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Post Independent (Colorado): Shell pulls mining permit but says it’s still committed to shale project

By Dennis Webb
Post Independent Staff
Glenwood Springs Colorado CO
June 15, 2007

Shell has pulled a state mining permit application but remains committed to trying to commercially develop oil shale in western Colorado, a company spokesperson said Thursday.

The company has withdrawn a permit application associated with one of three, 160-acre oil shale research, development and demonstration leases it has been awarded on federal lands.

Shell’s permit decision means that it is putting on hold plans to hire 600 workers. However, no workers are losing their jobs, Shell spokesperson Jill Davis said Thursday.

“Don’t misconstrue this as pulling out of oil shale or anything remotely like that,” she said.

She said Shell wants to finish testing of freezewall technology on private land in Rio Blanco County before trying out its oil shale development technology on the leased land.

“The purpose is to be a demonstration of the technology, and so we want to hold off demonstrating until we have more certainty of the freezewall technology,” she said.
Shell is studying the feasibility of extracting oil from shale by heating the shale underground and then pumping the oil to the surface. It hopes to create a frozen wall around areas of the so-called “in-situ” development to protect surrounding groundwater from being contaminated.

Shell had applied for the mining permit earlier this year but Davis said the freezewall testing is taking longer than expected. She said it should be finished by 2009 or 2010 if all goes as planned.

Shell hopes to make a final decision on oil shale development by early next decade, but it’s possible that decision now may come a little later, Davis said.

Davis said freezewalls are expensive to build, and the cost estimates are rising thanks to soaring labor and materials expenses being experienced by the oil and gas industry in the region. She said it makes the most sense not to proceed with its oil shale test on the leased land until it can incorporate all the lessons from its freezewall tests.

“We don’t want to get ahead of ourselves. We want to take this step by step,” she said.

Davis said the company also didn’t want to waste the time of regulators in reviewing its seven-binder mining permit application if it is premature.
She said Shell’s decision shouldn’t affect its federal leases, which have a 10-year window.

“We’re definitely not at risk of losing that and we certainly want to preserve that outstanding land position that we have as a company with three leases,” she said.
Shell’s permit decision earned praise Thursday from Bob Randall, staff attorney with Western Resource Advocates, a nonprofit that works on energy, land and water issues.

“Honestly I guess I’m glad to see Shell is being cautious here and prudent. They’re making business decisions as to what makes sense to move forward with,” he said. “… I wish the BLM was being as cautious as Shell appears to be.”

The federal Bureau of Land Management has come under some criticism over its efforts to expedite oil shale leasing. This week, a House committee passed a bill that would push back time lines associated with that leasing.

Randall said Shell has invested 20 years of research and millions of dollars into its oil shale technology.

“In my view Shell’s announcement is very relevant to the efforts that are moving through Congress, just showing that commercial leasing is far premature and it makes sense to slow things down a little bit,” he said.

He said Chevron and EGL Resources, which also have federal R&D leases, also plan to try in-situ oil shale development, but to pump out groundwater rather than using freezewalls to protect it.

“We have real concern about the effect their processes will have on groundwater,” he said.

Davis said Shell is fine with postponing the issuing of commercial leases, but has asked Congress that it proceed with laying out a leasing program that spells out royalties, local impact fees and other costs. That will help Shell assess the economics of oil shale development, she said.

She said Shell wants 75 percent of the funds it pays to go back to local communities to pay for infrastructure needs created by oil shale development.
Davis called commercial leases “probably premature, given that there’s no proven technologies at this point.”

She said Shell continues to have 40 permanent employees at its test site, along with 150 contractors. Another 300 employees in its Houston office are working on oil shale technology.

She said it’s possible Shell may proceed sooner than had been planned with work on another of its three R&D leases. It plans to test its heaters on that lease, and the results might be useful once it proceeds with the oil shale test.

Contact Dennis Webb: 384-9119
[email protected]

Post Independent, Glenwood Springs Colorado CO

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