Rules slow 'heavy' oil extraction
Getting the nation's large resources of "heavy" crude oil out of the ground is proving a stickier task than expected. The task has run into environmental difficulties.
By removing price controls from the thick, black, gooey petroleum last August , President Carter intended to stimulate future production. Hopes were high for fast results. The oil industry promised to take its heavy oil projects off the shelf.
Today, however, most of the potential still hasn't surfaced. But everyone agrees the potential can still be realized.
With recent moves on the part of the California Air Resources Board (ARB) to alter air-quality regulations, action may begin soon.
"Its been a stalemate because of air-quality standards," says Arthur O. Spaulding, vice-president of the Western Oil and Gas Association. "We've all been wrestling with the ARB -- they have pre-empted the whole affair."
California sits on 70 percent of the nation's heavy oil reserves, with some 20 to 30 billion barrels.
The ARB is beginning to alter its position on nitrous oxide emisions in Kern County, but the California oil industry is equally concerned that the federal windfall profits tax may reduce the profitability of drilling heavy oil.
But despite these two question marks, the rising price of oil has made it worthwhile to extract the tar-like oil.
The costs are considerable. An expensive steam generator is needed to produce the heat that is injected into the oil fields to reduce the viscosity of oil and bring it to the surface. Stack scrubbers for the generators costing around $750,000, are needed to keep Kern County air clean.
But the largest expense is for the fuel that is burned to make steam. One barrel of oil is burned to bring three barrels to the surface. Nonetheless, Union Oil company expects to double its current daily production of 14,000 barrels over the next two years, expanding both in Kern River fields and in the Guadalupe field along the south-central coast.
By 1984, Chevron (Standard Oil of California) expects to take its 50,000 barrels per day production to 90,000 barrels per day. Along with Shell Oil Company, Chevron expects to be pumping heavy oil from San Pedro Bay soon.
And Getty Oil Company, with the largest installed capacity in Kern County, plans to add another 25,000 barrels per day to its production by 1984. The company now produces 65,000 barrels per day.
Getty continues to negotiate with the US Environmental Protection Agency over the future of 62 generator shutdowns in December 1978 after air-quality standards were exceeded once during particularly adverse weather conditions. Getty estimates the 1979 loss at 3.6 million barrels, and when the generators are fired it will take one year to regain the heat in the reservoir that has dissipated since the generators were turned off.
While some production and profits were lost in 1979, however, the higher prices Getty and other companies will realize with 1980 prices should be handsome.
But oil industry sources say that a clear sense of direction from the state and the federal government, rather than on-going back- and-forth squabbles over regulations, would enhance prospects for development.
"If we could see some stability here with the regulations, we could get production up substantially," says Ed H. Shuler, vice-president for Western exploration for Getty. "I really think that when the President decontrolled heavy crude the industry felt it had a green light. We knew we had some environmental problems to straighten out, but then all of a sudden we couldn't do a thing."
Pollution in the southern end of the San Joaquin valley has been among the most troublesome in the state. The California Air Resources Board developed a program that required the oil companies to clean up existing sources of pollution as they proceeded with new expansion. But the oil companies squawked over the terms of the regulations and only in March reached tentative agreement with the state.
While President Carter asked Congress to exempt heavy crude from the windfall profits tax, House and Senate conferees agreed to a 30 percent levy on heavy oil. That is not final. The Western Oil and Gas Association says that measure may limit production to 195,000 barrels per day by 1990 instead of the 500,000 barrels per day target set by President Carter.