America’s Untapped Oil

Royal Dutch Shell, the international oil giant, thinks the solution to America's oil crisis may lie in the heart of Colorado. Since 1981, the company has quietly funded a multi-million dollar research project that many call a quest for energy's Holy Grail. The mission: to discover a way to safely and economically extract fuel from oil shale, a type of sedimentary rock found in Wyoming, Utah, and especially Colorado's Western Slope. The potential windfall is staggering. Studies over the years by industry and government alike estimate that there may be between 800 billion and more than one trillion barrels of oil locked up in these rocks--nearly three times the known reserves in Saudi Arabia. That would be enough oil to supply America for the next 400 years. "It's coming eventually. It's just a matter of when," say Roy McClung, mayor of Parachute, Colorado, a community in the heart of oil shale country. "Should all the stuff come into place, this area is going to--well, I don't know if anyone is ready for that kind of growth."

With oil bubbling over $140 a barrel, the political push is heating up. On Monday, President Bush announced that he is lifting an executive ban on offshore drilling. In June, he also championed oil shale, calling it "a highly promising resource," and asked Congress to lift a year-old national moratorium that critics say prohibits the industry from tapping oil-rich shale deposits.

But are McClung and Bush being overly optimistic about shale? Yes, say some oil industry executives, government officials and environmentalists. They point to a 2005 RAND Corporation study that suggests a commercially viable means of extracting oil from shale may be at least 12 years off, if ever. Shell, a leader in the research effort for the past 25 years, has not sold a single barrel of fuel from shale. In fact, no one has ever commercialized oil shale in the United States. The extraction process carries with it significant environmental risks as well-a political stumbling block in a region of the country where water is an extremely precious commodity.

For generations, oil shale has been more a source of frustration than actual energy. Early Western homesteaders unwittingly used the rocks to build their chimneys, only to find that they were fire hazards. During the 19th century, the stones were squeezed for kerosene and lamp oil. And by the mid-20th century, government and industry were eyeing shale as a source of gasoline and jet fuel. "The question has always been how to recover it and at what cost," says Glenn Vawter, executive director of the National Oil Shale Association (NOSA), an industry-funded advocacy group that was reborn this year after being defunct for nearly two decades.

With analysts predicting oil could hit $170 a barrel by the end of the year, the rush is on for shale oil again. But Colorado's been through booms before, only to be burned. After prices spiked in the late 1970s, big oil poured into Colorado's Western Slope, the world's biggest oil shale deposit. Flush with money and jobs, towns like Rifle and Grand Junction thrived. "People were living in tents, under bridges. There was nowhere to put all the workers," says Parachute's mayor, McClung.

But by the early 80s, oil prices fell and extraction technology never panned out. On Sunday, May 2, 1982, the bubble burst. Exxon announced it was closing its $5 billion Colony oil-shale operation. Overnight, Colorado's entire Western Slope economy collapsed. "Police were put on riot alert," McClung recalls. "Thousand of people arrived to work on Monday and were met with armed guards and the last pay check. Buildings partly erected sat for years until they were tore down. It was awful." To this day, many Coloradoans still blame "Black Sunday" as the trigger that put the state in a near decade-long recession.