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State mining regulators have given "tentative" approval to a British energy company's plans to process oil shale in the Uinta Basin.
The Utah Division of Oil, Gas and Mining last month signed off on TomCo Energy's proposal to use an unproven "underground capsule technology" to superheat eastern Utah's oil shale — one of three active proposals aimed at mining Utah's bounty of an unconventional and yet-to-be-tapped resource.
And environmental group Living Rivers filed a protest of the permit with the mining division this week.
Tomco's proposal, the Moab group's attorneys argue, is energy speculation — a misuse of state permitting processes.
Capsule technology has yet to be tested or proven on a commercial scale and the firm has no intention of building a prototype capsule before full-scale operations commence, Living Rivers attorney Rob Dubuc wrote. The company's application fails to adequately describe the design or performance of its below-ground ore-processing capsules, therefore DOGM has no legal basis for permitting large-scale mining operations.
"By asking state regulators to approve commercial development using a technology that these same officials are currently evaluating for safety and viability undermines the credibility of the entire process," Dubuc said. "It's unclear what they are permitting. What are you guys allowing?"
State officials counter that the viability of TomCo's process has been demonstrated by another Utah oil shale developer.
TomCo seeks to mine 1,186 acres of school trust lands south of Vernal using a proprietary technology known as EcoShale, which Red Leaf Resources is pioneering nearby on Seep Ridge.
The technique entails digging 10-acre pits 150 feet deep and filling them with crushed hydrocarbon-bearing ore. The capsules act as ovens where the shale is cooked at 725 degrees for several months, slowing breaking down kerogen locked in the rock into a liquid and gas form that is recovered and refined into fuels.
"TomCo's plan is exactly the same as Red Leaf's. Red Leaf has been approved and they are doing their test stuff," said DOGM spokesman Jim Springer. "If the technology is there and it works, then they can go ahead and do that."
The London-based firm claims the tract can yield up to 126 million barrels of oil over the 21-year life of the mine.
Last month, state mining managers authorized TomCo to construct 106 capsules and a smaller test version.
But Dubuc alleges the company has no intention of developing the mine itself, citing TomCo CEO Paul Rankine's own presentations to investors.
"They are positioning themselves to be sold," Dubuc said. "They are trying to get through the permitting process so they have a package to offer investors."
Utah environmentalists generally oppose oil shale development because they see it as further entrenching the state's embrace of fossil fuel sources blamed for climate change. And oil shale requires strip mining and heavy processing.
Living Rivers members worry TomCo and Red Leaf's underground ovens will release pollutants into the ground and contaminate springs. In the end, the ovens will permanently store the spent ore once the oil is extracted.
The company defended its environmental record and rejected the claim it lacks the ability to develop the project.
"TomCo will continue to adhere to the regulatory process of state law and look to finalise all necessary permitting before taking the project to the next stage in its development," Rankine wrote in an e-mail. "TomCo is committed to continuing the important work of putting the Holliday Block into production whilst being extremely mindful of our duty of care to the environment and the people of Utah as we progress."
Rankine said the firm has financial backing and a track record of completing mining projects on time. TomCo is listed on the London Stock Exchange, currently trading at the equivalent of 75 cents a share.
Under a licensing agreement, TomCo paid Red Leaf $2 million up front and will give the company a 6 percent cut of the production revenue. Another 5 percent will go to the Utah School and Institutional Trust Administration. And 5 percent goes to the state, which will return most of that tax revenue under an incentive program.
The state has authorized Red Leaf to construct a three-quarter scale "early production" capsule and results from that project will guide final design of the commercial-scale capsules used at both project areas.
Meanwhile, state environmental regulators have yet to issue TomCo a groundwater permit and have limited their approval of Red Leaf's permit to a single prototype capsule.
The Division of Water Quality insists that additional testing and monitoring are needed before Red Leaf wins a full permit, so it follows that TomCo's mining permit for large-scale operations is premature, Living Rivers contends.