OIL SHALE has an elusive history. It was being mined even before oil was discovered more than 100 years ago. In 1918, no less an authority than the U.S. Geological Survey exulted, "No one may be bold enough to foretell what tremendous figure of production may be reached within the next 10 years." For decades, experts predicted that a small increase in the price of oil was all that was needed to make oil shale competitive. Yet despite the enormous increases of the 1970s, the price of oil shale always climbed faster than the price of oil.

In 1979, the Iranian revolution triggered a frantic search for a "quick fix" to the vulnerabilities of dependence on imported oil. Congress and the administration pounced on synthetic fuels. In the first rush, a $20 billion government fund was created to help support the development of this "new" industry. Oil shale projects were among its first beneficiaries.

This week the oil shale project that had been given the greatest chance of success was abruptly cancelled. Exxon, the world's richest company, allied in a joint venture with TOSCO, the most experienced oil shale developer, with the most highly developed shale technology, said it would walk away from a project on which it had spent about half a billion dollars. The reason? Projected costs had more than doubled in two years, even before the technology's most difficult environmental problems had been solved.

Exxon's decision could not have been more timely. The Senate is to vote soon on a new oil shale development bill sponsored by Sen. John W. Warner (R-Va.). It is based on the premise that land shortages are reponsible for limiting the growth of an oil shale industry, and it would accelerate leasing of public lands at bargain basement rates. Opponents argue that there is no evidence of land shortages, but that serious economic, technical and environmental uncertainties are holding back oil shale development--just as the marketplace says they should. Exxon's cancellation, despite access to unlimited capital, plenty of land and to the best technology in the field, confirms that analysis. Now only one small active shale project remains out of the many that were begun.

Oil shale's history also confirms the wisdom of limiting government subsidies--whether in the shape of money, special access to public resources or exemptions from rules other enterprises must obey--to projects and technologies promising enough to attract substantial private investment. The government should be willing to backstop long-range risks, but it is a reliable rule that any technology that can't attract private funds shouldn't be force-fed public resources.