http://www.denverpost.com/breakingnews/ci_9138674

In its quest to melt oil out of western Colorado's shale, Royal Dutch
Shell has been buying up land and water rights in anticipation of what
is likely to be a thirsty new industry.

Some officials, however, worry that the demands of the oil-shale
industry could drain every drop of the region's remaining water.

"On the upper end, we're looking at potentially several hundred
thousand acre-feet of water — more than people think is commonly
available to develop in the Colorado River," said Dan Birch, deputy
general manager for the Colorado River Water Conservation District.

Shell and other energy companies have amassed tens of thousands of
acres of cropland, ranches and open space — including a state wildlife
area — to gain water that would be needed to power the oil-shale
process.

"We've been acquiring land and associated water rights for a long
time," Shell spokesman Tracy Boyd said. "We're just situating
ourselves so that when the time comes, we'll have the resources we
need."

In the past year, Shell has:

• Bought a property near Mack that included rights for water in the
Colorado River and a 30,000 acre-foot reservoir.

• Bought a ranch from Texas oil tycoon Oscar Wyatt that holds water
rights from the 1800s.

• Completed a land swap with the Colorado Division of Wildlife for
water along Piceance Creek in the heart of the shale formation, in the
northwestern part of the state.

Boyd declined to detail how much water and land the company has
acquired, and state and local government officials say they don't
maintain complete ownership records.

Water rights in Colorado are considered private property and can be
sold separately from land.

The Bureau of Land Management estimates the shale formation in western
Colorado could yield as much as 1.8 trillion barrels of oil.

Getting that oil, however, could require three times as much water to
operate power plants, according to some estimates.

"The volumes are pretty enormous," said Bart Miller, water-program
director for conservation group Western Resource Advocates.

"The net water requirements . . . were something in the neighborhood
of 200,000 to 300,000 acre-feet annually," Miller said. "To put that
in context, that's the consumption of about 2.5 million people."

Energy companies will probably tap into previously unused water rights
that will force longtime ranchers and even Front Range municipalities
to cut back, said Birch of the Colorado River district.

David Smith, the owner of a cattle ranch near Meeker that has been in
his family for more than a century, worries that diverting water for
oil-shale production will harm places like the White River Valley,
where runoff and water that seeps into the ground benefit other users.

"We barely have been getting by, particularly in these drought years,
with the amount of water that's in the river — without taking anything
out above us," he said.

"But if they were to take out a large amount of water high in the
valley, it would cut the whole river down," Smith said.

Boyd said the water demands haven't been determined because the
technology hasn't been perfected.

At its experimental Mahogany project near Rifle — one of five
oil-shale research-and-development efforts taking place on federal
land — Shell is taking a novel approach by heating steel rods 2,000
feet underground to more than 700 degrees to extract oil from the
rock.

The company also is establishing an underground "freeze wall" around
the site, using a refrigerant in buried pipes to freeze water in the
ground and create a barrier of ice that keeps water from infiltrating
the site or chemical contaminants from leaving.

For now, Boyd said, most of the water is being leased back to the
ranchers for traditional uses. Major production, he said, is at least
a decade down the road.

Still, environmentalists question whether there is enough water and
energy to make oil shale viable.

"I'm pretty skeptical," said Elise Jones, executive director of the
Colorado Environmental Coalition.

"Oil companies have been working on trying to find this holy grail for
decades and decades and decades and still haven't," she said. "Then
you look at just some of the potential impacts to water and climate
and the incredible energy that might be required, and the costs may be
too great."