Oil Shale

PREPARED BY THE SENATE ENERGY COMMITTEE – REPUBLICAN STAFF

Oil Shale

Background and Impacts

What is oil shale?

· According to the Argonne National Laboratory, “the term oil shale generally refers to any sedimentary rock that contains solid bituminous materials called kerogen that are released as a petroleum-like liquid when the rock is heated.”

· The kerogen content of oil shale varies widely, from less than ten gallons per ton to more than 100 gallons per ton. To be considered recoverable, it must yield at least 15 gallons per ton of rock.

· Oil shale is converted to liquid fuel through a process known as retorting, which involves heating a rock formation to a high temperature and then separating the oil that is produced. This may be accomplished through in-situ processes, which occur underground, or at the surface after extraction.

· With oil prices now above $130 per barrel, concerns about the economic feasibility of oil shale have faded. Mining and surface retorting of oil shale is projected to be cost-effective at oil prices above $54, with in-situ retorting viable at prices higher than $35 per barrel.

How extensive are the United States’ deposits of oil shale?

· While the U.S. is known as the “Saudi Arabia of coal,” our deposits of oil shale may be much greater. According to the Department of Energy, “America’s total oil shale resources could exceed 6 trillion barrels of oil equivalent.” Total resources could exceed 2 trillion barrels of oil equivalent in the Green River Formation in Colorado, Utah, Wyoming, and elsewhere.

· Of this amount, at least 800 billion barrels of oil equivalent are technically recoverable. At current rates of consumption, those resources are equivalent to a 106-year supply of conventional oil.

Why is oil shale important to America’s energy supply mix?

· Global oil consumption is rising rapidly, but U.S. production has fallen to its lowest level since 1947. If America does not reduce its heavy dependence on foreign oil, our nation will become even more vulnerable to geopolitical instability, supply shortages, and energy market volatility in the years ahead.

· Alternative fuels, particularly those made from oil shale, can provide an affordable and reliable replacement for petroleum long into the future. Because oil shale can be used to create diesel fuel, jet fuel, and naphtha (gasoline), it could become a significant source of energy for our transportation sector.

How have congressional Democrats sought to delay the development of this vital resource?

· The Energy Policy Act of 2005 directed the Department of the Interior to issue final regulations for commercial oil shale leasing by the end of 2008, in order to provide industry with a ‘road map’ for development and financial assurance to potential investors.

· Last year, Democrats on the House Interior Appropriations Subcommittee inserted language into the omnibus spending bill that effectively places a one-year moratorium on the completion of final regulations.

· In May 2008, during the Senate Appropriations Committee’s markup of the Fiscal Year 2008 Supplemental Appropriations bill, Senator Wayne Allard offered an amendment to lift the moratorium. The amendment was defeated on a strict party line vote, with 14 Republican members in support but 15 Democrats opposed.

· Continued obstructionism will prevent the timely release of final regulations and, ultimately, progress on oil shale production. Companies seeking to invest billions of dollars in oil shale development are asking to know the “rules of the road” as soon as possible.

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