxpayers shouldn't have to do the upfront
development or upfront impacts for that. As you know, from your
experience in our State Legislature, our tax structure here
delays gratification. You know, if Gary builds a plant today,
it may be reassessed next year. You may get the bill the
following year, and the money may be collected the year after
that. All that time he is building that plant is when most of
the impacts occur.
So, that is why I suggest that we revisit the idea of the
oil shale trust fund, where these companies would pay royalties
in advance against future billing and provide that upfront
scenario where money is available for communities to deal with
these impacts.
Mr. Tipton. I appreciate your comments on that.
And Mr. Whitney, can you give us an idea, and we are going
back to 10 years down the road, 10 years down the road, has
your business at Shell taken a look and said have we had a
consistent regulatory policy? This is where we could have been?
Are there any sorts of those types of estimates, or do you
feel like you get to wake up in a whole new world every morning
when it comes to regulatory policy and then try and move the
ball forward from there?
Mr. Whitney. In general, we just try to communicate clearly
that a stable, long-term view and stable regulatory policy is
very important for industry. And indeed, change does happen,
and we always are forced to deal with that.
But when we see change on the horizon, that is when we
really want to communicate more clearly and make sure that
people really understand that the things that they are
considering, are they addressing them in the right way? Is the
PEIS the right way to deal with it, or is it the NEPA process?
What is the best way to address the concern, and how do you
get it done in the appropriate regulatory environment?
Mr. Tipton. I think that certainly goes to Mr. McCloud's
comments in terms of companies must be provided with the path
to commercialization. I think that was your comment.
Mr. McCloud. Exactly. Actually, if I can, Representative
Tipton? One of the things that the BLM stated when they
reissued the PEIS and one of the rationale was that there was
not an economically viable way yet known to extract and process
oil shale for commercial purposes.
By continually moving the parameters or not offering set,
clear guidelines and policies, that is rather a self-fulfilling
prophecy. Being a businessman, and people involved in business
know that you have certain things you have to consider when you
are putting together your business model and your business
plan.
You have to look at what your return on investment is, how
is it potentially profitable, the different environmental,
social, and economic considerations. Is it sustainable? And
those are just a few of the things that you have to consider
when you are putting those policies together. But if you can't
maintain a stable regulatory environment to do that within, you
can't build a business model that you are going to have for
future needs down the road as well.
The biggest thing we have to consider if it is going to be
economically feasible, if you look at the U.S. Energy
Information Administration, they reported that by 2035, even
with aggressive use of hybrid, electric, hydrocarbons, natural
gas, 93 percent of the vehicles in the United States are still
going to run on oil.
So, by that same year, 2035, they estimate that the
consumption, the world's oil consumption will be up by 30
percent. The thing is on supply and demand, at least now oil
shale works to be a bridge fuel in that middle.
Mr. Tipton. May I ask one more? I kind of ran through both
my series of questions.
Mr. Lamborn. OK. Sure. Go ahead.
Mr. Tipton. But I would like to return back to the comment
I was making to Ms. Mittal in the previous panel in regards to
a static versus a dynamic model in terms of looking forward. I
believe it is the Moore's principle, you know, we apply that to
technology in terms of it reducing costs.
It has been my experience in my business that we are able
to at least create efficiencies. Would that be unexpected once
we get this development process going, that we are going to be
able to create efficiencies?
If we are looking at the $70 barrel model, the Estonian
model, that actually with American inventions, American
creativity, and entrepreneurship, that we can probably
anticipate that we would actually see those production costs
lower, reducing, and a more affordable product for American
consumers?
Mr. Whitney. Yes, sir. We call that a learning curve. If we
look back at history--I will just use a couple of examples--it
consistently takes around 30 years for new forms of energy to
achieve about a 1 percent market share. Biofuels is just now
reaching 1 percent, and it is because of the number of
companies and the number of tries that have been taken to make
it a viable fuel on the world supply market.
Wind. Wind took about three decades and may get to the 1
percent mark in the next few years. The very first wind farms,
large ones, were built in Denmark and here in the United
States. But it still took that incredible amount of time and
investment to go down the learning curve to make it a viable
alternative source of energy.
Mr. Aho. You are right. I think what we are looking at
today, we call ``first generation'' or ``second generation''
retorting concepts. These will all continue to evolve.
Corporations are in the business to make money. So when
they look at reducing cost of production, we are doing that day
in and day out, whether it is the amount of water we use. And
our objective is to get water use to a minimal amount because
water costs us money.
Anything we are doing in a project of this nature, this is
a capital-intensive industry. A shale oil project that will
produce 50,000 barrels per day, we are talking--again, it is
the model with mining and surface retorting--roughly $4
billion. And on a 50,000-barrel-per-day plant, we are looking
at roughly 25-to-1 on barrels produced per worker. The question
was raised earlier.
So a 50,000 barrel per day plant would employ roughly 1,900
to 2,000 permanent employees. Plus then there are the service
industries and families and so forth. We are looking at that
2,000 being the population of 8,000 in an area. Kind of brings
up what Jim was talking about earlier that certainly
socioeconomic impacts are an issue that corporations deal with
when they look at permitting one of these projects.
Will there be enough trained workers in that region? How
are we going to support our employees? How are we going to
provide housing?
So we work together with the local economy and the counties
to try and mitigate that impact. That is part of the permitting
process. Corporations are not going to get permits to build a
plant if they haven't dealt with mitigation issues that
surround it.
So, thank you.
Mr. Tipton. Thank you.
Mr. Lamborn. All right. Thank you, Representative.
And to conclude now with the last couple of questions, Mr.
Whitney, what is your company doing to concentrate on the
important issue of reducing water consumption and using more
recycling should the RD&D project be successful and you go
forward?
Mr. Whitney. Shell understands how important water is to
the Western Slope and Western States. Shell is committed to
using water responsibly. To date, Shell has purchased or
appropriated a diversity of water rights, in accordance with
Colorado law.
Shell's overall water management strategy involves three
key aspects, all aimed at minimizing the quantity of water used
and negatives impacts to other users. So the first one is
maintaining a diversity of water rights to provide our
operations the flexibility of alternative sources and to
minimize the impact on existing and traditional users.
Second, it is optimizing our oil shale recovery and
processing technologies to reduce the amount of water required.
And third, applying best water management practices in our
operations, such as water treatment, storage, and reuse
wherever practical. In a commercial operation, we will have
staff dedicated to water management and optimization.
Mr. Lamborn. OK. Thank you.
And Mr. McCloud, we have talked a lot here today about some
of the concerns such as water and other things that we really
have to watch closely about. What do you see, on the other
hand, are the upsides, both locally and nationally, should
these projects be successful and they go forward on a
commercially viable scale?
Mr. McCloud. We feel that those benefits become relatively
obvious. If we have a potential industry that could create
potentially 100,000 jobs roughly, not only is that good-paying
jobs that we need here in the United States to help those
unemployment rates, but we also create a tax base to support
our local and Federal and regional governments.
That, in turn, obviously, helping with our infrastructures,
our schools, community support programs, et cetera. It should
be, to use a term from earlier, self-fulfilling in the fact
that if we can get those processes and that industry here, we
will be able to create the revenues to support the communities
like we would like to.
Mr. Lamborn. OK. Mr. Spehar?
Mr. Spehar. Well, again, I don't need to remind you, given
your Colorado experience, that it is an issue of timing and
when those revenues become available and if there is adequate
funding in the early stages while the impacts are the greatest
to make sure that the burden doesn't fall on the backs of
taxpayers in existing communities.
And there is a piece of that that we haven't discussed. I
have a great deal of faith in a thoughtful and measured
research process. It will give us the answer, yes or no, and I
have no real concern about that going forward.
My concern is this, and maybe we ought to all check our
iPhones and see where Gaddafi is right now. But if Hugo Chavez
wakes up on the wrong side of the bed or we have some new
crisis in the Middle East, and supplies tighten dramatically,
and we get back in that kind of Jimmy Carter era scenario, all
bets are off.
And unless we have done what I have suggested and, in the
process of this research, identified how we are going to deal
with impacts, then we are going to be chasing our tail, and we
will be back in that scenario of 30 years ago, even though this
is a different industry and a different technology today. So
that, if anything keeps me awake, that is it.
Mr. Lamborn. All right. Well, thank you all for being here.
As we wrap up, I want to thank the crowd, for the people
gathered here for being so polite and attentive. Maybe the best
crowd I have ever seen.
[Laughter.]
Mr. Lamborn. Or one of the best. So thank you as well.
For the witnesses, members of the Committee may have
additional questions for the record, and I would ask that you
respond to these in writing.
Mr. Lamborn. I would also ask unanimous consent to submit
three additional pieces of testimony to today's hearing record.
Hearing no objection, so ordered.
[The additional testimony follows:]
Statement submitted for the record by Alan Burnham, Ph.D.,
Chief Technology Officer of American Shale Oil (AMSO), LLC
I am Dr. Alan Burnham, Chief Technology Officer of American Oil
Shale Co. AMSO, LLC is a joint venture of IDT Corporation and Total,
S.A., and holder of one of the first-round oil shale research,
development and demonstration (RD&D) leases awarded by the Bureau of
Land Management in 2007.
On behalf of AMSO, I thank you, Chairman Lamborn, and Congressman
Tipton for holding this hearing on Domestic Oil Shale Research,
Regulations and Roadblocks. It provided a good opportunity to provide
an update on the status of oil shale RD&D activities.
In response to your hearing, an anti-oil-shale organization posted
quotes from the hearing witness compared to predictions about the
future viability of an oil shale industry with the intent of
discrediting the witnesses as telling the same old (and incorrect)
story. While it is appropriate to ask the question, ``what is different
this time?'' This is an important question that deserves a thoughtful
answer. The opponents presume that nothing is different. However, that
presumption demonstrates a lack of understanding of both history and
economics.
Production of shale oil from oil shale is not new. Shale oil was
used for street lights in Italy in the 1600s. There was a British
patent on oil shale retorting in 1694. Commercial lamp-oil industries
started in France and Scotland in the mid 1800s to compete with whale
oil. The Scottish industry lasted more than a century and employed up
to 5000 miners. The Swedes produced a couple thousand barrels per day
from surface and in-situ retorting after their fuel was cut off by the
Nazis until 1966. The largest oil shale industry today is in Estonia,
and it is profitable at current world oil prices. China also has a
significant oil shale industry.
The reason shale oil is not being produced in the United States
today is simple--it could not compete in the past with crude oil for
any sustained period of time. Over the past century, a pending shortage
of crude oil was predicted every 25 years or so, and interest in oil
shale rose. However, oil shale was crushed every time by collapsing
crude oil prices. The predicted oil shale boom in the 1920s was killed
by crude oil discoveries in Texas. The oil shale boom in the 1970s was
inspired by a high prices caused by a politically contrived oil
shortage. That boom was killed in the early 1980s when crude oil prices
collapsed due to a combination of reduced usage, North Sea oil, and
Alaskan North Slope oil. OPEC's market share dropped from 50% to 30%,
and OPEC's price-fixing power was neutralized.
So there are three real questions before us now: (1) are the
current high oil prices a reflection of true demand pressure on
achievable production levels, (2) will the situation get worse over the
next couple decades as demand increases in the developing world while
conventional crude oil production peaks, and (3) will alternatives such
as electric vehicles and biofuels be able to beat shale oil on cost? We
believe the difference in the situation today from the past is real,
and oil shale will be economically competitive with the new sources of
crude oil and with biofuels in the coming decades.
But what if we and other oil shale investors are wrong and oil
shale really is fools gold after all? The answer is simple--we will
lose our investment. It is not now nor ever has been the responsibility
of the public to prevent companies from making bad investments--it is
not a topic worthy of public discussion. The public's primary
responsibility is to be sure that any successful industry would be
conducted in an environmentally acceptable manner. Environmental
performance standards can be set to a large extent without a detailed
understanding of oil shale technology, and they are basically in place
today. It is industry's responsibility to meet those standards. That
said, it is desirable to consider all such environmental standards in
an intelligent manner that includes the cost-benefit ratio to society,
but those tradeoffs are broader than the oil shale industry.
While industry has the responsibility for providing the capital and
technical expertise for oil shale development, if it is in fact viable,
the Federal government also has a unique role as the owner of the most
and richest resource. Over human history, economic development has been
optimized by producing the best known mineral resources of the day. And
by law, the federal government has a responsibility to use the oil
shale resource for the public good, which includes establishing a
reasonable leasing policy. Oil shale leasing will not preclude the
simultaneous use of the land for other purposes such as grazing and
hunting. In fact, the oil shale industry can partner with the
government to optimize the habitat for desired vegetation and animals.
Projected costs for in-situ oil shale are competitive other sources
of unconventional fuels being produced today. The same cannot be said
for biofuels, which exist today only because of governmental mandates
and tax subsidies. If the United States had taken a longer term view
for oil shale as Canada did for oil sands over the past few decades and
the United States is doing today for biofuels, oil shale would be a
commercially viable industry today supplying a significant fraction of
our liquid fuels. While we cannot change the past, we can still
influence the future.
That concludes our supplemental testimony. Again, we very much
appreciate the Subcommittee's visit to Grand Junction last month, and
we thank you for the important work you are doing to draw attention to
federal oil shale and unconventional fuels policy.
______
Mr. Lamborn. And if there is no further business, without
objection, the Committee stands adjourned.
[Whereupon, at 11:26 a.m., the Subcommittee was adjourned.]
[A list of documents retained in the Committee's official
files follows:]
``Final Report: Northwest Colorado Socioeconomic
Analysis and Forecasts,'' BBC Research & Consulting, submitted
for the record
Hrenko, Rikki Lauren, CEO, Enefit American Oil,
Statement submitted for the record
``OIL SHALE: America's Untapped Energy Source''
prepared by the National Oil Shale Association
``Secure Fuels from Domestic Resources: The
Continuing Evolution of America's Oil Shale and Tar Sands
Industries''; U.S. Department of Energy, June 2007