Promoters of $1.4 billion railroad in Utah’s oil country want state help

(Brian Maffly | Tribune file photo) The Green River Terminal in Wellington this year began trans-loading oil from trucks to rail cars, opening a new path for Uinta Basin crude to reach out-of-state markets. But environmentalists are concerned about worried with what they see as a lack of regulatory oversight this and two other new oil terminals in Carbon County.

Vernal • Uinta Basin officials are pushing a project they say could quintuple oil production here, bring higher prices and create 27,000 jobs.

The plan? Building a 150-mile railroad to allow transporting oil from the basin to out-of-state markets.

There’s one big hitch: It carries a price tag of $1.4 billion.

Supporters say that’s a deal compared to the $6 billion estimated for previous rail proposals that were studied and rejected. The old idea was to go through mountain canyons to connect to national rail lines at Price. Now they are looking at going east to Colorado.

“The terrain is better. The slopes are better. The costs are so much less, which makes this a viable project,” said Mike McKee, executive director of the Seven County Infrastructure Coalition, and a former Uintah County commissioner.

His group hopes that federal grants will eventually cover the big construction cost. But before the coalition can apply for those, it must conduct an environmental impact study. It plans to ask the Utah Community Impact Board next month for $27.9 million from the state’s share of federal oil royalties to help pay for that.

On Friday, the coalition asked the Utah Transportation Commission to also consider helping.

McKee told the commission, meeting in Vernal, that Uinta Basin oil fields now ship about 80,000 barrels of crude a day to oil refineries in North Salt Lake by truck.

“That’s pretty much the maximum amount because of air quality issues” that refineries there can handle, he said.

But the group says oil companies report they could produce and sell up to 400,000 barrels a day in the Uinta Basin — if they had a way to economically transport it to other markets, too.

(Kim Raff | Tribune file photo) Ralph Walker, an oil truck driver for Flying J, fills up his truck with oil from an oil pumping station in Newfield Exploration Company's oil fields in Monument Butte near Roosevelt, Utah on August 9, 2012.

Previous state studies have said $30 billion worth of oil and gas could remain undeveloped in the basin during the next 30 years because of transportation constraints — missing the opportunity to create an estimated 27,000 jobs. Those same studies could not find economically feasible rail or pipeline routes.

McKee said new studies commissioned by the seven counties group have found practical rail routes from Myton, Utah, to Craig or Rifle, Colo. It hopes to study an additional option to Mack, Colo., in the environmental impact study.

The new line would connect to Union Pacific and/or Burlington Northern rails — McKee said both companies have expressed interest — and allow transporting oil in heated cars perhaps to refineries on the Gulf Coast or elsewhere.

(Uinta Basin crude must be heated during transport or it turns essentially into wax — which has complicated building pipelines for it.)

McKee said his coalition aims to own the track but contract with a rail company to operate it. He said studies indicate the line would be used for more freight than oil, such as bringing in huge amounts of “frack sand” needed for gas wells in the area. He said that makes operations more economically feasible.

McKee said studies so far estimate that using the new railroad to transport oil to North Salt Lake would be slightly more expensive than using trucks — but hopes the yet-to-be evaluated route to Mack, Colo., might make it cheaper than trucking.

Kim Raff | The Salt Lake Tribune An oil tanker uses US-40 to travel from the oil fields in the Uintah Basin to the refineries in North Salt Lake near Daniel's Summit in Utah on May 18, 2012. More tankers are expected to be using US-40 in coming years, increasing wear & tear and creating some safety concerns.

Transportation commissioners said one reason they are considering helping with studies for the rail line is the prospect it may help end a constant parade of large oil trucks on narrow and congested U.S. 40 to Interstate 80 to refineries in North Salt Lake. Some trucks also take similarly narrow U.S. 191 to rail connections in Price.

Opening up Uinta Basin crude would also increase the price paid for it. McKee said it currently is sold at a 20 percent discount from national prices because it goes to only one market. Opening other markets would boost prices, and offer incentives for companies to expand Utah operations.

McKee said that could not only fuel the Uinta Basin’s economy, but also bring the state hundreds of millions annually in taxes. He used that argument in encouraging the Transportation Commission to consider helping with costs of needed studies, although he gave no target amount.

The commission took the matter under advisement.

Sen. Kevin Van Tassell, R-Vernal, told the commission that unless Utah finds a way to encourage more investment in basin oil fields, he worries oil companies will send their development money elsewhere — stifling local economies.

“If you can’t move more than 90,000 barrels a day in the very best conditions, there’s no way that we can grow it to the 500,000 that companies want to produce,” he said.

“If we can’t give some incentives to companies to invest, the state of Utah and the Uinta Basin are going to be suffering as bad as we were in the 1980s,” after a severe bust in oil prices.