1st U.S. tar sands mine set to open for business in Utah

Brady McCombs, Associated Press
A Canadian company is about to embark on something never before done commercially in the United States: digging sticky, black, tar-soaked sand from the ground and extracting the petroleum.
Copyright 2015, The Associated Press

On a remote Utah ridge covered in sagebrush, pines and wild grasses, a Canadian company is about to embark on something never before done commercially in the United States: digging sticky, black, tar-soaked sand from the ground and extracting the petroleum.

The impending opening of the nation's first tar sands mine has become another front in the battle across the West between preservationists and the energy industry.

U.S. Oil Sands has invested nearly $100 million over the last decade to acquire rights to about 50 square miles, obtain permits and develop what it says is a brand-new, non-toxic method of separating out the oil with the use of an orange-peel extract similar to what's in citrus-scented household soaps and detergents.

"We're dedicated to having the world's most environmentally responsible oil sands project ever built," CEO Cameron Todd said in a boast that has failed to reassure protesters.

Across the rolling green hills of the Book Cliffs of eastern Utah, about 165 miles from Salt Lake City, the company plans this fall to begin digging the first in a series of pits, each the size of a football stadium, and start unsticking oil from the sand that crumbles in your hand like a brownie.

Tar sands, also called bitumen, are naturally occurring deposits of petroleum. Unlike the oil that flows out of wells, the hydrocarbons in tar sands must first be separated from the dirt by mixing the stuff with hot water and solvent. The oil is then sold to refineries for eventual use as fuel or an industrial ingredient.

Oil production from tar sands has been going on for years in Canada and Venezuela. The Canada-to-Texas Keystone XL pipeline that has been blocked by the Obama administration is supposed to carry tar sands oil.

While tar sands mining involves higher operating costs than traditional drilling, it can be highly profitable, especially when crude prices are high. But whether U.S. Oil Sands can make any money on this project remains to be seen.

What looked like a shortage of oil when the company began raising money has now become a glut, in part because energy companies have learned to extractpetroleum from formations long thought out of reach.

By the company's own estimate, it will make little to nothing at crude oil's current price of $48 per barrel, down from a peak of $147 in 2008. As of Tuesday, U.S. Oil Sands stock was trading at just 12 cents.

Protesters have tried to thwart the mine's construction for two summers in a row and have gotten arrested for chaining themselves to equipment. They argue that the project is an eyesore and that it could contaminate nearby springs and ruin habitat for deer, beaver and bears.

The mine sits on a cleared swath of land enclosed by barbed wire, with modular buildings, bulldozers, large metal posts and rails and a massive metal cylinder with a cone-shaped bottom where the tar sand mixing will be done.

Demonstrators who have been camping out all summer near the site gathered outside the front gate on a recent day to show their opposition. Some wore chipmunk masks. Other banged drums. Some held signs with messages such as "Dirty Energy Kills."

"It's heartbreaking to see what they've been doing out here," said Melanie Martin of the Tar Sands Resistance Movement. "It's impossible to reclaim and rehabilitate the land once they do what they are planning to do with it. The land is not going to come back for millennia."

Opponents also worry the mine will spur more projects in this pristine area that attracts hikers, campers and hunters. A 45-mile, $86 million highway as smooth as an autobahn has been built out to the mine. And the state has given approval for three other tar sands operations in the same corner of Utah.

Instead of relying on the usual industrial-strength hydrocarbon solvent, U.S. Oil Sands says it will employ the biodegradable citrus extract that is in grease-cutting household products.

Utah officials who recently approved the mine also imposed a key requirement environmentalists considered a victory: The company must monitor water and air quality.

And instead of leaving open pits, ponds of mining debris and barren land, U.S. Oil Sands says it will fill in the holes with the clean leftover sand and plant grass and other vegetation.

U.S. Oil Sands estimates there are 180 million barrels of oil close to the surface on the land it is leasing. It plans to begin turning out 2,000 barrels per day later this year — a puny share of the 9.3 million the U.S. produces daily — and take it by truck to refineries. It says the mine will create about 50 full-time jobs when opened.

"This is a breakthrough in technology," Todd said by telephone from Calgary. "If we're able to demonstrate to the investment world that this is possible, there are many, many places where this could be done."

Alex Beeker, an industry research analyst, said he doesn't expect the mine to set off an explosion of tar sands mining in the U.S., where the prospects are basically limited to Utah. "But if U.S. Oil Sands starts to do very well, you're going to see more operators try to mimic what they're doing," he said.

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