Bills aim to fund big oil and gas transport projects without oversight by state board

(Leah Hogsten | Tribune file photo) State Treasurer David Damschen, left, pictured in this Nov. 28, 2018 file photo with Auditor John Dougall, spoke out against a bill Friday that would divert federal mineral royalties to the Seven County Infrastructure Coalition without any direct state accountability for how the money would be spent.

The Utah Senate passed a bill Friday that would create a permanent funding stream for a seven-county consortium’s efforts to develop major projects for moving minerals extracted in eastern Utah to market.

Over the objections of state Treasurer David Damschen earlier in the day, a Senate panel advanced SB152, which would divert up to $750,000 in Utah’s federal mineral revenues from the state’s Community Impact Board, or CIB, to the Seven County Infrastructure Coalition. The bill is among two that would blunt the CIB’s oversight of how these federal revenues are spent in an apparent effort to fast-track this money into costly “throughput” projects needed to move Utah coal, oil and other mineral commodities

For the past four years the CIB has been supporting the seven-county group with a $3 million grant that is currently up for renewal. The bill sponsored by Sen. Ron Winterton, R-Roosevelt, would short-circuit the CIB’s oversight role, argued Damschen and Jonathan Hardy, who heads that board and is director of housing and community development for the state.

“This bill is problematic,” Damschen said in the single minute he was allowed to testify against the bill Friday, calling it “fiscally imprudent.”

As state treasurer, Damschen holds a seat on the CIB which distributes millions in grants and loans to rural counties to address impacts arising from mineral development on public land.

“The coalition has something of a checkered history in terms of their compliance with the Public and Open Meetings Act, execution of appropriate procurement practices and other issues,” Damschen told the Senate Government Operations and Political Subdivisions Committee, which passed out the bill on a 4-1 vote. “It’s an organization that needs strong oversight and accountability.”

Winterton’s bill, which hours later passed the full Senate, would divert 1 percent of the CIB’s annual revenue to the infrastructure coalition, whose active projects include developing roads, rail and pipelines that would move Uinta Basin crude out of Utah, establishing a nuclear research lab in Emery County, and developing a processing plant tailored to handle the basin’s waxy crude.

“If we don’t get a way to move oil out of the Uinta Basin, the basin will fail,” energy-industry lobbyist Jeff Hartley said in support of the bill. “It’s expensive and it needs funding.”

But such “throughput” facilities are not the sort of projects CIB money is supposed to fund, critics argue. Traditionally this money fixes streets, upgrades water and sewer systems and builds community centers and public safety facilities.

Sevier County Commissioner Garth “Tooter” Ogden supported the bill, saying the coalition has a new board, which he serves on.

“I think we’re going to try to make sure there’s some accountability to what’s going on with these funds going forward,” he said.

Damschen has long raised concerns about the seven-county group’s reliance on CIB money and how it conducts business.

Winterton, a former Duchesne County commissioner who served on the seven-county coalition’s board, originally sought to boot Damschen off the CIB. The initial version of his SB152 would have filled the state treasurer and the Department of Environmental Quality’s seats on the Community Impact Board with representatives from top energy-producing counties and the school trust lands office.

A second bill that would reduce CIB oversight is sponsored by the coalition’s former executive director, Sen. Ralph Okerlund, R-Monroe. To be heard in committee Monday, SB248 would funnel the entire $53 million balance of the CIB’s new so-called throughput infrastructure fund to an unnamed “bulk commodities ocean terminal.”

With the attorney general’s help, the CIB set up a vetting process for making loans out of the fund, intended to support commodity-moving projects, most famously a proposed coal-loading terminal in Oakland, Calif. SB248 would throw that out the window and hand the fund’s oversight to the Office of Energy Development with a mandate that that office grant the money to an unnamed interlocal agency to invest in an out-of-state export terminal.

A likely impetus for the bill is to facilitate a pathway for Utah coal to cross the Pacific Ocean from a West Coast port. The Utah Office of Energy Development has recently opened a dialogue with Mexican economic development officials to develop a bulk loading terminal for coal at the Port of Ensenada 65 miles south of San Diego.