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Utah oil shale developers are blaming soft oil prices for delaying the nation's first commercial oil shale mines, located in southern Uintah County.
Red Leaf Resources, and a second company that has licensed its processing technology, have the green light to construct and operate underground capsules where they plan to heat ore and collect hydrocarbons in vapor and liquid forms.
But oil prices plummeted to less than $50 a barrel last year while Red Leaf was digging out a 10-acre, 150-foot-deep trench, meant to serve as an "early production" demonstration for the firm's EcoShale technology.
In response, company officials have restructured construction contracts for the prototype, which had already been delayed by challenges from environmental groups.
Around the state, oil drilling is slowing. Newfield, Utah's largest oil producer, has announced layoffs. And Tesoro has put a hold on its proposed Uinta Express Pipeline, a heated, 135-mile crude conduit that would connect the Uinta Basin oil patch with Salt Lake-area refineries.
Meanwhile, state officials have braced for a steep decline in oil revenues.
Jeff Hartley, who directs Red Leaf's governmental affairs, emphasized his firm is not halting construction, but rather slowing it in the hope that prices recover by the time production starts.
"It is still fully funded and we are moving forward," said Hartley, a Salt Lake City-based energy industry lobbyist. "The price of oil is cyclical. We want to emerge at the strongest point possible."
The project has financial backing from French energy giant Total.
"We'll slow it a year," Hartley said. "The capsule is excavated. The next phase is the walls and floor and collection system. We had been pushing headlong to get done as soon as possible, but now we are taking our time."
Red Leaf engineers hope to solve the century-old riddle of tapping the vast Saudi-scale reserves of oil shale under Utah, Colorado and Wyoming. The company's method places hydrocarbon-bearing ore in lined pits where it is cooked at 725 degrees for 210 days. The process converts, or "retorts," solid kerogen — found in a slice of the Green River Formation that geologists call the Mahogany Ledge — into petroleum.
Hartley expects Red Leaf to start applying heat to ore in the second half of 2016.
Red Leaf and London-based TomCo plan to use data from the demonstration project to craft a final design for their oven-like capsules.
The two oil shale companies are mining land they have leased from the Utah School and Institutional Trust Lands Administration, which many view as easier to develop than federal shale reserves. The proposed mines are at the end of the Seep Ridge Road in the Uinta Basin south of Vernal.
A third company, using a completely different retort system, is developing private property several miles to the east.
Both Red Leaf and TomCo hope to produce 9,800 barrels a day.
Environmental groups led by Living Rivers contested the firms' mining and water quality permits, arguing they ignored the possibility of groundwater contamination. The group agreed to quit fighting Red Leaf's prototype as long as state regulators subject it to careful testing to ensure the capsule performs the way Red Leaf promises.
"We need the prototype to be tested rigorously before any commercial-scale development occurs," said attorney Joro Walker of the environmental law firm Western Resource Advocates. "What we care about is that it is properly monitored and information gleaned from the prototype is actually applied in the real world."
Environmentalists oppose oil shale because it requires strip-mining and heavy processing that consume vast amounts of fossil energy, so it emits more carbon dioxide than conventional oil production.