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Thursday, September 8, 2011

GAO: Water Supply Poses Obstacle to Green River Oil Shale Dev't

- GAO: Water Supply Poses Obstacle to Green River Oil Shale Dev't

Thursday, September 08, 2011
Rigzone Staff

The Green River formation – an assemblage of more than 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah and Wyoming, is estimated to contain up to 3 trillion barrels of oil – or an amount equal to the world's proven oil reserves. However, extracting these oil shale resources is expected to require substantial amounts of water and could impact groundwater and surface water.

The U.S. General Accountability Office (GAO) reported that, while U.S. oil shale development could have significant impacts on the quality and quantity of water resources, 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.

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.

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. 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 by 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," said Anu K. Mittal, director of GAO's natural resources and environment team, in testimony before the House of Representatives' subcommittee on energy and mineral resources in Grand Junction, Colo. on Aug. 24.

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. Potential water demand is further complicated by the past decade of drought in the West and projections of a warming climate in the future, GAO noted.

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, Mittal said.

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 potential development of this resource. The federal government through the Department of Energy and Interior sponsors research on the impacts of oil shale on water resources.

However, nearly all 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," GAO reported. Federal agency officials also told GAO that they seldom coordinate water-related oil shale research among themselves or with state agencies that regulate water.

Interest in oil shale as a domestic energy source has waxed and waned since the early 1900s. 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, six small RD&D leases had been awarded, including five in the Piceance Basin and one in Uintah Basin.

Another significant challenge to oil shale development is the technology to economically extract oil from oil shale. The rock needs to be heated to temperatures between 650 and 1,000 Fahrenheit to extract the oil, or retorting. Retorting can be accomplished either by mining oil shale, bringing it to the surface, and heating it in a vessel known as a retort. While this process is done to a limited extent in Estonia, China and Brazil, a commercial mining operation with surface retorts has never been developed in the U.S. because the oil it produces competes directly with conventional crude oil, which historically has been less expensive to produce.

The other method, the 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.

GAO's review of available studies indicates that 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 operations, with an average of about five barrels, and from about two to four barrels of water per barrel of oil produced from mining operations with surface heating, with an average of about three barrels.

Additional economic challenges include transporting oil produced from oil shale to refineries because pipelines and major highways are not prolific in the remote areas where oil shale is located, and the large-scale infrastructure needed to supply power to heat oil shale is lacking. Average crude oil prices also have been lower than the threshold necessary to make oil shale development profitable over time. The influx of workers associated with such projects, as well as their environmental impact, also are issues.

While industry has focused primarily on overcoming technological challenges and trying to develop a commercially viable operation, "the 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," Mittal said.

Colorado Reps. Scott Tipton and Doug Lamborn testified at the oversight field hearing that the Obama Administration has repeatedly delayed and hindered oil shale development to the detriment of local economies, job creators and "American families struggling with high energy costs."

"The United States is blessed with tremendous oil shale resources – and we have appropriately been called the 'Saudi Arabia' of oil shale," said Lamborn, noting that the Western U.S. may hold more than 1.5 trillion barrels of oil, enough to supply the U.S. with energy for the next 200 years.

Dan Whitney, heavy oil development manager for Shell Exploration and Production Company, said that the lack of policy and regulatory consistency from one administration to another makes the investment climate even more risky and potentially untenable.

Gary Aho, representing the National Oil Shale Association, said that 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."

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