BLM OKs 2 more Colo. oil shale research leases

September 2, 2012
Shale Play

DENVER (AP) - A baking soda company and an energy industry giant are the latest companies that have received approval to research how to economically extract oil from oil shale on federal land.

The Bureau of Land Management on Thursday approved oil shale research, development and demonstration 160-acre tract leases for Natural Soda Holdings Inc. and ExxonMobil Exploration Co. in the Piceance Basin in northwestern Colorado. The decision is subject to a 30-day appeal period before the leases are issued.

Both companies had applied for leases after the BLM announced in 2009 that it was awarding a second round. The agency awarded six research leases in Utah and Colorado in 2007 to Chevron USA Inc., Shell Frontier Oil and Gas Inc., and E.G.L. Resources Inc. to test ways to develop oil shale. Chevron said this year it was divesting its lease and reassigning workers to other projects.

AuraSource Inc., of Scottsdale, Ariz., had applied for a lease in Utah in the second round, but the BLM is awaiting documents from the company before a lease can be approved. A company representative didn't return messages seeking comment Friday.

Since 2009, the BLM has proposed shrinking how much public land in Colorado, Wyoming and Utah would be available for research leases. A final decision isn't expected for a few more months.

Oil shale deposits in the three states represent a potentially huge, unconventional energy resource, but the trick is turning it into oil. Oil shale is rock that contains kerogen, which must be subjected to high heat before it produces liquid. Companies are still figuring out how to do that commercially in the U.S. with limited environmental impacts.

The Green River Formation underlying parts of Colorado, Utah and Wyoming is estimated to have 1.2 trillion to 1.8 trillion barrels of oil reserves, and about 800 billion barrels may be recoverable, according to U.S. government estimates.

Both Natural Soda and the Exxon Mobil Corp. subsidiary and exploring "in situ" technologies to heat kerogen underground rather than bringing it to the surface first.

ExxonMobil would hydraulically fracture the oil shale, fill the fractures with an electrically conductive material, then heat it by conducting electricity along the fracture, spokesman Patrick McGinn said. The kerogen would be converted to oil and gas recovered with conventional wells.

Natural Soda, based in Rifle, Colo., plans to use a process researched in Australia to liquefy low-grade coal, spokesman Bill Ray said. For years, the company has been extracting nahcolite, or baking soda, mixed with oil shale in the Piceance Basin. Now it wants to try using superheated water combined with other substances to extract oil from kerogen.

Once both companies are issued leases, they would have to submit more detailed plans to the BLM and receive state and county permits for their work, BLM spokesman David Boyd said.

"It's been a long process, and there's still a long process to come," Ray said.

The leases were approved with measures to protect air quality, water and other sensitive resources.

Some farmers, ranchers and environmentalists have expressed concerns about how much water commercial-scale oil shale development would use, with the Government Accountability Office citing estimates of up to 500 gallons of water needed to produce a barrel of oil.

However Rep. Doug Lamborn, R-Colo., is among those trying to encourage more oil shale development on federal land, saying it's a promising domestic energy source.

David Abelson, of the environmental law and policy group Western Resource Advocates, said there's no reason to rush and that companies have private land they can use for research.

"The first round of leases has yet to yield any meaningful results other than Chevron deciding to pack up and leave," he said.



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