DENVER—Shell Frontier Oil and Gas Inc. is withdrawing a state mining permit to start work on experimental oil-shale operations on federal land so it can refine its process at its private test site near Meeker.
Shell spokeswoman Jill Davis said Thursday that the company wants to gather more information about its process that heats the shale in the ground to extract the oil.
“By no means is this an exit of Shell from oil shale,” Davis said. “All along we’ve been taking a very cautious approach to oil-shale development.”
Shell wants to delay work on the federal land leased for research and development to wait for results from its test site, Davis said.
The results are expected in late 2009 or 2010.
Shell is one of three companies to win 10-year leases on 160-acre parcels of federal land in northwest Colorado and eastern Utah for research and development projects in oil shale. The Interior Department awarded three separate leases to Shell.
The experimental projects are seen as setting the stage for commercial-scale development of oil shale. Western Wyoming, eastern Utah and northwest Colorado are believed to have enough oil locked in rock formations to supply U.S. energy needs for a century.
The Bureau of Land Management is writing an environmental impact statement on large-scale oil development in the region. BLM officials have said the preliminary plan could be released as early as mid-July.
The states of Colorado and Wyoming are among those urging the federal government to move cautiously. Colorado and Wyoming officials wanted more time to review the oil-shale plan before its release, but got just an additional two weeks rather than the three months they requested.
“I’m glad to see that Shell is moving cautiously and prudently,” said Bob Randall, an attorney with Boulder-based Western Resource Advocates, an environmental law and policy group. “I honestly just wish the BLM would move as cautiously as it appears Shell is.”
BLM officials have said the federal government is already behind the schedule set by Congress for completing the final environmental analysis on oil shale. The 2005 federal energy bill directed the BLM to complete it by February.
The oil, or kerogen, is locked in layers of hard rock, and the technology for affordably heating and extracting the liquid is still evolving. Shell’s process of baking it in the ground is an alternative to previous methods that mined and brought the rock to the surface to cook in a furnace.
Shell is experimenting with creating a “freeze wall” underground by circulating to freeze adjacent areas to keep groundwater away from the melted oil.
Local governments have urged federal officials to move cautiously because the impact on water and other resources isn’t clear.
Area officials and residents also are wary because of the oil-shale bust of the early 1980s. Western Colorado’s economy was sent reeling when falling oil prices and declining government subsidies led Exxon to shut down its $5 billion Colony oil-shale project in Parachute and lay off 2,200 workers.
