Utah’s diverse and dynamic economy is powered by a young, well-educated workforce, world-class transportation and communication infrastructure, a business-friendly governing paradigm and—perhaps most foundationally—stable and low energy prices. Those prices on our utility bills, at the pump and elsewhere are no accident. With plentiful fossil resources underfoot and renewable resources overhead, those prices are the product of geographic circumstances combined with an enterprising energy development community. Utah’s energy resources are tapped throughout the state through thousands of wells and rigs, fiberglass turbines and silicon panels, mines and power plants. Those resources fuel rural economies throughout the State, and the urban economy along the Wasatch Front.Alex Nabaum
As the energy sector in Utah booms, so too does its outdoor recreation and tourism sectors, which thrive on pristine landscapes and vistas. The state is continually engaged to ensure that neither industry expands to the detriment of the other. Governor Gary R. Herbert has made striking the right balance between development and recreation a priority of his administration, and his leadership on the issue—which he prioritized during his tenure as chair of the Western Governors’ Association—has had a regional impact.
By the Numbers
Utah is a net energy-producing state. Since the early 1980s, Utah has produced more energy than it has consumed. Today, the state produces 30 percent more energy than it uses, selling the excess to other states such as Arizona and California. Coal, oil and natural gas collectively account for 95 percent of Utah’s electricity production. The remaining 5 percent of electrical generation comes from energy sources that include hydro power, solar, wind, geothermal and biomass.
Utah is ranked 11th in the country for crude oil production and 10th in natural gas production. Approximately 4,300 oil wells and 6,900 natural gas wells are currently in production. In 2010, Utah ranked ninth in proven reserves of crude oil and 11th in natural gas, not including federal offshore areas. Utah produced 1.7 percent of U.S. coal in 2012, with 30 percent of its production being sold out of state.
Most of Utah’s coal is mined in Sevier, Emery and Carbon counties. When it comes to oil, Duchesne, Uintah, San Juan and Sevier counties are the biggest active producers. Uintah, Carbon and Duchesne counties are by far the largest producers of natural gas.
According to the Governor’s Office of Energy Development, production of energy in the state was valued at $4.6 billion in 2012. Energy development directly accounted for more than 18,000 jobs and resulted in $587 million in state and local revenues. The average wage in the sector was almost twice the average Utah wage.
Energy development is a significant source of property tax revenue for more than half a dozen counties, ranging from 35 to 83 percent of the total in those counties. Of the $587 million in state and local revenues, $69 million went directly to education through the Utah School and Institutional Trust Lands Administration (SITLA).
When Utah was granted statehood, Congress set aside millions of acres of land to be held in trust for the financial support of public schools. These lands are now managed by SITLA. The state trust administers 4.5 million acres with more than one million already leased for oil and gas development. The majority of energy resources are found on federal lands, which account for approximately 60 percent of Utah’s surface lands and a larger portion of its mineral reserves.
For Utah businesses in every industry, the state’s abundant resources translate into some of the lowest energy prices in the nation. Utah ranks in the top 10 for low energy prices, according to the U.S. Energy Information Administration’s latest data.
A Cleaner Future
By far, fossil fuels play the largest role in Utah’s energy development. But industry trends have pushed natural gas—a relatively clean and inexpensive fossil fuel—to the top of the heap.
“Natural gas is one of the least expensive forms of fuel, whether used for the generation of electricity or used directly by industry or at the residential level. It is much cleaner in terms of carbon emissions than either coal or oil and is more energy efficient,” says Brad Markus, general manager of Questar Gas Company.
He points out that Utah is in a prime location for using natural gas in transportation—fueling fleet vehicles, buses, heavy equipment and commuter vehicles. “Utah has more natural gas filling stations per capita than any other state,” he says. “The infrastructure in this part of the country is such that you will find natural gas filling stations from Rock Springs, Wyo. to San Diego. It’s an energy source that is found right here in the state and offers a cleaner alternative to coal and oil and makes sense economically.”
Rocky Mountain Power, which is owned by PacifiCorp, provides service to about 80 percent of Utah customers. Since 2000, all of the company’s new generating plants have been either wind or natural gas projects. And the year 2010 marked the first time that more natural gas than coal was used in the production of energy in the state.
“Environmental regulations, with increasingly restrictive limits on air emissions, have had an impact on what energy source is used to generate electricity. Although we expect to continue to operate many of our existing coal plants for years to come, the forecasts of natural gas prices continue to look favorable for customer electric prices,” says Dave Eskelsen, spokesperson for Rocky Mountain Power.
Traditional oil and coal production is also thriving in the state. Anadarko, one of Utah’s largest oil and natural gas producers, drilled 220 new wells in 2013, employing 280 direct employees and hundreds of contractors. Operating primarily in the Greater Natural Buttes and Helper areas, the company is also pursuing oil-prone opportunities in other areas of Utah such as the Paradox and Uinta basins.
“Anadarko has a strong history of investment and an expanding presence as an oil and gas operator in the state of Utah. Over the past five years, the company has invested in excess of $3.2 billion and drilled over 1,500 wells while climbing to the top of all natural gas producers, by volume, in the state. Our projected plans for 2014 include investing over $500 million in continued exploration, production and maintenance of operation,” says Anadarko spokesperson Robin Olsen.
Utah’s vast amount of oil shale may very well be the biggest story in energy resources. The state ranks first in the nation and world in recoverable oil shale and tar sands reserves. The United States Geological Survey estimates about 105 billion barrels of economically recoverable oil are in the Uinta Basin, trapped in oil shale (77 billion barrels) and tar sands (28 billion barrels). The oil in oil shale is actually kerogen, a type of organic matter that is the precursor of crude oil. Kerogen is locked up in rocks, as opposed to being a liquid that can be drilled for. When the shale is heated to 450 to 500 degrees, the kerogen converts to recoverable oil and natural gas.
In 2010, Herbert formed the Governor’s Energy Task Force, a body that produced the 10-year Strategic Energy Plan that “combines Utah’s rich abundance of diverse natural resources with our innovative and entrepreneurial spirit—to ensure that Utah is at the forefront of solving the world’s energy challenges.”
One company at the forefront of the emerging shale industry is Red Leaf Resources. The Utah-based company has developed technology that it says allows for extraction of oil and gas from oil shale through an economical and environmentally responsible process.
“The shale is ‘cooked’ in place, opposed to digging it up and processing it in above-ground retorts to be cooked, as is done in traditional shale extraction methods. It is responsible development, and SITLA receives 12 percent of sales for the oil produced,” explains Adolph Lechtenberger, CEO of Red Leaf Resources.
The company believes that its technology will allow it to profitably recover oil from shale even if oil prices are under $50 a barrel. (Oil prices have been around $100 per barrel.) Branded as EcoShale, the company has more than 20 U.S. and international patents on its technology and has licensed its use to other companies around the world.
“Our technology has moved out of the lab, passed bench testing and is ready for commercial demonstration. We are commencing a commercial-scale demonstration that will produce as much as 300,000 barrels of oil,” says Lechtenberger. “We have over 17,000 acres of school lands under lease and more available for future development. The State of Utah has been very supportive and a helpful partner in regard to permitting and working with us. We expect to be producing oil by 2015.”
Three other companies have a stake in oil shale and tar sands development in the Uinta Basin. Enefit is an Estonian energy company with a project that should be producing oil by 2020. US Oil Sands plans to use a non-toxic, citrus-based solvent and expects to be operating in early 2015. TomCo Energy, a UK-based company, has licensed Red Leaf technology for a project in the basin.
“Utah has a huge untapped potential of energy that can be developed. The governor and Legislature are on board. We are very optimistic—we are on the cusp of some very exciting development projects,” says Cody Stewart, energy adviser to Gov. Herbert.
Another asset when it comes to the state’s natural resources is the land’s natural beauty. According to the State Office of Tourism, Film and Global Branding, in 2012 nearly 44 million people visited Utah’s five national parks, seven national monuments, nine national forests, 43 state parks, 14 ski resorts and other outdoor destinations to vacation, hike, bike, hunt, fish, boat, backpack, ski, camp, climb and spend money.
Indeed, those travelers spent $7.5 billion, generating $960 million in state and local tax revenues. This equates to $1,076 in tax relief per household. The national parks alone generate an estimated $1 billion a year for the Utah economy and are the essential lifeblood for many gateway towns.
Realizing that traditional methods of extracting energy resources have often raised environmental concerns, the State of Utah has dedicated itself to promoting responsible energy development practices. With a belief that it is possible to enjoy the benefits of all its natural resources in a way that produces economic and environmental wins, the governor created both the Office of Energy Development and the Office of Outdoor Recreation, and has directed them to work together to accomplish this goal.
According to Brad Petersen, director of the Utah Office of Outdoor Recreation, “outdoor recreation, and the associated multi-billion-dollar recreation economy, has become an essential component of Utah’s culture, identity, economy and enhanced quality of life. Development and conservation don’t have to be mutually exclusive, but they do require land management plans and policies that strike a sensitive balance between general development, motorized use, human-powered activities and preserving the unique natural experience that people seek in Utah.”
Stewart believes energy development can be done in an environmentally responsible way. “Critics who doubt this often point to methods and technologies that were used in the 1970s that did indeed cause great environmental damage. We do not oppose the development of any of our energy resources, as long as it can be done responsibly. The reality is that we are currently dependent on fossil fuels. About 80 percent of our energy needs are met through fossil fuels and will continue to be for the foreseeable future.”
Indeed, the State of Utah has gained a reputation for being very cooperative in the permitting process. That is why the Office of Energy Development was created—to facilitate responsible development. “The state doesn’t cut corners on environmental regulations and standards, but they make the process very clear. It makes it easy for companies to know exactly what needs to be done for permitting. This speeds up the development process. Energy development needs certainty from the government. The state provides that certainty,” says Lechtenberger.
Utah’s energy future is both abundant and bright. With great potential comes great responsibility and the state recognizes this. Energy development and use will continue to be ever more important to both the state and to the nation. Utah has the resources and is committed to meeting those challenges.
Renewing the Future
Renewable energy is a part of Utah’s energy equation, and its significance is certainly growing each year. Rocky Mountain Power signed a number of new power purchase agreements with renewable energy companies in 2013. Furthermore, the state is now home to several utility-sized renewable energy generation facilities. The largest is First Wind’s 306-megawatt wind development in Millard and Beaver counties, which sells into the Southern California market. Edison Mission Group has a 19-megawatt wind development in Utah County and sells the power to PacifiCorp. PacifiCorp has its own 38-megawatt geothermal facility located in Beaver County. Enel Green Power owns a 25-megawatt geothermal facility on the border of Millard and Beaver counties, selling the power to Arizona. Finally, Cyrq Energy’s Thermo 1 project consists of a 10-megawatt geothermal plant in Beaver County and sells power into the Southern California market.
Other, smaller projects are under way, many of which involve solar power generation or other renewables. In 2013, Burton Lumber installed the largest privately owned, commercial roof-mounted solar project in the state. The company now boasts 2,676 solar modules on its 193,484-square-foot roof—the equivalent of more than four acres of solar panels—which will generate 642.2 kilowatts of electricity.
Projects like these—both large and small, public and private—will continue to enhance Utah’s overall portfolio of energy resources.