U.S. oil shale has potential, report says

WASHINGTON — The United States has an oil reserve at least three times that of Saudi Arabia locked in oil shale deposits beneath federal land in Colorado, Utah and Wyoming, according to a study released this past week.

But the researchers at the RAND think tank caution the federal government to go carefully, balancing the environmental and economic impacts with development pressure to prevent an oil shale bust later.

"We've got more oil in this very compact area than the entire Middle East," said James Bartis, RAND senior policy researcher and the report's lead author. However, he added, "If we go faster, there's a good chance we're going to end up at a dead end. You could end up bogged down."

For years, the industry and the government considered oil shale — a rock that produces petroleum when heated — too expensive to be a feasible source of oil.

However, oil prices, which spiked above $70 a barrel last week, combined with advances in technology could soon make it possible to tap the estimated 500 billion to 1.1 trillion recoverable barrels, the report found.

That could meet a quarter of the nation's current oil needs for the next 400 years.

But the risks are high. It's unclear how new technologies will affect the land, air and the Colorado River, Bartis said.

The study, sponsored in part by the U.S. Department of Energy, comes in the wake of Hurricane Katrina, which disrupted Gulf oil production and sent crude oil prices surging.

It also comes about a month after the president signed a new energy policy, which dramatically reversed the nation's approach to oil shale, opening the door within a few years to companies that want to tap deposits on public lands.

Bartis said he hopes lawmakers will take the study's recommendations into consideration as they make future decisions on oil shale.

The U.S. has tried to develop oil shale in the West before. Sky-high oil prices in the 1970s led Congress under President Carter to create the Synthetic Fuels Corp., to find new, domestic sources of crude. Entire towns in Colorado were created and all-but abandoned after oil prices bottomed out in the 1980s.

The RAND researchers estimate the federal, state and local governments would rake in about $10 billion a year from lease payments, royalties and taxes if the industry produced 3 million barrels a day.

Production would also likely cause oil prices to fall by as much as 5 percent, saving American oil consumers up to $20 billion a year and creating hundreds of thousands of jobs.