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March 21, 2009 — A new oil shale energy boom on Colorado’s Western Slope like the one that went bust in the 1980s will come at the expense of agriculture and continued residential growth on the Front Range and in the state’s mountain towns because of a lack of water, according to a report released Wednesday.
The study by Boulder-based Western Resource Advocates concludes that the fully ramped-up oil shale industry contemplated by energy companies and some state and federal lawmakers would consume as much water as the entire Denver metro area on an annual basis.
“Water on the Rocks: Oil Shale Water Rights in Colorado,” produced by the environmental group and funded in part by the Aspen Skiing Company, essentially concludes that six different energy companies led by ExxonMobil and Shell have “cornered the market” on water in Northwestern Colorado.
The report details more than 200 water rights totaling 7.2 million acre feet in diversions and 2 million acre feet in water storage rights in the Colorado River and White River basins.
Estimates put the water requirements of an oil shale industry producing 1.55 million barrels of oil a day at 378,000 acre feet per year, more than the entire Denver metro area consumes on an annual basis, which is less than 300,000 acre feet.
Should oil shale production hit full stride in the next 15 to 20 years – something the Bush administration tried to accelerate by opening up 2 million acres of BLM land to leasing and approving royalty rates and leasing rules – there will be a major political battle over water rights.
Many of the conditional and perfected water rights owned by energy companies date back to the 1950s and are senior to rights owned by other users such as local water districts, ski areas and agricultural stakeholders.
“There are potential limitations on planned water development along both the Front Range and the West Slope, for example in ski towns and other communities that hold rights that are junior to these energy company rights,” WRA executive director Karin P. Sheldon said, adding that even the BLM predicts Northwestern Colorado would shift from an agricultural landscape to an industrial one.
Not even included in the WRA report is the bid by Shell to obtain extensive rights in the Yampa River Basin, and other reports have concluded full-scale commercial oil shale production is not compatible with current and future water needs for sustained residential growth. The WRA study, though, is the first to detail the extent of energy company water rights.
ExxonMobil and Shell both issued statements Wednesday indicating they won’t leave other water rights holders high and dry either on the Western Slope or the Front Range. Currently, oil shale extraction technology is unproven on a commercial scale, and estimates of the amount of water needed for the process vary.
Environmental groups have sued the BLM to reverse the Bush administration’s midnight leasing rules, and other studies have indicated that the long-term environmental implications for the Colorado River Basin don’t justify the economic benefits of the boom-bust energy industry.
Still, that hasn’t stopped state lawmakers in Colorado from trying to foster a better business climate for oil shale production, which Sen. Kevin Lundberg (R-Berthoud) earlier this year told the Colorado Independent is the future of energy production in the state.
Lundberg introduced a House bill that would have provided a severance tax exemption for oil shale production. He reintroduced that bill in the Senate when he moved over, but it was postponed indefinitely in the Senate Committee on State, Veterans & Military Affairs in late February.
Lundberg said it was the first bill he introduced this session because the industry is so critical to the creation of jobs in Colorado.
Sen. Gail Schwartz (D-Snowmass Village), who participated in the WRA conference call announcing the study Wednesday, questioned the speculative nature of oil shale and its huge demand for scarce water resources.
“This is not an industry that is going to compete for jobs. We’re in a mode of jobs by June. These are not jobs in June and that’s why I think looking down the road at the severance tax exemption and also driving employment in that sector, we’re not quite there yet,” Schwartz said.
“We do have an opportunity certainly through our new energy economy to put energy development throughout the state of Colorado, and those technologies we’re actually deploying right now.”
But Lundberg said blocking an industry with the potential to tap 800 billion gallons of estimated oil reserves in Colorado, Utah and Wyoming is shortsighted. He also said most estimates overstate the amount of water needed.
“It’s a red herring to say we don’t have enough water,” Lundberg said in a previous interview. “That’s like putting your head in the sand … it’s kind of a Luddite notion of, ‘I know we can’t develop this because we didn’t 30 years ago.’”
WSA’s Sheldon says the industry’s own data put the estimates of the amount of water needed at between 2.6 and 4 barrels of water per one barrel of oil if the shale rock and sand is mined and then retorted (heated at high temperatures to extract the oil). That was the technology in use in the 1980s.
In situ retorting, or heating the oil shale while it’s still underground, was not available then but still requires between 1 and 3 barrels of water per barrel of oil produced, Sheldon said.
“If indeed these figures are too high as is being alleged, we’d like to see figures from the energy companies so that we can adjust them,” Sheldon said. “We relied on the best available data that we could find.”
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