I bet we'll be hearing more about shale oil, or Kerogen, this year. Canadian Tar Sand had a very profitable year in '05, thanks to a massive marketing campaign to promote Canada as the Saudi Arabia of the future. This year Colorado's shale will want some of that action. Really, all kerogen has going for it is that it is American. So, we can at least dream of energy independence. And some people will want to invest in that. I've thought for a while that it won't work, for a shortage of water, for one, and a very low return on energy.
Now Shell Oil has a particularly preposterous, and seductively innovative, plan to produce oil from shale. They intend to heat Colorado earth to 650 degrees F, from the surface to 1000 feet down, and let it cook for three or four years. This will turn the kerogen into light free-flowing oil! Lots of natural gas is also produced, which can be recovered, and many bi-products, which are mostly toxic. So that the oil doesn't escape (and pollute groundwater) they plan to construct a "freeze wall". This is a huge box of frozen earth that contains the boiling earth. They plan to do this for up to 1000 square miles!
Its hard to even imagine the environmental consequences of such madness. I read about this scheme in Dan Denning's Strategic Investment newsletter (I would link, but it is subscription only). My first reaction was that this would never work out, so why worry? But then I thought of all the people who are desperate to find the "next energy source", and the people who are desperate to achieve "energy independence", and the people who are simply desperate to get rich on any scheme no matter how stupid. And then I thought of how easily Shell and other oil companies will be able to raise billions of dollars just by making classy presentations (they will make presentations to everyone except the hapless residents of the shale country, who will have their land and health taken from them). And then the oil companies will have to do something with the dollars that they raise. They will have to go make a gigantic mess in Colorado. They will destroy what little, and very precious, groundwater there is in those high arid plains. Then naturally the whole thing will go bankrupt amid financial scandals.
So I just hope, as it becomes more obvious that we are facing peak energy, and we look to the future, and as our dollar starts its long final slide to irrelevance, that we do sensible things with the last of our capital and energy, not blow it on a dangerously idiotic shale oil boondoggle. Lets think about re-building America's rail system. There is a lot that we could fix in this country. No need to boil up Colorado.