Shell turns its back on the ‘Next big thing’ — plans exit from the oil shale game after 30 some years

Oil shale deposits Colorado, Wyoming and Utah
Oil shale deposits Colorado, Wyoming and Utah

Oil shale has been the “next big thing” in Colorado for over 100 years. It looks it will take a bit longer to develop as Royal Dutch Shell is pulling out of the play in western Colorado. Here’s a report from Cathy Proctor writing for the Denver Business Journal. Here’s an excerpt:

“There’s been a shift in our oil shale project,” spokeswoman Carolyn Tucker said Tuesday. “The energy market has evolved since Shell first started its oil shale research project in 1981. We plan to exit our Colorado oil shale research project in order to focus on other opportunities and producing assets in our broad global portfolio,” she said in an email.

“Our current focus is to work with staff and contractors as we safely and methodically stop research activities at the site,” she said.

The announcement regarding the closure of Shell’s oil shale research and development work comes as the company announces plans to put its assets on the market across the United States, including oil and gas assets in northwestern and southeastern Colorado…

…scientists have spent decades trying to unlock oil shale’s bounty, and many believe that breakthroughs are years away — if they ever happen. Chevron, another Big Oil major, abandoned its oil shale research efforts in February 2012.

I hate to tell you that I told you so but here’s an article that I wrote in 2008 for the Denver Examimer.

From the Glenwood Springs Post Independent (Hannah Holm):

In 2008, the Colorado and Yampa-White Basin Roundtables, which are groups of stakeholders responsible for “bottom-up” regional water planning, commissioned a study on future water needs for energy development. The initial phase of the study raised eyebrows with the estimate that if oil shale really took off, the industry could be using nearly 380,000 acre feet of water/year by the 2040s, largely due to water use by power plants needed to provide the energy to extract oil from shale. An acre foot is approximately enough water to supply 2-3 households for a year.

A later version of the roundtables’ study revised the oil shale water use projections down significantly, in part by changing assumptions about how the energy for the extraction process would be generated (with less thirsty natural gas-fired plants rather than coal-fired plants). This version settled on an estimate of 120,000 acre feet/year to supply a large-scale oil shale industry and concluded that it could be supplied mostly from the White River.

Although significantly lower than the earlier estimate, 120,000 acre feet/year is still much more than the water needs projected for other energy development sectors in the region, including natural gas development. Water use of that magnitude could impact the state’s ability to develop water from the Colorado River and its tributaries for other uses, including meeting the needs of our growing cities. Current uses, such as irrigated agriculture, could also be impacted if senior water rights were applied to meeting the industry’s needs.

So … does Shell’s withdrawal from oil shale research in the region mean water planners no longer need to account for this potentially large increase in the use of our region’s water? Not necessarily, since several other companies are still actively working on their oil shale research and development projects.

However, since the water use estimates used in the roundtables’ studies were based largely on the technologies Shell was testing, the numbers will certainly need to be reconsidered, and the time horizon may be pushed back even further.

From The Grand Junction Daily Sentinel (Dennis Webb):

In a major setback to the effort to develop oil shale in the United States, Shell is closing down its research and development project in Rio Blanco County.

The company was the biggest player in oil shale in Colorado, holding three federal research, development and demonstration leases.

Shell spokeswoman Carolyn Tucker said the decision reflects an evolving energy market since Shell began its oil shale research in 1981.

“We plan to exit our Colorado oil shale research project in order to focus on other opportunities and producing assets in our broad Global portfolio,” she said in an e-mail. “Our current focus is to work with staff and contractors as we safely and methodically stop research activities at the site.”

In an interview, she said employment at Shell’s research site has ranged anywhere from 10 to 50, depending on activity levels.

“It’s not going to be an abrupt exit,” she said.

Shell has obligations and projects it needs to wind down, including reclamation and decommissioning work required by the Bureau of Land Management, she said.

Chevron, which also received a research and development lease from the BLM, decided early last year to divest itself of the lease, saying it wanted to focus on other priorities.

Just last month, Shell announced plans to sell its oil and gas project in Routt and Moffat counties. That followed an earnings decline and a review of Shell’s various oil and gas projects in the Americas, followed by a decision to keep those with the most growth potential.

At that time, Tucker said that decision had no bearing on its oil shale project, saying it involved a separate business that’s still in the research stage.

But she said this week’s decision results from another review project looking specifically at Shell’s oil shale assets, which also include holdings in Jordan and Canada.

“A number of factors went into the decision. Based on those many factors we’ve chosen to put those resources into the other oil shale assets and not in Colorado,” Tucker said.

More oil shale coverage here and here.

Ridgway is embarking on a rehabilitation project for Lake Otonowanda

Lake Otonowanda -- photo / Applegate Group
Lake Otonowanda — photo / Applegate Group

From The Watch (Samantha Wright):

The $2.4 million Lake Otonowanda Rehabilitation Project will allow the town to exercise its full decreed storage right by improving the lake’s capacity from 100 to 600 acre feet, while restoring the tunnel outlet near the reservoir to make the delivery system more efficient.

The town’s municipal water right on Lake O predates the Colorado River Compact, a 1922 deal made by seven U.S. states in the basin of the Colorado River in the American Southwest, which to this day governs the allocation of the water rights to the river’s water.

Currently, due to Lake O’s modest size and declining condition, the Ridgway stores only a fraction of the water to which it is legally entitled; the renovation will allow the town to maximize Lake O’s historic adjudicated capacity. Stored water will supply the town when its flow rights are out of priority, ensuring enough water for most anticipated situations, even during drought years, and accommodating growth well into the future.

When the renovation is complete, the town will be able to supply water to the community for a minimum four-month period in a drought event, compared to its current storage capacity of only 10‐14 days’ worth of water.

The rehabilitation project got the big green light earlier this month, when the Town of Ridgway finalized a $1.2 million grant/loan package with the Colorado Water Conservation Board that will contribute significantly toward financing the project…

Arguably among the most scenic municipal reservoirs in the nation, Lake O is located about three miles south of Ridgway off of County Road 5, in an alpine meadow encircled by ponderosa forests and pristine views of the Cimarrons and Sneffels mountain ranges. It is the town’s primary municipal water source; the town also holds junior flow rights on Beaver Creek and Cottonwood Creek/Happy Hollow that are more vulnerable to calls. Generally, the lake provides enough water for the town’s needs (with an average of 280 acre feet diverted each year), but in the drought of 2002, all of Ridgway’s water rights were called by downstream senior water rights holders. The state water engineer subsequently put the town on notice to shore up water rights and storage strategies to prevent this situation from happening again.

More Uncompahgre River Watershed coverage here and here.