Shell said in a statement it has decided not to pursue the Yampa water right at this time "in light of the overall global economic downturn that has affected our project's pace."

The controversial proposal — seeking about 8 percent of the Yampa's average spring flow — drew opposition letters from 27 businesses, environmental groups and federal, state and local agencies.

"The Yampa is the last river in Colorado with natural peak and low flows," said Kent Ventrees, who teaches river recreation at Colorado Mountain College. "This is outstanding news for the Yampa."

The natural river sustains endangered fish species and flows through Dinosaur National Monument, where National Park Service officials worried that Shell's plan would hurt the park.

Shell was seeking a water right to pump water into a new reservoir covering 1,000 acres and 15 billion gallons.

The water — taken from a point west of Craig — would have been shipped to the White River basin for use in Shell's oil-shale program.

Shell said it would continue oil- shale research and development work and plans to submit applications for its first pilot project this year or in early 2011.

Commercial development may be at least 10 years away.

"It is obvious that commercial oil- shale development is still not ready for prime time," said Boulder-based Western Resource Advocates.

"As a result of Shell's actions, Colorado residents can breathe a little easier and the Yampa River lives to flow another year," Western Resource Advocates said.

Shell's water-right application was vulnerable to challenges because the water could not be directly put to use, said Drew Peternell, Colorado water- project manager for Trout Unlimited.

"They don't even know how much water they need," Peternell said. "It was very close to speculation, which is not allowed in Colorado water law."