Shell: Oil shale project to go on

Company won't seek water right on Yampa

A decision announced by Shell on Tuesday ends a battle over Yampa River water, but the company says it doesn’t mean the end of its oil shale project in Rio Blanco County.

Shell cited the global recession in deciding to withdraw a hotly contested application for conditional water rights on the Yampa River.

“We reviewed our application in the context of our ongoing research and development activities and, in light of the overall global economic downturn that has affected our project’s pace, have decided not to pursue the Yampa water right at this time,” the company said in a prepared statement.

Shell spokeswoman Carolyn Tucker said that doesn’t mean the pace of the project has slowed. Rather, it is just maintaining its research focus while adjusting to economic realities.

“The global downturn has effects on Shell just like it does on any other company. Some of the resources and some of the plans we’ve made early on don’t ring as true. We have to be more flexible as a company, and some of the research dollars have to be doled out more sparingly,” she said.

Tucker added, “We’re not pulling out, we’re not shutting down. We’re just being as flexible as we can with the economic times.”

Shell holds three federal research and development leases in Rio Blanco County. It is pursuing a process that involves heating shale in place underground and pumping kerogen to the surface, while protecting surrounding groundwater by encircling the heated area with a freezewall.

The company said in its statement, “The exact scale and timing for development will depend on a number of factors, including progress on our technology development, the outcome of regulatory processes, market conditions, project economics and consultations with key stakeholders.

“Shell is continuing its research and development work, including active operation of the Freeze Wall Test, ongoing environmental and reclamation studies and advanced heater technology development.”

Shell said it plans to submit permit applications for its first research and development pilot project late this year or early in 2011.

“We hold a variety of water rights in northwest Colorado and we have for many years, so we do have water,” Tucker said.

Shell had set out to diversify its water rights by seeking 375 cubic feet per second from the Yampa to fill a 45,000-acre-foot reservoir in Moffat County.

David Abelson, oil shale policy advisor for the Western Resource Advocates environmental group, said the WRA opposed the water right application on behalf of four environmental groups. Altogether, he said, 28 statements of opposition were filed against the application, from water districts, local governments, the Colorado Division of Wildlife, several federal agencies and other interests.

The Yampa is the state’s only major river with water left to appropriate, Abelson said.

“We’re extremely pleased about the decision to save the Yampa for another day,” he said.

He said he believes Shell’s decision also supports his organization’s long-held view that oil shale development is not ready for prime time.

“The technology is not developed, oil shale has never been economically competitive, and there’s nothing to suggest that either of those hurdles are about to be overcome,” he said.

How much water might be required to develop oil shale in an arid region also has been a lingering question.

Theo Stein, spokesman for the state Department of Natural Resources, said of the Shell announcement, “I think that this is an illustration of how complex the interweaving of oil shale issues and water issues is, and the need for a careful and thoughtful (oil shale leasing) process that the Interior Department is managing.”

Tucker said Shell “will continue the slow, cautious approach that we have in the past.” She said the size of the local oil shale resource long has interested Shell.

Its research efforts date back almost 30 years, with several encouraging results from tests of its development process to date, she said.

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