Subsidizing Oil Shale: Tracing Federal Support for Oil Shale Development in the United States

Although the oil shale industry is still in its commercial infancy, it has a long history of government support that continues today. The Bureau of Land Management recently issued two new research, development, and demonstration leases and new federal regulations for commercial leases and royalty rates are expected any day. Before the federal government goes down that road it’s important to take a look back and ask whether we should be throwing good money after bad.

Over the last century billions of dollars in taxpayer-funded subsidies have been risked on failed oil shale experiments.  This includes $3.2 billion dollars in loan guarantees and $3.7 billion in price guarantees – all taxpayer dollars – that were available to oil companies to commercialize oil shale in the 1980s. Yet, oil shale has never been a viable commercial product.

Oil shale today is often conflated with shale gas and shale oil, giving the false impression that oil shale is somehow ready for prime time. In fact, oil shale is not "shale oil," which has been drilled using the ubiquitous "fracking" method that has been written about and discussed extensively in the past couple years. Oil shale is a rock found mainly in Colorado, Wyoming, and Utah that contains a waxy substance called Kerogen and must be superheated and refined into a transportation fuel. However, oil shale has never been a viable commercial product.