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Colorado's public lands are faced with new challenges but water and land management depend on working together. Read about the relationship between water and land in Colorado and how Coloradans are converging to restore Colorado's public lands in the Spring 2018 issue of Headwaters magazine.

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Water Education Colorado

Oil Shale Déjà Vu

By Donna Gray

For the people of western Colorado, oil shale has been both a blessing and a curse.

Touted as the solution to the country's energy shortfall in the 1970s and '80s, oil shale development caused rapid growth followed by a precipitous economic decline when it failed to reach commercial production.

Once again the United States is faced with declining reserves of oil and a sharp increase in worldwide demand, and oil shale is getting a second look. The old adage, ‘The more things change, the more they remain the same,’ could be the motto of the new plans for oil shale. Familiar fears have arisen once again.

Area governments fear the industry will bring thousands of workers to small communities unprepared for the influx. Rural western Colorado officials fear oil shale development will adversely affect the lifestyle they cherish. This time around, oil shale will only add to the impacts already felt in a region experiencing burgeoning oil and gas development.

The scenario is familiar to people who were in the area in the 1970s. More than 30 years ago, the country was firmly in the grip of an energy crisis. OPEC price and production practices catapulted retail gas prices, curtailed supplies, and extended lines at the pump. President Jimmy Carter encouraged alternative energy development. Congress formed the Synthetic Fuels Corporation to promote research, and set aside $12 billion in price guarantees and tax incentives to jump start the process.

On the other hand, oil shale isn't new or alternative. It is a sedimentary rock formed more than 50 million years ago in the shallow Cretaceous seas that covered much of the West. The rock contains an organic material, kerogen. When heated, kerogen is released and can be refined into oil. As far back as the 19th century oil shale was used as a fuel source.

According to a 2005 Department of Energy report, the United States holds the world's largest oil shale reserves, an estimated 1.5 to 1.8 trillion barrels in the Green River Formation. The oil shale-bearing marlstones extend through northwestern Colorado, southwest Wyoming and northeast Utah. In 1917, President Woodrow Wilson recognized its potential as a strategic petroleum source for the nation, and set aside tens of thousands of acres as the Naval Oil Shale Reserves of Colorado and Utah. The catch: No technology existed at the time to extract the oil.

During the 1950s and '60s a handful of energy companies developed oil shale using traditional mining methods and above-ground retorting. But it wasn't until the 1970s energy crisis when the federal government released the Naval Oil Shale Reserves for commercial use that oil companies committed to commercial development of oil shale.

Although they made modest advances in production, the industry never produced commercial quantities of shale oil. On Sunday, May 2, 1982, the boom came to an abrupt halt.

Glenn Vawter was a senior vice president with The Oil Shale Company, or TOSCO, a partner with Exxon in the Colony Oil Shale Project, in Parachute, Colo. He remembers the day the Colony Project shut down, putting him and more than 2,000 other people out of work.

‘I was in a state of shock,’ he said, after getting the news. While Exxon shut down, Unocal continued to produce modest amounts of shale oil at its Parachute plant until it closed in 1991. A dramatic drop in world oil prices alarmed companies involved in oil shale production. They had anticipated a continued rise in prices as well as shortages in foreign oil.

Soaring oil prices and demands by rapidly industrializing countries, such as China and India, precipitated the latest push to develop oil shale. In March 2005, the Department of Energy's Office of Naval Petroleum and Oil Shale Reserves published ‘Strategic Significance of America's Oil Shale Resource,’ which predicted a shortfall in the worldwide oil supply in the next 20 years. Later in 2005, Congress passed the Energy Policy Act, which mandated the

Bureau of Land Management to offer research, development and demonstration leases to test new oil shale extraction technology. It also directed BLM to hold a commercial oil shale lease sale by the spring of 2008. The agency recently released a draft programmatic environmental impact statement that analyzed the potential oil shale development effects in Colorado, Utah and Wyoming.

While no one knows for sure what the environmental consequences of the new oil shale industry will finally be, there are indications.

A 2005 report by the RAND Corp. identifies water consumption as the major development issue. In an effort to understand what those water demands might be, the Yampa and White River Basin Roundtable and the Colorado River Basin Roundtable intend to analyze the near- and long-term water requirements in a region that is at the epicenter of current oil and gas, coal and oil shale development.

The basin roundtable process was created by House Bill 1177 and The Water for the Twenty-First Century Act. The roundtables include representatives from municipalities, local government, water conservation districts, as well as environmental and recreational interests. The roundtables' goal is to identify water availability and demand within each river basin. The analysis will look at water needed for extraction and processing of the oil shale and additional municipal water requirements for communities enlarged by incoming energy workers.

Water will also be necessary for the electricity needed to heat the shale underground. Shell's in-situ retort research has determined that 250 to 300 kilowatt hours are required for each barrel of oil produced. The U.S. Geological Survey estimates that for every kilowatt hour of power required, 25 gallons of water is needed. Overall, the U.S. Water Resources Council calculates three barrels of water will be needed to produce one barrel of shale oil. By international agreement, a barrel of oil equals 42 U.S. gallons, or almost 160 liters.

Oil shale development could increase annual consumptive water use in the upper Colorado River basin by 150,000 acre feet annually for each million barrels of oil shale produced, predicted former director of the Colorado Department of Natural Resources Russell George in his testimony before a Senate Energy Committee hearing in Grand Junction in 2006.

Jeff Devere, Rangely's assistant town manager, worries no long-range planning for water needs has been done. Rangely felt the brunt of the last oil shale boom and is now in the grips of accelerating natural gas development.

‘Reservoirs take decades to develop,’ Devere said. ‘If you need it 20 to 30 years down the road you'd better get on it today. We need to begin to talk about a population base that will triple. We need to talk about (water) storage and reservoir capacity on the White River.’

‘We're sitting on some of the last unused water in the state.’ Energy development in northwestern Colorado, Devere said, ‘will require environmental and industrial compromises’ that will limit industry and strengthen environmental regulations. It will also require building more reservoirs. ‘We need to do this in a balanced way. If we don't, we'll die a death by many small cuts.’

Finding available water will be a challenge. Some companies now engaged in oil shale research on BLM lands held on to the water rights acquired during the last boom.

‘Water was not a limitation (then). It was an important part of our resource portfolio,’ said Chris Treese, external affairs manager with the Colorado River Water Conservation District in Glenwood Springs. He worked for Unocal during the '80s oil shale boom.

Available water rights now are much more limited. Chevron still holds water rights it purchased in the 1950s on Roan Creek near Parachute and on the Colorado River, Treese said. ‘Shell has been very aggressively purchasing water rights in the White River basin.’

Vawter said his company, EGL Resources, does not have water rights but is preparing to purchase them.
Besides the challenge of finding available water, 25 years later companies also face a changed political climate. Unocal bought water rights up and down the Colorado River Valley between Glenwood Springs and Parachute. In Glenwood Springs alone it purchased three ranches for the water rights that went with the land. It has since sold those rights.

‘We have a skeptical public, that is gun-shy over the prospect of oil shale,’ Vawter said. ‘There's also the ethos around water rights. Recreation and environmental values are greater today than in the 80s.’

The new in-situ technology requires less water for production than the mining and above-ground retort process used during the last boom. The retort process involved heating the shale to 750-950°F. At the high temperatures, the kerogen decomposed to gas, oil vapor and char. The gas and oil vapors are cooled and the oil condensed. Water left over from cooling and condensation had to be treated before disposal.

To prevent contamination, the new process requires isolating the production area from the surrounding groundwater. Shell is experimenting with a process to freeze water around the production zone.

‘It will be the real challenge this time with oil shale,’ Vawter said. EGL will attempt to de-water the shale production zone with a ring of wells that will draw the groundwater off. Water could be contaminated with the hydrocarbons associated with kerogen and natural gas, and the hydrocarbons will have to be separated during processing. Once the oil and natural gas are drawn off, groundwater will seep back into the retort chamber and could become contaminated with residual hydrocarbons.

‘We'll have to pump it out and treat it until it's cleaned up and can meet regulatory standards,’ Vawter said.

Water produced from processing may be re-injected into the ground, but if improperly handled could increase the salinity of the groundwater. High levels of salinity are already a problem in the Colorado River Basin, where there is an ongoing Salinity Control Program.

‘We're spending $500 to $750 million to clean up the salinity in the Colorado River,’ said Cathy Kay, oil shale organizer for Western Colorado Congress, a community action group.

Jim Evans helped establish the Associated Governments of Northwestern Colorado in the 1970s to bring a balance to rampant oil shale development. He holds out hope for oil shale's latest go-round.

‘I believe our region is somewhat protected because 80 percent of the activity will be on public land,’ and the environmental impact statement now being prepared by BLM will set standards for mitigation, Evans said. ‘The bigger issue is the ultimate water supply for growth in the region as all these energy resources continued to be developed. I don't think it's an insurmountable problem.’

What local, state and federal governments must take into account, though, is the impact of all energy development.

‘That's the reason why we're growing in northwest Colorado. This time around is not the boom and bust cycle of the past,’ he said. Because oil shale developers are proceeding as they should have in the 80s, through a research program that will test the technology before commercial production gets under way, it's more likely to last.

‘It's absolutely happening the correct way,’ he said.

Only time—and the eventual commercial development of oil shale—will tell.

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