The “Rural Matters” section of Utah Gov. Spencer Cox’s “One Utah Roadmap” has been criticized for over-emphasizing resource extraction and insensitivity to the environment. It seeks to buttress the coal, gas and oil industries by creating reserve stockpiles and proposes pricey investments to prop up carbon industries, e.g. the Uintah Basin railway and the inland port and its satellites.
These proposals simply perpetuate the existing flawed economic development strategy in rural Utah. They fail to address the “local resource curse” that has caused mediocre development in the resource-rich counties of Utah.
In 2017, over 80 percent of Utah’s oil production came from Duchesne and Uintah counties. Two-thirds of natural gas production originated in Uintah County. Sevier, Carbon and Emery counties accounted for 94% of coal production.
As natural resource extraction is important to the Utah economy, we should expect these resource-rich counties to be quite prosperous, right? Wrong, because they suffer from local resource curse.
All of the aforementioned counties have median household income far below the 2019 Utah average of $75,705. Other indicators of human welfare are similar. For example, the under-17-year-old poverty rate in all these counties is much higher than the Utah average of 9.6%.
The dispiriting performance of their traditional resource extraction model is similar to that found in other case studies of local areas experiencing the resource curse.
There are several explanatory factors. Resource extraction tends to discourage local economic diversification. This is certainly the case in Utah where all those counties are below the median Hachman index of county economic diversification.
Secondly, benefits of the extractive activity leave the local economy because the resource is owned or exploited externally. An obvious example is Sevier County, whose coal mines have been passed around from Robert Murray’s bankrupt companies to other weak out-of-state businesses. Rocky Mountain Power’s coal activities are guaranteed a return for Warren Buffet’s PacifiCorp. Much of the value added to oil and gas production comes from refining and transporting, not from extraction in the local economy.
Finally, political power often is concentrated by access to resource extraction. So rather than the benefits being widely dispersed, they accrue to those most directly involved in the industry. The average person, therefore, has little influence even in so-called democratic political environments.
These negative results of the local resource curse mimic results found at a national level, where it is termed “Dutch disease.” After North Sea oil was discovered, the domestic and international economy of the Netherlands was distorted so that its economic performance was far worse than that of its less resource-rich neighbors. We might call what we see in Utah “The County Disease.”
The good news is that there are cases in which resource extraction actually benefits the local economy. These are characterized by two main factors. First, a significant portion of the proceeds is shared with the local economy. And second, they are spread broadly and creatively in the local economy, rather than being captured by the small group with control over the resource.
This explains why the Cox “Rural Matters” program will replicate earlier failures. The billion-plus dollars spent on the Uintah Basin railway will yield small benefit for the local communities. We have already seen too many examples of Mineral Lease Act funds being used to support the economically powerful rather than local communities for whom the capital was intended.
An extreme recent example is the $53 million set aside to create a coal export facility in California or Mexico. Direct benefits to coal county residents will be minimal, especially as demand for coal overall is decreasing. The population of the three main coal-producing counties is around 52,000; the local economy would be much better off if everyone was simply provided $1,000, rather than sending it out of state.
Or an even better use would be to hire local people to begin mitigating the environmental degradation that poor government oversight has facilitated, such as the uncapped wells in Uintah County, the coal dust piles in Carbon and Sevier, the waste coal illegally used for road paving and the abandoned uranium sites in San Juan County.
In this case, local welfare improvements and environmental improvements could go hand-in-hand, and those counties could, as a result, escape the local resource curse.
Ken Jameson
Ken Jameson is a retired economics professor from the University of Utah. In addition to work on immigration into Utah, he has worked throughout Latin America, including in resource-rich countries such as Peru, Bolivia and Ecuador.
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