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RENEE MONTAGNE, host:

Good morning. The high cost of crude oil has many people looking for new sources of energy and taking a second look at some old ideas. Oil shale is an idea that was tested a generation ago, and abandoned when the price of crude oil plunged. Now, a self-taught inventor is once again eyeing the vast shale deposits of the Rocky Mountains. NPR's Scott Horsley has the latest in our series on the future of fuel.

SCOTT HORSLEY reporting:

Byron Merrell steers his Chevy pickup truck along Highway 40 in eastern Utah, past the fiberglass dinosaurs that welcome tourists from the nearby national monument.

Mr. BYRON MERRELL (Chief Technology Officer, Oil-Tech): Right now, we're just leaving Vernal, Utah. We're driving through a small community. And we will turn off Highway 40, and go on what we call a Bonanza Highway.

HORSLEY: The highway is a remnant of the bonanza that was expected here a quarter century ago. Back then, the nation was in the grips of another Iran-related oil crisis. And this highway through the Utah Desert seemed to many like the road to energy security.

Mr. MERRELL: It was built by the county in the late '70s and early '80s, primarily for oil shale. And then when oil prices dropped to 10, nine, $10 a barrel, everyone folded their tent and left. It was kind of a dark day out there when all of the jobs disappeared.

HORSLEY: Exxon's announcement that it was closing its oil shale project in 1982 is still referred to as Black Sunday. It was about that time, just when everyone else was getting out of oil shale, that Byron Merrell started getting in.

Mr. MERRELL: I haven't bought very much stock in my life. But I know when stocks go down, that's the time to buy.

HORSLEY: Merrell spent five years mentally designing an oil shale retort, in which pulverized rock is baked and vaporized oil extracted. He built his first prototype in 1993, buying shale from an abandoned mine to experiment with. Getting oil out of the rocks is not the problem, Merrell says. Any junior high school kid can do that with a Bunsen burner.

Mr. MERRELL: Every retort that's ever been built, I think, has made oil. To make it economically is another trick.

HORSLEY: And that's the trick that, so far, has eluded almost everyone who's tried. If the price of oil stays high enough, though, if the retorting process can be made cheap enough, and if environmental concerns can be satisfied, there's a lot of oil to be had here.

A study by the Rand Corporation estimates the sedimentary rock in this corner of Utah, Colorado, and Wyoming hold some 800 billion barrels. That's three times the size of Saudi Arabia's oil reserves.

Mr. MERRELL: The hills you see way off in the distance, and those are oil shale. That's in Colorado over there. South of us, that's all oil shale for probably 100 miles. If the planets line up right...

(Soundbite of laughter)

Mr. MERRELL: ...and everyone supports it, this could really be the oil capital of the world, because there's enough to last us for a long, long time. This is the most exciting entrepreneurial adventure in the nation right now, at least for us.

(Soundbite of laughter)

Mr. MERRELL: It's really exciting.

HORSLEY: Merrell's retort is located about 35 miles outside of Vernal, right next to a pipeline that carries oil into Salt Lake City. The retort used to be guarded by two dogs: Smith and Wesson. Wesson ran off, though, so Smith greets us by himself.

Mr. MERRELL: Smith, go away.

HORSLEY: We walk on gravel made of ground up oil shale, then climb an Erector set staircase six stories into the Utah sky. Crushed oil shale is dumped here in the top of the retort, then heated to about 1,000 degrees on its way down, until the organic material inside is vaporized. It takes about a ton of rock to produce a barrel of oil. When it's operating, this handmade prototype can make 24 barrels a day.

Investor Romit Bhattacharya was so impressed with Merrell's work, he joined the company last year as CEO, while Merrell took the title chief technology officer. Bhattacharya says their next step is build a commercial-scale retort more than 40 times the size of this one, capable of churning out a thousand barrels a day.

Mr. ROMIT BHATTACHARYA (CEO, Oil-Tech): People still want to say show me. Show me that you can sell the product. And so I think the first 1,000 barrels will get us to us to that commercial validation in the eyes of the business community.

HORSLEY: Bhattacharya figures the company can produce oil for about $33 a barrel in the early days. And the production cost will fall, over time, to less than $20 a barrel. That seems like a bargain at today's prices.

But for most of the last two decades, when conventional oil was cheap, no one wanted to talk about oil shale. Byron Merrell once went two years without a paycheck, while his wife, a school secretary, supported their family. It was a lonely road at times. But Merrell says he never thought of giving up.

Mr. MERRELL: An entrepreneur works a lot like an artist. They say that a sculptor can see the finished product inside the rock before he starts chipping away. And an artist that's painting in oils can see the finished picture before they start mixing their paint. I think all entrepreneurs are that way. They can see the end, but getting to end sometimes doesn't have paydays for a long time.

HORSLEY: Paydays seem closer now. Big oil companies like ExxonMobil and Shell are showing renewed interest in oil shale, although they're testing a different process that bakes the rock while it's still underground. Utah's governor signed a bill this spring with tax incentives to encourage the oil shale industry. All that worries environmentalists.

Staff attorney Steven Bloch of the Southern Utah Wilderness Alliance warns that mining and baking thousands of tons of shale would pollute the air, tax the water supply, and destroy the fragile western terrain.

Mr. STEVEN BLOCH (Staff attorney, Southern Utah Wilderness Alliance): It leaves huge, lasting scars. And eastern Utah, western Colorado is a landscape that heals very slowly from that type of damage.

HORSLEY: Merrell counters. His retort is designed to minimize water use and air pollution. But driving back to Vernal, Merrell admits he shares one concern with the environmentalists. If oil shale takes off in Utah, this part of the country will see substantial growth. Having grown up in the area and enjoyed its wide-open spaces, Merrell is not entirely happy about that.

Mr. MERRELL: It won't be too many years until this intersection will have a stoplight. There's going to need to be new schools and new businesses. And the county probably has 25,000 people in it now. If that was to jump to 50,000 or 100,000, I hope the community will forgive me.

HORSLEY: Still, Merrell says if somebody is going to develop the resource, it might as well be him. And if the sculpture he's imagined actually takes shape from tons of oil shale, Bonanza will be much more than the name of a highway through a lonely Utah desert.

Scott Horsley, NPR News.

MONTAGNE: Wind farms in the Gulf of Mexico and ethanol made from grass are two other fuels that could play roles in the nation's energy future. Hear more about them at npr.org.

(Soundbite of music)

MONTAGNE: This is NPR News.

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