Watching Government: Utah copes with low oil price

Aug. 17, 2015
Utah's oil and gas activity, while not as large as some states, has taken similar hits since crude prices plunged from $100/bbl in mid-2014 to about $45/bbl in early August.

Utah's oil and gas activity, while not as large as some states, has taken similar hits since crude prices plunged from $100/bbl in mid-2014 to about $45/bbl in early August.

Figures from the state's Division of Oil, Gas, and Mining indicate production is falling in 2015. While not strictly comparable, it's down from 2014 4-year peaks of 40.9 million bbl of oil and 453.2 bcf of natural gas to 13.2 million bbl and 151.4 bcf, respectively, through Aug. 11.

"Companies completed projects they already had under way," said Utah Petroleum Association Pres. Lee J. Peacock. "Our statewide rig count went from 28-29 13 months ago to 5-6 now. Some companies are taking time to do maintenance and workovers to maximize production from existing wells, but there's very little new drilling going on."

Utah's Department of Workforce Services reports that in 2015's first quarter, nonfarm employment fell year-to-year by 7.9% in Duchesne County (11.1% in mining, which includes oil and gas) and 2.3% in Uintah County (15.9% in mining), compared with increases of 3.7% for the state overall and 2.2% for the US as a whole.

Local governments are feeling the pinch. "Royalties and mineral lease monies which come from production are down substantially," Uintah County Commissioner Mark Raymond told OGJ. "That has a direct impact on services we provide.

"We've had to tighten our belts as a county government," he told OGJ. "In addition, sales tax is down. Our property tax is still healthy, and our budget is fairly secure. Nevertheless, we are feeling the impacts of lower oil prices."

Utah's downstream oil community also reacted. "Some Salt Lake area refiners modified their long-term plans based on possibly lower projected Uinta Basin production," Peacock said.

Pipeline is on hold

When Tesoro Corp. temporarily shelved its proposed Uinta Express pipeline from the Uinta basin in May, it cited economic uncertainties arising from from depressed crude prices. "That's unfortunate, because truck traffic from those fields is an issue here," Peacock told OGJ. "Almost all the black, paraffinic crude from those fields now moves by truck over highways."

Uintah, Duchesne, and four more of the state's eastern counties formed a coalition to address infrastructure needs. "It's interested in access to markets, and ways to advance pipelines, rail, and other energy transportation opportunities, including power transmission," said Laura Nelson, executive director of state's Energy Development Office.

"Once the oil and gas industry comes back, it will need more electricity," Nelson said. "Companies can't make those investments now because of low oil prices, but the state can look at preliminary routes and possible environmental impacts. That way, when activity ramps up, we'll be ready to move."