Colorado oil shale project banks water rights for future

In what is expected to set a pattern for the industry, the Colony Oil Shale Project has almost completed an agreement with the US Bureau of Reclamation which will guarantee water for its synthetic fuel plant in western Colorado.

The deal, now in its final stages, would reserve 6,000 acre-feet of water in the Reudi Reservoir near Aspen for Colony, a partnership of Exxon and the Tosco Corporation. (An acre-foot is the amount of water it takes to cover an acre one foot deep. It is also about the amount of water that a family of four consumes annually.)

The technology for boiling oil out of hydro- carbon-rich shales found in Colorado, Utah, and Wyoming is considered the most economical of the various methods for producing synthetic fuels. After a 60-year cycle of hope, effort, and disappointment, the most recent increases in the price of petroleum appear to have made oil shale competitie at last.

Industry sources estimate that oil shale can be produced for $42 to $51 a barrel, while the Congressional Office of Technology Assessment more conservatively puts the break-even price at $48 to $62 a barrel. Since the nation's largest oil company bought out ARCO's interest in Colony last year the partnership appears to be forging ahead steadily.

According to Robin McKinley, chief of the Reclamation Bureau's Repayment Branch in the region, the oil company has agreed to pay $15 an acre foot to reserve the water in the reservoir and $40 to $80 an acre foot for water actually delivered to it. "This translates into a minimum of $130,000 annually going into the Treasury," he points out. The Reudi Reservoir, built in 1964, still has some 49,000 acre- feet of unused water.

The Reudi deal is "insurance" against the possibility that Colony may not have gotten control of enough Colorado River water rights to supply its operations. Colony's current plan is to build a plant that will start producing oil in 1985 or 1986. This will have an ultimate capacity of 47,000 barrels a day. The water consumption of this plant plus the new town they are building will be 11,000 acre feet a year. The company has water rights for 10 times this amount, but they are lesser rights and so may be cut off during periods of low flow.

No one knows for sure just how much area water the energy companies control, except that it is a considerable amount: They have been buying up rights since the 1920s.

The process of squeezing oil from rock requires a considerable amount of water. A plant that produces 50,000 barrels a day devours 5 million to 10 million gallons of water daily as well, and the area where the richest oil shale deposits are located is extremely dry. A survey by Colorado's Department of Natural Resources established that the industry had acquired enough water rights to supply 500,000 barrels a day. Should be industry grow to 1 million barrels a day, however, water should become a serious problem.

A million barrels a day is peanuts compared with Exxon's vision, however. Last summer the giant oil company released a "white paper" that foresees an industry producing 8 milli on barrels of oil a day for 175 years."