The state of Colorado says it will require American Shale Oil, LLC, -- a company backed by Rupert Murdoch and Dick Cheney -- to fix several poorly cemented wells that, according to the state, appear to be endangering ground water in western Colorado.
Halliburton -- the oil and gas giant once headed by Cheney -- conducted the cementing and cement evaluation of the wells and rated several as having "poor" cement bonds in certain segments, according to a memo that American Shale Oil (AMSO) submitted to state and federal regulators in late July.
In the July 26 memo, AMSO claimed the poor cementing in its wells "poses little threat" to groundwater resources in the Piceance Basin on Colorado's Western Slope, where the company is leasing federal land to pursue oil shale research and development.
But the state disagrees. When contacted about the AMSO memo, Steve Shuey, a Senior Environmental Protection Specialist for the Colorado Division of Reclamation, Mining and Safety (DRMS), told Media Matters in a statement that the cementing fell short of the plans filed by the company and it "appears to be inadequate to protect" the region's aquifers. Shuey said the state would require AMSO to fix the cementing:
DRMS has reviewed the document to which you refer. We recognize that the well completion cementing was not conducted as specified in the Well Construction Designs of the approved NOI [Notice of Intent]. The current well completion status appears to be inadequate to protect the Uinta and A-Groove aquifers. DRMS will be sending AMSO a letter requiring remedial cement and completion work be performed on tomography wells TM-1 through TM-4 to ensure adequate protection of the groundwater resource.
When asked about Shuey's statement, AMSO maintained that the cementing issues identified in its July memo do not significantly impact the "protection of water quality" and told Media Matters the company would "work with the responsible agencies to resolve any outstanding concerns." According to an AMSO spokesperson:
AMSO's priority is to protect the Piceance Basin aquifers. In fact, we are initially concentrating on developing the shale located far below the aquifer and insulated from it by an impermeable cap rock. With regard to the cementing of our casings, none of the issues identified in AMSO's "Casing Cement Operations and Evaluations" memo significantly impacts our retort confinement or protection of water quality. We have several redundant systems in place to protect the aquifers. In addition to protecting the aquifers, we are documenting the effectiveness of our ground water protection program by conducting a long term aquifer monitoring baseline, operational and post operation period program. We will work with the responsible agencies to resolve any outstanding concerns.
Briana Mordick, an Oil & Gas Science Fellow at the Natural Resources Defense Council told Media Matters that the poor cementing "could cause water contamination" and said that "remedial cementing can and should be performed":
This is only a small-scale demonstration project but they're already falling short of constructing their wells to the highest, or even adequate, standards. These wells are located on wildlands that belong to the American people. The oil shale industry and regulators must not accept poorly constructed wells.
Proper casing and cementing are crucial to protecting fresh water from contamination and ensuring mechanical integrity of the well. An inadequate bond between the casing and cement can put both drinking water and the well itself at risk.
Remedial cementing can and should be performed on those wells with poor cement bonds. Well TM-4 is of particular concern because there is no cement whatsoever behind the top 700 feet of casing - an interval that contains a groundwater aquifer. This could cause water contamination and damage to the well.
Oil shale development has long enticed investors and those seeking a route to energy independence, but no company has yet proven a way to make the process both commercially viable and environmentally sound.
Genie Energy -- which has a major stake in AMSO and another oil shale venture in Israel (IEI) -- acknowledged as much in a recent filing with the SEC. Under "Risks Related to Genie Oil and Gas," the division of the energy company focused on oil shale development, the company said: "We have no current production of oil and gas and we may never have any." Referencing the technology AMSO plans to test in Colorado, the company continued, "In-situ technology for the extraction of oil and gas from oil shale is in its early stages of development and has not been deployed commercially at large scale. AMSO, LLC and IEI may not be able to develop environmentally acceptable and economically viable technology in connection therewith."
Genie Energy is currently a subsidiary of IDT Corporation, a global telecommunications firm. However, IDT filed initial documents with the SEC earlier this week to spin off Genie in late October. Last year, Murdoch joined the "strategic advisory board" of Genie Energy and purchased an equity stake in Genie Oil and Gas. Other high-profile advisers and investors include Cheney, Lord Jacob Rothschild, and Michael Steinhardt, a prominent hedge fund investor and philanthropist.
Genie Energy clearly sees value in its association with Murdoch. It touted the "vast experience and immeasurable value" Murdoch would bring to the board when he joined it last September. In July, the company stood by Murdoch, calling him a "valued member of Genie Energy's Strategic Advisory Board," even as public outrage grew over allegations that his British tabloids illegally hacked the voicemails of thousands of people and bribed the police.
Fox News Channel and Fox Business Network, which are owned by Murdoch's News Corp, have repeatedly featured reports on Genie's oil shale ventures without disclosing Murdoch's conflict of interest. Other News Corp. outlets -- like The Wall Street Journal and the Times of London -- have touted the oil shale projects but disclosed Murdoch's financial stake.