And Now Here's What Happened The LAST Time America Thought Shale Oil Would Change The World

shale oil debacle

Photo: Pittsburgh Press/Google News

People can’t stop talking about America’s potential to develop its shale oil and gas.These are liquid crude hydrocarbons found deep within specialised rock formations.

But it’s not our first time shale has shaken us up.

In the late ’70s and early ’80s, the U.S. went through a frenzied period of attempting to develop domestic oil shale resources (which, although it comes from the same type of rock, is slightly different from the oil shale everyone’s talking about today).

The plan was to pump product out of mountain ranges spanning Wyoming, Utah and Colorado.

To that end, the government set up the Synethic Fuels Corporation “to create a market for synthetic fuel alternatives to imported fossil fuels” like shale oil.

Five years later, it was dead — a spectacular boondoggle 

But the hysteria at the time was incredible — rivaling what we’re seeing today.

And the company’s story teaches us a lesson about what will truly determine our energy future.

As far back as the '60s, the government recognised shale's importance

'The Department of the Navy is convinced that it is necessary to encourage continued experimentation in the mining, production and refining of oil shale and shale oil' for both emergency use and as a fuel supplement, Navy captain Ken Lovell told Congress.

Occidental was proposed to lead the project to access the estimated 1.8 trillion barrels lie beneath the those states. 'A crash program, say the Occidental engineers, could relieve the us oil shortage within 3 years,' the article says.

'The Utah sands are so hard that there is no commercial interest in extracting the oil,' the reporter wrote, though noted a new study said the setbacks would be temporary.

President Ford was still on board

By 1979, the project was ready for launch thanks to record high world crude prices and prospect of a $3 per barrel production tax credit

On March 5, 1980, the Synthetic Fuels Corporation was born

It would spend $20 billion (about $54 billion in 2011 dollars) to develop shale oil, with the goal of producing 500,000 barrels by 1987 and 2 million barrels by 1992.

But although the economic conditions were ripe, the politics weren't. It would actually take another two years before the company actually began spending money

One of President Reagan's first acts in office was firing every member of the company's board President Carter had appointed and suspending the company's operations.

Three months later, the first economic shoe dropped: Exxon shut down its Colorado plant

By the end of the year, the government was scrambling

It offered $1.6 billion to build a new plant in the region

Too late. By 1985, it was all over

'The remains of what once was a $20 billion program to wean the US from its dependence on foreign oil has become the first victim of Congress' new resolve to balance the federal budget by 1991,' the AP reported.

That simplifies things a bit. The real issue was that oil prices had collapsed, so it was no longer profitable to develop

That is perhaps the ultimate paradox of the current boom: Were it not for record-high oil prices, our new shale renaissance would have never gotten out of the ground

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