Posted by
I believe on Tuesday, July 24, 2007 3:26:07 PM
Imagine laboring on a project for a considerable part of the year. The work accomplished shows promise, benefits consumers, and generates substantial revenue for the company. Despite all of the project’s benefits clearly outweighing the costs, your boss puts the kibosh on it.
In reality, the commercial production of Shell’s Mahogany Oil Shale Research Project, a study over 25 years old, could very well be headed down the same path with its ultimate boss being the federal government.
An estimated 1.2 to 1.8 trillion barrels of oil is available in the Green River Formation, an area which expands through most of Colorado and parts of Utah and Wyoming; the recoverable oil refined from oil shale would provide another resource for fuel production. In fact, an Environmental Impact Statement produced by the U.S. Department of Interior and Bureau of Land Management stated that:
A moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia.
Any hopes of expediting the process to large scale commercial production appear grim at best. Despite Shell’s promising research and development of oil extraction technology, including a freeze wall the size of a football field to protect Colorado’s drinking water, the fact remains that federally owned land encompasses 70% of the oil shale accessibility.
If the latest energy bill moving through Congress indicates the path energy legislation will move in the future, Shell’s most hopeful target of ten years for mass commercial production appears to be unfortunately futile, as Shell projects a much longer time period if Congress fails to concede regions of the off-limit reserves.
In his op-ed Untapped oil supplies, Senior Fellow Ben Lieberman asserts that:
[C]ongressional efforts to reduce the restrictions on domestic energy productionhave fallen short in previous years. And now the new Congress isn't even trying. The Senate energy bill does nothing to lift existing restrictions, and the House version wants to add new limits.
While these restrictions apply to domestic crude oil production, one would expect comparable restrictions on oil shale in the U.S. to protect federal land and prohibit any contamination of the Colorado River basin. Restricting the domestic supply of oil and creating artificial markets for renewable fuels distorts the market, with the consumer bearing the additional costs.
Claiming the oil shale industry could compete at $25 a barrel, Shell made an effective sales pitch yesterday to Capitol Hill staffers, not to advocate subsidizing the production of oil shale, but to simply consider the economic benefits of reduced restriction and private investment. The risk involved is not whether oil shale will ever generate a profitable return; it’s whether or not Congress buys the pitch to lessen regulation for commercial production in a timely fashion.
Cross posted on www.regwatch.org (A Heritage Foundation Production)