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l Od. 27. 1974 31 >(.. A SECTION ON THE ENVIRONMENT OF THE WEST Billion 1 , - Dollar Shale Pullout Decision Outlined BJ STEVE WYNKOOP ments or an aodent ocean buried in Cllo- De-nnr P05t Staff Writer rado's Piceance Basin. The manager 0{ a Colorado project that The sediments didn't quite turn to oD, was closest to making a billiCfl..dollar de- but all that Is needed Is some heat.-and hydrogen to do the trick. r cision 10 den-lop oU shale is less than The knowledge that almost two trlllion enthusiastic about Its proopects. barrels of oil is at your fingertips is a ~ollis M. Dole. manager of the ()))OIly tantalizing inCt'ntive to find eronomical Development Operation, says oil II h a I e ways to extract it. may never be developed unless there are While oil-shale proponents Inside and more tanrable goyernmental policies and outside of major oil companies are still an end to inflation. promoting oil shale and making optimistic statements about its future. the company For more than 70 years, men ha\'1!I that had done the most work and was Cr@amed about unlocking the world's larg. closest to constructing a comm@rcial est hydrocarbon deposit from the scdi. operation has pulled out. l\'hen Colony Development Operation dollar dtocisI.on to pull back from 011 ~. announced Oct. '" It was Indefinitely into the billioo.(\oUar dedslon to pull back suspending plans to build Its proposed from 011 shale. Colony Development Is . Joint venture SO,OOO barrel-per-day oil-shale plant near sponsored by Atlantic- Richfield Co. Grand Valley, Colo., the nascent oil-shale (ARoo), The Oil Shale Corp. (TOSCO), industry received a blow from whicb It Shell Oil Co. and Ashland Oil, Inc. might not rectl\'er. ARCO was to be the operator of the Added to this Is the detmnlnation of the plant. Federal Energy Administration (FEA) to Unless economic and political climate! reject the goal of U.S. energy indepen- change dramatically, Dole aaid, eompa- dence and accord oil shale a low priority nles that are four to five years behind e\'en 11 independence from foreign oil Colony in oil shale will be coofronted with Sources were made a national goal. the same painful decision. In an extensive inter....lew last week, Dole, as assistant secretary for mineral DoJe spelled out what \\-rot into the billion. resourees from 1969 to 1973, was so bullish . . Billion-Dollar Deelslo~ On Shale Pullout Outlined nolI!' remains convmced that Continued from page 3': \the plant would, have ml!'t all hat WllS man:Ina.1\y a1tfllct~ve ,environmental entena. . t aboUt J1 per cl!'nt, aCCOrdm~\ M !'UCh. he stated. It w.oulrl - - . -",rd of ('n....U'on- o industry sour~s,. have !let a al~ _ t With Arab oil i/:OIng for about, mental commitment that i~ th ~ml!' price and Presldl'nt ~ du~lrV ~enerallY would ha~1!' Fe dtrvitijt to forcl!' down the I ~n 'expected to [0110"'. oi~P of domestic oi~. .011 Sha~e I "Ilhmk it Is too bad \\'1' 'tH'rp ~~gj.t lOOK promiSing no 'I bl to han i/:one forward ........'. . nol a e h bel!'n thl!' Doll' !'.aId '\bf>eause it would, a\'1!' de- DEC1SI0~ ",WE .. no first malOr nf'''' mdustry to sed "EconomicallY Ihl'fP ":,11 Dolf' velop under Ow Mwl~ p:lS:-d way you co,uld m<lKe It'llrt~erS I!'nvironmenHll regulatlOnS an -d ttwo jomt.wnture p ~ .. [)ole lIald, ~1 1 act._, conclurlt'd Oct. ~ ( ~ ..., . . . . on oll shale that he was widely suspectt:'d by environmentalists of developing a fed- eral leasing program that would be a giveaway to the oil companies. Dole was once a member of a large c0- terie of oil shalers whose true faith Is that oil shale will be developed. Tbe only ques- tion is when, they say. Now, whl!'n asked if 011 shale will be de- veloped, Dole cites a list of economic and social factors and concludes: "When these things come Into Juxtaposl- tlon, then it will go. It might be tomor- row. It might be ne....er." Dole spew from experience. He's been further into the business of making 011- shale development worlt than any other Individual. His operation was on the brink of com- mitting nearly a billion doUars on the ....en- ture, when from the corporate board rooms came the fateful word Oct. 1: Stop. The reasons given for the decision wl!'re double-digit inflation, uncertainty In feder- al energy policy and tight money. Dole clings to those reasons:, while others ha....e speculated that it was pres- sure from environmentalists or inside in. formation that the rEA would frown on oil shale that motivated the decision. Rising cost estimates for constructing the oil-shale plant were the largest single factor in the decision, Dole said. A consultant to Colony did a million- dollar study of the cost of constructing an oil-shale plant that would turn 66,000 tons of raw shale into 50,000 barrels of oil every day. That early estimate in l!1i3 ~ho\\-"ed that a plant could be built for $250 to $300 million, Dole said. By the first of this year, another consul- tant retained to do cost studies, estimated the plant would cost $400 million to $450 million. After that estimate was given, ARCQ officials said oil could be produced at S6 a barrel. But the figures kept creeping upwards. And Colony had already started to get worried after it saw the Jan. 1 figures, Dole said. With a decision made to start construc- tion in May of 1975, Colony, with a wary eye on inflation, asked for monthly report! oncosts. Then, Dole started looking around for materials to build the plant with. It woUld be a huge project. Eacb of the 10 units that would heat the shale to extract oil would be as tall as the Denver Hilton Hotel. Dole says Colony found that mawrial suppliers \It'anted virtual blank checks for plant components and longer lead times to build them than expected. Meanwhile, higher and higher cost es- timates for construction kept rolling In. . By September, the consultants estimat. ed that it would cost a staggering $9\5 million to build the plant. Even t!wn, some in Colony clung to the belief that ARCQ, which had sunk $5lI million into oil shale already, would bet "on the come" and let the project con- tinue. Colony trlmmf'd $65 milllon off the con- sultant's cost estimate and passed the .....ord that the plant would probahly cost $850 mi1Jion. At that. oil from shale would cost $12 a barrel with a rate of return on investment Continued on page 33. 00<19