Grand Junction Sentinel (Colorado): Shell pulls its oil-shale permit: Firm not abandoning project, says it needs time to study process

By MIKE McKIBBIN & AMY HAMILTON The Daily Sentinel
Friday, June 15, 2007

RIFLE — A permit to start work on one of three federal oil shale research leases in Rio Blanco County was withdrawn Thursday by Shell Exploration and Production Co. to allow more time to test its process, according to a company official.

The move does not mean Shell has any plans to abandon its longtime efforts to mine shale oil, spokeswoman Jill Davis told The Daily Sentinel, nor should it affect plans to decide shortly after the next decade if the process will allow Shell to develop a commercial project.

“We’ve had some challenges with drilling all the wells we need in the freezewall process,” Davis said.

The geology of the company’s privately-owned Mahogany test site has caused the bore holes to angle out too far to allow the groundwater to efficiently freeze, she said.

The freezewall is supposed to protect groundwater in Shell’s in-situ, or in-ground, process that uses electric heaters to “cook out” shale oil that is pumped to the surface. Frozen groundwater around an area where heaters are placed would keep other groundwater from seeping into the area and potentially becoming contaminated, Davis said.

Each of the 157 bore holes at the site have to be evenly spaced, Davis said, and some did not drill straight enough, so the refrigerant coolant did not work efficiently.

“There’s a bigger space in between the bore holes than we need, so it takes longer to freeze,” she said.

Shell withdrew its mining reclamation permit because it assumed the freezewall would function properly, Davis said.

“It’s likely we will have to redesign the (freezewall) test, which extends our research and evaluation before we start anything on this research, development and demonstration site,” she said.

Davis said Shell will continue to research heater technology as well. Previous problems with electrical shorts and crushed heaters were addressed with the latest well design, she said.

“We have good heaters now, but we’re always looking to increase efficiency,” Davis said.

The move will not cause any layoffs for Shell’s 35 to 40 on-site workers, or approximately 150 contractor employees, Davis said. It will delay plans to build an up-to-400-person “man camp” to house some of the 600 planned workers for the project, she said.

“We will still have a very active oil shale program over the next several years,” Davis said. “This is all part of our cautious, deliberate approach to oil shale that we’ve taken over the last 20 years.”

Rio Blanco County Commissioner Joe Collins said the permit withdrawal will give the county more time to prepare for Shell’s expansion in an already-energy intensive Piceance Creek basin.

Division of Reclamation, Mining and Safety spokeswoman Loretta Pineda said Shell’s seven-binder application was a big project to review, and the next step was to hold public hearings and gather comments. The division planned to issue its initial comments within the next few months, she said.

Bob Randall, staff attorney for Western Resource Advocates, a Boulder-based conservation group, submitted comments about Shell’s application and said Thursday he was surprised, but pleased, to hear it had been withdrawn.

“I’m glad to see Shell is moving cautiously and prudently,” he said. “Having an effective containment system and groundwater protection is paramount for Western Colorado. I wish the (Bureau of Land Management) would move more cautiously and prudently instead of offer commercial oil shale leases as soon as 2008.”

BLM spokesman David Boyd said the agency did not anticipate any reduced commitment by Shell because of the permit withdrawal.

“We commend Shell for taking appropriate steps at this juncture to ensure that the lease is developed correctly,” Boyd said. “We don’t anticipate giving approval for commercial production for several years, and this is just another step in what is a deliberate process to ensure proper development of a new energy resource.”

Mike McKibbin can be reached at [email protected].

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