Squeezing Oil From A Stone

The desolate beauty of Northwest Colorado is breathtaking. But it's the area's potential to help quench America's thirst for oil that can really make you gasp.

And you can just see the shale in the mountains, CBS News correspondent Kelly Cobiella reports.

"Oh yes, that dark line there," said Glenn Vawter, executive director of the National Oil Shale Association, said.

That dark line is oil shale. Heat it and out seeps black gold.

Geologists estimate the rocks hold over a trillion barrels of oil.

"That is more than all the reserves of the Middle East," Vawter said.

But this mother-load is locked deep inside deposits across three states.

"Oh gosh, if you took just an acre, you are probably looking at 100,000 barrels of recoverable oil," Vawter said.

"But that's the key isn't it? 'Recoverable," Cobiella asked.

In other parts of the world, giant mining and heating operations process oil shale. But producing vast amounts of oil from shale has been prohibitively expensive and messy. Until now.

Cobiella met Terry O'Connor of Shell Oil. She asked him: "how much oil did you pull from here?"

"We pulled 1,800 barrels of oil plus a substantial amount of natural gas, also," he said.

All from a tiny 30-by-40 foot patch tucked inside a Shell Oil compound that was top secret.

When he saw the results, what did he think?

"We were really happy!" he laughed.

Shell's revolutionary approach involves dropping electric heaters deep underground to heat the shale to 650 degrees. At that magic temperature, oil and natural gas separate from the rock and can be pumped to the surface - all with minimal impact to the surrounding area.

"And with a modest amount of processing this is the final product we go, which can be used for jet fuel, diesel fuel and naphtha for gasoline," O'Connor said.

Shell thinks it can produce hundreds of thousands of barrels a day from Colorado's oil shale. The trick now is trying to figure out a way to build an underground ring of ice around production sites to protect local ground water.

There are other hurdles. The technology requires a lot of electricity and a lot of water. Three barrels of water for every one barrl of oil that that comes out of the shale. And there's a saying in Western Colorado: You talk over whiskey but you fight over water.

"There's not any extra water to go around, so it's going to be a real water crisis," said Leslie Robinson, a resident of Rifle, Colo.

Robinson is among many of the skeptics in nearby Rifle, Colorado. She was around for the oil shale boom of the 1970's, when Exxon and others rushed in to open shale mines only to bolt when the price of oil collapsed.

Before that can happen, the U.S. government must write new regulations for the commercial development of oil shale. No one is sure when that will happen.

And even if everything goes right, Shell figures it will be 10 years before large scale production could begin.

But is it really going to happen?

"I truly believe it will," O'Connor said.

If he's right - America's energy supply may have a rocky future.