Vernal • Standing in a Uinta Basin quarry overlooking eastern Utah’s Green River winding through the desolate hills in the distance, Donald Clark picks up a chunk of black rock and breaks it apart, exposing surfaces that glisten under the hot sun.
“It’s weeping oil,” says Clark, a geologist with a Canadian firm called Petroteq Energy that is poised to extract marketable crude from tar sands south of Vernal on aptly named Asphalt Ridge.
Long a paving source for roads, the 12-mile-long ridge wraps around the west side of Vernal and is one of Utah’s eight tar sands sites, containing between 1 billion and 1.5 billion barrels.
“It is Mother Nature’s oil spill,” says company CEO David Sealock. “We are here to clean it up.”
His company says it has perfected a process that separates oil from silty substrate in a cost-effective, yet environmentally friendly, way using a proprietary cocktail of solvents. The spent sand is so clean it can be used to grow vegetables, while the oil produced would command higher prices than the waxy crude currently coming from the Uinta Basin’s conventional wells, according to Petroteq Chairman R. Gerald Bailey.
That’s because this heavy product doesn’t harden when it cools and is extremely low in sulfur and metals such as nickel and vanadium that make refining more costly.
If Petroteq succeeds, it would be the first to extract commercial quantities of crude from the West’s bounty of tar sands, also called oil sands or bitumen sands. With billions of barrels locked under the Uinta Basin, entrepreneurs have toiled for decades trying to solve Utah’s tar sands riddle without success.
Another Canadian company, U.S. Oil Sands, is also trying to produce oil from Utah tar sands, tapping state trust land leases at PR Spring on the southern end of the basin.
Both projects have been hampered by stagnant oil prices. But those prices are now showing signs of life, surging above $60 a barrel. In response, Petroteq, formerly known as MCW Energy Group, has resumed pursuing its plans and is soliciting investors.
Both Utah projects use proprietary solvents in “closed-loop” processes that perpetually reuse these chemicals.
Unlike the PR Spring project, however, Petroteq’s Asphalt Ridge project has drawn far less , unfolding largely under anti-tar-sands activists’ radar.
Critics contend tar sands rank among the dirtiest of fossil fuel sources and are best left in the ground. Some call Utah’s vast deposits of tar sands and oil shale, another hydrocarbon resource requiring mining, a “carbon bomb” because of their potential to emit megadoses of climate-altering emissions should they be mined.
Tar sand operations in northern Alberta, which use steam to extract the oil, have given the industry a black eye that U.S. developers want to avoid replicating as they tap rich bitumen deposits lurking under Utah, Colorado and Wyoming.
“We have a tremendous amount of tailings ponds in Canada that are an environmental nightmare. No one wants to see that anywhere,” says Clark, who stresses Petroteq’s process has little in common with those used in Alberta’s water-intensive projects.
It was developed by a Ukrainian chemist named Vladimir Podlipskiy, the firm’s chief technology officer.
“I know, it’s a scary name,” Podlipskiy says, “but I am good guy.”
His process, which Bailey calls “crazily simplistic,” crushes the ore into three-quarter inch chunks and spins it with solvents in a vertical tank equipped with three horizontal propellers.
“It is like a cyclone,” says Podlipskiy. The engineering challenges were finding the right alloy for the propellers so they could withstand the erosive force of the sand and determine the best angle for propellers.
“Because everything is a consistent size, it goes through the conveyor belts, it goes through the pumps and the centrifuges a lot easier,“ Clark says. “Most importantly, with all that surface area, you have a more complete extraction and the time in the mixing tank can be a bit less.”
The solids fall out of the mixture and the liquid is run through a heated separation column so the solvents float off as vapor. These chemicals are condensed and run back through the process with fresh ore, while the black oil is piped out. The sand emerges dry, scrubbed almost entirely of hydrocarbons and solvents and can be safely returned to the mine pit without risk of chemical leaching into the ground.
For tar sands critics such as Joro Walker, it sounds too good to be true.
“The way to ensure the sands don’t have residual hydrocarbons is to test it. Show us the tests,” says Walker, an environmental attorney with Western Resource Advocates, which has previously challenged MCW Energy and U.S. Oil Sands permits — but without success.
“We need to know how much waste they are planning on producing per barrel. We’ve seen estimates of 1 to 2 tons per barrel [of finished oil],” she continues. “They are essentially going to strip mine. It’s like producing coal in that it’s an incredible disruption to the landscape.”
Petroteq officials say their project won’t produce that level of waste because Asphalt Ridge bitumen lies close to the surface in rich 50-foot seams. The ore averages 12 percent oil. At that saturation, a ton would yield 0.62 barrel, or 26 gallons of oil, according to Sealock.
Nearly all of Asphalt Ridge is overseen by the Utah School and Institutional Trust Lands Administration, or SITLA, which traded into these lands years ago in hopes of reaping a windfall from the bitumen. But Petroteq is not working these lands, which were recently leased to Houston-based Hoodoo Mining and Production Co.
Instead, the company dropped $10 million acquiring the rights to mine 2,230 acres of private land owned by several ranchers. Petroteq will pay a 7 percent royalty on production, far less than the 17 percent and annual rents SITLA charges. These rights were previously held by Temple Mountain Energy, which had dug the quarry where Petroteq recently relocated its pilot plant from a site on SITLA land on the north end of Asphalt Ridge.
Petrotech’s leases hold 86 million barrels of “contingent” oil, or enough to sustain a 10,000-barrel-a-day operation for 25 years, according to Sealock. The firm is now in the second week of a seven-week commissioning process for its pilot plant, which will yield 1,000 barrels a day, processing 50 to 70 tons an hour.
This crude, which would be good for diesel as opposed to gasoline, will be trucked to Salt Lake City area oil refineries to inspect.
“As soon as the refineries start testing our oil,” Sealock says, “it will be easy to show we have a marketable, takeaway product.”
Petroteq plans to quickly scale up, adding 1,000 barrels of daily output capacity every year.
“We will be working round the clock,” says Bailey, a former Exxon executive. “And as we expand the plant, it’s like a Lego kit. We add a few more similar units side by side and magnify the output.”
The project has secured a draft groundwater permit from the Utah Division of Water Quality, while Petroteq is finalizing a permit for large mining operations from the Division of Oil, Gas and Mining, which is awaiting an updated reclamation plan.
Employing 17, the initial processing plant would operate 350 days a year, with three annual shutdowns to make seasonal adjustments. The company says the cost of production would be as low as $22 a barrel, or about a third the current price listed on the West Texas Intermediate.
However, a 2013 analysis by the University of Utah came up with a much higher estimate for production costs associated with Uinta Basin tar sands.
“The supply cost without any investor profit was $75.50,” said chemical engineering research professor Jennifer Spinti of the U.’s Institute for Clean and Secure Energy. Her analysis factored several costs, such upgrading, permitting and equipment maintenance, that were not considered in Petroteq’s investor materials.
“There is a dearth of detail on what is and is not included in the analysis,” she said.
For Petroteq, the real money might come from licensing Podlipskiy’s patented technology around the world. But that would happen only if it can squeeze oil from Asphalt Ridge at a profit.