In modern energy development, traditional forms of energy like natural gas are produced with a keen eye on protecting the environment. Environmental stewardship and responsible energy development take many forms in Utah. Environmental stewardship means working with local and state governments as well as environmental groups
Recent successful collaborations of this kind include the Bill Barrett Corporation’s Nine-Mile Canyon Project and Anadarko’s Great Natural Buttes Project.
Stewardship also means voluntarily going above and beyond current energy development standards like Newfield has done with its gas oil separators, creating centralized collection points which decrease truck traffic, reduce dust and minimize environmental impact.
Salt Lake City-based Questar has exemplified environmental stewardship with its Mainline 104 Project Extension, which has earned them an Interstate Oil and Gas Compact Commission Stewardship Award. Questar also recently opened its new headquarters in downtown Salt Lake, a 170,000-square-foot, $45 million, LEED Silver-certified office building.
Utah’s Division of Oil, Gas and Mining has won awards in its efforts to reclaim abandoned mines and restore the natural beauty of Utah. Governor Gary Herbert has been instrumental in bringing all stakeholders to the table to find ways to achieve energy production, while prioritizing the protection and conservation of our environment.
Utah is one of the nation’s top 10 producers for natural gas, oil and coal, and those resources are increasingly important to the State’s economy. Conventional gas and oil production is booming and will continue to grow rapidly.
However, Utah’s energy experts say that unconventional resources, especially oil shale and oil sands, could become bigger than conventional resources. Utah has unfathomable amounts of petroleum locked in shale and oil sands in the Uintah Basin — more energy than in the oil reserves of Saudi Arabia. The amounts are estimated not in millions, but in tens of billions of barrels in recoverable oil, enough to make the United States energy self-sufficient several times over.
Today, thanks to technological advancement, a number of companies are gearing up to extract oil from oil shale and sands using new technologies that consume very little water or energy, reclaim and restore the land, and are economically viable. Commercial-scale extraction is expected to be underway within a few years.
Building on a Legacy
Utah has a rich history of mining and natural resources extraction. As a state with wide open spaces and a preponderance of public land, Utah attracted, especially in its early history, nearly every imaginable sort of mining and prospecting endeavor.
Natural resource extraction has taken place in every one of Utah’s 29 counties. What are now renowned mountain ski resorts started out as rough mining towns in Salt Lake County’s Cottonwood canyons and in Park City. Today, Rio Tinto operates one of the largest open-pit copper mines in the world in the Salt Lake Valley.
Resources extracted statewide and throughout Utah’s history include gold, silver, copper, coal, salt, phosphate, oil, natural gas, lead, iron ore, potash, uranium, vanadium, zinc, tungsten, alunite, molybdenum, manganese, gilsonite, potassium, mercury, beryllium, clay, limestone, gypsum, sand and gravel.
Utah has long been a major coal producer, but because of pollution and climate change concerns, coal is declining as a favored energy source for electrical power generation. As a result, coal production in Utah is expected to only remain steady or slowly decline over the next several years.
Production of petroleum products, by contrast, is expected to grow dramatically. Utah currently produces 72,000 barrels of oil per day, with 10,000 operating oil and natural gas wells, and another 7,000 approved.
Uintah County Commissioner Mike McKee says 30,000 additional wells are proposed, and he expects that billions of dollars will be invested over the next decade in the Uintah Basin. At a recent energy summit in Uintah County, speaker after speaker from both government and industry said, “We are barely scratching the surface” of what is possible in the Uintah Basin, particularly when shale oil and oil sands production are ramped up.
Daryll Howard, vice president, Rocky Mountains, at Newfield Exploration, the biggest oil producer in the State, says his company invested $500 million in Utah in 2012. “Utah is in the same league as North Dakota, Oklahoma and Texas,” he says, with Newfield production growing 17 percent a year. “We’re three-and-a-half years into the permitting process for several thousand more wells.”
Alex Woodruff of Anadarko Petroleum Corp. says Utah has a world-class natural gas resource. The firm’s Utah reserve, estimated at 9.2 trillion cubic feet, is the multinational company’s largest gas field. Anadarko plans to drill in 3,600 Utah locations in the next several years.
Besides carbon-based energy, Utah’s renewable energy industry is growing rapidly, and cutting-edge research is being conducted in Utah’s universities on a wide range of renewable energy projects. Thanks to the Utah Office of Energy Development’s aggressive, mutually beneficial post-performance Alternative Energy Development Incentive, companies looking to expand renewable energy generation can benefit from a 75 percent credit of new State revenues up to 20 years.
At the outset of his administration, Governor Gary Herbert identified energy as one of four cornerstones of economic recovery and prosperity. With input from multiple agencies and stakeholders, the Governor developed a 10-Year Strategic Energy Plan and created the Office of Energy Development that reports directly to his office.
Utah is open for energy development
At an energy conference in January 2013, Governor Herbert said, “Billions of dollars will be invested in energy development in Utah over the next several years. Our goal for energy development can be summed up in three words: sustainable, affordable and cleaner.” Governor Herbert emphasized five points in his address:
1. Utah is open for energy development. Energy companies are welcome in the State and State regulatory agencies will be fair and efficient.
2. Utah will protect its environment. Energy companies must comply with environmental regulations and deploy new technologies that reduce water consumption and environmental impacts.
3. Utah welcomes new ideas and promotes alternative energy and renewable resources. Promising energy research is being conducted at Utah universities and especially through the Utah Science Technology and Research (USTAR) initiative.
4. Energy sources need to be competitive. The State supports innovation and research and promotes renewable and alternative energy, but will not pick winners or losers or provide massive subsidies for any particular energy resources. The free market works best to produce the energy needed by society.
5. Conservation and efficiency are crucial components of the energy mix. Conservation reduces energy consumption and protects the environment, saving money for consumers and businesses.
Promise Realized: Oil Shale and Oil Sands
The promise of oil from oil shale and oil sands has been long in coming. But according to Utah energy experts and industry leaders investing millions of dollars in these resources, the era of unconventional energy has arrived.
The U.S. Geological Survey estimates that some 4.3 trillion equivalent barrels of oil exist in oil shale and oil sands in the Green River formation in Utah, Colorado and Wyoming, the largest unconventional energy resource in the world. “These resources can be developed responsibly,” says Uintah County Commissioner Mark Raymond.
New technologies are making oil shale dramatically more cost-effective with minimal environmental impact. Ryan Clerico, with Enefit American Oil, an oil shale developer, says his parent company, Eesti Energia, produces 90 percent of Estonia’s energy. It has a 30-year track record of successfully producing oil from oil shale. Enefit plans to produce 50,000 barrels per day from oil shale in its project south of Vernal in Uintah County. Construction will start in four years, and oil will be produced by 2020. The project will use minimal amounts of water and will be environmentally sensitive to air quality, water, biological resources and cultural impacts, he says.
The European Union has very strict environmental regulations, and Enefit’s oil shale operations in Estonia fully comply. “We are very methodical and thorough,” Clerico says.
U.S. Oil Sands has already drilled 240 test wells in Uintah County and has been active in Utah for eight years. “Utah reserves can be developed responsibly and economically,” says Cameron Todd, CEO of U.S. Oil Sands. “Most oil sand extraction techniques are 90 years old. We will use dramatically advanced technology to achieve world-leading environmental performance.”
U.S. Oil Sands uses breakthrough extraction technology with no tailings pond and very low energy use (its techniques uses the equivalent energy of one barrel of oil to produce 18 barrels of oil). Capital costs are five times less than current oil sands projects. The firm uses renewable, biodegradable solvent made from citrus, recycling 98 percent of the solvent and 95 percent of water used. “The only thing we leave behind is clean sand,” Todd says. “We reclaim the land as we go.”
The firm has spent $45 million in Utah so far, and expects to be producing 20,000 barrels of oil per day, ramping up over the next five years. Over the next 10 years, the company estimates 500 to 1,000 jobs will be created that pay excellent wages. The firm will spend $300 million in capital development and pay $200 million in royalties to the school trust fund, along with $800 million in other taxes.
Cody Stewart, Governor Herbert’s energy advisor, has heard naysayers argue that major production of shale and sand resources will never occur because of costs and environmental roadblocks. “The critics are stuck on old technology,” he says. “The new processes and technologies are as different as a Chevy Volt is to a Model T. Ford.”
A study by national environmental consulting firm SWCA estimates that new Utah oil and gas projects proposed in NEPA documents as of Jan. 1, 2012, could create 62,425 jobs, $12.7 billion in economic impact and $56.7 million in government revenue annually, based on 1,445 wells drilled per year.
A diversified energy economy
Utah enjoys a diversified, balanced economy. A key component of that diversity is the State’s vast energy resources. Energy abundance helps sustain Utah’s status as the best state in America for business, bolstering Utah’s economy in three primary ways.
Inexpensive energy is a major attraction for companies looking to expand or relocate. The U.S. National Security Agency, for example, is installing a massive $1.2 billion data center in Utah, in part because of Utah’s stable and inexpensive electricity supply.
Energy abundance drives Utah’s economy by generating new jobs, increased tax revenues and economic growth that is enjoyed not just along the Wasatch Front, but also in rural areas of the State. More than 23,000 Utahns earn more than $1.5 billion annually from the energy sector, and energy jobs pay, on average, more than 170 percent of the state’s average wage.
Over the next several years, energy taxes and royalties will help protect Utah’s state and local governments from likely declines in federal funding. Energy revenues are bolstering education funding, especially as energy development increases on school trust lands that feed revenue into the State’s School Trust Fund.
State Sen. Kevin Van Tassell, who represents the Uintah Basin where much of Utah’s energy resources are concentrated, says “it’s entirely possible” that more than $300 million could be deposited annually in the education trust fund if 100,000 barrels of oil a day were produced on school trust lands. “It will take 1,000 to 2,000 more workers, and improved transportation infrastructure, but in 10 years we could be at that level,” Van Tassell says.
Energy prices in Utah are 30 percent below the national average. Utah consumers and businesses currently enjoy natural gas and electricity prices that are among the lowest in the country. Energy supplies are stable and reliable. This provides certainty, confidence and low overhead for manufacturing, transportation and high-tech businesses and industries that require reasonably priced and secure electricity, natural gas and petroleum supplies over the long term.
Energy is an important export product for Utah, returning significant revenue to the State from outside purchasers. California, for example, purchases major amounts of electrical energy from Utah, from both carbon-based and renewable generating facilities. Anadarko, with more than 2,300 operating natural gas wells in the Uintah Basin, produces enough natural gas each day to heat or cool more than 2 million average American homes. Anadarko’s approved new gas wells will produce enough energy to meet the demands of more than 5.5 million homes.