GNC Energy Corp. (fka GNCE)

[lifegear]

Alberta's tar sands development may offer lessons for western U.S.
(Originally published 08/18/2005)
Mary O'Driscoll, senior reporter

U.S. officials, the petroleum industry and environmentalists are studying Alberta's tar sands development for ideas on how to exploit oil sands and oil shale resources that some say could turn Utah, Wyoming and Colorado into the nation's oil production center.

Tapping tar sands on the periphery of the Uinta Basin east of Salt Lake City would yield 12 million to 16 million barrels of low-sulfur oil, said James Bunger, acting energy director for the Utah governor's economic development office.

And oil shale deposits found in a 16,000 square-mile region bounded by Utah's Uinta Basin, Wyoming's Green River Basin and Colorado's Piceance Basin could hold 1 trillion to 2 trillion barrels of oil, depending on the grade of shale being produced, Bunger added.

Utah's senior senator, Republican Orrin Hatch, hopes to spark industry interest in risking expensive ventures to draw oil from Western sand and shale with provisions he added to the Energy Policy Act of 2005, which President Bush signed into law earlier this month. Bunger said the law's industry incentives are having the effect Hatch intended.

"It's made them sit up and take notice," Bunger said in an interview. "The words I've heard from industry are that it appears as though government is genuinely interested in oil sands and shale. And if government is, then we should be. It's had that effect."

Tax breaks and an environmental study
Energy bill provisions require the Interior Department to complete a programmatic environmental impact statement by February 2007 for a commercial leasing program for oil shale and tar sands resources on public land.

The law also includes tax incentives granting speedy depreciation of equipment for producing oil shale and tar sands and cost-sharing provisions for government and industry patterned after those that Alberta's provincial government provided for its oil sands producers in the early years of development there.

Hatch said he added tar sands and shale provisions to the legislation because "it just bugged him" that a quarter of the oil used in Utah, an oil-producing state, is imported from Canadian tar sands, said J.J. Brown, a Hatch aide who recently toured Alberta with other Capitol Hill staffers and Energy Department officials.

"The reality is that between the U.S. and Canada, we truly are the energy future of the world," Brown said. "We will be the go-to guys."

Bunger said it is unclear what type of extraction technology -- strip mining or drilling -- would be used to get to the oil in Western tar sands. Given the Alberta experience, resources closer to the surface would probably be mined, which is less expensive than the in situ drilling, which involves injecting steam to loosen the bitumen from sand, then pumping the bitumen to processing facilities.

Oil shale, which would also either be mined or drilled in situ, would require processes to fracture and heat the fine-grained rock to release gases and oils out of the keragen. Keragen is the shale equivalent of bitumen in the tar sands.

Shell Exploration and Production Co. has been experimenting with electricity to heat the rock up to 700 degrees at a site west of Denver. A heating element is lowered into the well to slowly convert the keragen into oils and gases, which are pumped to the surface. The company says it intends to make a decision about commercial development efforts by about 2010 ( E&E Daily, June 24).

Enviros see trouble ahead
Environmentalists are already raising red flags about oil shales. Steve Smith, assistant regional director for The Wilderness Society's Four Corners States office, told the Senate Energy and Natural Resources Committee that Alberta's experience should be a cautionary tale for the United States. For one thing, tar sands development in Alberta consumes so much natural gas that it might deprive the United States of supplies it needs, he said.

"Tar sands development in Canada could not occur without the use of large quantities of natural gas -- potentially much of the entire production to be carried by the new pipeline from the MacKenzie Delta," Smith said at an April 12 hearing. "Tar sands development in Canada is one of the principal reasons natural gas exports to the United States will not increase and may even decline over the next 10 years."

Smith also raised air quality, water use and quality, and economic considerations for oil shale development in a region. Tar sand development consumes large amounts of water, he said. Large consumption of water by the industry would post major problems in the West, where booming cities depend on the Colorado River for drinking water as well as tourism and recreation destination.

"I raise just a few of the many questions that must be asked," Smith said. "Is any water available for a new energy industry in drought years? If so, would the withdrawals for oil shale result in a reduction of flows -- or even a loss of flows -- in the critical reach just upstream of Grand Junction? If so in turn, what endangered species issues are implicated? If any water is available in drought years, how would oil shale development affect the total amount of water remaining for Colorado's use under the Law of the River?"