| Description |
The Green River oil shale formation in Colorado, Utah, and Wyoming is estimated to hold the equivalent of 1.38 trillion barrels of oil equivalent in place. The shale is generally acknowledged as a rich potential resource; however, it has not generally proved to be economically recoverable. Thus, it is considered to be a contingent resource and not a true reserve. Also, the finished products that can be produced from oil shale are limited in range to primarily diesel and jet fuel. Earlier attempts to develop oil shale under the 1970s era Department of Energy (DOE) Synthetic Fuels program and the later Synthetic Fuels Corporation loan guarantees ended after the rapid decline of oil prices and development of new oil fields outside the Middle East. Improvements taking place at the time in conventional refining enabled increased production of transportation fuels over heavy heating oils (which were being phased out in favor of natural gas). Rising oil prices and concerns over declining petroleum production worldwide revived United States interest in oil shale after a two-decade hiatus. In addition to technological challenges left unsolved from previous development efforts, environmental issues remained and new issues have emerged. Estimates of the ultimately recoverable resource also vary. Challenges to development also include competition with conventional petroleum production in the mid-continent region, and increasing petroleum imports from Canada. The region s isolation from major refining centers in the Gulf Coast may leave production stranded if pipeline capacity is not increased. The Energy Policy Act of 2005 (EPAct) identified oil shale as a strategically important domestic resource, among others, and directed the Department of the Interior to promote commercial development. Since then, the Bureau of Land Management (BLM) has awarded six test leases for oil research, development, and demonstration (RD&D). The ongoing program will confirm whether an economically significant shale oil volume can be extracted under current operating conditions. If so, early commercial development may directly proceed. BLM has published a final Programmatic Environmental Impact Statement (PEIS) in which approximately two million acres of oil shale lands, out of approximately 3.54 million acres total, are identified as potentially available for commercial leasing. Draft rules for commercial leases have also been issued, and final rule making is proceeding. The lease and royalties rates proposed in the draft rules appear to compare with rates charged for similar resources, but provide no unique incentive for producing oil shale. In a previous report, CRS framed oil shale in the perspective of national energy security and reviewed the circumstances under which policies first promoted and then ended support for earlier oil shale development. This second report takes up the progress toward commercializing oil shale development under the EPAct 2005 mandates, and offers a policy perspective that takes account of current turmoil in the energy sector. The Green River oil shale formation in Colorado, Utah, and Wyoming is estimated to hold the equivalent of 1.38 trillion barrels of oil equivalent in place. The shale is generally acknowledged as a rich potential resource; however, it has not generally proved to be economically recoverable. Thus, it is considered to be a contingent resource and not a true reserve. Also, the finished products that can be produced from oil shale are limited in range to primarily diesel and jet fuel. Earlier attempts to develop oil shale under the 1970s era Department of Energy (DOE) Synthetic Fuels program and the later Synthetic Fuels Corporation loan guarantees ended after the rapid decline of oil prices and development of new oil fields outside the Middle East. Improvements taking place at the time in conventional refining enabled increased production of transportation fuels over heavy heating oils (which were being phased out in favor of natural gas). Rising oil prices and concerns over declining petroleum production worldwide revived United States interest in oil shale after a two-decade hiatus. In addition to technological challenges left unsolved from previous development efforts, environmental issues remained and new issues have emerged. Estimates of the ultimately recoverable resource also vary. Challenges to development also include competition with conventional petroleum production in the mid-continent region, and increasing petroleum imports from Canada. The region's isolation from major refining centers in the Gulf Coast may leave production stranded if pipeline capacity is not increased. The Energy Policy Act of 2005 (EPAct) identified oil shale as a strategically important domestic resource, among others, and directed the Department of the Interior to promote commercial development. Since then, the Bureau of Land Management (BLM) has awarded six test leases for oil research, development, and demonstration (RD&D). The ongoing program will confirm whether an economically significant shale oil volume can be extracted under current operating conditions. If so, early commercial development may directly proceed. BLM has published a final Programmatic Environmental Impact Statement (PEIS) in which approximately two million acres of oil shale lands, out of approximately 3.54 million acres total, are identified as potentially available for commercial leasing. Draft rules for commercial leases have also been issued, and final rule making is proceeding. The lease and royalties rates proposed in the draft rules appear to compare with rates charged for similar resources, but provide no unique incentive for producing oil shale. In a previous report, CRS framed oil shale in the perspective of national energy security and reviewed the circumstances under which policies first promoted and then ended support for earlier oil shale development. This second report takes up the progress toward commercializing oil shale development under the EPAct 2005 mandates, and offers a policy perspective that takes account of current turmoil in the energy sector. |
