The highest-profile oil driller in Northwest Colorado plans to walk away from its play here.
Shell Oil informed officials in Routt and Moffat counties late last week it wants to soon sell off the leases it holds in the Niobrara Shale formation here to focus on more productive operations.
The news came on the same week the energy giant reported a disappointing 60 percent drop in its second quarter profits stemming from poor drilling results in North America.
Carolyn Tucker, Shell's spokeswoman for the Rocky Mountain region, said the decision is the result of an extensive review of all of the energy company's plays in North America.
“We decided to focus on the assets that had a higher growth potential, and unfortunately, the Sand Wash Basin Niobrara did not meet that criteria,” Tucker said.
She said Shell's departure won't happen overnight but will be market driven.
The company plans to move forward with its planned wells before starting to market off its assets.
Some elected officials said they were surprised and disappointed to hear about Shell's plans.
“I was very disappointed to hear this because we were all hoping this would turn into a field to spur our economy here,” Moffat County Commissioner Tom Mathers said Monday. “We've all benefited from Shell being here. We got a new highway. They put up power lines to one of their locations. They spent a great deal of money on infrastructure.”
The highway Mathers referred to is Colorado Highway 317, which Shell recently paid to have resurfaced so that it could support heavy truck traffic associated with drilling operations.
“After everything they put into this area, you'd think they were more down-the-road focused and had a longer game plan in 'em,” Mathers said.
He added he is optimistic other operators will step in to pick up where Shell leaves off.
In May at an open house, officials with Shell revealed their 2013 plan to drill about 17 new wells in Moffat and Routt counties, with most in Moffat.
Twelve of the wells were drilled in Moffat during the winter.
Routt County Manager Tom Sullivan said it remains to be seen what impact Shell's departure would have locally.
“It's probably going to be a question as to whether they're able to sell or contract out the leases to one firm, or if there are going to be a lot of different developers stepping in,” Sullivan said. “It's always wait and see what it means over a period of time. It's nothing we have any influence over.”
In recent months, Shell has hosted several community meetings in both Routt and Moffat counties to discuss its future plans.
At one such event in Hayden last year, Matt Holman, Shell's exploration project manager for the area, told a crowd that was eagerly glancing at a map of potential drilling locations that there was the chance his company's play for oil wouldn't move past the exploratory phase.
Still, the company's investments in infrastructure coupled with longer-term planning seemed to be signals it wanted to be here for the long run.
That's why some local officials said they were stunned to hear the energy company isn't planning to move beyond the exploratory phase.
Just two days before officials learned of Shell's plans, the energy company met with the planning staff in Routt County to discuss a long-term wildlife mitigation plan.
The company also recently hired a consultant to examine the potential socioeconomic impacts of an oil play here.
“It sounded like Shell was going to be our biggest applicant,” Planning Director Chad Phillips said. “Now, they're not going to be the biggest applicant.”
He said the news of Shell's potential departure was “unfortunate” because the company proved in recent years it was willing to adhere to the county's rules and conditions for drilling.
“Pretty much if the community said do something, they've done it,” Phillips said.
Sullivan echoed that sentiment, saying the company has been “great to work with.”
Shell's departure also has the potential to impact Quicksilver Resources, which last year announced an agreement with Shell to jointly develop oil and gas in an area covering more than 850,000 acres in Northwest Colorado.
Steve Lindsey, Quicksilver's senior director of government and community affairs, said Monday his company still was waiting to get official word of Shell's future plans.
In the meantime, he said, Quicksilver's operations will continue as planned.
To reach Scott Franz, call 970-871-4210 or email scottfranz@SteamboatToday.com