The Energy Conundrum
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The Energy Conundrum
by Jennie Lay
The Good, bad and ugly of Northwest Colorado's expanding energy economy
On a glorious May morning, Bruce Gordon is quiet as he pilots his small EcoFlight plane over Colorado’s northwest corner. He’s providing a bird’s eye viefor congressional staffers for John and Ken Salazar, representatives from two environmental groups and me, the reporter. At 750 feet above the deck, he lets this vast, rugged landscape bursting with spring color speak for itself.Confluence of Yampa and Little Snake rivers. Photo by Jennie Lay The terrain is not subtle. With its stark geology and twisting rivers, it screams wilderness at me. I peer down at the stunning cliffs, crags and desolation of Sandwash Basin, Irish Canyon, Vermillion Basin and the Little Snake River Valley with a nesense of wonder. But Bruce’s flight is designed to give decision-makers an alternative perspective on the impacts of natural resource extraction, and there’s more on this horizon than meets the eye: Oil and gas run thick down there. Known as the Little Snake Resource Area, the territory northwest of Craig is mostly managed by the Bureau of Land Management. Within about 1.3 million acres are five wilderness study areas, five proposed stretches of wild and scenic rivers, seven citizens’ wilderness areas and Dinosaur National Monument. The area is home to wild horses, trophy elk and a healthy stronghold of sage grouse. Increasingly, there’s also a web of dusty roads with dead end spurs and acres cleared for natural gas wells. It’s a pattern that communities like Meeker and Rifle started seeing seven years ago as gas drilling first took hold. Nothis frenzy is moving north, and the area around Craig is on the brink of becoming the West’s next big natural gas development. This is where two worlds collide like rutting bucks. On one side, countless jobs are created by energy development. On the other side are the socioeconomic stresses of a boom economy and compromised habitat for wildlife – not to mention cutting dangerously close to some of the most remote wilderness in the United States. But in this era of shrinking energy resources, increasing demand and technological innovations to access once untouchable resources, the arrival of energy development here is imminent. Whether it’s oil, gas, oil shale, coal or maybe even a giant wind farm, the biggest hurdle isn’t extracting the resources, but making sure it’s done in a way that’s economically viable, environmentally responsible and socially sustainable. Energy development has lucrative aspects. Among the immediate benefits are well-paid jobs, more property taxes and a flood of severance tax revenues, plus state payments that return to local communities in the form of energy impact grants. “Done well, it (energy development) can be very positive,” says Mike King, the deputy directory of the Colorado Department of Natural Resources. “But it begs for a sound approach.”
Unfortunately the boom of fossil fuel development also sucks local resources and contributes significantly to CO2 emissions. Energy extraction requires massive infrastructure to mine and move resources, plus a substantial workforce that puts pressure on competing job markets like tourism – an industry destined for cutthroat competition against energy extraction’s higher paying jobs. Housing is a quagmire in energy boomtowns, while schools and hospitals may struggle to absorb the rapid influx of people. Both in terms of quality and quantity, water is a constant concern. And then there’s the dark side of a transient population of miners, roughnecks and wildcatters that has cropped up in many energy-boom communities from Pinedale, Wyo., to Rifle – bringing the possibility of drug traffic and crime, particularly methamphetamines.The Gas We’ve Got Driving around Northwest Colorado these days, it’s hard to miss the signs of our unprecedented gas boom. The nation’s greatest concentration of towering drill rigs lights up the hillsides near I-70 and the hotly contested Roan Plateau, to the Wyoming state line. Swaths of forest and meadows have been sliced through the region for two nepipelines to transport natural gas out of the state. Trucks hauling massive pipes, generators and earth moving equipment traverse sleepy rural roads. Between 1998 and 2003, gas production in Colorado increased by a factor of more than 16, topping a trillion cubic feet in 2004, enough to heat 500,000 homes for 25 years – and that was before the drill permits hit a record pace. As of May 3, the Colorado Oil and Gas Conservation Commission had approved 2,051 nedrill permits this year, putting the state on pace for an estimated 6,186 permits in 2007. This is a 4.7 percent increase over the previous record high of 5,904 permits in 2006, and more than doubled the 2,915 approved in 2004. Two of the state’s top five gas producing counties are in Northwest Colorado (Garfield and Rio Blanco), with Moffat County poised to join them. During the past seven years, gas production in Moffat County has been relatively stable, but at least 140 nepermits have already been approved there since the beginning of 2006, and Questar alone is proposing 4,000 gas wells on their leases in the Hiawatha gas field at the northern edge of Moffat County. Caught in the middle: beautiful locals like Vermillion Canyon are in the middle of the Little Snake Resource Area. Photo By: Jennie Lay The Little Snake Resource Area, primarily encompassing Moffat County, offers an estimated 14 trillion cubic feet of recoverable gas and another 74 million barrels of recoverable oil. According to the BLM’s draft resource management plan that is due to be signed next year, about 97 percent of those reserves are available for extraction, and about 70 percent of the leases are already secured. The number of active drill rigs in Colorado has doubled in the past three years, with at least half of them undertaking directional drilling, one way to help decrease surface impacts. Paul Matheny, vice president of Questar Exploration and Production, says this may not be feasible in Moffat County’s quickly developing Hiawatha gas field. The Coal We Know
The powerful presence of coal in Northwest Colorado precedes gas development. With close to 500 employees, Twentymile Mine, located just south of Steamboat, is an underground longwall operation that is Colorado’s most productive mine and often a top contender in the nation. Twentymile shipped a record 9.6 million tons of losulfur coal in 2005 and growing operations expect to up the ante to 12 million tons per year by 2008 – enough coal each year to power eight Hayden power plants. Currently, there’s an estimated 72 million tons of recoverable coal in Twentymile's reserves. With well-entrenched programs like energy impact grants and a skilled local labor force, coal is long past the “boom” economy that gas is poised to bring to the region. Coal mines in Routt and Moffat counties are long-term economic stabilizers. Done with enough planning and foresight, hopeful county commissioners, landowners and environmentalists say gas might hold the same promise – but they all agree they’re going to have to plan fast. The elephant lurking in Northwest Colorado’s living room is oil shale.The Oil to Come Three years ago I went to Parachute, on a nuclear expedition – a mission to find Project Rulison, a well where scientists exploded an underground nuke in 1969 to unleash natural gas.
Starting at Parachute’s weensy visitors’ center, an elderly woman reminisced about Project Rulison’s “beautiful flare” as the radioactive gas it produced was burned off. As I departed past tourist brochures and glossy corporate pamphlets proclaiming, "Natural Gas Exploration and You," and "Mining a Revolution," she offered me a commemorative token. Delving into a bucket by the door, she handed me a greasy chunk of rock with a kitschy-looking leaflet called "Oil Shale, The Rock That Burns.” Power and progress: wildlife must live through development. Photo courtesy of Mark Parchman.
At the time, I didn't grasp the significance. After all, she merely chuckled and instructed me to go home and light the rock on fire – “but keep it outside 'cuz it's stinky,” she warned. Nine months later, Sen. Ken Salazar addressed the oil shale discussion during a town hall meeting in Steamboat. But he wasn't chuckling. “All of us who love the state of Colorado need to watch it carefully,” he warned. He talked about oil shale's abundance, its uncertainty and the need “to make sure tens of thousands, of tens of thousands, of acres are not leveled" for oil shale. Northwest Colorado is the Mother Lode of oil shale: The world’s largest known deposits are in the Piceance Basin, near Meeker. The potential is huge. Domestic crude oil production has steadily declined since its 1971 peak, but a recent report by the RAND Corporation, a public-policy think tank, estimates enough oil can be weaned from oil shale to more than triple Saudi Arabia’s proven oil reserves. Current U.S. demand for oil is 21 million barrels per day, but a trillion barrels could be recoverable from oil shale in Piceance Basin if the industry can figure out a way to extract it economically.
Coaxing oil out of the Piceance Basin’s rock has always been the challenge. Oil shale (neither shale nor oil) is a hard rock called marlstone that contains kerogen: Heat the rock, process the kerogen that seeps out and get a low-grade oil. Previous attempts to develop oil shale in the U.S. – most notoriously during an early 1980s oil shale period in Colorado that collapsed on a single “Black Sunday” – involved digging massive open pit mines, cooking the rock at 1,000 degrees in electric “surface retorts” (multi-story towers that are essentially giant barbecues) and releasing kerogen. That’s all before shipping the oil away for refining. That process uses tons of water, releases sulfur in the air and leaves heaps of salty, spent shale. Today, Shell is experimenting in the Piceance Basin with its proprietary “in-situ conversion” process that might prove less environmentally destructive than traditional strip mining and surface retorting. In-situ conversion is essentially a giant, underground electric oven designed to melt oil shale in place, insulated by an even bigger earthen freezer to keep groundwater out of the mix. After three or four years of 700-degree heat, high grade shale oil can be pumped out of the ground (generally from 500 to 1,000 feet belothe surface) and sent to a refinery. It’s estimated the process will be competitive with crude oil prices at $25 to $30 per barrel.
Shell is dumping tens of millions of dollars into their experimental project. Meanwhile, Congress is plowing ahead with expedited oil shale land leases in the Piceance Basin under the terms of the 2005 Energy Act, regardless of proven technology or a social net to catch communities that get swept away in development.
Unlike gas, with its known components, oil shale production is hard to plan. Shell's technology might be the golden ticket; and it might not. At a February community information session that Shell hosted in Meeker, Shell gave us a glimpse of their technology, a report on their demonstrated successes and some hope that this development might take a holistic community-wide approach. Still, the crowd murmured uneasily. Shell representatives wearing shiny nedenim mingled with lifelong ranchers who were especially concerned about water, local government employees concerned about social services and curious residents wondering what might be in store for their employment and education. The dilemmas that oil shale developers will face are ones that the entire energy industry and the communities that house it are already wrestling with. “The problem we all have as county commissioners in this kind of county is that we don’t become addicted to that money,” Garfield commissioner Larry McCown warned attendees at the Northwest Colorado Energy Summit in May. He knew, probably better than most in the room, what it feels like to live in the midst of energy development. I could sense the awe among a crowd that was largely in the initiation stages of the drilling prospects to come – Moffat county officials dreaming of the prospects of economic development and landowners anticipating financial windfalls. But Larry kept his note of caution: “We’re living’ the dream. But five years, 10 years from now, I don’t know.”
Lurching through the choppy air currents, our EcoFlight followed the Yampa River back to the Craig airport. To me, it still looked rural, wild and tranquil – hard to imagine all the energy development that may soon change this landscape. But a fly-by on the Craig power plant, with giant piles of coal lined up for combustion, was a stark reminder of America’s voracity for energy. An insatiable appetite my back yard is destined to feed.