A pair of former coal strip miners have signed mineral leases on some 300,000 acres in Kentucky, Ohio and Indiana in an attempt to prove that eastern oil shale deposits can be made productive and profitable sources of motor fuel.
Larry and Robert Addington, brothers who sold their Kentucky coal mining operation in 1976 to Ashland Oil reportedly for $113 million, are working against conventional wisdom in the oil shale business. The majority of shale development has taken place in western states, primarily Colorado, where seams of shale as thick as 1,700 feet have proved to contain more than 25 gallons of oil in each ton of rock.
Eastern Shale lies in seams too thin or too irregular to mine and contain little oil, 10 gallons a ton at most, the story goes in both industry and government. "I think there's a large segment in the Department of Energy that believes eastern shale is not as ready to go as western shale," says Paul Petzrick, director of the DOE office of Shale Resource Applications.
The only major recent attempt to synthesize eastern deposits -- a younger mineral than its western cousin -- was a multi-million-dollar failure by Dow Chemical to gasify Michigan shale, according to Petzrick.
"Back when we started, it was very hard to get anyone to listen," says Robert Addington, owner of Pyramid Minerals and controller of 200,000 acres of oil-shale-rich land. "But in recents months we've gotten a much better reception."
The reason for this interest has been the Addingtons' ability to put together a large reserve base of shale -- Robert's holding alone contain 30 billion tons of recoverable shale, mostly in Kentucky -- and the use of several techniques to extract significant amounts of oil from the rock. The Chicago-based Institute of Gas Technology has managed to pull 25 gallons of oil out of a ton of eastern shale, an "ultimate" amount, according to Pyramid's Addington, but a figure that puts eastern shale on a par with western deposits.
Pyramid finds the IGT process too expensive and not yet suitable for commercial use, but the Grayson, Ky., company has had some success using retorts to distill oil from shale. A Brazilian pilot retort, using shale similar to the rock found in Kentucky, was producing oil at $26 a barrel when he visited the project this winter, Addington said.
The Addington brothers, however, are facing some resistance to their development plans. Kentucky landowners have filed more than 50 complaints with the state attorney general claiming that they unknowingly signed leases that pay them too little for their shale and that allow their farmland to be strip-mined.
And the Kentucky General Assembly is considering a 15-month moratorium on major shale development so that the state can have time to draw up regulations covering the mining and processing of the rock.
In addition to the environmental concerns raised by the landowners and the state, Robert Addington says Pyramid Minerals has run into financing and engineering problems. Pyramid once hoped to raise money to open a commercial venture within the next three to five months, but now plans to seek DOE funding to prove the worth of eastern shale development.
"This company has to have a group of industries behind it," Addington says, "and we have to prove the economics before anybody will help."