ExxonMobil and Natural Soda Holdings Inc. have edged another step closer to undertaking oil shale research-and-development projects with the Bureau of Land Management’s approval of their development plans. The approvals are for the company’s research, demonstration and development leases on federal land southwest of Meeker in Rio Blanco County. The projects still must undergo review by the Colorado Division of Reclamation, Mining, and Safety.
For ExxonMobil, its project marks a renewed attempt to commercially extract petroleum from oil shale after what was then Exxon shut down its Colony Project in 1982. That shutdown resulted in some 2,000 workers losing their jobs and caused economic repercussions for years from Glenwood Springs to Grand Junction.
Natural Soda, meanwhile, has extensive experience with another kind of mining at a site just north of its federal lease. It injects hot water underground to solution-mine for baking soda, known as nahcolite in its natural form. On its lease, it proposes first removing the nahcolite using its normal process, then producing oil from underground by heating it using either a downhole burner or a closed-loop steam system.
ExxonMobil also is proposing an in-situ, or in-place, development project involving heating the oil shale underground and then pumping out the oil — a process different from the Colony Project, which involved surface mining and heating of oil shale. Exxon wants to hydraulically fracture the oil shale, fill the fractures with conductive material and then electrically heat the shale.
The companies acquired the leases under a second round of R&D leasing conducted by the BLM. The leases initially cover about 160 acres but potentially can be enlarged by some 480 acres for commercial development if certain conditions are met.
Shell, Chevron and American Shale Oil hold R&D leases in Rio Blanco County from the earlier round of leasing — including three leases in Shell’s case — with the potential to convert each lease to nearly eight square miles for commercial development. But while AMSO continues to work on an in-situ project, Chevron, and more recently Shell, have ended their oil shale projects in connection with their leases. Shell had done the most work of any company on an in-situ shale project in Colorado before shutting it down last year.
Economics, environment
In approval documents for the ExxonMobil and Natural Soda plans, BLM White River Field Office manager Kent Walter wrote that each proposed action “with mitigation represents an opportunity to develop domestic energy sources and to inform and advance knowledge of commercially viable production, development and recovery technologies of oil shale resources consistent with sound environmental management. It also will provide a basis for informed future decisions about whether and when to move forward with commercial scale development and allow for the assessment of its impacts on the environment.”
David Abelson, an oil shale policy advisor for the Western Resource Advocates conservation group, said that if history is any indication, there’s a strong likelihood the latest projects won’t prove economically viable.
But he added, “One thing I think we have learned over the years is to proceed cautiously so we don’t repeat what happened in western Colorado in the early ‘80s.”
He said both Shell and Chevron showed a big difference from companies’ past practice in acknowledging failure early on rather than proceeding to the point where shutting down a project is economically devastating.
New approach
He said ExxonMobil and Natural Soda also will operate under a framework governing the second round of leases that requires more reporting regarding protection of air and water quality and other concerns.
“And that is good public policy. That’s the basis for making smart decisions,” he said.
ExxonMobil repeatedly has emphasized the desire to take a prudent, step-by-step approach to its new oil shale undertaking, something reiterated in its development plan.
“It is recognized that development of a commercial(ly) viable in situ oil shale technology will require a paced approach to thoroughly evaluate and optimize technology viability, with appropriate focus on environmental protection, water conservation and responsible land use,” the company said in the plan.
It plans to first conduct an appraisal phase involving drilling one or more test wells to ascertain the oil shale resources within the lease, along with groundwater monitoring wells to do baseline testing of water quality before further work ensues.
It currently estimates a resource of 600 million barrels of oil are contained in the shale within its lease.
The appraisal phase would be followed by three experimental phases, first to establish the ability to install the technology in the test zone, secondly to heat the zone, and then to do a pilot test to determine commercial viability on a field scale.
“ExxonMobil has consistently proposed a staged and deliberate development program that allows for technical advancement while minimizing the potential for environmental impacts,” its plan says.
Natural Soda also is outlining a phased approach in its plan, starting with a monitoring well to be drilled as soon as this year. That would be followed by steps such as building processing facilities, installing heating elements, operating the facilities and expanding and replicating the process over a period of up to nine years.
