Duchesne County Economic Update

Tyson Smith, Regional Economist

The Uintah Basin continued to add employment throughout the fourth quarter of 2014. Average annual employment in the region grew nearly 4 percent from 2013. Despite the sustained growth trend throughout last year, it appears that the economic conditions in the Uintah Basin are taking a turn for the worse.

The Utah Department of Workforce Services relies on several data sources to help describe the state of the economy. The most accurate data available is the nonfarm payroll employment information that is collected through the Quarterly Census of Employment and Wages. However, the resources required to gather data accurately come at the expense of timeliness, which results in a four to six month lag between the time these data are collected and when they are available to the public.

When economic trends change dramatically it is important to understand the recent history of the region, while also using up-to-date information to inform the current economic climate. The most recent data that highlight the shrinking labor market in the Uintah Basin are the unemployment rate and the initial weekly unemployment claims, both of which have jumped significantly to start 2015.

Uintah County Economic Update

Tyson Smith, Regional Economist

The Uintah Basin continued to add employment throughout the fourth quarter of 2014. Average annual employment in the region grew nearly 4 percent from 2013. Despite the sustained growth trend throughout last year, it appears that the economic conditions in the Uintah Basin are taking a turn for the worse.

The Utah Department of Workforce Services relies on several data sources to help describe the state of the economy. The most accurate data available is the nonfarm payroll employment information that is collected through the Quarterly Census of Employment and Wages. However, the resources required to gather data accurately come at the expense of timeliness, which results in a four to six month lag between the time these data are collected and when they are available to the public.

When economic trends change dramatically it is important to understand the recent history of the region, while also using up-to-date information to inform the current economic climate. The most recent data that highlight the shrinking labor market in the Uintah Basin are the unemployment rate and the initial weekly unemployment claims, both of which have jumped significantly to start 2015.

Uintah Basin Economic Discussion (TV Interview)

Tyson Smith, Regional Economist

I was recently asked to do an interview with VTV6 in Vernal, Utah. Chris Piner, one of the hosts of Local Point, focused the discussion on the Uintah Basin's economy, but we also touched on national and international issues and the role of the Utah Department of Workforce Services in the labor market.

For more local content, please visit the VTV6 YouTube channel.

News on Crude Oil Prices

Tyson Smith, Regional Economist

Residents of the Uintah Basin continue to keep a close eye on crude oil prices. As has been discussed on this blog, and by news outlets across the nation, falling crude oil prices have had a negative effect on domestic oil and gas production and employment. Falling oil prices shrink the profit margins of U.S. extraction companies, which leads to less exploration, more rig closures and more layoffs. The questions being asked most often in oil and gas communities are: "When will prices stabilize?" and "At what level?"

While it is unclear what the answer to these questions will be, two recent articles in the Wall Street Journal directly addressed those issues.

Both articles, one by Georgi Kantchev and Bill Spindle and the other by Benoît Faucon, explore the possibility that oil prices my still have room to fall.

Kantchev and Spindle ask, "After their sharp drop late last year, oil prices have been trading in a relatively steady band for more than a month, raising an obvious question: Has the market hit a bottom?", before answering, "A number of fundamentals suggest not yet..."

Faucon addresses the possibility of stable gas prices even more bluntly when he quotes the monthly report from the International Energy Agency, which states, "On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”

Residents of the Uintah Basin will have to wait (along with the rest of us) to get the answers to these questions. But until then, energy prices will continue to be a major topic locally, nationally and globally.

Eastern Region Economist Discusses 2013 Year-in-Review and What to Expect on the Horizon

Eric Martinson, regional Economist for DWS, joins Chris Piner on Local Point as they discuss the economy and employment trends of the Uintah Basin.

Domestic Crude Oil Drives a Cautious Refining Revival

Clifford Krauss reports on the U.S.’s ever-expanding oil and gas industry, and what it means for communities who support the industry across the country. Though the article reports on plans for expansion and new refining capacities in Utah, it does not report on the unique situation faced in  Utah’s oil-and-gas-producing Uintah Basin Region. Because of a lack of immediate refining capacities and no rail infrastructure, oil companies operating in Duchesne and Uintah Counties need to have extracted crude trucked to refineries in Salt Lake City (over 150 miles away). When faced with excess supply, that is, crude that cannot be entirely accommodated by the semi-local refineries, the excess is trucked 100 miles to a rail port in Price, UT which then gets railed all the way to refineries in Texas. New York Times

British company jumps into Utah oil shale

Just weeks after Utah-based oil and gas development company Red Leaf Resources obtained the final permits for Utah’s first commercial oil shale mine, London-based TomCo Energy filed papers proposing large-scale extraction operations in southeast Uintah County. TomCo plans on licensing Red Leaf’s EcoShale technology to heat mined hydrocarbon solids into liquid petroleum. Salt Lake Tribune

Oil and Gas Royalty Split Favors Feds

According to the 2014 federal budget deal recently passed, a 51-49 percent share of royalties from the oil and gas industry slightly favoring the federal government was made permanent, a share that has been in place since 2008. Please follow the link for the article by Mary Bernard.

O&G royalty split favors feds

Hinto Energy acquiring additional wells and 4,400+ acres in Utah

Hinto Energy reported on Wednesday the Company has entered into a letter of intent to acquire a 100% working interest in 9 natural gas wells and in excess of 4,400 gross leased acres in the Cisco Springs oil and gas field, in the Uintah Basin of Grand County, Utah. The company is planning to connect the well into the local gas gathering system, as soon as proper testing and evaluation is completed. They expect to complete the acquisition in May of this year. Fairfield Sun Times

Transportation ills could derail Uintah oil boom in Utah

Utah’s Uintah Basin could see huge growth in oil and natural gas production — akin to the current boom in North Dakota — except for one problem: the remote area lacks adequate transportation to handle it.

Unless that problem is solved, $30 billion worth of oil and gas may go undeveloped there over the next 30 years. It could cost Utah’s economy $10 billion, and prevent creation of nearly 27,000 jobs.

That’s the conclusion of a study funded by the Utah Department of Transportation and local governments in Uintah and Duchesne counties, which was presented Friday to the Legislature’s Infrastructure and General Government Appropriations Committee.

Cory Pope, UDOT program development director said that also means Utah would be losing on average $180 million in taxes a year over that time, equivalent to about 4 percent of the state’s annual tax collection.

Pope stressed that the study tried to be conservative in its estimates. It did not count on, for example, much production from oil shale, which so far has not resulted in much commercial production in Utah despite large reserves. Salt Lake Tribune

Environmentally-friendly oil sands extraction technology

The International Resource Journal story focuses on MCW's breakthrough, oil sands extraction technology in an industry often criticized for its extraction processes by concerned environmentalists throughout Canada and the United States. The MCW story elaborates on the Company's proprietary, patent-pending oil sands extraction technology, which requires no water (a major benefit in desert locations), high temperatures or pressures. Included in this feature, are some candid comments from MCW's CEO, Dr. R.G. Bailey who expresses confidence in the future of MCW's unique technology in Utah where there's been no commercially-viable oil sands extraction technology to date. He also outlined the tremendous upside potential for worldwide licensing. Utah has over 30 billion barrels of oil (U.S. DOE) within 8 major deposits....representing a massive untouched resource.

MCW is now entering the assembly stage of its initial extraction plant on its lease location in Asphalt Ridge, Utah. It is expected that upon assembly completion, the Company will subsequently conduct a series of tests on the efficiencies and capacities of the unit prior to production. Azom

Awash in Oil, U.S. and Utah Set a New Course

When it comes to oil, a dramatic shift is under way in America, and Utah is playing a role.

Improved technology in both the oil fields and under vehicle hoods are big reasons why rising energy
production in the state and nationally is helping the country not only more than meet demand but also is putting it on course to reduce oil imports to historic levels.

Along the way, gas prices have fallen 50 cents or more in the state in the past month as oil stockpiles
grow, reducing the pressure on fuel costs, at least for the time being.

This year, Utah crude oil production is estimated to top 29 million barrels, marking a steady increase
since 1989. By comparison, the lowest output according to record-keeping going back 36 years came in 2003 at 13 million barrels, when drillers ran into a familiar boom-and-bust cycle common in the U.S. oil industry. Highs were registered in 1985 (41 million barrels) and in 1976 (35.4 million barrels).

"Historically, we’ve had more than one boom-and-bust cycle," said John Rogers, associate director of the Utah Division of Oil, Gas and Mining. "But production has steadily been increasing recently, largely through better technology."

In fact, production is up in the country a whole to a level that the United States could overtake Saudi
Arabia to become the world’s biggest oil producer before 2020, and might be energy independent a
decade later, according to a recent forecast by the International Energy Agency.

The radical reshaping of the nation’s energy picture means that the U.S. could become a net exporter of oil around 2030, the global organization said. Salt Lake Tribune

Crescent Point to buy Ute Energy for $784M

Here is a Reuters article looking at one of the oil and gas industry transactions in the Uintah Basin. New production technologies in the oil and gas industry have completely revitalized the nation’s energy fields, in the processes setting the stage for the Uintah Basin to be a more active energy area than ever before.

Crescent Point Energy Corp, Canada's No. 4 independent oil-exploration company, said on Thursday it will buy privately held oil and gas producer Ute Energy Upstream Holdings LLC for $784 million in cash to gain oil production in the Uinta basin in northern Utah.

The company said the acquisition, set to close at the end of the month, brings additional oil and gas production of 7,800 barrels of oil equivalent a day from proved and probable reserves of 55.1 million barrels of oil equivalent.

Crescent Point, which has focused primarily on producing oil from unconventional fields such as the Bakken shale-oil region of Saskatchewan, said its new Utah lands have the potential to boost production using multi-stage hydraulic fracturing on both vertical and horizontal wells.

The company said that adding Ute's production will raise its average output in 2012 to 97,000 barrels per day from its earlier estimate of 95,000 bpd. Reuters

Crescent Point Snares Ute Energy in $861M Transaction

Canada's Crescent Point Energy Corp. said Thursday it would buy Ute Energy Upstream Holdings LLC in a $861 million cash and debt deal that would extend the energy producer south into the U.S. Rocky Mountain region.

Denver-based Ute is active in Utah's Uintah Basin and is currently producing about 7,800 barrels of oil equivalent per day. Terms of the deal call for Crescent Point, of Calgary, to pay $784 million in cash and assume about $77 million in debt for privately held Ute, with the deal expected to close by the end of the month.

Crescent Point, which is engaged in developing oil and gas properties primarily in Saskatchewan and Alberta, in a statement, said it believes it can apply some of the vertical and horizontal infill drilling techniques it has used successfully in Canada to the Ute properties. The company also sees value in Ute's large undeveloped land base, which is also located in the Uintah Basin.

"This resource play is a new core area for Crescent Point and is consistent with our strategy of acquiring high-quality, large oil-in-place pools with long-term upside potential," Crescent Point CEO Scott Saxberg said in a statement. "We see great opportunities in the Uintah Basin."

The seller is the Ute Tribe Business Committee, a representative of the Ute Indian Tribe of the Uintah and Ouray Reservation which formed Ute Energy in 2005. Irene C. Cuch, chairwoman of the Ute Tribe Business Committee, in a statement said her group is "pleased to have another quality operator of Crescent Point's capabilities and financial strength operating on our lands and look forward to a long and successful relationship." The Deal

Industrial Growth Challenges Electric System Expansion

The expanding natural gas and oil drilling industry in the Uintah Basin is resulting in new requests for electric service from Rocky Mountain Power. The potential electrical demand of these industrial customers could triple the need for electricity supplies in the area. The expansion of this industry could create a need to construct additional electric transmission and distribution facilities to serve the region.

The needs of all Rocky Mountain Power customers, industrial and residential, will be addressed as this growth continues in coming years.

Transmission lines transport large amounts of electricity from generating sources to regions where electricity is needed. They are typically connected to a substation, which converts the higher transmission voltage to a lower voltage for distribution to customers. The distribution lines carry electricity from the substation to the customer.

If studies determine that new transmission lines are needed, local permitting approvals will need to be obtained from the Bureau of Land Management, Tribal authorities, county and city governments before construction can begin. Negotiations with private land owners will also be conducted.

One of the hallmarks of this process is that large customers whose service needs require major expansion of the transmission and distribution system pays their fair share of those costs. This protects existing customers from unfair impact to their prices because these facilities are so expensive to approve and construct. Rules for line extensions on the local distribution system have been developed over the years to provide protection and fairness to existing and new customers. Vernal Express

Utah Regulators Approve 'Fracking' Disclosure Rule

Utah has joined a growing list of states that require energy companies to disclose which chemicals they employ in a controversial process used to stimulate oil and natural gas production.

The state Oil, Gas and Mining Board, by a unanimous vote, approved a new rule Wednesday that requires companies to use www.fracfocus.org to report the amount and type of chemicals used to hydraulically fracture any Utah oil and gas well.

FracFocus is managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission, with funding from the U.S. Department of Energy.

Hydraulic fracturing— known commonly as "fracking" — involves introducing explosive charges deep underground to perforate a completed well casing. A mixture of sand, water and chemicals is then pumped down the steel casing under high pressure to fracture the shale rock around it. The sand holds the new cracks open to allow previously inaccessible reserves of oil and natural gas to flow to the wellhead.
The Bureau of Land Management and the U.S. Environmental Protection Agency are currently studying hydraulic fracturing, with an eye toward possible federal regulation of the practice. Any such regulation would be "redundant," said John Baza, director of the Utah Division of Oil, Gas and Mining.

"Utah geology is unique. It can't compare with Texas, Oklahoma or the states back East," Baza said. "We think that fracking rules, as they're implemented and developed, should be unique to state programs."
Hydraulic fracturing has been blamed by landowners and environmental groups for groundwater contamination. The practice has even been highlighted in an Oscar-nominated documentary that included footage of a man lighting his tap water on fire.

Utah has seen a rise in drilling permit applications this year. As of Wednesday, the state had already received 141 more permit applications in 2012 than it did the prior year, and 471 more permits than the year before that.

The increased workload has environmentalists worried that state regulators won't be able to keep pace, even with the new disclosure rule.

Baza acknowledged that his agency hasn't added any new positions for nearly a decade. That's something he expects will change. Deseret News

Judge recommends approving Utah tar sands mine

An administrative law judge has affirmed Utah’s decision to OK a Book Cliffs tar sands mine without requiring a groundwater pollution permit.

The decision nearly concludes the state’s permitting for the nation’s first fuel-producing tar sands mine, leaving two state boards who were waiting on the judge’s recommendation to sign off. It likely sets up an environmental appeal to the Utah Court of Appeals, though.

The mine, on a Utah School & Institutional Trust Lands Administration lease, would produce up to 2,000 barrels of oil a day — small by the standards of a Canadian industry that strips oil from mined sands with water rather than chemicals. The Utah sands have properties making the fuel more difficult to extract.

 
The company hopes to produce oil by the fourth quarter of 2013, US Oil Sands CEO Cameron Todd said. First, though, it must raise more money to set up the mine.  Salt Lake Tribune

Asthma takes toll on Basin residents

The just-released Asthma Burden Report for 2012 shows that 9 percent of adults and 7 percent of children have asthma in Utah.

Every day a statewide average of 20 people struggle with asthma attacks potentially so severe that they need treatment at a hospital.

What does this mean for the TriCounty Health Department regional residents of Daggett, Duchesne and Uintah counties?

Lost work days, lost school days, and lost lives –— the cost of asthma to our communities is cumulative.
On Thursday the TriCounty Asthma Coalition met to look into the report numbers in relation to local asthma treatment numbers.

Findings indicate that Uintah Basin asthma sufferers are twice as likely to be hospitalized; 57 basin residents per 10,000 people in population versus the state average 25 people.

Current air quality findings suggest work-related asthma losses in labor will persist until improvements are made.

“The more industry you have, the more problems you are going to have even among mild asthmatics,” said Dr. Daniel Kwak, Dinosaurland Pediatrics, Ashley Regional Medical Center.

From 2001 to 2010, the Burden Report indicates that total charges for asthma hospitalization in Utah has doubled from $8 to $16 million.

In the interim, the cost of asthma in emergency health care continue to rise. Vernal Express

Tanker trucks on highways

Give state officials an A for being frank. They don’t know what to do about vastly increased tanker truck traffic that will barrel down U.S. 40 when the volume of crude oil heading from the Uintah Basin to Salt Lake Valley refineries doubles next year. We don’t know what to do, either. But like state transportation officials and legislators, we know a problem when we see one.

A study is under way to consider options. The trouble is that those options are unlikely to be available before the truck traffic swells.

If you live in Heber City, where U.S. 40 doubles as Main Street, that’s not good news. That could mean one or two of the heavy trucks passing every minute.

Daniels Canyon above Heber City is steep and can be treacherous during winter weather. The same is true of I-80 through Parleys Canyon before the roadway passes into Salt Lake City. U.S. 40 passes Strawberry Reservoir above Daniels Canyon, and I-80 abuts Mountain Dell Reservoir in Parleys. An oil spill into either of those waters could be an environmental mess.

I-80 is the transportation aorta for Salt Lake City from the east. Adding more heavy truck traffic to that already congested roadway will inevitably add to safety risks.

Those are the negatives. There also are positives. It’s good that Salt Lake City refineries will be processing more crude oil from Utah to produce gasoline and other petroleum products. Energy independence is important to the nation and to Utah’s economy. It’s better to have the oil come from Utah than from somewhere more distant. Salt Lake Tribune

Uintah County says controversial shale meeting invalid

Admitting to the improper posting of a public notice, Uintah County Commission has settled the suit over a closed door oil shale meeting held on March 27.

The reversal came as the commission resolved to “rescind and vacate all matters discussed in the meeting and the resulting resolution.”

It ends a lawsuit filed by retired attorney Sandy Hansen, who asked the courts to declare the closed-door session as an “invalid violation of the Utah Open and Public Meetings Act.”

County officials overturned the discussion and resolution upon learning the public posting did not comply with the law.

For their part, county officials say its the federal government who has violated the law in failing to respect the states and counties as cooperators in crafting new public lands policy.

They cite the Obama administration’s reduction from 2 million oil shale acres of leasable public land to 461,965 acres in the three western states for oil shale.

Saying the concerns express about impact to water and air is misplaced as the current PEIS “is simply a land allocation document, it puts the cart before the horse,” said Mike McKee, commissioner. 

An environmental impact statement for oil shale application will be prepared after the PEIS is finalized. Vernal Express