Elliott Roosevelt Jr., a grandson of President Franklin D. Roosevelt, grins and leans toward visitors in his Dallas office to describe his biggest discovery in 53 years as an oilman.

After nursing a single 10-barrel-a-day well in a desolate stretch of west Texas for two decades, Elliott Roosevelt, 76, is embracing a technique he says can liberate a third of the 1.8 billion barrels of petroleum stuck a mile below. He plans to inject carbon dioxide into limestone, potentially freeing oil valued at about $58 billion in early April — more than the gross domestic product of Bulgaria — and reaping this bounty from a 38-square-mile area drillers abandoned long ago.

Roosevelt’s method, known as carbon-dioxide-enhanced oil recovery, or CO2 EOR, may speed up the resurgence of the United States as a fossil-fuel superpower — and do so under a president elected as a green-energy champion.

With an oil rush endowing North Dakota with the nation’s lowest unemployment and shale gas drilling rigs sprouting from Colorado to Pennsylvania, the nation is shedding the energy inferiority complex that has humbled it since lines snaked around gasoline stations 40 years ago.

“Independence day is coming,” says Ed Morse, global head of commodities research at Citigroup. Morse says the United States could stop being a net importer of crude oil and petroleum products and become a net exporter in about five years. That would trim the $540 billion trade deficit and encourage a foreign policy that promotes democracy instead of protecting oil supplies, he says.

Elliott Roosevelt Jr., a grandson of former President Franklin Delano Roosevelt, sits in the recreation room of his home in Rosston, Texas, on Feb. 14, 2013. Roosevelt is pursuing a residual oil zone in a 38-square-mile area in the Permian Basin, where he owns mineral rights. (Spencer Lowell/Bloomberg Markets)

Daniel Yergin, author of “The Quest: Energy, Security and the Remaking of the Modern World,” says North American production along with stagnating demand will reduce U.S. dependence on the Organization of the Petroleum Exporting Countries. “The U.S. is now in a position of being envied because of our energy vitality,” Yergin says.

The United States is swimming in newfound oil. Crude output surged 14.3 percent to an average of 6.47 million barrels a day in 2012, compared with a year earlier. This included 300,000 barrels a day from CO2 EOR. Last year’s leap of 812,000 barrels a day was the biggest since 1859, when Edwin Drake drilled the first commercial well, in Titusville, Pa.

In the years since Barack Obama defeated Sen. John McCain (R-Ariz.) and his drill-baby-drill backers and succeeded oilman George W. Bush in the White House, oil production has soared 29.4 percent.

Meanwhile, the Earth is hotter now than during three-quarters of the 11,300 years since the most recent ice age, according to researchers at Harvard and Oregon State universities.

By 2020, U.S. oil output may surpass that of Saudi Arabia, the world’s top producer, the International Energy Agency says. Drillers say they can hasten the U.S. petroleum revival with CO2 EOR. In the mid-1990s, Hess and Occidental Petroleum began using carbon dioxide in residual oil zones, areas previously rejected because the petroleum was mixed with too much water.

Since then, mapping and other technologies for steering CO2 toward productive reservoirs have improved, says Steve Melzer, who has run CO2 EOR conferences in Midland, Tex., for 18 years. The enhancements helped convince Roosevelt, who aims to be the first person to drill residual oil in a virgin field where there’s no network of existing wells.

Roosevelt’s claim that roughly 1.8 billion barrels are trapped below his parcel is accurate, says Melzer, whose consulting firm studied and verified it. Ryder Scott, a Houston firm that oil companies hire to independently evaluate petroleum-reserves data they file with the Securities and Exchange Commission, estimates Roosevelt has a 90 percent probability of recovering 437 million barrels.

Carbon-dioxide enhanced oil recovery.
Texas rozapolis

Melzer has no doubts about the oil. He calls west Texas residual oil zones, or “ROZ” in drilling lingo, the “rozapolis” because of their enormous potential. Montana, North Dakota and Wyoming are also rich in residual oil, says Vello Kuuskraa, who helped develop wells near Fort Worth in 1997 that showed the viability of hydraulic fracturing, or fracking, and unleashed U.S. fossil-fuel fever.

Unlike fracturing, in which drillers blast water, sand and chemicals into wells to shatter shale and release oil and gas, CO2-enhanced drilling induces a chemical reaction that makes oil less sticky and helps it flow from pores in the rock. CO2 costs about $35 per metric ton in west Texas, and drillers recycle it as many times as possible to dislodge more oil.

Such drilling has the potential to unlock 100 billion barrels of recoverable U.S. reserves, says Kuuskraa, president of Advanced Resources International. U.S. reserves total 222.6 billion barrels this year, the Energy Information Administration says. About one-third of Kuuskraa’s projected increase, or 33 billion barrels, would come from residual zones, augmenting the bounty that fracturing is recovering from shale rock.

“Shale oil could produce 3 million barrels a day for the U.S.,” he says. “With CO2 EOR, we’ve got the potential to do 3 or 4 million barrels a day for a long time.” That much CO2 EOR crude would have increased last year’s output by 50 percent.

Kuuskraa’s projections come with a caveat: securing enough CO2 to free the oil. Expanded CO2 EOR requires new sources of carbon dioxide, which scientists say hastens global warming. In 2009, the Environmental Protection Agency classified CO2 as a pollutant that threatens public health.

Kuuskraa estimates that the United States may need 33 billion metric tons of the gas for CO2 EOR. Three billion tons are available from such naturally occurring sources as extinct volcanoes. The rest would come from man-made sources such as power plants that create and capture CO2. Only a handful of these exist.

John Thompson of the Clean Air Task Force says creating demand for carbon dioxide is an environmental benefit of drilling residual oil. He says the zones are big enough to absorb half the CO2 from U.S. power plants over 30 years, and he advocates tax incentives for companies to expand CO2 EOR. “I hope Elliott Roosevelt makes a lot of money,” he says. “I hope other people replicate his model and take more CO2 out of the atmosphere.”

The seeming illogic of using a heat-trapping greenhouse gas to enable the pumping of pollution-spewing hydrocarbons isn’t lost on Kyle Ash, senior lobbyist for environmental advocate Greenpeace USA. He says enhanced oil recovery doesn’t move the nation away from fossil fuels or permanently bury carbon.

The Permian Basin

If Roosevelt can get enough CO2, he’s certain he can wring oil from the Permian Basin, a 250-by-300-mile area underlying Texas and New Mexico and a cradle of conventional U.S. drilling.

Joseph Googins, Roosevelt’s maternal grandfather, started buying mineral rights there after moving to Fort Worth to build stockyards in 1902. He bequeathed the rights to his daughter Ruth, who married Elliott Roosevelt, Franklin’s son, in 1933. They divorced 11 years later. She passed the rights to her son Elliott Jr., who remembers visiting the White House as a boy but says he doesn’t focus much on being a Roosevelt. “It’s just the name I was born with,” he says.

He’s so sure he’s on to something that he has spent $10 million on more mineral rights. Sitting near a framed collection of FDR campaign buttons, both pro and con, he declines to give the location, saying he fears others may buy competing claims.

“The Permian has produced 32 billion barrels to date,” he says. “Residual oil zones mean the Permian has the potential to produce that much again in the future — plus, plus, plus. We don’t view this as a high-risk project.”

Roosevelt, a Republican, says he disagrees with friends in the party about climate change. He says it’s real. Yet he no longer subscribes to another hydrocarbon premise — peak oil, or the idea that global output is poised to permanently decline. The remaining oil, however, won’t be cheap. “It’s not coming out of the ground at $20 a barrel,” he says. “All our models are run at $90.” West Texas Intermediate (WTI) crude sold for $97.07 on April 1.

Roosevelt uses a $90-a-barrel selling price for his financial calculations. When he reaches full production, he says, he can generate a 15 percent internal rate of return if crude sells for $50 a barrel — greater if it sells for more.

Philip Verleger, an energy adviser to President Jimmy Carter, says cost could be a big deterrent to CO2 EOR. The risk for WTI crude to plunge back to its 2008 low of $32.40 a barrel means most drillers lack the patience to nurture the technology.

“Companies aren’t going to spend a lot of money on CO2 EOR with all this oil they can get by fracking,” he says.

Legado Resources has used carbon dioxide in Texas since 2008 to recharge existing wells and tap the residual oil. The company is one of three working the Goldsmith oil field, where cactuses are scattered among pumps, pipelines and drilling rigs. Operations superintendent Bobby Lord snaps his head around to what sounds like a rifle shot as compressed air bursts from another company’s pump. With the Permian booming, it’s hard to find good help, Lord says. Its portion of the Goldsmith field has produced 74 million barrels since 1934. The company has 70 wells for injecting CO2 and 93 for extracting it along with water and oil. Operators send the mix to a station that pumps oil to a pipeline, recycles CO2 back to the reservoir and injects water deep underground to protect upper-level aquifers. Almost all the CO2 remains underground or in the pipelines and processing stations, Legado says.

“If you’re serious about supporting your family, maybe it’s time to move here,” he says.

In June, Occidental told California regulators that 0.3 percent of the CO2 used at its enhanced-recovery field near Denver City, Tex., escaped during a 25-year period; the rest stayed trapped.

As many as 100 million additional barrels of oil may be recoverable from Legado’s portion of Goldsmith. Permian oil producers, which buy about 83,000 tons of CO2 each day, could use twice as much to develop all available reserves.

Roosevelt is also on the hunt for CO2. He began studying the well that led to his biggest discovery, in 2007, when WTI crude neared $100 a barrel. He planned a second conventional well to double output but reconsidered when chief engineer Jimmy Hawkins suggested carbon dioxide. After studying Melzer’s CO2 research, Hawkins realized Roosevelt’s well sat atop a residual oil zone.

Roosevelt has been seeking such aha moments since 1960, when as a land man he roamed ahead of rigs and negotiated mineral rights. He drilled for oil and gas in the United States and Canada and started a natural gas storage company.

Now he’s poised to launch what he says could be the world’s biggest CO2 EOR project, with 17,500 acres for drilling and 100,000 acres for permanent CO2 storage.

Roosevelt’s quest for carbon dioxide has led him to Kinder Morgan Energy, the biggest U.S. pipeline firm, which may supply the gas, operate his project or take an equity stake, Roosevelt says. Tim Bradley, CEO of Kinder Morgan’s CO2 unit, says his company was slow to see the potential of residual oil zones. Now it seeks joint ventures to expand into them.

Roosevelt says he has a contract to buy CO2 starting in 2017 from a power plant that Summit Power Group has proposed near Odessa, Tex. He has an option to buy the CO2 from any additional gasifiers Summit builds.

Roosevelt is also in touch with Southern Co. and other utilities that capture CO2 after burning coal or natural gas. North of Mobile, Ala., Southern and Mitsubishi Heavy Industries are running the world’s biggest test for trapping carbon dioxide from power plant smokestacks. The plant can capture 500 tons a day.

To get started, Roosevelt is seeking small quantities of CO2 for two years of test drilling beginning in 2014. He’s seeking financing to invest $300 million in six years. He says cash flow would fund further investments, bringing the cost to $2 billion. He expects a 50-fold return on equity for Roosevelt Resources, which employs his sons Elliott III, 50, and David, 43.

“The key is getting CO2,” he says.

As the United States rises as a fossil-fuel powerhouse, so does anger among backers of President Obama who want action on clean energy. On March 1, the State Department said the proposed Keystone XL pipeline for hauling tar-sands oil from Alberta, Canada, wouldn’t hurt the environment. If the pipeline stalls, it says, producers have other options to reach the market, so the impact won’t change.

In other disappointments for environmentalists, Obama’s cap-and-trade plan to limit CO2 died in the Senate in 2010.

Obama has made some headway toward his environmental goals. He mandated better fuel efficiency, requiring a corporate average of 54.5 miles per gallon for cars and light trucks by 2025. He also proposed limiting new power plants to 1,000 pounds of CO2 emissions per megawatt-hour. He may expand that rule to existing plants, including coal-fired facilities that emit 2,249 pounds per megawatt-hour on average — potentially providing sources of CO2 for oil recovery.

Roosevelt says he’s happy to pursue the type of drilling that creates a market-based demand for CO2 to clean up coal and gas plants. At his core, though, he’s a Texas oilman. “We’re not doing this to solve climate change,” Roosevelt says. “We’re in business to liberate and sell oil.”

The full version of this Bloomberg Markets article appears in the magazine’s May issue.