Enefit in America: Hot Topics
If Enefit is successful in America, its operation will singlehandedly more than double the current oil production in the Uintah Basin, adding 50,000 new barrels per day to the Basin’s current daily production of 48,000.
Since no company in the United States has yet successfully extracted shale oil from oil shale on a commercial scale and brought it to market at a competitive price, guarded optimism – or natural skepticism, depending on your point of view – hangs heavily in the air over Enefit in America.
The following is an exploration of the backdrop to Enefit’s American venture, and the hot topics which concern those who surround the American extraction industry.
…Nor any drop to drink
One Utahn put his skepticism bluntly: “Where’s the water going to come from? Where’s the waste going to go?”
Water in Utah is regulated by the Colorado River Compact of 1922. The Compact, which prescribes how water is shared by states through which the Colorado River and its tributaries flow, is based on uncharacteristically high flows – possibly 21 percent higher than average historical flows.
The Natural Resources Defense Council, an environmental action group, released a report last August, citing a 2011 US Bureau of Reclamation study concluding that the long-term Colorado basin water yield is 14.7 million acre-feet a year – a half-million less than the Southwestern states that own it have used on average since 2000.
In other words, there is more water allocated for use than there is water in the river. Also, many feel that a barrel of water used in the extractive industry is a barrel not used in agriculture, further tightening the region’s economic bond to industry.
While Uintah County has not actually run out of water yet, enough water may not be present for the growth industry foresees.
Few I talked to who study the water issue doubt the presence of enough water for the development of an oil shale industry, but for the longer term there exists the concern that population growth combined with climate change will result in too little water to support the bigger goal: an oil shale industry of the size which could truly help reduce America’s independence on foreign oil.
Published estimates for water requirements in shale oil production range from 1 to 12 barrels of water needed for each barrel of oil produced. Ex situ processing, the technique Enefit employs, is thought to require 1 to 3 barrels of water per barrel of oil.
Rikki Hrenko, Enefit American Oil’s CEO told me that Enefit’s water needs are “on the low end” of the 1 to 3 barrel range.
Hrenko also says that Enefit’s water requirement is already taken care of. GAO reports confirm that water rights were possessed by the Oil Shale Exploration Company (OSEC), the company which Enefit acquired this year, and Hrenko says that the water rights transferred with the sale: “It is correct that OSEC did have a water right which we acquired in the acquisition, along with not only the RD&D lease (White River Mine) but also all the other property. We anticipate that this water right is sufficient for supplying the water needed for the industrial operations.”
Independent academic sources confirm water availability will not be a problem for Enefit and its 50,000 barrels. “I don’t see [water] as a showstopper for a 50,000 barrel per day operation,” Jennifer Spinti, University of Utah Research Associate Professor, told ERR News.
Of course, the second part of the water issue is how to dispose of it once it’s used. Last winter, local skepticism was fueled by an incident where a Uintah County citizen caught on video a county truck using toxic wastewater to de-ice roadside culverts. Press reported that the water contained “drilling fluids, hydrocarbons, and other unknown contaminants,” and it was determined that the truck had obtained the water too far upstream before it had been treated. The county claimed ignorance about the use of the contaminated water, but the press reported – and some Uintah Countians I spoke to repeated – that the practice had been going on for over two decades. Whatever the history, the incident didn’t serve to improve industry’s or local government’s image.
Another environmental concern is how mining operations can affect groundwater flow. Removal of water in mines, says a GAO report, can decrease water levels in shallow aquifers and decrease flows to connected streams and springs. When mining ends and tunnels are filled with waste rock, porosity and permeability are altered, which can permanently change the direction and pattern of flows. Also, the risk is present of increased concentrations of salts, metals, and hydrocarbons within groundwater.
Utah Shale not Estonian Shale?
Many have pointed out that American shale has a different chemical composition than Estonian shale, and drawn the conclusion that Estonian retorting technology may not work. It is tough, however, to make the case that Enefit is not doing its homework.
Enefit, says Hrenko, has access to historical testing information and possesses a number of cores from previous drilling. There are 75 boreholes on the Enefit property, and another 27 were slated to be drilled, if they have not been drilled already. "We are confident that we know where the target oil shale layers are and the amount of oil in those lawyers," Hrenko wrote me in an email. Enefit has also collected a two-ton sample of the Utah resource for bench testing. After bench testing, they will collect approximately a 100 ton sample for testing in the pilot plant.
There is a second aspect of the chemical composition which may come into play in reclamation processes.
Tom Elder, a Uintah County environmentalist and science teacher to whom local environmentalists repeatedly referred me, has some reservations about whether Enefit will be able to reclaim land given the chemical composition of American shale and the high-desert climate.
“Here you’re pulverizing weird rocks in an arid climate. Estonia is a cold, wet place. If they can reclaim it there then I’m glad for them. But Uintah County is not Estonia.” Hrenko argues that “oil shale mining, whether underground or surface mining, is actually a very standard process, similar to other mineral mining operations. There are mines in similar environments around the world, techniques for reclamation have been used and proven successful and totally new techniques […] should not be needed.” She recognizes that climate, topography, shale composition, and heavy metals left in the ash do differ, but believes Estonian reclamation experience is indeed applicable in Utah. She notes that much of Enefit’s mining in Utah will be underground (room and pillar) which is “very similar to our underground room and pillar mines in Estonia, which allow us to avoid surface subsidence.”
Transport: ‘If You Build It, He Will Come’
Even if Enefit is able to produce its product in a cost-efficient and clean enough fashion to satisfy locals and government regulations, the issue of how to transport the product to market still looms.
Trucking the oil out could be costly. A 2007 report by the Institute for Clean and Secure Energy at the University of Utah reported that the cost of trucking crude to Salt Lake City refineries was 4.772 dollars per barrel. In contrast, they reported the cost of oil moved via the Chevron pipeline from nearby Rangely, Colorado, to Utah refineries was only 0.6331 dollars per barrel.
But those I spoke with told me the ten-inch Chevron pipeline is both at capacity and old. A June 2010 pipeline break resulting in the spillage of 33,000 gallons was cited as evidence of the pipeline’s condition. Chevron itself has said that the short in a power line that traveled through a fence post into the pipeline was the likely cause.
Whatever the case, a pipeline is not a current option for Enefit to carry its product to market.
A rail spur was mentioned by several sources as a possible solution, though a local journalist noted that, with the exception of light rail, no new rail track had been laid in the United States in 50 years.
But Enefit is not worried. While unwilling to offer specifics, Rikki Hrenko said that “We have completed a market study and are currently evaluating various options. I can say that we have confidence that the product produced will achieve a pricing that will allow us to feasibly get it to the market.”
Jeff Hartley, Enefit’s public affairs consultant, told ERR News that the transportation problem is not unique to Enefit, but rather a regional issue which is being worked on. “I predict you’ll either have robust pipelines in place and working before Enefit comes online, or you’ll see a rail spur built. There’ll be a solution before Enefit comes on line.”
The next wrench in the works is the Utah refineries, which are working at near capacity. In order to refine Enefit oil there, a current customer would have to be displaced. Experts say Enefit may look to the Texas Gulf Coast.
“North Salt Lake refineries are fully subscribed, that’s true,” said Hartley. “Enefit’s intention is to upgrade the crude so it could be piped or trucked to the gulf coast.”
Given the nature of Enefit’s technology, a Build-It-and-He-Will-Come approach to transport is not without merit, according to Hartley: “If Enefit is successful, it’s a game changer for the US.”
Air Quality
Currently, Uintah County is threatened with receiving nonattainment status for its air quality. Elevated ozone levels in the range of 103 to 123 ppb (parts per billion) were measured in the county over three winter months, with EPA permissible ozone levels from 60 to 70 ppb for an eight-hour period.
The government has suggested ozone-forming compounds in the Basin are “primarily from fumes produced in the oil and gas fields,” but many I spoke with in the Basin said tailpipe emissions were an equally likely culprit. No conclusion will be reached until testing is completed in three years.
According to those I spoke with, nonattainment status would not impact Enefit directly, though nonattainment could mean a loss of federal funding for infrastructure from which the company might have otherwise benefitted.
Another Spotted Owl?
Endangered species are the wild card in the mix. No one I spoke with thought there was a high probability of an endangered species putting a halt to the oil shale industry, but it is not outside the realm of possibility.
Most famously in the United States, after more than a decade of active lobbying, environmentalists succeeded in getting the Northern subspecies of a spotted owl taken under the Endangered Species Act. A federal ruling in 1991 closed much of the American Northwest to logging, and harvest of timber on 24 million acres of federal land dropped 90 percent.
Utah’s spotted owl may be Graham’s Penstemon. First collected along the Green River in 1933, the flower’s total population is estimated to range between 5,500 and 7,000 individuals. It grows actively on oil shale outcroppings and has been a candidate for federal listing as endangered or threatened since 1975. It has yet to be listed.
Present in the rivers of Utah are threatened or endangered fish such as the Pikeminnow, the Razorback Sucker, the Humpback Chub, and the Bonytail Chub. Industry is probably safe from these fish for now, but reduced river flows could once again empower the fishes’ lobby.
On the Whole
Tom Elder best sums up the environmentalists’ position, and the arguments with which Enefit and the industry are going to be repeatedly presented.
Despite some sympathy for the extraction industry (his first job was sacking industrial garnet in Idaho), Elder’s main concern is with externalities. “I believe the value of energy put into getting out oil shale plus the external costs like air and water pollution will always exceed what you get out of it.”
The externalities, recognizes Elder, are not easily calculated. “[T]his is a complicated world, and people looking for simple answers (like a simple dollars-and-cents balance sheet) are being simplistic.”
But like most in Uintah County, Elder understands that the oil and gas industry is the economic motor of the region. He also believes that the oil and gas industry can be managed so that “renewable resources can be patched up.” But he is not yet ready to believe the same about the oil shale industry.
“I believe that the development of oil shale will permanently impair our water, range, and recreation, so to me it is not in the long-term economic interests of Utah. […] If they demonstrate to my satisfaction that they truly would not permanently impact those resources, I would withdraw most of my objections.”
Of the potential trinity of new energy sources which may reduce America’s dependence on foreign oil – heavy oil, tar sands, and oil shale – the Institute for Clean and Secure Energy calls oil shale the “least understood.” Leaving real opportunity, one might argue, for Enefit to explain it.
Scott Diel