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Oil, coal, gas: Energy development an integral part of our economy

Donna Daniels

Energy development, be it oil shale, coal or natural gas, has been the backbone of western Colorado’s economy.But it’s an industry that peaked and crashed and took the citizens of Parachute, Grand Junction, Meeker, Rangely and Rifle on a long roller coaster ride over the last century.Perhaps the biggest bump in energy development’s bumpy ride came on Black Sunday, May 2, 1982, the day Exxon shut the doors of its Colony oil shale project and put 2,100 people out of work. The closure began a tsunami of social upheaval that left Garfield and Mesa counties in economic depression. Both counties took about eight years to recover.Although Black Sunday marked the end of the oil shale era in western Colorado, it did not close the door on energy development. Nor did it mean the end of the oil shale industry.Houston-based Shell Exploration & Production, a subsidiary of the international petroleum giant Royal Dutch/Shell Group, launched its Mahogany Project in 2001. Shell hopes its new technology will finally unlock oil from the shales of the Piceance Basin.Shell held a series of public open houses in February in Rifle, Rangely and Meeker. Company officials said they are nowhere near ready to go commercial, but they hope their in-situ mining process will eventually prove fruitful.”Right now it’s a dream. There’s no guarantee it will work,” said Shell E&P spokesman Rich Hansen at the Rifle open house in February.But the very fact that Shell has committed time and money to the project means it does think oil shale will eventually pay off, said alternative fuels consultant Jerry Sinor of Niwot, who worked in oil shale development in the Piceance Basin the early 1970s.”Shell is very patient. They see enough promise to invest a lot of money in it,” he said.In-situ oil recoveryThe in-situ technology differs from the method used during the oil shale hey days of the 1970s and early ’80s. Most companies mined oil shale by blasting and removing the rock, then hauling it to a processing plant where the rock was crushed and heated to extract the oil.Shell, on the other hand, is drilling deep into the shale layers and sending heaters deep underground to liquefy the oil, or kerogen, as it is technically known. The same in-situ process was successfully used in Sweden for about 20 years beginning in World War II, Sinor said.But Shell’s success will boil down to economics, he added.The most expensive part of the process, he explained, is heating the kerogen. That takes lots of electricity.Besides taking into consideration the cost of production, Shell must also consider the oil market.”It’s obviously not economical. Oil prices are not sky high right now.” Crude oil was selling for about $26 per barrel on May 1, according to oilprices.com. Two decades ago, oil companies said the price of oil would have to hit $40 a barrel for oil shale to become economically competitive.Other companies tried to stay with oil shale even after the bust, waiting for crude oil prices to climb and make oil shale commercially competitive.Unocal, one of the many petroleum giants to enter the oil shale play in the late 1970s, was the only company to build a commercially sized processing plant, Sinor said.Despite its best efforts, it too succumbed to rising costs and decreasing oil prices and finally closed down its Parachute plant Feb.19,1991.Rise of natural gasWith the demise of oil shale development in Garfield County another hitherto overlooked energy resource gained attention.Natural gas, now the primary heating fuel for homes and businesses in the West, got short shrift as a potential energy source when the oil and oil shale booms were going on, Sinor said.Prices for natural gas were controlled by the federal government during the 1970s, he explained. “That’s why we ran into a problem with supply,” he said. “It was not worthwhile to explore for it. It was considered a waste product of oil.”But the energy crisis in the United States caused by the oil embargo of the Organization of Petroleum Exporting Countries in 1973 eventually led to the present wave of natural gas development.In the early 1980s, price controls on natural gas were lifted.”There was a big spike in price,” Sinor said, and a drilling boom.Exploration companies “found it economical to extract gas from coal beds.”At the same time, power generating plants were converting from oil to less expensive, clean-burning natural gas, further increasing demand, he said.Gas wells were drilled sporadically in western Garfield County through the 1970s. When prices began to climb after price controls were lifted, drilling began in earnest.Companies such as Barrett Resources began acquiring natural gas leases in the early 1980s and started drilling in 1984, said Steve Soychak, district manager of Williams Co. in Parachute. Williams acquired Barrett last year.Williams now has about 600 producing gas wells, and there are approximately 1,000 producing gas wells between Silt and Parachute, Soychak said.”Now we’ve seen population grow and there’s even more demand for natural gas over the last 10 years,” Soychak said. “Commodity prices do go in cycles, and activity goes along with commodity prices. Last year was a peak year. There’s always been natural gas out here, but the bulk of development has been in last 18 years.”Energy development remains a key component of the county’s economic future. Natural gas wells continue to pump out their product, and drilling looks to continue unabated.Shell’s oil shale project is intriguing in that it may yet prove to be a viable alternative energy source.The people who saw the boom and bust don’t want to repeat the experience. But if the response of the folks who listened to Shell’s presentation at the open houses in February is any indication, perhaps there is a feeling of quiet optimism in the air as the Mahogany Project develops.


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