Oil sands company raises $11M for Utah project
Friday, May 25, 2012
SALT LAKE CITY (AP) — A tiny Canadian company announced Thursday it had raised enough money to start producing oil from Utah's tar sands for a first-of-its kind project in the U.S.
U.S. Oil Sands Inc. said it raised $11 million from a stock offering and will get started this summer on plans to dig a 62-acre pit in an area of eastern Utah that contains gooey bitumen, a tar-like form of petroleum.
Executives said they will produce 2,000 barrels of oil a day by next year, in the start of what could grow into a much larger operation. The Calgary, Alberta-based company holds leases on 32,000 acres of state trust lands in Utah's Uinta basin.
"We're going to build this project ourselves," Cameron Todd, the chief executive of U.S. Oil Sands, said Thursday. "We may take on a partner, but the technology is ours."
The company says a citrus-based solvent will leave the oil-soaked sands as clean as beach sand, though environmental groups dispute that. Moab-based Living Rivers is trying to stop the pilot project by challenging mining and water discharge approvals from Utah regulators in administrative hearings.
But will the project pencil out? Todd said his company will earn at least $30 a barrel after processing and a 200-mile truck delivery to refineries in Salt Lake City or Wyoming, for a potential profit of about $21 million a year for 700,000 barrels of heavy crude.
The 62-acre pit, as deep as 150 feet, could yield 4 million barrels of crude over about six years, he said.
"There's a lot of risk — prices for oil could be worse and costs more, but those figures are very robust economics," he said.
Living Rivers argues tar sands mining will leave behind solvents and petrochemicals in unlined waste pits and that snowmelt and rain will wash the toxins into the ground and spread pollution.
Todd said the company will recover all but 4 percent of the bitumen from the sands, and leave behind only 1 percent of the solvent.
"This stuff will smell lemony fresh," he said.
Arguments at hearings last week before the Utah Division of Water Quality largely concerned the pollution threat to groundwater — the company and regulators say there isn't any groundwater in the desert area, except at extreme depths. The company had to drill nearly a half-mile deep for water it plans to recycle for oil processing.
"We got regulators to admit there was groundwater out there that could be impacted," Rob Dubuc, a lawyer for Living Rivers, said Wednesday. "The groundwater doesn't occur year-round — that's the nature of the climate. But that doesn't mean groundwater is less deserving of protection because it only happens on a seasonal basis."
Any administrative judge is expected to issue a recommendation by July for a final ruling by the Utah Water Quality Board.
Utah's political leaders and agencies are fast-tracking development of oil sands and oil shale and denouncing the federal government for holding up development on its lands — they cover about two-thirds of Utah. The Utah Trust Lands Administration says it has leased 53,000 of 140,000 acres of state lands known to contain oil sands. U.S. Oil Sands has most of those leases locked up, and it is only company ready to start production.
Utah has an estimated 12 billion to 19 billion barrels of oil buried in its tar sands. Not all of that is considered accessible.
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