Environmental groups say a new state law on mineral revenues is a win for fossil fuels, a blow for rural Utah

The bill comes after an audit last year flagged concerns with the state’s process for distributing federal royalties.

(Brian Maffly | Tribune file photo) Since 2014, the Price River Terminal in Wellington has been loading oil from trucks to rail cars, opening a new path for Uinta Basin crude to reach out-of-state markets. Utah lawmakers have changed the law directing that state proceeds from oil an gas mining royalties on federal lands be used to mitigate the impacts of that resource restriction in nearby communities.

Auditors last year cautioned that a fund set up to benefit Utah’s rural communities was actually pumping money into projects that could increase the toll that mineral extraction takes on these regions.

But many worry that instead of trying to change those practices, state legislators this year have acted to validate them by throwing off legal constraints on using millions in federal revenues to subsidize the expansion of oil production and other extraction efforts.

Changes enacted by state lawmakers through SB176 would deprive communities impacted by fossil fuel and essentially convert the Permanent Community Impact Fund into a “a state-supported piggy bank for these industries,” one environmental advocate testified earlier this year. On top of that, opponents of the bill recently signed into law by Gov. Spencer Cox say it could have implications for an ongoing court battle over a $28 million grant to study a proposed railway line for the Uinta Basin’s waxy crude oil.

The state senator who sponsored the bill described it as an innocuous clarification that he brought forward at the request of state officials and the Permanent Community Impact Fund Board, which oversees the federal mineral royalties and is commonly known as the CIB.

“We’re not trying to change anything,” Sen. Ron Winterton said during a committee hearing on SB176. “It’s a very simple bill.”

However, the bill does delete language that designates money from federal mineral royalties for “the alleviation of social, economic, and public finance impacts resulting from the development of natural resources.” And some rural officials and environmentalists say that small change strips away the legal guarantee that the funds should go toward ambulances, firetrucks, parks and trails, waterlines and civic buildings in communities affected by mineral extraction.

Officials at the Department of Workforce Services, the parent agency for the CIB, say the bill’s intent is to give board members clear parameters for how to award grants and loans from the fund, which doled out $77 million from July 2019 through June 2020. To that end, the legislation attempts to better define the planning and public service initiatives that CIB money can support, they say.

They say it’s not their understanding that the bill opens the door for more mineral extraction.

(Rick Egan | Tribune file photo) Sen. Ronald Winterton, R-Roosevelt, speaks on a bill in the Senate Health and Human Services Committee, on Thursday, Feb. 18, 2021.

Addressing or ignoring an audit?

The audit completed last year concluded that in several major instances, funds administered by the CIB appeared to be flowing toward economic development efforts or offering low-interest loans benefiting the private sector.

One example was the board’s 2019 decision to funnel $28 million to a coalition of rural counties for planning a controversial 80-mile rail line from the Uinta Basin to Union Pacific tracks in Price Canyon. The railway’s backers, a group that includes Winterton, say the line would allow for a surge in energy development by connecting the basin with the national railway network and enabling producers to move oil to refineries without the limitations of trucking.

Proponents also argue the project qualifies for CIB assistance because it would benefit the surrounding community by adding employment opportunities in a place that sorely needs them.

“This is going to create hundreds and thousands of jobs,” said Mike McKee, executive director of the Seven County Infrastructure Coalition, the interlocal entity trying to develop the rail link. “Out in the Uinta Basin and our other areas, our businesses, our people are struggling.”

Environmental groups allege the railway grant violates the law and have gone to court to force the CIB to return the money to the fund.

“This money is meant to help repair damage done by the fossil fuel industry, not subsidize it,” said Wendy Park, an attorney at the Center for Biological Diversity, one of the groups that filed the lawsuit.

The auditors also focused on the roughly $60 million in loans and grants awarded for Seep Ridge Road construction in an area dotted with oil and gas wells and a $9 million grant for Leland Bench Road improvements that could accommodate large industry trucks. Both projects were in Uintah County.

In questioning the funding decisions in these cases, legislative auditors pointed out that state law reserves CIB money for mitigating community impacts from fossil fuel development — referencing the very language that Winterton’s proposal removed.

The state senator said the deletion was the work of the legislative attorney who drafted his bill and that he would’ve been willing to leave that language untouched. He also says most of the audit’s recommendations have already been implemented by the CIB without the need for legislative action.

To Winterton, efforts to expand roads and evaluate rail lines would fulfill the traditional mission for the CIB funds by steering heavy trucks away from community roadways and by improving thoroughfares that serve everyone from the extraction industry to public school buses.

A former Duchesne County commissioner, Winterton is employed as a client relations consultant by the engineering firm of record for the coalition working on the rail line project. He sponsored failed legislation last year that would have granted a huge tax break to oil and gas companies in a move designed to expand production — something seen as necessary to make the rail line economically feasible.

With Uinta Basin line supporters estimating the project will nearly quadruple oil output, Park said there’s no way around the fact that the rail linkage would greatly exacerbate the impact of oil extraction rather than ameliorating it as the project’s backers suggest it might.

And opponents of SB176 also argue the measure would only compound the issues identified by the audit, since it not only strips out wording on alleviating community impacts but also specifies that CIB money can pay for studies of “development related to natural resources.”

“Rather than address this issue going forward, the legislation simply attempts to make this outrageous practice legal,” Grand County Commissioner Sarah Stock told state lawmakers earlier this year.

Other local leaders got behind the bill as a way to strengthen a program that serves as a lifeline for their communities.

“In Duchesne County, with 63% of our county either federal- or state-owned,” Commissioner Greg Miles testified, “we rely on mineral lease money for important purposes like planning.”

To those who argue this money shouldn’t boost industry, he said: “Show me a CIB project that’s been granted that could not be misconstrued as economic development.”

(Brian Maffly | Tribune file photo) An oil jack pulls crude from a well in Lake County in Duchesne County.

Who benefits?

Winterton acknowledges that his bill gives a legislative nod to tapping CIB funding for projects like the railway or the road upgrades highlighted by the audit. But it won’t make much of an actual difference when the board has been supporting these types of initiatives already, he said.

“The money will still continue to be used as it has,” the Roosevelt Republican, who used to serve on the CIB, said in an interview. “[SB176] is only giving the board the understanding of what’s going to be appropriate and what’s not.”

This interpretation of the CIB fund’s purpose runs contrary to the intent of state and federal lawmakers over the years, Park contends.

Utah’s law has mirrored the Federal Mineral Leasing Act, which states that royalties should go to local governments “socially or economically impacted” by extraction activity. And the Utah attorney general’s office has held that these federal restrictions would prohibit the CIB from citing economic development alone as a justification for awarding money, although job creation could be a welcome side effect of a project.

Congress has viewed this money as a way of buffering communities from the “boom and bust cycles” that often come along with mineral extraction and of bolstering police, public health services and government facilities in these areas, office attorneys wrote in a 1993 opinion.

Park expects that rail line proponents will cite SB176, which is retroactive, as they try to fend off her group’s lawsuit challenging the CIB grant for the Uinta Basin railway — but she believes that in itself could create an opportunity for blunting the new state law’s impact. As it asks a judge to reverse the grant, the Center for Biological Diversity will likely contend that even the revised state statute must be read in light of the federal rules that prioritize mitigation projects, she said.

Eric Johnson, another Seven County Infrastructure Coalition representative who testified for Winterton’s bill, said its retroactive clause would add a layer of protection for past CIB disbursements, including the ones flagged by auditors.

“The retroactivity is in there because there were numerous projects that were questioned, and there’s many more that could be questioned,” he said. “And so you just you want to ratify the things that have been done.”

Carly Ferro, who directs Utah’s chapter of the Sierra Club, said relaxing legal checks on the CIB is the wrong response to last year’s audit calling for process improvements. Her plan going forward is to work with the governor’s office on reforms that will ensure that federal mineral revenues end up benefiting rural Utahns and not the energy industry.

“Our goal is to really ensure that rural communities are receiving the support and investment that can allow them to have healthy communities and healthy environments,” she said, “so that they can not only sustain and endure, but thrive.”