A Roadmap to
North American Oil
Self-sufficiency:
Lessons Learned
from Alberta U.S. oil shale reserves
have the equivalent of 2.6 trillion barrels
of oil - 20 times more than the total
U.S. oil resource. By Robert Simpson
T
The roadmap for development of
Alberta’s oil sands has caught the attention of the U.S. Department of Energy’s
Naval Petroleum and Oil Shale Reserves
program. The roadmap may influence
the U.S. Energy Policy and its approach
to unconventional oil development of
the massive U.S. shale resources.
“We have been watching the development of the Alberta oil sands since
the early 1980’s and the one thing that
we have learned is not to give up,” says
Tony Dammer who has is in charge of
the U.S. Department of Energy’s Naval
Petroleum and Oil Shale Reserves Program. While U.S. efforts to recover oil
shale were abandoned in the 1980’s,
Alberta stuck with the process of oil
sands recovery until it became a viable
economic operation.
The United States has had an onand-off relationship with oil shale and
unconventional energy recovery over
the past century. The National Petroleum Reserves was established in 1912,
and there have been several ventures
into synthetic fuels since.
While U.S. efforts to recover oil
shale were last abandoned in the
1980’s, Alberta stuck with the process
of oil sands recovery until it became a
viable economic operation. In the
process, Alberta has proven some
things that were not known 25 years
ago. For example, it was difficult to
convince investors back then that the
cost of oil sands production would
decrease over time as production
increased. Alberta’s experience has
proven this to be the case, justifying
substantial initial investments that
many though would be unrecoverable.
A U.S. Task Force on Strategic
Unconventional Fuels proposed two
development cases to kick-start the
dormant American unconventional
energy recovery process:
• A measured development case where
government enables and facilitates
growth through resource access, regulatory reform, an advanced fiscal
regime and government organization.
• An accelerated development case
where government becomes a direct
participant by developing costshared demonstration projects, R&D
support and firm price floors for
product.
Initial recommendations were also
included for the task force to consider.
Access to resources on public lands
must be granted through an equitable,
Tony Dammer, Director of the US Department
of Energy’s Naval Petroleum and Oil Shale
Reserves Program, tells delegates to the ACR’s
2007 Annual General Meeting that America has
a lot to learn from Alberta when it comes to
sticking with unconventional oil recovery
technology.
stable and effective land tenure system.
A fiscal regime that quickly attracts private development capital must be created. There has to be a fast-track
technology program to attract investment, but not to break the bank. An
inclusive regulatory system and review
process that encourages expeditious
development and a predictable schedule
for permitting and approvals is important. Government has to crate an organizations structure to promote and
accelerate unconventional fuels development in a reasoned and efficient
manner.
Despite the upside of America’s
unconventional energy reserves, development must still overcome a number
of challenges before an industry can be
established. Resource access, technological efficiency, reliability, capital/
operating costs, regulatory requirements, permitting timelines and product prices are all first generation
hurdles that must be crossed.
“The Alberta experience justifies the
substantial initial investments resulting
Alberta Chamber of Resources Directory 2007 • 33
in a profitable and viable industry in
less than two decades,” says Dammer.
With oil prices reaching record levels and as part of the strategic fuels initiative launched in 2005, the massive
U.S. shale reserves are now getting a
second look as a resource for unconventional oil development.
A major impetus for accelerating
oil shale development is the U.S. federal government’s 2005 Energy Policy
that aims to secure North American
34 • Alberta
314734_SNC.indd
1
oil supply and make the United States
less dependent on foreign energy
sources. Military preparedness and
homeland defense require a secure
fuel source, but current U.S. energy
sourcing relies heavily on Middle East
energy. As a result, there’s a new
urgency in America for homeland oil
resource development. In response,
the oil shale research and development leasing program was initiated
in 2005.
Chamber of Resources Directory 2007
3/12/07 10:06:35 PM
Since the Bureau of Land Management announced its oil shale researchand-development leasing program, 19
energy companies have applied for a
chance to make the alternative energy
source an economic reality. Public
parcels of land have been applied for in
Colorado, Wyoming and Utah.
These three states hold the world’s
largest concentration of oil shale, the
equivalent, the land bureau says, of 2.6
trillion barrels of oil – 20 times more
than the total U.S. oil resource of 116.5
billion barrels.
Exxon Mobil and Chevron Shale Oil
Co. have applied for the 160-acre leases
and both were key players in the oil
,
shale boom of the late 70s and early
,
80s. The land bureau has offered the
leases for 10 years. During that time, if
the companies demonstrate their technology for extracting oil from shale is
sound and there is a viable market for
the product, they have the option of
expanding the holding to 5,120 acres.
When companies like Exxon and
Chevron staked their claims to oil shale
,
in the 70s, they were backed by hefty
government subsidies from the Synthetic Fuels Corp., established by Congress under President Jimmy Carter.
Energy companies got the boost to
spur them to find alternative sources of
crude. Back then, the conventional wisdom was that once crude hit $35 a barrel, oil shale production would be
commercially feasible. The price neither shot that high nor did the efforts
of Exxon and others prove economic.
Now, as crude prices hit $60 a barrel,
the federal government is driven by the
same fear of a dwindling world supply.
Earlier this year, the Department of
Energy’s Office of Naval Petroleum and
Oil Shale Reserves met with energy
companies in Washington, D.C., to discuss the state of oil resources and the
need for a strategic plan to develop oil
shale as an alternative fuel before oil
reserves give out.
In the early 1900’s, the federal
government set aside thousands of
acres in Colorado’s Piceance Basin and
the Uintah Basin in Utah as the Naval
Oil Shale Reserves to protect what it
saw as a strategic energy resource.
The Energy Policy Act of 2005
requires the land bureau to begin leasing oil shale tracts for commercial
production by August, 2007.
The land bureau will review the leases with a team of experts from the
departments of Energy and Defense will
have the leases issued and operations to
start next summer.
a barrier between the heating zone
around its well bores and groundwater.
It does not expect to go to commercial
production before the end of the decade.
Other companies that have applied
for leases will use a more traditional
“room-and-pillar” mining system and a
retort process above ground which
heats the shale to extract the oil.
Once companies go to the 5,120acre commercial parcels, federal environmental laws must be met.
Companies will be required to do substantial environmental studies for each
commercial parcel
It may all appear difficult and on a
tight time schedule, but it is not impossible. The U.S. continues to look to
Alberta as a place where many of these
hurdles have been crossed, and an
industry built on the recovery of
unconventional energy has become an
economic driver for one of the continent’s most vibrant economies.
The United States has
had an on-and-off
relationship with oil shale
and unconventional
energy recovery over the
past century.
In evaluating the proposed technologies, the lands bureau wants know
whether this is just someone’s science
experiment or will it really work. Exxon
Mobil and Chevron will also try an inground heating approach, now being
tested by Shell Oil in its Mahogany
Research Project in the Piceance Basin.
Since 2000, Shell Oil has been testing an in-ground heating system that
will liquefy the shale which it them
pumps out on the approximately
20,000 acres it owns in Rio Blanco
County. Shell applied for three
parcels under the land bureau’s
research and development leasing
program.
Seventy to 80 per cent of the oil
shale (in the Piceance Basin) is on federal land. The richest resource is in the
center of the basin, owned by the land
bureau.
The opportunity to convert (the 160acre parcel) to 5,120 acres is very
important to all of the oil companies.
Once they have the capacity and infrastructure in place they could upgrade
to commercial production.
Shell recently initiated the second
phase of its Mahogany Research program, testing a “freeze wall” that sets up
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Alberta Chamber of Resources Directory3/27/07
2007 •5:04:49
35 PM