“We’re in the area of projects now that are much more complex than funding a grant for a master study or a water system or a sewer system. These are much more complex deals,” said Utah State Treasurer and CIB member Richard Ellis, who raised concerns about the legality of funding the projects at several recent meetings. “The expertise needed legally ... is much greater than we typically run into.”
Using public funds — mineral royalty and bonus monies paid to the state by development companies who do mineral extraction projects on federal lands — the CIB provides grants and loans to state agencies, cities, counties and county coalitions “which are or may be socially or economically impacted, directly or indirectly, by mineral resource development on federal lands,” according to the Utah statute that established the board. Grants and loans from the CIB are intended to offset the impacts of mineral development, and must fund public projects, services and facilities, according to the Utah statute.
Traditionally, that has meant funding senior centers, maintenance facilities, and sewer plants. But in recent years, the board has drawn attention for funding much larger-scale infrastructure projects in mineral-rich areas across the state.
In the past six years, the CIB has provided $56 million in funding for the Uintah County Seep Ridge Road, approved $29 million for the Duchesne County Victory Pipeline and a authorized a $53 million project in April that gives Utah “throughput capacity” or the right to ship goods such as coal, salt and grain through a multi-commodity export terminal in Oakland, California.
Proponents of the CIB’s major infrastructure projects say supporting mineral development infrastructure will help Utah’s counties by securing the state’s economic future.
“There are some questions with this one, there’s no doubt about it ... [but] the potential benefit for the entire state is really evident,” Utah Sen. Ralph Okerlund said April 2, regarding the throughput capacity project. “From the state’s standpoint, the economic development as well as the support of the existing businesses and all of the existing infrastructure that goes along with the businesses in the rural part of the state is just dependent on us looking forward enough in the future to be able to address these needs.”
But Ellis has recently questioned the board’s direction, questioning whether some large-scale infrastructure projects are legally unclear and if they are being funded potentially at the expense of other community needs.
“I understand the intent of all of this is really to keep economic growth going in these counties, whether it’s coal production or oil or gas. I understand that, and I think that needs to happen and somehow we need to make them survive ... [but] are we as a board willing to do that at the expense of other things you need in your counties? We need to think about that,” Ellis said during the CIB’s Sept. 3 meeting. “We’re not in the same situation we were several years ago.”
A new direction
That different situation, according to Ellis, is an economy where the price of oil is down from $100 a barrel to just above $40. That means less money in CIB coffers, and less to fund all projects large and small.
According to Ellis, during better economic times, the CIB’s former chairman, Gordon Walker, encouraged the board to fund major infrastructure projects. Ellis said Walker suggested smaller projects could be deferred, and facilitating major infrastructure would increase mineral royalties over the long term.
“Before [Walker] left, his point to the board was ‘we’re deferring current projects,’” Ellis said. “That’s not to say they couldn’t get done, but they may be deferred two or three or seven years. So if you could develop big infrastructure, potentially you could increase production, increase mineral royalties — that was the vision. But that was when oil was $100 a barrel, and there were lots of drilling rigs in the [Uintah] Basin. And that has completely changed.”
Almost two years ago, the CIB created a set-aside fund for such large-scale projects, called the “major infrastructure fund.” As the board began discussing the electrical transmission line project in August, Ellis said the CIB had roughly $8 million left in its major infrastructure fund, having drained the rest by funding the $53 million throughput capacity project in April.
The throughput capacity project gives Sevier, Emery, Carbon and Sanpete counties the right to ship goods such as coal, salt and grain through an Oakland export terminal. That terminal is currently scheduled for completion in mid-2017. Proponents of the throughput capacity project said it will open Utah’s export market to the Pacific Rim, Australia, and Central and South America.
Jeff Holt, Utah Department of Transportation Commission chairman and the throughput project advisor for the four counties, told the CIB this spring that before the Oakland opportunity, the commission had looked “as far away as Mexico” for a viable overseas export terminal for Utah’s goods.
Although the project was approved with only two opposed, the CIB members in opposition raised concerns regarding the legality of funding a project that does not clearly fit under the board’s mandate of offsetting the impacts of mineral development within Utah.
“The mineral lease law itself says the priority of funding is for infrastructure, planning and community services, with priority of those funds going back to the area of impact,” Uintah County Commissioner and CIB member Mike McKee told The Times-Independent. “[O]ne of the concerns that I had is I don’t think that Oakland, California, is really returning [funding] to the area of impact.”
Moab-based lawyer Christina Sloan said that by funding the throughput capacity project, the CIB is aiding the mineral extraction industry, standing in direct violation of state and federal laws.
“This decision violates both state and federal law by subsidizing oil and gas exploration and development for the extractive industry and investing Utah CIB money out of the state of Utah,” Sloan said. “The Community Impact Alleviation statutes intend, in language and spirit, projects funded by the CIB are located within Utah, with priority given to those projects that meet certain criteria, such as where additional state and local revenue for the project is not available and existing public facilities and services serving the impacted community is inadequate.”
Sloan said the CIB could be in a similar legal hot water with the electrical transmission line through the Book Cliffs if the line serves only the Uintah Basin extraction industry.
Okerlund, who represented the Six County Infrastructure Coalition in presenting the electric transmission line project, assured the CIB that the line would serve more than just the mineral extraction companies.
“[It’s] not only about delivering power to the energy companies that are producing our mineral lease funds but also for the public,” Okerlund told the CIB during its first discussion of the transmission line on Aug. 6. “They have gotten to a crisis point and they need to be able to find a way to deliver the power needed for all of the development that they’re having out there.”
Noting that the public could tap into the line, Okerlund said the project would also directly offset the impacts caused by mineral development. Electrifying an eventual 80 miles would help improve the Uintah Basin’s air quality, which, he said, is suffering because of the propane burned to light the oil fields.
But Ellis debated the project’s actual benefit to the public during the CIB’s Sept. 3 meeting, saying the transmission line might only benefit the extraction industry and the existing electric companies, Moon Lake Electric and Rocky Mountain Power.
“Essentially we’re building a line for Moon Lake and Rocky Mountain Power and charging them a capacity fee or something,” Ellis stated. “Are we really facilitating users and this isn’t just a facilitation of private business — building a power line for two private companies? I don’t have an answer to that. I’m not comfortable now that what we’ve committed to there is legal.”
But Okerlund told The Times-Independent that the Uintah Basin’s air quality is directly suffering from mineral development. The real questionable use of CIB funds, he said, is projects being funded in counties not as impacted by the development industry.
“The intent is to serve the public and clean up the air,” said Okerlund. “The real stretch of what these [CIB] funds are supposed to be used for is why are we using it for other projects that are not impacted by extraction? Other counties don’t have the impacts.”
According to Sloan, funding the most recent CIB projects — the throughput capacity in Oakland and the 2 miles of electrical transmission line in the Bookcliffs — have officially caused the CIB to come under scrutiny.
“There are entities watching to see what action the CIB and the Six County Infrastructure Coalition take on both of these projects, and I do expect these issues to end up in court if the CIB and SCIC act in spending public money in this way,” she said.