This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
The Obama administration's decision to take a "fresh look" at oil shale policy and regulations is sound public policy that will benefit the future viability of commercial development in the long-term.
Today, the commercial feasibility of proposed oil shale development remains tenuous due to a number of technical, environmental, regulatory and economic challenges.
A formal, nonbiased review is needed for a number of reasons.
First, the current information base for making informed decisions about oil shale development is outdated, lacks transparency and raises more questions than it answers about oil shale as a realistic fuel source.
The most recent comprehensive economic study of a potential U.S. oil shale industry dates to 2005 and does not address critical issues such as the impact of price volatility on the maturation of the oil shale industry.
The use of proprietary data in economic modeling, such as the National Strategic Unconventional Resource Model — used to estimate the benefits of aggressive incentive packages for the oil shale industry — is out of step with public demands for fiscal responsibility in the public sector.
Second, additional review will help to establish the costs and benefits associated with the large taxpayer and public lands investment in oil shale.
A recent peer-reviewed study, for example, states that the "reasonable estimate of the emissions range [for oil shale from a "lifecycle" standpoint] is between 1.25 to 1.75 times those from conventional oil." The economic model mentioned above also showed that, even under highly generous public subsidies, oil shale would not show a net return for at least 25 years.
Third, a number of publicly funded research programs on oil shale are nearing their deadlines. Providing more time will have the practical benefit of allowing decision makers and the public to learn from these studies which address key issues such as water resources, advances in drilling techniques and socioeconomic impacts.
The large scale of commercial oil shale production means final decisions about development of the industry will have tremendous economic, fiscal, social and environmental impacts. Producing a reliable development plan means taking the time to carefully evaluate a number of specific issues, many of which are potential deal breakers.
Infrastructure: What are the costs and feasibility of the significant upgrades in refinery, pipeline capacity and auxiliary power plants needed to accommodate oil shale?
Water: As the administration noted, a 2010 Government Accountability Office report projects that water usage demands of oil shale development — hundreds of thousands of acre-feet per year — greatly exceed water availability in the Colorado River Basin.
Community impacts: The rapid build-up of natural gas production in the Piceance Basin in northwestern Colorado in the mid-2000s raised questions concerning whether impact mitigation, revenue collection and distribution, and services delivery are adequate.
Economies of scale: Neither existing production techniques nor new technologies in development have ever actually functioned at the scale that both industry and government experts predict would be required to make oil shale financially viable.
Comparative analysis: The costs and benefits of the sizable public investment necessary for this fuel source should be evaluated alongside comparable investments in other energy sources, including alternative fuels as well as energy conservation.
Existing operations: An analysis of the only existing oil shale operations, in Estonia and China, shows both require strong government support and contribute minimal energy.
Oil shale reserves in the Western states could hold great promise, but the complexity, cost and technological hurdles associated with a viable, commercial industry are daunting.
Before any final decisions are made, national taxpayers, as well as local and state governments, must have the opportunity to better understand and more fully coordinate with the federal government and industry about the risks, costs and rewards of oil shale.
Simply put, we still have a great deal to learn about whether it is possible to minimize the risks and maximize the opportunities of oil shale, and if so, how.
Julia Haggerty is a policy analyst at Headwaters Economics, a Bozeman, Mont.-based independent, nonprofit research group.