Mr. FARRAND. In that sense I think you could say that the prototype program has already been a measure of success since we have already learned that there is an air quality problem that has to be dealt with before that resource can be reasonably extracted and that off-site disposal is needed for an open pit operation. We have also learned, as in the case of C-b, now, that the best way to go may be in a modified in situ program and I think you will hear from some other witnesses on that. There are many who believe that modified in situ or situ itself may be the most economically sound approach, and that is the approach that the lessees of C-b have indicated they are going to go We anticipate that during this period of suspension they will submit to us a modified detailed development plan which would convert the operation to a modified in situ; we have, also, had indications from the lessees of C-a that they are studying the possibly of modified in situ for that tract.

So there are some things, a great number of things that we have learned already, and we just hope that the program can continue until we learn more. The alternative, I suppose, if the leases were to be cashed in, would be to start all over again with a new Environmental Impact Statement, a new development plan for the leases, and a new sale. The result would be the loss of very valuable time.

We have good quality oil shale resources in the hands of people who still profess a great deal of interest in developing them. What remains are these few impediments and we hope to be able to deal with those one by one and move ahead with the program as originally conceived. Senator BUMPERS. Mr. Chairman.

Senator METCALF. Senator Bumpers.

Senator BUMPERS. Mr. Farrand, what is the status of Occidental Products? They don't have a lease.

Mr. FARRAND. No, they have a lease now, sir, as a result of Shell's withdrawal from tract C-b. C-b was a lease that was owned 50 percent each by Shell and Ashland and Shell about a month ago withdrew and two days later Ashland announced that it had joined in partnership with Occidental in which Occidental would become the operating partner with a 50 percent equity. So they have the oil shale now and it is suitable for in situ development and they maintain they have a process and they are developing a modified detailed development plan now to submit to us.

Senator BUMPERS. Don't they have an operation going on some of their own lands?

Mr. FARRAND. They do.

Senator BUMPERS. How are they getting along?

Mr. FARRAND. They maintain they have a viable process. There is a research effort at this point. What they now have and what they have been requesting of us for sometime in the form of a new in situ sale, which we are still preparing to make late next year, what they have asked for is a commercial resource where they could test the test research, if you will, and they now have it.

Senator BUMPERS. How much oil are they producing with the project they have in operation?

Mr. FARRAND. I can't answer that.

Senator BUMPERS. This is a pure in situ process?

Mr. FARRAND. I understand it is. What they anticipate for their C-b tract now is a modified in situ which is a room and pillar operation with in situ for those resources in between. I understand they are going to testify later today.

Senator BUMPERS. I will save my questions for them.

Senator METCALF. Very well.

Now we have Dr. Philip C. White, Assistant Administrator for Fossil Energy, Energy Research and Development Administration. We are pleased to have you here this morning, Dr. White. We are grateful for your presence.

STATEMENT OF DR. PHILIP C. WHITE, ASSISTANT ADMINISTRATOR FOR FOSSIL ENERGY, ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION

Dr. WHITE. Thank you, Mr. Chairman, Senator Bumpers. On my far left is Mr. Huge Guthrie, director of the division of oil, gas and shale technology. Next to me is Mr. Ed Meyerson, director of the division of commercial application, and formerly with our office of commercialization before that was dissolved a few weeks back.

To simply excerpt some comments and highlights from my prepared testimony which I ask to be put in the record, I would like to start by agreeing with Mr. Farrand about the prospects for shale. We at ERDA are also very optimistic about it for two reasons that he mentioned, the economics which I will get into in more detail—and, of course, it does represent a very important source of liquid synthetic fuel. The only other prospect we have for this is coal, and for liquid fuel that would supply the transportation sector of the economy, I think liquids from coal are considerably further away in time of development and the prospects today look like they will be more expensive than oil.

The picture in shale today, however, is quite confusing. A number of problems have been outlined by Mr. Farrand, but I might mention a few others. There are both negative and positive aspects to this picture. These are the positive factors. The technology to mine the shale is in good shape, and the surface retorting is developed at the pilot plant level. There are several processes that have been tested for some time and that are considered to be ready for demonstration at a commercial or near commercial scale.

It is very obvious that when you are producing liquid fuel, if you are working with oil shale it is a simpler process basically than if you are working with coal. And the size of the resource, as we know, is enough to be very attractive and very important to the country for a long time to come. The liquids that we produce from shale fit the so-called middle distillate part of the conventional oil products that are important, of course, to the mass transportation industry. In contrast, of course, coal tends to be more in the fuel oil or heavy oil, with some production of the lighter material in the gasoline range, but very little in the middle range.

On the other hand, there are negative problems. The environment has been very well covered by Mr. Ferrand, but there are some others that I think are important to keep in mind. Inflation in the last several

years, of course, has hit the prospects for oil shale ju many other parts of the economy and the synfuels in

I mentioned that the technologies for the retorting at the pilot plant level, but it does have to be recog have not been demonstrated either here or abroad on so that a private company could with real confidence g and construction of a full scale surface retort or an 1 tort of the type Occidental has. That has been a modes mental scale SO far.

It is also true, of course, that the market for the over the life of a plant is a matter of some uncerta course, the OPEC countries have the power to drop ported oil and this could seriously affect the profitabil cial venture. Finally, again I agree with Mr. Farran the synfuels legislation has left an uncertainty over t that has thus far, I think, a negative aspect.

We see in ERDA that of the in situ retorting proc question in my mind that the Occidental process is vanced. The possibility of combining a modified ir plementary above ground module represents a very s tunity and one I think we should look at very clos also noteworthy that Brazil is planning a commer ground retort operation down there. We have had re vising that. Dr. Seamans was down there earlier this 500-ton-a-day retort which has worked very success: much like the Paraho retort which is a fairly well cedure and they are planning on that basis to go ahe mercial scale.

We are doing quite a bit in ERDA's program o shale technology, particularly in situ technology. V hard on the so-called true situation where there is at all, and had a modicum of success here. It wa encouraging to make us want to go all out for that as where some mining is done and getting the remaining bed. In order to try to develop this we have recently program opportunity notice for different types of in to be tried on a small scale. We received some nin organizations and in the prepared statement I hav of these that are currently under negotiation.

There is another shale resource that I don't thir sight of. The so-called Devonian shales and Antrim which we know less about, are a large resource of h are not, apparently, retortable in terms of producing do contain gas and they have a high hydrocarbon particularly the ones in Michigan which apparentl in place. The process doesn't come up with natura so-called producer gas or low Btu gas. There are a ronmental issues other than the ones Mr. Farrand think are going to be problems for us where we ne mation, and this is something that is going to come development program. The matter of water that is situ mine to begin with. What is produced during th

where that goes, and then, of course, the matter of how the character of that underground shale is changed due to the reporting which may make it more leachable by water percolating through it, and a possible impact on groundwaters. The work that we contemplate under the various current projects are going to address those problems.

We have, of course, the usual amount of support research in the program in terms of shale characterization and we fund studies on small scale try to look to second or third generation approaches for shale retorting.

On economics we have some figures in the prepared testimony that I think might be worth just quoting a few of them because they certainly reflect the kind of optimism that Mr. Farrand mentioned. If one does conventional mining, and these are based on, I might say, current dollars and large commercial plants, who think they are optimistic, they are giving every break to the process that we think might eventually come with a lot of learning. These were taken out of some of the figures in the synthetic fuels commercialization program report; the surface retorting is probably a little beyond the current level of oil prices producing liquids at the range of $16 to $25 per barrel, but the multimineral process of Superior might well be below this, depending a lot, of course on the credits given for the other materials, but coming down to below $12 per barrel, and the modified in situ ranging from $8 to $11 a barrel which, of course, would be competitive right today. This doesn't say these are the costs, but if you assume everything worked just the way it should, and the environmental protection costs aren't too great, it is conceivable that it could be this low. This accounts for the significant interest being shown by Occidental and the other holders of the leases.

We think, however, some action is needed in spite of this optimistic figure, that there are the environmental problems to be resolved, and more importantly we feel there is some form of demonstration required to show that you can build one of these large retors, or perhaps, a combination of the retort and modified in situ, and I think here it is very important to recognize how neatly this might fit.

A modified in situ process requires taking out about 15 to 20 percent of the shale at the bottom of the chamber to have room to work. If one is operating at a commercial level that is aimed at 50,000 barrels per day of shale oil production, which is the size considered to be commercial, this implies a retorting level of 10,000 barrels per day, being the 20 percent size. Ten thousand barrels per day is the size of the demonstration retort we have been talking about in a number of these hearings before this committee and others, as a place to begin, that is a single retor of a size that could be designed today and it might actually fit commercially as an adjunct to a modified in situ.

I think this is the sort of approach that may be very worthwhile taking in the near future as far as demonstrating the modified in situ and the retorting step at the same time.

In conclusion, I say that we feel that shale oil production is closer to commercial acceptance than other liquid fuels or synfuel alternatives, particularly coal. We think it is basically simpler than coal. Costs are estimated to be less than the coal liquid.

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The environmental impacts of a large oil shale plant are likely to be similar, certainly the socioeconomic impacts would be similar to the coal plant. However, there are likely to be less solids admitted into the atmposhere, and in terms of water requirements it appears that the modified in situ oil shale plant would take less than a coal plant.

The kind of problems, leasing and so forth, that are before us have been outlined by Mr. Farrand and I think we certainly agree with

these.

I think there are problems here to be resolved but it is our intent that we should come into the Congress with a proposal to proceed with some form of retorting, perhaps coupled with a modified in situ, and seek ways of funding for that in the next session of Congress. Just exactly what form that should take and exactly what form of incentives, is something still being discussed in ERDA. This question does need to be settled.

Speaking in a personal opinion, it is my view that we should clearly go ahead and demonstrate at least one installation, get our feet wet, find what it means to build one of these. Not that we should put the Government into a commercial business or continue to underwrite this, but I think if we go ahead and demonstrate it once and get some of the answers on the environmental problems and on the basic costs, that we have a very good prospect then that further commercialization will be handled by the private sector with no further Government action.

I think that concludes the summarizing remarks I wish to make, and I would be happy to answer any questions.

[The prepared statement of Dr. White follows:]