Resource World Magazine

the oil patch report Joe l C hur y US Oil Sands develops breakthrough green process T ypically when the media decides it wants to do a hit job on the oil sands, it'll roll out photos that are over a decade old. These will include clichéd shots of massive tailings ponds, and flyovers showing large footprints. However many recent developments in oil sands extraction reduced the ammunition environmentalists have to fire back at industry. A breakthrough south of the border could lead to a truce between environmentalists and oil sands developers, well eliminating the construction of new tailings ponds. Through the proprietary use of a biodegradable solvent derived from oranges, US Oil Sands Inc. [USO-TSXV] believes it has a very green answer to many of the concerns coming from naysayers. First off, they're shaking off the imagery of tailings ponds, as their process doesn't require them. Next, through recycling, they're drastically reducing water usage and reusing the solvent to cut the costs involved for each barrel produced. "We recycle 95% of our water, as well as recycling the bio solvent that we use," says Cameron Todd, CEO of US Oil Sands. "The sand is clean enough that you can return it to the mined out areas immediately. This allows us to reclaim the lands as we go, and removes the need for tailings ponds. You don't need tailings ponds when you have a clean separation of the oil from the sand." And while all of these facts regarding the process may perk up the spirits of staunch environmentalists concerned with the footprint the oil sands leave, it is the economics of the process that will get the investment community dancing. Not only are the environmental cleanup costs reduced to miniscule proportions, the process actually enhances bitumen recov- 86 www.resourceworld.com ery. The biodegradable solvent upgrades bitumen recovery to 96% (up from conventional methods that run around 70%). "It's a breakthrough," says Todd. "This process is going to be a significant change to anything that's been done before with regards to oil sands. But for my investors, the most important factor is that it costs 80% less per barrel of oil production capacity." Not only do these operations save on capital and public relations headaches, but they also allow scalability. After undergoing extensive pilot testing for the extraction process, the US Oil Sands team realized that they could implement this all over the world, from large 20,000 barrel per day units to smaller 2,000 barrel per day units. It's this scalability that has allowed the company to set up its land base outside of the Athabasca Basin in northern Alberta, and to establish itself in Utah. Since most of the mineable oil sands lands are already spoken for in Canada, USO quietly went about establishing the largest commercial oil sand land position in the United States with 32,005 acres in Utah. The state has many large oil sands deposits, however, they are not nearly as large as the ones found near Fort McMurray. That said, there's an estimated 20-30 billion barrels of bitumen in Utah, and they're mostly located near the surface, in the sweet spot for surface mining. "Our process allows you to track down oil fields that aren't as big as the billion barrel ones that you'll find only majors operating in the oil sands of Northern Alberta," says Todd, who believes that his company's version of solvent-driven extraction can lead to a small-scale oil sands renaissance. "There are still plenty of plays that are worth hundreds of millions or even billions of dollars, but have not been economic to develop as of yet. This is because of the giant capital costs involved." Once set up, the process becomes quite self-sufficient, allowing a large quantity of repeated uses of the solvent, which can be re-used 50 or more times per installation. The small amount left in the clean sand at the end of the process breaks down and disappears quickly, as it is highly biodegradable. Future cleanup costs will be far less, as the solvent itself is non-toxic to the point that it's even fit for human consumption. It bares many similarities to the orangebased cleaners used for medical and industrial purposes. Unlike the questions raised about chemicals used in fracking, this solvent will hardly raise any red flags. While the company has proven its ability to use this method effectively through pilot demonstrations, the next stage will be bringing in production that the company can call its own. "We expect to see our first oil next year," says Todd. The company's development business plan is to acquire land and develop the resource themselves, however, down the road they could very well be capable of developing oil sands operations all around the world in regions that were previously uneconomic to do so. "I can point to dozens of basins that contain anywhere from between 10 million barrels to a few hundred million barrels that all are of a size that can't be developed with current oil sands techniques. This is because they'd be seen as too small, and too expensive to construct a facility. That's a great window for us to apply our technology." n february 2013

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