With boom looming, Rifle recalls bust
Vail, CO Colorado
GLENWOOD SPRINGS ” Glenn Vawter remembers exactly where he was on Black Sunday, May 2, 1982, when the oil shale boom busted.
“We were having a birthday party for my son,” said Vawter, who was then a senior vice president with The Oil Shale Company, or TOSCO as it was commonly known.
TOSCO partnered with Exxon in the Colony Oil Shale Project in Parachute.
In response to an oil embargo by the Organization of Oil Producing Countries in the early 1970s, which severely curtailed worldwide oil supplies, Congress in 1979 passed the Energy Security Act. The act established the Synthetic Fuels Corp., which set aside $88 billion to fund development of alternative fuels, including oil shale.
Contrary to what the oil companies that invested in oil shale production hoped, oil demand decreased in 1982 and oil prices plummeted. Exxon shut down the Colony project, putting more than 2,000 people out of work in one day. That precipitated a mass exodus of workers from the county, hundreds of home foreclosures and an economic depression that took a decade to remedy.
“I was in a state of shock for quite a while,” Vawter said when his boss called him that Sunday with the news. “There was so much construction on the site.”
Exxon had also launched construction of a new town, Battlement Mesa, to house the thousands of workers it expected when oil shale production reached commercial levels. But that Monday, May 3, work on the town ground to a halt.
Only one company, Unocal, which also had a processing plant in Parachute, hung on until 1991 when operating costs forced it to shut down.
Vawter laid off 120 people in his Denver office. He went on to make a career out of mining consulting, most notably to the king of Morocco, and retired to the Roaring Fork Valley a few years ago.
Now he’s come out of retirement and is involved in EGL Resources, a newly formed oil shale company that is experimenting with an underground oil shale heating process on one of four Bureau of Land Management research, development and demonstration leases near Meeker.
“I hope it goes a different way now,” he said. “We had high hopes then, and maybe they’re even higher now.”
That hope is shared by many who see the new wave of oil shale development as both a blessing and potential curse.
Andrew Gulliford, who lived and taught in the valley during the boom and wrote a book called, “Boomtown Blues,” sees the latest development as a repetition of the past.
“I’m astonished that we haven’t learned from the past,” he said.
Once again companies are “showering money on the West Slope” to mount research projects in the Piceance Basin and the federal government is promising to offer commercial leases next year.
Gulliford, who teaches history at Fort Lewis College in Durango, advocates “a slow methodical approach” that figures out how to have a net gain in the amount of energy in a barrel of oil shale over the amount of energy it takes to produce it.
Oil shale will also bring another layer of impact on a region that is already feeling the effects of fast-paced oil and gas development.
Rifle, which has seen unprecedented growth in the last few years partly because of the burgeoning oil and gas industry, is already feeling the strain.
“Every piece of infrastructure in the city is maxed or under construction,” said Rifle city manager John Hier. “Housing prices are up 20 percent in the last year.”
Rifle’s wastewater treatment plant is at capacity and the city is struggling to find a way to pay for a new $20 million plant. Motels are full of oil and gas workers.
“It’s just one thing after another,” he said.
Shell Exploration and Production, which launched its Mahogany Research Project in 2000 in the Piceance Basin, continues to test its “in-situ retort process,” which involves heating the shale underground to liquefy an oil-producing organic substance known as kerogen, then pumping it to the surface.
The company resists making projections of how much it could produce in the next decade.
“Everybody wants to know that,” said Shell spokeswoman Jill Davis. “We don’t have those answers, and if we did it would be like issuing the ‘white paper’ which sparked Black Sunday.”
Exxon published a so-called white paper in the early 1980s that predicted it would produce 50,000 barrels of shale oil a day by 1985. Exxon also said that with the need for industry workers, the population of Battlement Mesa would reach 25,000 by the 1990s.
“We hope to disclose bigger plans when we know it’s something we can deliver on,” Davis said. “We know our technique works, but we want to make sure we do this in an economically viable, environmentally sustainable and socially responsible way.”
She said Shell also hopes Bureau of Land Management will go forward with its commercial leasing plans next year.
Although it’s not necessary for Shell’s research plans, which are taking place on over 20,000 acres of land it owns in the Piceance Basin near Meeker, “it’s necessary (to establish) the royalty regime. We need to know how much we’ll be paying the government,” she said.
Currently, oil and gas companies operating in Colorado pay royalty owners ” either the federal government or private mineral rights owners ” 12.5 percent on gas production.
Shell doesn’t want to see a repeat of Black Sunday, Davis said.
“We want to avoid that at all costs,” she said. “It’s really important that we do this right.”
Garfield County Commissioner Larry McCown, who moved to Rifle in 1981 to work on construction of the Unocal oil shale plant in Parachute, said oil shale still holds the same promise it did 25 years ago.
“It’s a significant alternative energy to decrease our dependency on the Middle East for our energy needs,” McCown said.