The company is one of only three that holds a federal lease to research oil shale energy development on the Western Slope, but officials say they would rather pursue other projects.

“Chevron has notified the Bureau of Land Management (BLM) and the Department of Reclamation, Mining and Safety (DRMS) that it intends to divest its oil shale research, development and demonstration lease in the Piceance Basin in Colorado,” the company announced Tuesday. “While our research was productive, this change assures that critical resources — people and capital — will be available to the company for other priorities and projects in North America and around the globe. We will work with the BLM and DRMS to determine the best path forward, timing and other issues.”

Despite nearly 100 years of failed attempts to make oil shale commercially viable, House Speaker John Boehner, R-Ohio, has said the energy source will help fund his $260 billion transit package and U.S. Rep. Doug Lamborn, R-Colorado, is pushing the Pioneers Act, which would revive a 2008 plan put together during the Bush administration to open 2 million acres of public lands in Utah, Wyoming and western Colorado to oil shale drilling. The House passed Lamborn’s bill this month.

The Congressional Budget Office issued a report, however, which projected that Boehner’s bill would, over 10 years, leave the highway trust fund $78 billion in the red, and the Interior Department is looking at slashing the amount of land available for oil shale research to 462,000 acres.

“Chevron’s research hardly got started and they quickly concluded that they were throwing money down a rabbit hole. It’s indicative of the fact that oil and gas companies see much more profitable, and realistic, opportunities elsewhere,” said Colorado energy expert Randy Udall.

Squeezing energy out of oil shale requires immense quantities of water. Industrial-scale oil shale development could require as much as 150 percent of the amount of water the Denver Metro Area consumes annually, according to Bureau of Land Management estimates.

As early as 1921, oil companies have been trying to tap northwest Colorado for oil shale. The expense required to develop the energy source, however, has outweighed potential profits. About a dozen different projects have come and gone during that time — none remembered more than “Black Sunday” when ExxonMobil pulled the plug on a huge oil shale operation in western Colorado in 1982 that left the region in economic shambles.

Chevron and its subsidiaries started amassing acreage in Colorado for oil shale research back in the 1930s.

“Oil companies have been trying to pull the sword from the stone for nearly a century. Oil shale has no King Arthur,” said Matt Garrington of the Checks & Balances Project. “Chevron’s decision to pull out of oil shale is yet another reason why [U.S. Rep. Scott] Tipton [R-Colorado] and Lamborn should quit saying that melting rocks into oil will somehow fund critical repairs to our roads and bridges.”

Royal Dutch Shell and AMSO are the other two companies that hold oil shale leases in Colorado.

As predicted, testimony at Wednesday’s House Subcommittee on Energy and Mineral Resources oil shale field hearing in Grand Junction produced more industry hand wringing over federal regulatory uncertainty and environmental push-back over an unproven energy source.

Spearheaded by Western Slope U.S. Congressmen Scott Tipton, R-Cortez, and Doug Lamborn, R-Colorado Springs, the meeting was entitled “American Jobs and Energy Security: Domestic Oil Shale, the Status of Research, Regulation and Roadblocks.”

Lamborn and Tipton at oil shale hearing in Grand Junction (Western Colorado Congress photo).

So reviewing current rules already on the books, which is what Interior Secretary Ken Salazar announced with his “fresh look” at oil shale rules earlier this year, is an “inefficient and unnecessary use of taxpayer money and is a significant deterrent to capital investment,” according to Whitney.

But conservation groups point out that oil and gas companies have had decades to perfect technology that makes full-scale oil shale production commercially viable and have failed to do so. Meanwhile, they add, companies have plenty of private and federal land to continue testing on without the 2 million acres of public land offered up by the Bush administration in 2008.

Oil shale production involves heating rocks to extract organic kerogen – a precursor to oil – that is then refined into gasoline. Unlike shale oil and gas, oil shale has never been produced on a commercial scale in the United States. The world’s largest reserves of oil shale are in the Green River Formation of northwest Colorado, southwest Wyoming and eastern Utah.

“During Wednesday’s field hearing led by Reps. Lamborn and Tipton, both the congressmen and witnesses repeated century-old rhetoric in an effort to promote oil shale as an ‘environmentally responsible’ energy option,” reported the non-profit watchdog Checks and Balances Project. “And while we managed to fill up our bingo sheet, we hardly won anything. The hearing resulted in the same failed ideas on energy policy and a lack of leadership for real solutions to our growing energy problems.”

Checks and Balances offered up an Oil Shale Bingo card (see completed card below) to track repeated promises from industry and politicians about the potential of oil shale production. However, critics say the process would industrialize the Western Slope, consuming far too much water and conventional power while increasing heat-trapping greenhouse gas emissions by up to 75 percent over conventional oil.

Exxon laid off 2,200 workers at its Colony Oil Shale Project in Battlement Mesa in 1982, devastating the economy for years. Nearly 30 years later oil shale is still not being produced commercially.

“Oil shale continues to be a laggard,” Randy Udall of the Association for the Study of Peak Oil & Gas – USA told the Colorado Independent in an earlier interview. “It continues to be a no-show, and one must really wonder whether oil shale is ever likely to be a significant player in U.S. energy supplies.”

Still, Tipton insists the Bush administration rules, which included royalty rates and leasing terms for federal lands, need to be implemented without interference from former Colorado Sen. Salazar and the Obama administration.

“The road to viability for the oil shale industry is reliant on a predictable regulatory structure and an environment in which companies can invest in research and development and create jobs,” Tipton said. “The proper implementation of our environmental and safety regulations already on the books is a far better strategy than adding additional layers of bureaucracy to the process.”

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The director of sustainability for Aspen Skiing Company on Monday trumpeted the results of a rural electric association board election that saw the local co-op flip to “a supermajority of progressives who support clean energy and energy efficiency, stable prices and fiscal prudence.”

Aspen’s Auden Schendler sent out an email that echoed a pre-election campaign to “Vote the Women” in the Holy Cross Energy Board Election, where incumbent Lynn Dwyer won the western district over a field of four that included alternative energy advocate Randy Udall.

Dwyer got 1,522 votes to 1,105 for Clemons Kopf, 968 for Udall and 422 for Thomas McBrayer. In the northern district, which includes Aspen’s rival ski town of Vail, Megan Gilman won with 1,516 votes to 1,267 for Eagle County surveyor Dan Corcoran, 521 for Erik Lundquist, 445 for former Eagle County Commissioner Arn Menconi and 384 for Scott Prince.

“This year marks the end of a four-year period in which the board flipped from extremely conservative to remarkably progressive, likely the single most important step we could have taken in our region to address climate change,” Schendler wrote.

Holy Cross is already one of the state’s more progressive rural electric co-ops, with 55,000 members stretching from Vail to Aspen. Co-op board elections have become contentious local battlegrounds in the ongoing debate over global climate change, with the state’s largest co-op, the Intermountain Rural Electric Association on the state’s Front Range, steadfastly resisting efforts to reform its board.

An unprecedented nine candidates are running for two seats on the board of Holy Cross Energy, a rural electric co-op with 55,000 members on Colorado’s Western Slope. Its coverage area includes two of the biggest players in the nation’s ski industry: Aspen and Vail.

The race for the co-op’s Western District, which includes Aspen, features incumbent Lynn Dwyer – the first woman elected to the co-op board in its 71-year history – and Randy Udall of the Association for the Study of Peak Oil & Gas. Dwyer, the current vice president of the Holy Cross board, is owner of Dwyer Greens and Flowers in New Castle.

Randy Udall

The other two candidates in the Western District are Thomas McBrayer of Carbondale, general manager of a propane company in Glenwood Springs, and Clemons Kopf, an electrical engineer in Glenwood Springs.

In the Northern District, which includes Vail, five candidates are vying for one seat, including lightning-rod former Democratic Eagle County Commissioner Arn Menconi, who left office due to term limits and heads up a highly successful nonprofit snow sports organization that introduces at-risk kids to the mountains.

The other candidates include Megan Gilman of Avon, owner of Active Energies, a company specializing in renewables and energy efficiency consulting; Scott Prince, an Avon banker with Wells Fargo; Dan Corcoran of Eagle, the current Eagle County surveyor; and Erik Lundquist, a mechanical, plumbing and electrical engineer in Gypsum who ran for the board last year and lost out to banker Michael Glass by a margin of 1,683 votes to 1,179.

Veteran Colorado journalist and former Vail Trail editor Allen Best poses the question of why so many people would run for such a low-paying ($600 a month) position. On his website Mountain Town News, Best theorizes there may be some backlash after the Holy Cross board went majority green last year.

“[Holy Cross] is an open and transparent rural electric utility, arguably the most progressive in the state and possibly the country,” Udall told Mountain Town News. ““Is there a grassroots backlash to some recent green initiatives? Perhaps, but I haven’t heard about it.”

Best concludes the wealth of candidates for such low-profile and thankless jobs likely stems from an economic downturn providing people with more disposable time and the heightened interest in energy issues nationwide.

For years, electric co-ops have been largely ignored by the voting population (basically if you get your power from the co-op, you are considered a member-owner with the right to vote for the board of directors). Most co-op elections draw only 20 to 30 percent of the members compared to 50 percent or so in municipal and county elections.

Co-ops since the 1930s have been used to spread electrical power into rural areas where large, publicly owned utilities would not go, and the boards were often made up of ranchers and farmers who made decisions for decades. Now many of those rural areas have become populated with people questioning decisions on rates, fuel loads and other co-op policies.

Holy Cross Energy, which has a track record of supporting innovative renewable energy projects, has largely steered clear of controversy, although two years ago it was blasted by some for investing $100 million in Xcel Energy’s new Comanche 3 coal-fired power plant.

In the past, former Holy Cross board president and Carbondale rancher Tom Turnbull stirred up controversy with statements in the Holy Cross newsletter that societies sometimes benefit from warmer climates – obviously not a popular sentiment for ski resort operators.

Then last year, Turnbull, who is no longer board president, angered board challengers by backing the incumbents – a move that raised questions about possible violations of a state law aimed at rural co-op board election transparency. Turnbull is still on the board, but now serves as secretary.

Aspen Skiing Company director of sustainability Auden Schendler has sent out two emails supporting Dwyer and Gilman in this election.

“Vote the women!” the emails read. “Megan and Lynn are both energy progressives with the best chance of winning this election; Lynn is the first woman ever elected to the board, and Megan would be the second woman to serve since 1942.”

But beyond gender issues, Schendler argues co-op elections are much more important than most people realize.

“This is your biggest chance in the next year to influence where your electricity comes from, and how that affects air pollution, jobs, climate change, asthma rates, and a whole range of issues,” Schendler wrote. “It’s one of the most important things you do on the environment this year. I’m asking you to please vote for candidates that support clean energy and efficiency …”

Vail Resorts, a publicly traded company, typically does not take a public position in local elections.

In other parts of the state, co-op elections have become quite contentious – specifically at the state’s largest co-op, the Intermountain Rural Electric Association on the Front Range between Denver and Colorado Springs.

Elections at the IREA have become heated debates about climate change and coal, oil and gas versus renewable sources such as wind, solar and geothermal. In the IREA’s most recent election, just one green board member made it onto the co-op’s seven-member board.

All ballots are due in for the Holy Cross Energy board election by June 4 and can be either mailed in (for the first time ever members received postage-paid, pre-addressed return envelopes) or submitted in person by 10:30 a.m., Saturday, June 4, at the board’s annual meeting at the Ramada Inn in Glenwood Springs.

Dr. Jeremy Boak, a leading expert on oil shale technology at the Colorado School of Mines, says the Obama administration is dragging its feet on oil shale production in the United States much the way the Bush administration stalled on climate change policy.

Dr. Jeremy Boak

“It’s curious to hear the same sort of arguments being made by this administration that were made by the Bush administration for not doing anything on climate change,” Boak told the Colorado Independent. “We’ve got to have all the answers before we can move.”

Citing the “driest period on record in the Colorado River basin, Lake Mead water levels at historic low levels and impacts on the agricultural economy,” Salazar has said the Bush oil shale rulemaking “put the cart before the horse” by setting royalty rates at 5 percent for the first five years of oil shale production and opening up 2 million acres of BLM land to leasing before more research and development was completed.

Oil shale production has never been proven commercially viable in the United States because the process of heating shale rock to extract organic kerogen and then refine it into oil consumes a great deal of water and conventional power. A Shell official in 2009 confirmed to the Colorado Independent that his company’s process consumes at least three barrels of water for every one barrel of oil – a significant amount in the arid Colorado River basin.

Boak says that figure may wind up being closer to a one-to-one ratio, but regardless, he says the administration has its answer and needs to move oil shale research and production forward in light of rising global fuel costs and the increasing need for domestic energy production.

“It is a distortion to say we have to have an answer about water use because we have an answer about water use and either that answer is good enough – that three barrels per barrel is something we can live with – or it isn’t,” Boak said. “If it isn’t, then it’s incumbent on both the government of Colorado and the federal government to say why it isn’t and to say what is OK, and they have completely evaded that responsibility.”

Sen. Steve King

“Salazar’s decision to enter into a wink-and-a-nod settlement with the environmentalist opponents of oil shale and appease them by scoping out a new round of restrictions and royalty requirements is exactly the wrong policy for the Western Slope, for Colorado and indeed for America,” King wrote.

Boak also refutes a Rand Corporation report predicting it will take up to 10 new coal-fired power plants to generate the heat needed to produce just 1 million barrels a day of the estimated 2 trillion barrels of oil equivalent trapped under an approximately 16,000-square-mile area under northwestern Colorado, eastern Utah and southeastern Wyoming called the Green River Formation. New research by Shell and other oil companies indicates the heat will come from gas, he said.

“Their primary option is to use the natural gas that comes along with the oil,” Boak said. “That’s a significant fraction, especially for these companies that are doing in-situ. When you cook it more slowly you get a higher gas-oil ratio, so you get a higher fraction of it as natural gas.”

Shell’s in-situ process involves heating the rock deep underground rather than mining the shale rock and retorting it on the surface.

Still, conservationists and alternative energy advocates say it’s prudent to take a slower approach on leasing and royalty rates until more research is completed.

Randy Udall

“It is reasonable for companies like Shell that are having great difficulty increasing their own oil production – in fact Shell’s oil production of crude oil has been trending down over the last decade – so there are lots of oil companies that kind of wonder what comes next,” Udall said. “At least some of them think it’s reasonable for them to spend some of their RD&D money looking at oil shale, even though all of them – experienced petroleum geologists – understand what a big lift it will be ever to commercialize oil shale.”

Exactly why Boak says the initial 5 percent royalty rate set by the Bush administration makes sense. After five years that rate climbs 1 percent a year until it reaches a 12.5 percent cap for the 20 to 30-year life of the lease. The discounted rate up front allows companies to recoup capital costs that will likely be much higher than conventional oil and gas drilling, Boak says.

The size of the area opened for leasing is also under review by the BLM.

“We’re not sure that 2 million acres should be allocated for this type of use, but nonetheless we’re willing to go back and revisit that issue and through an amendment to our land-use planning process make that determination,” BLM Director Bob Abbey said in February.

Asked why such a large swath is needed, Boak said, “Because it’s where the oil shale is. Otherwise you’re making judgments about which oil shale is OK to lease out and which is not instead of letting industry decide which it would like to lease out and which it would not.”

Editor’s note: This is the first in a two-part series on the future of the oil shale industry in Colorado in the wake of recent Middle East unrest and steadily rising oil prices. Part two will run Wednesday.

Oil well on Colorado's Western Slope. (Photo/picture taking fool, Flickr)

State lawmakers and energy experts are hotly debating a pair of dueling oil and gas severance tax questions on the Nov. 4 ballot, with even some Republicans divided on Amendment 52, which is being touted by conservatives as an alternative to Gov. Bill Ritter’s Amendment 58 tax hike.

Sponsored by state Sen. Josh Penry (R-Grand Junction) and state Rep. Frank McNulty (R-Highlands Ranch), 52 would amend the state constitution to direct half of all current oil and gas severance taxes (or about $225 million over the next four years) toward road improvements, with an emphasis on Interstate 70. It would not increase the current severance tax rate of about 1.9 percent after various exemptions.

Ritter’s statutory Amendment 58 would increase that rate to five percent by rolling back those property tax exemptions for oil and gas companies and reducing the level of production that qualifies a well for another tax exemption. Overall it would bring in another $321 million a year, which would then be allocated to state college and university scholarships, wildlife habitat preservation and renewable energy production and efficiency projects.

“Amendment 52 is a common-sense solution that re-prioritizes existing revenues, and some have tried to put it as a counter to Gov. Ritter’s tax increase, but we brought this measure forward to make a down-payment on funding our transportation infrastructure,” said McNulty, who tried to pass an unpopular I-70 toll last legislative session.

But even the characterization of 58 as a tax increase rankles some proponents, who argue it merely rolls back unreasonable tax breaks for an industry enjoying record profits, bringing the state’s severance tax to a level more in line with neighboring states such as Wyoming and New Mexico.

“I think the current system is an outrage, and I don’t think we need to subsidize the largest and most profitable industry on the planet,” said Randy Udall, an Aspen-area independent energy consultant who is the brother of U.S. Senate candidate congressman Mark Udall.

Randy Udall’s 2006 whitepaper entitled “Torched and burned: Why does Colorado subsidize the world’s most profitable industry?” points out that in 2005 Colorado collected $132 million in severance taxes. That same amount of production would have produced $384 million in severance taxes in Wyoming and $479 million in New Mexico.

Udall said voters should shoot down 52, which does nothing to end that disparity, and support 58, because it will help alleviate Colorado’s chronic revenue shortages when it comes to funding education, transportation and other vital infrastructure projects.

McNulty, a supporter of increased oil and gas production, said there is no more critical infrastructure project in the Colorado than fixing gridlock along I-70 — the state’s main east-west highway, both for tourism and as a link to the rich natural-gas fields of the Western Slope.

He cited a Denver Chamber of Commerce report that indicated I-70 congestion costs the state $800 million a year in lost wages, jobs and revenue, and he pointed out that 52 is the only question on Colorado’s lengthy 2008 ballot that addresses critical transportation needs.

“I think too much is being made about this focusing exclusively on I-70,” McNulty said, referring to the Western Slope lobbying group Club 20 pulling its support for Amendment 52 because of its emphasis on I-70. “The way the ballot language reads is that the money is to go towards transportation infrastructure with priority given to easing congestion on I-70 — a simple recognition of how important I-70 is to Colorado as a whole.”

But that’s exactly one of the reasons McNulty’s fellow Republican, State Rep. Al White (R-Hayden), is leaning toward opposing 52.

“The dollars that they’re talking about raising, though substantial, are really a pebble on a gnat’s behind when you look at our overall transportation funding needs,” White said, “and so there would still be some other element of funding — a significantly large element of funding — necessary to accomplish even just maintenance of what we have, let alone reconstruction.”

The $60 million a year for I-70 would be a drop in the bucket compared to the state’s overall needs of $500 million more a year to maintain the current network of roads and another $1 billion a year to fund major reconstruction projects.

White, a member of the Joint Budget Committee who is term-limited but seeking the state Senate District 8 seat for Northwest Colorado, favors keeping state income taxes at their current level after Referendum C expires and dedicating those funds to transportation, or increasing the statewide sales tax from its current 2.9 percent to 3 or 3.1 percent to pay for roads.

State Rep. Bernie Buescher (D-Grand Junction), who chairs the Joint Budget Committee and served on the state transportation commission for five years, said that it will be an unpopular debate during the next legislative session but funding transportation is the most critical issue facing the state.

“Folks do want their roads taken care of, but it tends to not be a priority until something happens like the catastrophe last summer in Minneapolis when a bridge collapses,” said Buescher, the presumptive next Speaker of the House if he’s re-elected in November. He agreed with White that a tax increase is likely the only viable solution, but he also said fees may have to be part of the fix.