Howard S. Jonas holds a jagged rock that smells like the floor of an auto-repair garage. It’s oil shale and he considers it the future of IDT Corp., the Newark, New Jersey-based telecommunications company he founded in 1990.
IDT’s stock fell 99 percent from January 2004 to December 2008, bottoming at 66 cents a share, as the industry soured and the company lost half a billion dollars. It has since rebounded, closing at $12.75 yesterday, on enthusiasm for IDT’s attempt at a new direction to produce oil in a clean way in western Colorado.
“This is the richest shale in the world,” Jonas, 54, said in Bloomberg Businessweek’s July 5 edition.
Oil shale has broken many hearts. It doesn’t contain oil but kerogen -- a low-energy solid that must be heated to 600 to 700 degrees Fahrenheit (316 to 371 degrees Celsius) before it turns into oil and bleeds from the rock. Mining and heating shale are costly and energy-consuming and leave piles of waste.
Companies are experimenting with heating the shale while it’s underground and then pumping the oil to the surface, though that increases the risk of groundwater contamination.
Jonas, whose company offers phone cards and services, said his exploration approach is clean and energy-efficient: Capture combustible gas that comes from the earth with the heated oil, inject it back into the ground and burn it. That should heat up and crack more shale, yielding additional oil and gas in what Jonas said will be a self-sustaining process.
He plans to extract oil only from a layer of shale 2,000 feet (610 meters) below the earth’s surface. That’s beneath the water-rich layers known as aquifers, minimizing the risk of drinking-water contamination, Jonas said.
Royal Dutch Shell Plc, which plans to seek oil in the aquifer layer, has devised a complex method of freezing the ground around the heated shale to keep water away from oil.
The IDT technology comes from EGL Oil Shale LLC of Glenwood Springs, Colorado. IDT acquired 75 percent of EGL in 2008 and renamed it American Shale Oil LLC. Last year, Jonas brought in France’s Total SA as a 50 percent partner.
The venture will test the extraction method on a 160-acre (65 hectare) plot of U.S. government land in northwestern Colorado. The Bureau of Land Management is giving the company 10 years to show what it can do. It will take that long to know if Jonas’ latest venture will pay off.
“It’s hopeful but never for sure,” said M. Nafi Toksoz, a Massachusetts Institute of Technology geophysicist and adviser.
David Abelson, a policy adviser to environmental group Western Resource Advocates in Boulder, Colorado, said shale oil is a “looking-in-the-rearview-mirror fuel source,” and the U.S. should focus on clean renewables.
Jonas, an avid supporter of Israel, is developing shale oil there through a separate venture chaired by Michael Steinhardt, who made his fortune in hedge funds. Steinhardt said his investment is a way to do good and make money.
“On those kinds of investments,” Steinhardt said with a laugh, “I have a near perfect record -- of failure.”
That’s not what Jonas was hoping to hear.