SALT LAKE CITY — With oil prices down 45 percent from where they were last year, the troubling economic climate for continued exploration and drilling is having repercussions in Utah.
The Southern Utah Wilderness Alliance was celebrating what it viewed as the demise of Enefit's big oil shale extraction project in eastern Utah after the head of the parent company said it had been "stopped," and there was no business plan to continue.
An article posted on Estonia Public Broadcast included comments from Hando Sutter, chief executive officer of the state-owned Eesti Energia, about the Enefit project's remote location and other challenges.
"It sounds like they are saying this project is mothballed and there are no plans to continue," said David Garbett, attorney with the Southern Utah Wilderness Alliance.
But Rikki Hrenko-Browning, Enefit's chief executive officer, said the company is continuing to seek regulatory approval from the Bureau of Land Management for a right-of-way corridor for utilities, and the project is by no means dead.
"The idea that the Utah Project is ‘frozen,’ as the article says, seems to reflect the fact that Enefit is taking this period of low oil prices to reassess and refine its business plan, just as most energy companies are doing," she said. "The project does, in fact, have a business plan, but it’s being retooled and the engineering work is being reevaluated to make sure the economics of the project will be solid in the future."
Hrenko-Brownig said that the BLM is reviewing the draft environmental impact statement on the corridor, with the analysis expected to be published later this year.
Some of the changes in the business plan under consideration include boosting the economics of the mining of shale by producing additional by-products or amping up the number of gallons of oil produced per ton of shale that is mined, she added.
"The overall goal is to improve the project business case, to continue long-term strategic efforts, such as ongoing permitting activities, and eventually secure outside investors for the future development of the project once the oil price improves," she said.
Garbett said the latest news about Enefit signals that Utah's landscapes and airsheds are safe for a time and questions — and criticism — about the economic viability of oil shale extraction remain stronger than ever.
"History shows us this industry has never been successful or productive here in Utah," he said.
Rumors about the Enefit project — which aims to pull some 2.6 billion barrels of oil out of rock southeast of Vernal — came the same week Denver-based Fidelity Exploration and Production Co., announced it was getting out of the oil business altogether and shutting down nine field offices, including one in Moab.
The Denver Post reported Wednesday that the sell-off of Fidelity assets was accompanied by the elimination of 106 jobs.
Fidelity has been at the center of controversy in Grand County where horizontal drilling allowed it to access a bounty of oil from decades-old leases that were historically poor producers. At one point, the highest-producing well in the lower 48 states was pumping oil on the outskirts of Moab.
The conflict between oil and mineral extraction amid a prized recreation economy has created a battlefield in the red rock country, where both county officials and federal authorities are grappling to arrive at some semblance of agreement or compromise on what land uses are acceptable where.2 comments on this story
Some of Fidelity's operations, in particular, drew criticism because of their proxmity to the boundaries of Dead Horse Point State Park and Canylonlands National Park. A natural gas pipeline crossed land used by outdoor recreation enthusiasts, stoking further concerns.
Both domestically and abroad, skyrocketing oil production has led to a "glut" in the supply. Domestic supplies sit at 28 percent above the five-year average.
Chevron announced that it expects to cut as many as 7,000 jobs, while Shell said it is cutting 7,500 jobs.
The companies that bought Fidelity's assets — at a price reported to be $450 million — were not disclosed. The status of drilling operations in the Grand County area also remains unclear.