As production surges Uinta crude now clogs Indian Canyon

Major road upgrades are in the works to speed tanker trucks’ journey to Carbon County rail connections.

(Francisco Kjolseth | The Salt Lake Tribune) Tanker trucks carry oil through Utah’s Indian Canyon on U.S. Highway 191 on Aug. 5, 2022 from the Uinta Basin to the Wildcat Loadout, now controlled by Finley Resources, a Texas-based oil producer. The old coal-handling facility outside Helper has been repurposed for transloading oil that is ultimately shipped to Gulf Coast refineries. Finley is moving more than 20,000 barrels a day through the loadout, which it plans to expand to handle 100.000 barrels.

Say what you will about President Joe Biden’s alleged war on fossil fuels, but crude oil production in the Uinta Basin is hitting all-time records and is projected to keep growing for the foreseeable future. And that means heavy tanker traffic through Indian Canyon, where U.S. Highway 191 is in need of major upgrades, lawmakers say.

Driving that growth is the recent expansion of rail loading facilities outside the basin in Carbon County, where more and more of the waxy crude is trucked and transferred into tanker cars headed to Gulf Coast refineries.

Spurred by soaring commodity prices, production has grown to more than 135,000 barrels a day, increasing the revenues coming into Utah state coffers. Now lawmakers want to invest this windfall into a major upgrade of the highway through Indian Canyon and bulldoze a new one for oil tankers through quiet Gate Canyon.

“That road [U.S. Highway 191] is really seeing an impact with the amount of truck traffic going over there,” Sen. Ron Winterton, R-Duchesne, told an appropriations subcommittee last month. “As we continue to increase, we’re just going to see more and more problems there if the state doesn’t get out in front of it before we have a lot of serious accidents or bottlenecks.”

A winding unpaved road already passes through Gate Canyon, but Duchesne County leaders want to spend $20 million in state money to widen, pave and straighten it. Such a project would effectively put an incessant stream of oil-tanker traffic through Nine Mile Canyon, Utah’s famed rock art haven, critics say.

Winterton’s SB107 would, among other things, divert $20 million in severance tax revenue to cover the reconstruction of the road through Gate Canyon, which is now under review by the Bureau of Land Management.

Historic preservationists and others say the project would ruin one of Utah’s finest archaeological destinations by putting speeding tanker trucks within feet of Nine Mile Canyon’s walls where ancient Native Americans left a visual record in images chiseled in the rock.

The historic 6-mile road through Gate Canyon was built in the 19th century by African-American Buffalo soldiers, according to J. Michael Hansen, chairman of the preservation group Nine Mile Canyon Coalition. Straightening this road would destroy 23 historical and cultural sites in Gate Canyon and result in a tanker truck passing every three minutes through Nine Mile on their way to the rail loading terminals in Wellington, he told the Senate Revenue and Taxation Committee.

“Given the wildlife in Nine Mile Canyon, and the prevalence of black cattle on the road, they would probably only be able to run [trucks] during the daytime,” Hansen said. “So you’re looking at one of those oil tanker trucks, at least one a minute passing you if you’re down in Nine Mile Canyon, looking at the rock art, looking at the ruins, enjoying the beautiful scenery. Turning Nine Mile Canyon into an industrial zone, that’s really what this is about.”

Even though a billion-dollar oil-moving rail spur is under development in the basin, lawmakers say $100 million highway investments in Indian and Gate canyons are needed now to accommodate the influx in oil production that shows no sign of abating.

The Uinta Basin Railway, which would tie future terminals at Myton and Leland Bench with the Union Pacific tracks at the head of Price Canyon, is not expected to be built and operating for another couple of years, Winterton said.

“If we wait for that railroad, we’re going to be in a well of hurt and public safety is at risk here,” Winterton said, “because we are going to be doubling the number of trucks going over there [to Carbon County rail loadouts] to keep the contracts alive for when the rail is finally activated.”

Historically, nearly all of the Uinta crude has been trucked over U.S. Highway 40 to Salt Lake City’s five refineries, which can process about 85,000 barrels a day, effectively capping the basin’s production. But things have changed since the construction of a new rail loadout on the UP line in Wellington, called Price River Terminal, and the conversion of two underused coal loading facilities — Savage Services in Wellington and Wildcat outside Helper.

About 50,000 barrels a day, representing at least 160 truck trips, are moved through Indian Canyon to these three loadouts, according to Rikki Hrenko-Browning, president of the Utah Petroleum Association.

“We are expecting to grow to about 75,000 barrels a day of export down that same corridor in about a year’s time,” she told an appropriations subcommittee in support Winterton’s $88 million funding request to upgrade U.S. Highway 191. “That means we will have effectively doubled the state’s oil production in a very short period of time, all the while maintaining what we’re producing into the Salt Lake refining market.”

Much of this projected increase can be attributed to Wildcat, which recently became the state’s busiest oil terminal under its ownership by the basin’s top oil producers, Texas-based Finley Resources. The company acquired a 50% stake in the Wildcat loadout three years ago and has been loading 21,000 barrels a day on eastbound tanker cars, according to the company’s owner Jim Finley.

(Francisco Kjolseth | The Salt Lake Tribune) Crude oil is transferred from tanker trucks to rail cars parked at the Wildcat Loadout, now controlled by Finley Resources, a Texas-based oil producer. The old coal-handling facility outside Helper, Utah has been repurposed for transloading oil that is trucked from the Uinta Basin and ultimately shipped to Gulf Coast refineries. Finley is moving more than 20,000 barrels a day through the loadout, which it plans to expand to handling 100.000 barrels.

That’s about 100 tanker trucks each day passing through the facility, which operates 1,200 railcars. Because the yellow and black waxy crude hardens as it cools, these cars are equipped with steam coils so that it can be returned to a liquid state for offloading at refineries in Baton Rouge and Port Arthur, Finley said in an interview last year.

“We have contracts on the Gulf Coast for 2023 at 30,000 barrels a day, so we’ll [shipping] be at capacity beginning in January of 2023,” he said. “We have an incremental expansion going on right now to increase it to 60,000 barrels a day.”

That $20 million investment includes a 115,000-barrel tank and 1,800 more railcars.

Finley insists on calling his product “industrial wax” instead of crude because much of it is refined into high-value lubricants as opposed to fuels. He said he has offered to load his competitors’ crude at cost.

“We have a track record with the Gulf Coast refineries. We’ve proven that we can overcome the [Uinta Basin’s] logistical challenges. We’ve proven that we can unload it efficiently at the destination refineries,” he said. “They like the product. They like the lubricant yield that it has compared to other kinds of inputs. The track record has enabled us to sign bigger contracts with the refineries and with the bigger contracts we can afford to make the investments in loadout capacity.”

However, U.S. Highway 191 needs to be upgraded to support the heavy truck traffic that goes along with the rise in rail transport of Uinta crude, he said.

Petroleum producers are pushing the Legislature to appropriate $88 million for such a project.

“We need new pavement,” Hrenko-Browning recently told lawmakers. “Pavement is not holding up to the amount of love that the road is getting. There needs to be shoulder widening. We need passing lanes.”

The Utah Department of Transportation is looking to separate grades where U.S. Highway 6 and 191 meet in Price Canyon near Helper. That alone would cost $42 million.

“That is an incredibly important corridor for a lot of folks beyond just the oil and gas industry. It’s tourism, it’s recreation, it’s general commerce, it’s ag,” Hrenko-Browning said. “From our side, we are sending a truck about every eight to 10 minutes down that corridor. By this time next year, that will be a truck about every five minutes. that’s a significant traffic burden on what is a very challenging road.”

She said the proposed road improvements can be easily covered by projected influxes of non-earmarked revenue connected with surging oil and gas production. Winterton also wants to skim some of this money for Gate Canyon, which he denied was meant exclusively for oil tankers.

Utah levies a “severance” tax, ranging between a rate of 3 and 5%, on most oil and gas production. Last year, revenue from this tax jumped four-fold to $75.7 million, according to the Utah Tax Commission. Most of this money is deposited in the Permanent State Trust Fund, but some winds up in the General Fund.

The Senate passed Winterton’s SB107 on a party-line vote on Feb. 7 and the bill is awaiting action in the House. It would create an “enterprise fund” from severance tax revenues associated with “above trend” production from the Uinta Basin. The millions generated would be used “for infrastructure projects intended to address the impacts of oil and gas extraction.”

While the language is vague, lawmakers clearly expect the money to be spent on roads used for hauling oil. Some $20 million from this fund is specifically earmarked to repay any loan made to the Duchesne County Special Services District No. 2, the entity seeking to build the Gate Canyon project.

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