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The World’s First Clean Oil Sands Project: An Interview With Dr. Gerald Bailey

The World’s First Clean Oil Sands Project: An Interview With Dr. Gerald Bailey

After decades of exhaustive attempts to overcome the dirty reputation of oil sands, we finally have an environmentally-friendly and low cost method to tap into these vast resources in the state of Utah—good news both for Mother Nature and all oil and gas investors.

MCW Energy Group’s CEO, former Exxon President of the Arabian Gulf region, Dr. R. Gerald Bailey, tells Oilprice.com in an exclusive interview that his hunt for an innovative technology that simultaneously makes money and cleans up the environment is over. The race to capitalize on Utah’s vast oil sands resources is on, and only the ‘clean’—both financially and environmentally—will survive.

Coming hot off of the successful launch of clean oil sands operations in Utah, while other oil sands projects are under fire from protesters, Dr. Bailey discusses:

The difference between Utah and Alberta when it comes to oil sands resources.

How new technology can—and is—extracting oil sands without harming the environment.

Why the new technology is as much about remediation as it is about extraction

How to create new revenue streams and use the resulting clean sand for other purposes.

Why it’s finally possible to make money extracting oil from oil sands cleanly—despite the current world’s depressed oil prices.

What Alberta’s tailings ponds look like now, and what could be done to clean them up—eventually.

Interview by James Stafford of Oilprice.com

James Stafford: After many years of oil companies attempting to develop Utah’s vast oil sands deposits without harming the environment, where are we now?

Gerald Bailey: Right now, we’re experiencing an exciting moment in the history of oil sands technology. For the first time, we can finally extract oil from Utah’s oil sands without any environmental damage. And significantly, we can do it at a cost that makes sense, even in this depressed oil price environment. It’s taken decades for someone to come up with this technology and actually make it commercially viable; and it was these elements that attracted me to MCW Energy. I wanted to get involved in this project while it was still new and largely off investor radar—now it’s poised to explode as an additional source for independent American oil production. Related: Canada’s Oilfield Service Sector Battered By Low Prices

James Stafford: So, oil sands don’t necessarily have to be dirty?

Gerald Bailey: No, oil sands in themselves are not dirty. It is quite simply sand that contains oil, just like sand underground in an oilfield contains oil. They are dark with oil. The word ‘dirty’ has been derived from the fact that most current extraction processes use hot water or steam, which results in an oily water stream that leaves behind toxic tailings ponds.

James Stafford: How is this new proprietary extraction technology developed by MCW Energy different? How does it work?

Gerald Bailey: It’s really quite simple. The technology works in the same way as soap takes grease off plates: The grease adheres to the soap and pulls it away and off the plate. Our technology—which focuses on proprietary solvents—works in the same way. It adheres to the oil and pulls it away from the sand.

James Stafford: What happens with the sand after this process?

Gerald Bailey: Well, that depends on what other local market uses there are. Generally speaking, we wash the sand with our solvents and then return it to the earth 99.9% clean. You can grow plants on it and it is no longer contaminated with oil.

James Stafford: And are there any other uses for this sand? Is there any kind of a market for this once it’s been cleaned up?

Gerald Bailey: As I mentioned, for now the sand is usually returned to the earth—clean and safe. But there are other potential applications that we are exploring. One possibility is to sell the cleaned sand as frack sands, which is a spin-off business that’s growing as fracking activities in America increase. Frack sands require certain quantities of silicon and not all sands are equal in this respect. Much of the desired frack sand comes from the Midwest—from Wisconsin and Michigan, for instance. For years Utah oil sands containing bitumen/asphalt have been used in Utah, Wyoming and Colorado to build roads and highways.

James Stafford: So the immediate term goal is to focus on ramping up production in Utah and then licensing the technology for global application?

Gerald Bailey: Yes. MCW has achieved commercial viability already through a fully operational oil sands plant in Asphalt Ridge, in the heart of the Utah oil reserves both in sands and in conventional reservoirs, near the town of Vernal. It’s termed “America’s first environmentally-friendly oil sands extraction project.” Since the beginning of this year, we have been cleaning Utah’s oil sands and selling the oil to the market.

James Stafford: Why Utah?

Gerald Bailey: Asphalt Ridge is one of Utah’s 8 major oil sand deposits. Asphalt Ridge alone is believed to hold some 1 billion barrels of recoverable oil. Utah has some 55% (Department of Energy Estimate: 32 billion barrels) of the United States oil sands deposits. Related: Why Saudi Arabia Won’t Cut Oil Production

James Stafford: How much is the project producing now and what are the forecasts?

Gerald Bailey: The project is producing 250 barrels a day right now at a very reasonable production cost of $30 per barrel, with plans to build a 5,000/bpd plant, which could bring costs down to $20 per barrel. Even in this current world market, those numbers mean profit. While Alberta’s oil sands are expensive to produce oil using their existing technologies, and are very troubled right now, MCW can make a profit on Utah’s oil sands even with oil at $40 per barrel. And that’s what today’s market is all about—innovations that spell profit even in times of crisis. Finding a company that has no debt—such as MCW—in this atmosphere was a huge selling point for me.

James Stafford: How do you convince the public of the prospects of clean oil sands for Utah given the international outcry about Canada’s dirty oil sands?

Gerald Bailey: That is the challenge. Certainly, Canada has given oil sands a bad name and that is unfortunate, but the process and situation in Utah is entirely different and the two cannot be compared.

Utah oil sands are found in a different position---much of Utah’s oil sands deposits lie from surface to just 400 feet. You can just scoop up the oil sands with a front loader and then process it with MCW’s proprietary solvents. The oil comes out and you sell the oil and put the sand back in the environment.

In comparison, Canada’s oil sands have to be mined because they are several hundred feet deep and the oil needs to be extracted with steam. The resultant polluted water returns to surface with residual oil that cannot be separated. This dirty water and sludge is stored in huge tailings ponds, so large I understand they can be seen from space. Utah’s sands are oil wet, rather than water wet, eliminating the need for tailings ponds.

James Stafford: What does this really mean for the environment?

Gerald Bailey: We are here to clean up the oil sands business—for now, starting in Utah. And any savvy investor knows that technology that is environmentally friendly and commercially viable rules the day. This is already a proven, cost-effective technology. Our main technology process advantage is that we require no water to extract hydrocarbons from the oil sands. Almost all other technologies require up to 3 barrels of water for every barrel of oil produced.

Utah being largely a desert state, usage of water for resource development is an extremely touchy issue. Our system features a closed-loop technology….nothing leaves the system except the cleaned sands and oil. And after tweaking our process, we’ve managed to dramatically reduce our labor costs, decrease the costs of the petroleum products we use in extraction and, increase our process efficiencies ---all which result in the lowest production costs in the industry. Our next step is to share this technology with the rest of the world. For now, that means anywhere that has oil sands deposits similar to Utah’s.

James Stafford: Are you talking about a technology that extracts oil sands in an environmentally- friendly manner, or does it have broader environmental applications?

Gerald Bailey: Oh, the environmental applications are much broader. Our process may also be viewed as a remediation technology. This is not just an opportunity to get in on another source for oil, but also an opportunity to clean up the land after disasters or the resulting polluted tailings ponds resulting from other less efficient extraction processes Related: Canada’s Oilfield Service Sector Battered By Low Prices

James Stafford: Are you suggesting such a technology could have played a role in cleaning up the Deepwater Horizon oil spill, for example?

Gerald Bailey: I am. We could have applied our technology there and cleaned up significant areas of the contaminated beach. If you go there right now, you can still find a lot of polluted sand behind the beach dunes and in the adjoining swamps. This technology will certainly add value for its wider remediation applications.

James Stafford: For now, though, MCW’s technology seems to be flying under the radar—where many will not have heard of it.

Gerald Bailey: You know, I recognized this when I joined the company that MCW had a technology that nobody else had. I also recognized that it could make a huge splash on the world oil scene. Now it’s ready to reach out to the public. This comes at a time when oil sands extraction is a tense issue in Utah, with protesters attempting to block an oil sands project owned by another company, which is using a water-based technology. Educating the public on the different processes of extracting oil sands will be key to pushing an environmentally friendly agenda forward.

There has been no protest to our Asphalt Ridge project in Utah to date because we emit nothing to the air or soil and there is no water to discard. MCW has worked very closely with the Energy Development Department in Utah, meeting or exceeding all environmental requirements. We’re working under the guidelines of their Responsible Resource Development Program, which is proof that resources may be safely developed with placing the environment at risk. Nonetheless, the general public still needs to be made aware of both the environmental and economic possibilities here for the future.

James Stafford: What is the long-term goal here? Building plants around the world, or licensing the technology?

Gerald Bailey: MCW is prepared to go several routes. We can build a plant for others, or we can build and operate these extraction plants as a joint venture. However, licensing is definitely an excellent way to deploy our technology worldwide. This unique MCW technology has major global applications. You can create an attractive revenue stream for everybody who implements it. Russia, China, Afghanistan, Dominican Republic, Namibia, Jordan and Trinidad—these are all great potential license purchasers with considerable oils sands deposits.

Eventually, we could even potentially clean up Alberta’s tailings ponds by de-watering the abandoned sludge and applying our new solvents to squeeze the rest of the oil out.

It is actually surprising that nobody discovered this before… it is like the Wright Brothers, they found a way and they proved the process. Someone always comes along to solve the problem. MCW has accomplished this...Our technology works; there is no pollution; nothing toxic goes back into the ground or into the air. We will be driving a lot of cars on the refined gasoline that comes from these huge reserves. This is a national and historical first—one I am willing to bet my 50-year reputation on.

Interview by James Stafford of Oilprice.com

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  • Greg Hallee on September 01 2015 said:
    An interesting concept - one every inventor young and old has dreamed of developing. The interview is an exciting read but leaves me feeling very uneasy. The interview is suspiciously incomplete per se.
    In one sentence the extraction chemicals are described as "soap" in another as "oil derivatives" and then "solvents". Add to this the question "Are you talking about a technology that extracts oil sands in an environmentally- friendly manner," is never really answered.

    I'm very familiar with hyperbole distraction, misdirection interview strategies, interview designs that lead the general public in one direction away from the partially disguised full realities. This interview is a see-saw of unbalanced information, I'm not a child and this type of game does not excite me.

    What are the solvents used in "MCW’s proprietary solvents" process? If you decline to answer that..., what solvents remain in the cleaned sands? Next, what proportion of MCW’s proprietary solvents are evaporated into the atmosphere? The simple answer is: what is the annual replenishment cost of MCW’s proprietary solvents.

    If you cannot or will not answer at least two of these simple questions completely - that is fully describing a true closed loop system..., then consider this "PROTESTS HAVE BEGUN."
  • Stephen T. Harris, CPL on September 01 2015 said:
    I would also like to understand the extraction better, but then I am sure there are patent issues. Every company that deals in solvents right about now is trying to develop uses far beyond anything conventional. What I am sure of, however, is the ingenuity and resourcefulness of our industry. Maybe this is the "holy grail" for oil sands, or not, but I have no doubt that Gerald's company will stimulate others to compete and enhance what work has been done. I was interested in using solvents in our CA operations, as I found a continuous injection of only about two drums a month, maintained production increases of 300% in most cases. I have tested the idea that solvents could be substituted for steam as well, considering every other barrel of oil produced in CA is thermally produced. The issue is material balancing of the fluids to avoid subsidence problems. In these shallow, near surface pits of oil sands like in Utah, even microwaves will work to lower the viscosity and get the oil flowing. Anyway, more power to these guys and I wish them all the success.
  • Roland on September 01 2015 said:
    They could probably get some heavy equipment from the Wyoming Wind River Coal projects that are no longer economic. But it's still tar. It's hard to handle. Are they going to dilute it with (something) to make 'dlibit' so it can go in a tank car or a pipeline? Or somehow ship it as a solid? And refining it is difficult, and produces excess carbon: petroleum coke. That's useful for steelmaking, but there isn't any in 1000 miles, and there's already a surplus in Detroit & elsewhere. So, still lots of questions.
  • Frank on September 04 2015 said:
    Greg:

    It is easy to tell that this was a "setup" interview with softball questions.

    I have been following this company since last December and have had a number of calls to their investor relations. Go to their website and you can see how the whole process works in detail.

    The process is really quite simple. Scoop the oil sand into a tank, mix it with solvent, stir and remove oil into one tank, recycled solvent in another and clean sand from the third. A little oversimplified but you get the idea.

    The system is closed so solvent is recycled and used over and over. There is almost nothing lost because it is a closed system. It cannot evaporate out of a closed tank and there is minimal cost to replenish the .1% that is lost.

    Talking about how soap works with grease is a simple explanation of how the solvent works. In your sink, soap is a solvent. I could not find "oil derivatives" in the article, but there are no other derivatives, only clean oil, clean sand and the recycled solvent.

    The sand is 99.9% clean, meaning that less than one tenth of one percent of oil and/or solvent remain in the sand.

    The process is real and works. The only question that remains is, can this be scaled up? That has yet to be proven and is my major concern. If they can prove that and reduce the cost to $20 per barrel in a 5,000 barrels a day plant, the economics are crazy.

    At $50 a barrel oil you would have a $30 profit on each one.

    $30 X 5000 a day X 360 days is $54 million in annual profits from each plant they build. They will likely have to issue a lot more shares, but the $54 million is almost $1 per share in earnings. If this works it is going to be incredible.

    Even more exciting is the possibility of licensing the technology. No investment needed, they would receive a royalty from each barrel of oil that is produced by others.

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