Asleep at the Switch

What does a real synfuel operation look like, the kind that can change a country's energy fortunes? The answer can be found 700 miles north of Montana near a onetime frontier outpost in Alberta called Fort McMurray. At Syncrude Canada's North Mine, a huge open pit nearly two miles across and 250 ft. deep, giant shovels scoop out a petroleum-soaked deposit called oil sand that is beginning a long journey from here into the gas tanks of American cars. The region contains enough of the crude mixture to produce an estimated 175 billion bbl. of oil, eight times the known deposits of conventional crude in the U.S.

Everything here is done on a scale that would make Paul Bunyan feel right at home. The electric-powered shovels that mine the sands are several stories tall. Dozens of giant yellow earthmoving trucks lumber in and out of the mine carrying tons of freshly excavated sand. The largest ones weigh as much as 400 tons more than 200 times the size of the average car. The trucks use huge tires that cost $55,000 each. The drivers sit so high above ground that one says piloting these behemoths is "like driving a two-story house from the second-floor bathroom."

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The deposits can be as little as 25 ft. below the surface. After topsoil is removed, the shovels scoop the oily mix into the trucks, which transport it to hoppers for crushing. Hot water is injected to create a slurry that separates the raw oil from sand, clay and other particles. Then 2,500-h.p. pumps, the world's largest, push the viscous oil sands through pipes to a plant on-site that converts it to crude oil. From there, it goes by pipeline to refineries in the U.S. The output of the Alberta operations is expected soon to reach 1 million bbl. a day, surpassing U.S. crude production on Alaska's North Slope. The U.S. now imports more oil and petroleum products from Canada than from any other country.

Before you conclude that the moral of this story is that Canada is just lucky to have the stuff, read on. For the U.S. has vast quantities of a similar deposit called oil shale, a claylike rock soaked through with fossil fuel. In fact, at least 1 trillion bbl. of it, or four times Saudi Arabia's oil reserves, is locked up in the mountains 200 miles west of Denver. The U.S. spent billions of dollars to figure out a way to mine the stuff, then gave up and walked away. Why Canada has succeeded at creating a homemade source of alternative fuel while America has failed to tap its resources is testimony to Washington's short attention span when it comes to energy concerns.

How did the U.S. miss the opportunity? Ever since the 1920s, oil-shale pilot plants have been opening and closing in Colorado, reflecting the Federal Government's failure to develop a consistent energy policy. But in 1980, at long last, shale seemed poised for takeoff. Two traumatic Persian Gulf oil crises in the 1970s had sent oil prices zooming and had given rise to high hopes in Washington and the oil industry that shale would develop into a synthetic-fuel industry. To encourage domestic production, Congress enacted the synfuels tax credit and also created the Synthetic Fuels Corp. As envisioned by President Jimmy Carter, synfuels would "replace 2.5 million bbl. of imported oil a day by 1990." Oil companies flocked to Colorado. Those already active in the field, like Union Oil Co. of California (Unocal), redoubled their efforts to bring plants online. Unocal started construction of a mine and processing plant near Parachute, Colo., in 1980 and predicted that it would produce 50,000 bbl. of oil a day by the late 1980s. Calling the Unocal project vital to the nation's energy supplies and national security, chairman Fred L. Hartley described it as a "solid economic proposition."

The most dramatic sign that shale had finally arrived came from Exxon (now ExxonMobil), the world's largest oil company. In May 1980 Exxon bought control of the Colony Oil Shale Project, a promising pilot venture near Parachute. Exxon paid $300 million up front and said it would invest at least $2 billion. The plant was supposed to produce 47,000 bbl. a day by 1985. And that was only the beginning. An internal corporate report predicted that by the mid-1990s Exxon would be producing 2 million bbl. a day from shale enough to slice U.S. imports 20%. To accommodate the workers and families who would stream into Colorado for the new industry, Exxon began building a company town for 25,000 people. Called Battlement Mesa, it would be a self-sustaining community of single-family homes, apartments, churches, schools, stores, recreation centers even a golf course.

So what does Parachute look like today? The building where Unocal started converting shale to oil is still there, but it's not doing much to wean the nation from foreign oil. After sitting idle for years, the building was acquired in 1999 by American Soda, which began producing baking soda and soda ash from nearby deposits.