OIL

Construction of Utah tar sands plant possible by year's end

At a time when the Keystone XL pipeline has become a hot political topic for national environment groups, politicians and oil industry officials, Utah has been quietly paving the way for U.S. tar sands production on state lands.

Indeed, if all goes smoothly in the regulatory process, U.S. Oil Sands could begin construction in the state later this year -- a fact that environmental groups are eager to spread.

"It's not just something that's up in Canada," said Raphael Cordray, a member of the Utah Tar Sands Resistance, which recently helped stage a guerilla skit in the lobby of Utah's school trust lands offices to protest state plans to continue leasing trust property to tar sands development companies.

"People don't know it's here in Utah. Our goal is to get the citizens of Utah to recognize that there's a proposed tar sands site in Utah that could become the first commercial site in America, and what is at stake."

Tar sands are minerals that contain sand, clay and water saturated with a viscous form of petroleum known as bitumen. Bitumen can be refined into gasoline and other oil products. Tar sands -- known as oil sands in Canada -- have been used for more than a century as a paving material. According to Utah history, Salt Lake City officials began paving their streets with tar sand material before the region became a state.

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But efforts to extract the oil from the viscous material have historically been too expensive.

In recent years, however, technology advances in Canada and rising oil prices have made Utah's tar sands minerals more commercially attractive. At the same time, Utah state officials have been actively wooing companies interested in developing the state's oil and gas resources.

The Bureau of Land Management estimates that Utah's tar sands could hold between 12 billion and 19 billion barrels of oil, although not all of it is considered technically recoverable. Nationwide, tar sand resources are estimated at 36 billion barrels, with deposits found in Alabama, Alaska, California, Kentucky, New Mexico, Oklahoma, Texas and Wyoming -- as well as Utah, according to the U.S. Geological Survey.

U.S. Oil Sands, which is based in Alberta, Canada, owns leases to 32,000 acres of land in the oil sand-rich eastern region of the state, 170 miles from Salt Lake City.

The company, which was previously known as Earth Energy Resources, is currently focused on its PR Springs lease, a 6,000-acre region that company documents indicate could contain nearly 190 million barrels of bitumen.

Since 2005, U.S. Oil Sands has been conducting research and development tests and pilot projects on its Utah leases, drilling 180 core holes to assess the quality and quantity of the bitumen content. The company also hauled tons of Utah tar sands up to a site in Alberta to test its new technology for extracting bitumen oil from the U.S. minerals. In 2011 alone, the company invested $6 million in the project.

In 2009, Utah's Division of Oil, Gas and Mining granted U.S. Oil Sands preliminary permits to begin production. Since then, the company has been raising money and drawing up its final plans for construction.

At the same time, however, it is fighting a legal challenge from the environmental group Living Rivers, which wants the firm to conduct a battery of water quality tests on the new oil sands technology.

If U.S. Oil Sands successfully navigates the regulatory process, construction could begin later this year. "We would expect to hopefully to have this up and running by about September of next year," said Cameron Todd, CEO of U.S. Oil Sands.

'Best in the business' recovery rate

Environmental groups contend that the tar sands industry's extraction plans would destroy Utah's desert landscape by essentially strip mining the hydrocarbons from untouched lands in Utah's scenic Uintah and Grand counties, north of Arches National Park.

"Right now it's pretty much a roadless wilderness," said John Weisheit, conservation director at Living Rivers, a Moab-based conservation group. "It's high-elevation forestlands. It's aspens and pines. It's high enough to be an important component of the watershed, 8,000 to 10,000 feet tall."

U.S. Oil Sands is promising to reclaim the tar sands mining sites, but environmentalists note that past industry efforts to regenerate the wilderness landscape after experimental excavation have not succeeded.

"Anyone who's objective about this will tell you that you can't re-create this landscape," said Rob Deluc, staff attorney with Western Resource Advocates, an environmental group based in Boulder, Colo., who is handling Living River's legal challenge.

"You may be able to throw some plants on it and keep the dust from blowing," he said. "But it'll never be the same, and folks don't want to see this occur."

Company officials say the environmentalists' concerns are unfounded. They note that the Utah project will entail a technology that is significantly more environmentally friendly than the process used in Canada.

The Alberta hydrocarbons are "water-wet" sands, made up of a thin layer of water around every sand grain in the bitumen. When the mixture is heated, the bitumen oil and sand are easily separated. The process produces a sludge-like waste product that Canadian tar sands companies have been disposing of in nearby tailings ponds.

The Utah tar sands, however, are "oil-wet," making it harder to split the sand from the oil. "Even when you heat it up and make the oil flow, it still leaves a bunch of oil that's stuck to the sand," Todd of U.S. Oil Sands explained.

To overcome that obstacle, the company plans to use a citrus-based solvent to strip the oil off the grains of sand. Todd said the technology can extract most of the oil from the sand. "We get a 97 percent recovery of the oil off the rock, and that's the best in the business," he said.

As a result, separating the Utah bitumen from the sand and clay will not produce toxic sludge or require construction of massive waste ponds, Todd said. Company officials estimate that they can economically produce bitumen from their Utah tar sands leases for $50 to $60 per barrel.

U.S. Oil Sands plans to use modular processing facilities that can be built off-site and transported to Utah. The plants will have the capacity to produce 2,000 barrels of oil each day. To hike production, the company expects to import multiple production units.

The modular construction "allows us to put all of the equipment on a skid and truck it out to the lease," Todd explained. "It means the minimum amount of construction. It also allows it to be portable so that you can use the unit and deplete the resource in a smaller area and then redeployed somewhere else. It makes it a lot easier to recover the site afterwards."

Groundwater concerns

But environmentalists worry that the solvent-laced sand produced by the process will be dumped into the extraction pit when the resource is depleted. "The residual sand is part of the waste stream, which they're going to throw into the ground," Deluc said.

"This stuff could settle and consolidated. When it rains, it'll be picked up and contaminate the groundwater in the area," he said. In some areas, that could potentially lead to contamination of the Colorado River watershed.

"The troubling part of both the oil shale and tar sands proposals is that this is 100 percent land disturbance," Deluc said. He argued that state regulators do not have enough information to adequately assess the potential air and water pollution impacts of U.S. Oil Sand's project.

"We need to take our time, take a conservative approach" to tar sands extraction, he said. "Whether or not we allow this at all is a political decision. I think it's the wrong choice, but land use is always going to be controversial. But to the degree we do this, we have to do it right, and that's not happening right now."

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