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Taking a Closer Look at American Sands Energy’s Utah Oil Sands Project

Since the shale revolution ramped up, much of U.S. oil production has been light, sweet crude, which presents interesting challenges for operators sending their product to a refinery system that’s been set up to handle heavier crude oil. Much of the heavy crude refined in the U.S. is imported from other nations, including Canada, which exports its heavy oil sands crude to the U.S. refineries along the Gulf coast.

Until recently, the European Union labeled Canadian oil sands “dirty oil”, making the Canadian bitumen less attractive to European importers. But U.S. oil sands are a considerably different product – easier on the environment and theoretically cheaper to produce. The process used to extract crude oil from the Utah oil sands uses no water, making it environmentally benign, according to Dan Carlson, American Sands Energy’s (ticker: AMSE) chief financial officer.

A Conversation with Dan Carlson

Oil & Gas 360® spoke with Carlson about his company’s Utah oil sands project which is located on 1,800 acres of private property near Price, Utah.

“I carry around a sample of our oil sands in my bag,” says Carlson.

“If you smell it, it smells like oil, but it just looks like rock.” Because the oil sands in Utah are a more oil-wet and rock-like compared to Canadian oil sands, the process for extracting crude oil from the Utah sands is easier and has a smaller environmental impact, says Carlson.

“The real issue with the Canadian oil sands isn’t the sand so much; it’s the water that comes along with it,” according to Carlson. “It’s expensive to separate water from oil, but here in Utah our oil sands contain less than 1% water. We can mine it, grind it up and remove our solvent all for about $40 per barrel, and once that’s done, we can return the sand and recapture the solvent, too.”

Despite the key differences between the oil sands projects in the U.S. and Canada, AMSE’s Sunnyside Project is still subject to an arduous mine permitting process in advance of building the mine and beginning production.

Ground Water Discharge Permits, Construction Permit: “Check”

In March of 2014, nine years after the company first acquired its Utah leases, AMSE filed its application for an operating permit with the Utah Department of Oil, Gas and Mining. In April, 2015, the Department of Environmental Quality (DEQ) issued Ground Water Discharge Permits and the associated Construction Permit for the project, knocking out one of the largest permitting goals for any mining project.

“Now that the water permit has reached the public comment period, we hope the rest of our permits will follow closely behind.”

Targeting Utah Refining Capacity

Once the project begins production, the heavy crude will be shipped to refiners in Salt Lake City, which at times has taken as much as 25% of its input from Canadian oil sands projects, according to Carlson. In the longer term, the company may also use a nearby train terminal to ship the crude by rail to the Gulf or California.

“We expect to average about 7.5 MBOEPD for the first 15 years of the project,” says the American Sands CFO, “but this project’s life span is well in excess of 30 years. The great thing about this project is there’s no decline curves, no dry holes, just maintenance costs, and 100% of the resources here are recoverable.”

Initial production from the Sunnyside location is planned at approximately 10,000 barrels per day which the company hopes to have online by the summer of 2016. ASEC controls an estimated resource of approximately 150 million barrels (net P50) of recoverable bitumen, according to a Resource Audit and Classification.

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