For nearly 80 years, Colorado oil shale has been the pot of black gold at the end of the rainbow.
There's certainly lots of it.
Current estimates place the equivalent of 1.2 trillion barrels of oil in the rocks beneath the 1,500 square miles of the picturesque Piceance (pronounced Pee'-ahnce) Creek Basin in northwestern Colorado. And there are thought to be 620 billion more barrels in nearby areas of Utah and Wyoming.
But the cost effectiveness of oil shale, which depends on oil being relatively expensive, has always seemed just out of reach.
The National Geographic magazine once waxed lyrical on the potential of Colorado's oil shale, calling it ''almost beyond comprehension. Enough oil is held in these natural reservoirs to fill many times over every tank, cask, barrel, can, and other container of every kind in the world.''
The date? 1918.
Only now, 64 years later, does oil shale finally seem ready to be produced commercially.
Yet this boom will not develop at the tempo expected even six months ago, oil-shale developers agree. Instead of the 400,000 barrels per day (BPD) by 1992 the US government aimed for after the fall of the Shah of Iran, a more modest 100,000 BPD by the end of the decade is foreseen.
The scaling-down is ascribed to less interest on the part of the Reagan administration and a softening of oil prices.
William H. Love, president of Occidental Oil Shale, calls oil shale ''a very marginal business.'' He adds, ''I know people won't believe this, but the companies are not in it because of short-term profits. They are in it because, down the road, the country will need it and it will be economic,'' he maintains.
The technology involved in extracting oil from shale is relatively simple. The experts agree it can be done. The $64,000 question is, ''At what price?''
The biggest problem with conventional oil and gas is finding the stuff. Extraction is relatively simple.
With oil shale it's the other way around. The location of kerogen, the rubbery hydrocarbon in oil shale, has been well known since 1918. The big cost is extraction.
It is ''low-grade ore,'' so a great deal of rock must be processed for each gallon of oil. Also, the only way found thus far to extract the kerogen is to heat it to 900 degrees F., in a process called retorting, so the industry is extremely energy-intensive as well.
Since the days of $3-a-barrel petroleum, oil-shale advocates have been saying that if the price of petroleum goes up by only a little bit, oil shale will be competitive.
This history makes financial experts skeptical about current pronouncements of oil shale's competitiveness.
But the Tosco Corporation, a middle-sized oil company, for many years has been involved in, and is bullish about, oil shale. It is a joint owner with Exxon of the Colony Project, which, along with a Union Oil undertaking is one of two Colorado operations that appear committed to producing oil from shale on a commercial scale in the 1980s.
Tosco's conviction that oil shale could be competitive with oil goes back to 1960, explains John Lyon, head of its Oil Shale Division. During the 1960s, however, Tosco could not raise the money to go commercial, in part because financiers feared that such a development would depress world oil prices.
Tosco tried again in 1974 with Atlantic Richfield but was hit by extreme inflation in the construction industry and uncertainties in federal energy and environmental policies. Now, with a federal loan guarantee and Exxon as a partner, Tosco is trying again.
''Our economics are based on world oil prices staying level, in real terms,'' Lyon explained. Recent oil price declines have been primarily in heavy crude rather than in the light crude with which shale oil will compete, he noted.
Also, Tosco estimates that shale oil has a $1 to $1.50 advantage over the Wyoming oil most similar to it because it yields a higher fraction of gasoline and diesel fuel. Wyoming ''sweet'' has been selling for $36 to $37 a barrel lately. ''Our economics are premised on a lower price than that,'' he said.
Still, Tosco needed a federal loan guarantee before it could raise the money for 40 percent of the $3 billion to $4 billion which the project is expected to cost. Exxon, on the other hand, is putting up its 60 percent without federal assistance. And Union had a fixed-price contract for its shale oil before starting.
Some experts remain cautious, however: ''It is true that some recent economic studies have forecast a favorable situation for shale oil, with selling price estimated at $30 to $40 a barrel.
''But those analyses have no more substance than the operating experience on which they are based. In the United States, the necessary operating experience is slim,'' the Colorado Energy Research Institute warns.
Moreover, the economics of oil shale differ greatly from site to site, from company to company.
Colony and Union, for instance, are operating from private property. Here, the rich ''mahogany layer'' of kerogen-saturated marlstone has been laid bare in the dramatic, 2,000-foot weathered cliffs of Parachute Canyon. The site is water-poor, but the shale can be reached by mining straight into the side of the mountains. The most practical approach is conventional ''room and pillar'' underground mining with surface retorting.
It's totally different at Cathedral Bluffs, a partnership of Occidental and Tenneco, working on 5,000 acres leased from the federal government.
The square concrete tower over the mine shaft - the largest in North America - rises unexpectedly 390 feet above a rolling, sparsely vegetated plateau, its blinking halogen lights announcing its presence at night and warning away low-flying airplanes.
Here, the oil-bearing layer is 1,000 feet thick. But it is 1,500 feet beneath the surface. Underground retorting is most practical.
Occidental, under the direction of Armand Hammer, has been the leader in developing this approach, which involves excavating a series of rooms underground, blasting the intervening rock into rubble, setting it on fire, and siphoning off most of the fuel. This is called the modified in situ method, or MIS.
Unlike Parachute Canyon, however, water supply is not considered a problem at Cathedral Bluffs. The mine shafts must be continually pumped dry because of seepage from aquifers below.
The Cathedral Bluffs project is in eclipse at the moment; the firms recently announced a delay in their commercialization plans, did not renew their application for support from the Synthetic Fuels Corporation, and began laying off workers.
The second federal lease site, nestled in a shallow valley, was purchased by Gulf and Amoco. They have formed the Rio Blanco Oil Shale Project. This is much like the other federal lease site, but here the oil-bearing layer is much closer to the surface: only 600 feet down. Under this site are an estimated 9 billion barrels of oil, making it one of the richest areas in the basin.
Because it is so close to the surface, Gulf and Amoco believe open-pit mining is the best approach. With this, they estimate they could ultimately produce 300 ,000 BPD of shale oil, making this one of the biggest mines of its type in the world.''
I think we've been seeing two booms. One is the real boom at Colony and Union. The other is a boom of expectations, which has just received a strong dose of realism,'' observed DeWitt John Jr. of the Colorado Department of Natural Resources.
But a drive up Parachute Canyon should be enough to convince even the most skeptical that Colony and Union are in earnest.
Smooth, wide roads wind up the canyon now, and they are bustling with truck traffic. The weathered, pinkish-gray canyon walls have been smoothed and terraced above the Colony mine site. A 1,000-foot-high deck of packed earth has been built up in the narrow canyon to provide access to the mine portals.''
They tell me this is one of the biggest construction jobs in the world today, '' said Ki Bianchi. He is Colony's mine captain and has been with the project since 1965 ''when we had to hike three miles to get to the site.''Flagmen and -women, equipped with walkie-talkies and stop signs, direct traffic or huddle over portable gas heaters to keep warm. Atop the 8,000-foot plateau overlooking the canyon, bulldozers and 50-ton dump trucks are leveling 170 acres where the processing plant will be built.
A giant pile consisting of 4 million cubic feet of topsoil to be used to cover and revegetate the spent shale has been built.
The Colony project expects to begin producing 47,000 BPD of shale oil by 1987 . Union intends to take a modular approach, starting at 10,000 BPD and building up to 50,000 BPD by the end of the decade.
Thus, as the Rocky Mountain Oil and Gas Association's Committee on Oil Shale reported last summer, ''Today, the likelihood for an oil-shale industry seems stronger than at any other time in history.''
''However,'' the committee continued, ''many uncertainties face the industry. High capital costs, questions about governmental support, technological questions, and conflicting environmental laws and regulations all contribute to an unpredictable development schedule for the 1980s.''
How these issues are resolved, as much as future oil prices, will determine to what level the oil-shale industry will grow.
* Water quality: Oil-shale operations are being designed for ''zero discharge.'' Contaminated process water will be dumped into evaporation ponds or cleaned and recycled, not discharged into streams. Still, environmentalists worry that the dams the operators propose may not withstand exceptional flash floods.
And a number of people are concerned about the possibility of long-term contamination of the potable ground water.
* Water supply: The oil-shale area is in the Colorado River drainage. The Colorado River system is vital to the 15 million inhabitants of the semiarid Southwest. It is a small river compared with those which serve similar populations in other parts of the nation.
Estimates of the maximum shale-oil production that the river system can support - providing new dams are built and other uses are not seriously disrupted - vary from 1 million to 2 million barrels per day. These generally do not consider increased demand from other activities such as oil and gas or coal mining.
* Air quality: Provisions of the Clean Air Act, which is under revision in Congress this year, will have a direct impact on the oil-shale industry's future. The oil-shale project is near several Class 1 areas where very little deterioration in air quality is allowed.
This is the most serious environmental constraint that the industry faces.
However, the industry is lobbying hard - with administration support - for relaxation of provisions of the Clean Air Act.
* Waste disposal and reclamation: Developers originally planned to mix the toxic byproducts of the retorting process in with the spent shale. However, provisions of the Resource Conservation and Recovery Act will require more elaborate approaches.
Spent shale, although not classed as toxic, is a monumental waste-disposal problem. The rock swells when processed so it cannot simply be put back where it came from.
* Socioeconomic impact: Only in recent years have people throughout the Rocky Mountains area become acutely aware of the potential ills of the ''boom and bust'' resource economy that is the region's heritage.
That the local inhabitants' concerns be addressed is particularly important because, more than any other resource state, Colorado has left the vital development decisions in the hands of local government. Rio Blanco and Garfield Counties, with a combined population of about 35,000, have been planning for oil-shale growth for years.
Using a percentage of the money from the lease of federal oil-shale tracts, the state has spent about $55 million to prepare the area and will spend $47 million more by 1985.
Still, an analysis by the congressional Office of Technology Assessment has concluded that the area can smoothly absorb a 200,000 BPD oil-shale industry only if construction is phased and some of the workers commute from an adjacent county.