A few "facts"
The proposed reservoir is not on the main-stem of the Yampa.
The water right application is for 375 cfs, and would probably have the most significant impact to recreation during the "shoulders" of runoff.
Here's a link to the water court application, Case No. 08CW90, click on Dec 2008 Resume:
Colorado State Judicial Branch - Courts - Water Courts - Water Division Six
Not saying it's a good or bad idea.
Now some not facts, just speculation: there may be some short-term benefits to this water right for the basin. The Shell water right would probably never be diverted unless Oil Shale development starts in the Piceance Basin. Until then, this water right (if approved) may prevent Front Range export as proposed by Northern and others by appropriating a large share of the remaining un-appropriated Yampa flows. Ultimately, someone in Colorado will stake claim to excess Yampa flows, probably near Maybell. Unfortunately, it's a matter of time (and money).