Energy company eyes Utah's oil sands

SALT LAKE CITY — An energy company with government approvals to launch the first significant U.S. oil sands project is trying to raise money to build a plant in eastern Utah that would turn out 2,000 barrels of oil a day.

Earth Energy Resources Inc. has a state lease to work a 62-acre pit in Uintah County, where it has demonstrated technology that can extract oil out of sands using a proprietary solvent it calls environmentally friendly.

But first, the Calgary, Alberta-based company says it needs to raise $35 million, and it acknowledged that could be tough because private equity groups turned skittish after the 2008 economic meltdown.

Earth Energy said it is "de-risking" the project to lure investors.

"Until we raise our capital, we are unable to proceed with the project in any major way, but the minute we do, we are fully prepared and committed to advance," D. Glen Snarr, president and chief financial officer, told The Associated Press by e-mail.

Regulators say the company has obtained all permits necessary to open the first U.S. oil sands surface mine designed for producing bitumen, a tar-like form of petroleum. For decades, other Utah operators have used oil sands as a poor-man's asphalt.

Snarr offered no timetable, but the company has demonstrated for officials, researchers and regulators that it has equipment capable of producing bitumen from the oil sands.

With oil hovering around $80 a barrel — it bottomed out around $32 a year ago — unconventional fuels are looking more practical. Still, political, economic and environmental hurdles remain.

The Obama administration has been slow to lease large tracts of federal land for oil shale or tar sands development.

Utah is more willing to lease its state lands, however, and Earth Energy joins a neighbor on state lands, Salt Lake City-based Red Leaf Resources Inc., which is working on a small scale to develop the region's oil-shale reserves. Red Leaf also is looking for investors to ramp up production.

Wringing oil from hard rock or oil sands is technically possible, but nobody has proven it economical on a large scale yet, University of Utah chemical engineering professor Philip Smith said.

"Companies have to run on the dollar, so if it's not worth doing, no one will do it," Smith said in an interview. "Is there a future for this? There's a lot of hurdles to overcome yet."