• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Energy Bill May Help Colorado Oil-Shale Site

Posted on: Wednesday, 3 August 2005, 03:00 CDT

Energy legislation approved Friday by Congress will help move an experimental oil-shale project in northwestern Colorado closer to production, but energy giant Shell Oil Co. is still a long way from saying whether and when it will happen.

Though Shell's Mahogany research center near Rangely is producing promising results, no decision on commercial production is likely until the end of the decade, said Terry O'Connor, a Shell vice president working on the project in Denver.

"I believe the bill will help get the project off the ground because it sends a strong signal that the U.S. government believes oil should be an important part of our domestic energy mix if it can be done in an environmentally acceptable and economically feasible manner," O'Connor said.

Other Colorado impact from the legislation is expected to be slight.

The massive bill, which President Bush said he will sign, likely will have little effect on utility rates in Colorado Springs and statewide. Nor is it expected to trigger much more oil drilling, which is at record levels as oil prices hit $60.57 a barrel Friday.

The legislation's impact probably will be felt in helping to revive interest in extracting oil from rock. Geologists estimate about 1 trillion barrels of oil are buried in shale formations in western Colorado and nearby areas in Utah and Wyoming.

Efforts to develop oil-shale deposits began during World War II and continued until 1982, when falling oil prices prompted Exxon shut down its $5 billion Colony II project near Parachute and lay off 2,200 workers. Two other similar projects later closed.

The bill requires the Interior Department to begin leasing federal lands for oil shale production within 21/2 years as the next step to 160-acre research leases the Bureau of Land Management began offering in the three states last month.

The legislation also eliminates an 85-year-old rule that now limits companies to a single oil-shale lease nationwide and encourages local, state and federal officials to work together to reduce delays in issuing permits for oil-shale projects.

The bill didn't include provisions Shell sought to cut federal royalty rates and give favorable tax treatment to encourage oil shale production, O'Connor said.

"All in all, it is a mixed bag, but a balanced piece of legislation. The good provisions far outweigh the areas that were not addressed," O'Connor said.

Shell employs about 30 people and up to 60 contractors on the 5- acre site in Rio Blanco County. At the site, the company has drilled deep holes in the rock and inserted long electrical heaters to heat the shale to 700 degrees so it can pump out trapped oil and natural gas, O'Connor said.

The company has been researching oil-shale production since 1982, spending "tens of millions of dollars" to produce 2,000 barrels of oil. Shell is "optimistic" it can profitably produce oil from shale at oil prices as low as $30 a barrel, O'Connor said.

The new legislation also encourages mining coal on land controlled by Native American tribal governments, including a mine operated by Colorado Springsbased Westmoreland Coal Co. on a Crow reservation in Montana, said Christopher Seglem, the company's chairman.

"This important legislation reaffirms the importance of coal and coal-fired power in our country's energy future," Seglem said.

The company also backs "new incentives for research and development and deployment of clean-coal technologies and pollution control equipment."

The bill should not effect current utility rates in the Springs and could help curb increases by encouraging renewable energy that Colorado utilities are required to use under a new law approved by voters last year, said Andy Colosimo, a Springs Utilities spokesman.

Provisions in the legislation also will speed up the permit process needed to build transmission lines, such as one Xcel Energy Inc. wants to build in Eastern El Paso County.

The bill isn't expected to increase record oil drilling activity in Colorado despite provisions that would allow increased drilling on federal lands, said Ken Wonstolen, senior vice president of the Colorado Oil and Gas Association in Denver.

"I don't see anything dramatic that will effect the industry," Wonstolen said. "The constraints on drilling are rig availability and people to run them."

CONTACT THE WRITER: 636-0234 or wayneh@gazette.com

Source: Gazette, The; Colorado Springs, Colo.

More News in this Category