For Utah businesses involved in producing the raw materials of energy, there's an upside to the current energy downswing.
President Bush's call for more development of the country's energy resources to meet a growing crisis finds the resource-rich Beehive State already in a "boom" mode. The boom has been building for several years and is part of what some see as the emergence of the Intermountain region as an energy producer second only to the Persian Gulf countries — if the boom holds for a while.
State and federal agencies responsible for granting permits for both exploration and actual drilling of gas and oil are doing the proverbial "land office business," and some of the state's areas whose economic well-being is implacably tied to exploitation of energy resources are anticipating another period of good times.
"Anybody who has a well that can be on line is on line," said Lowell Braxton, director of the State Division of Oil, Gas and Mining. "Now we need to develop delivery structures."
One such project will eventually pipe gas and oil from the Uinta Basin to the Wasatch Front, he said. The basin also has received a $1 million planning grant to study the feasibility of a rail line that would expedite shipment of crude oil to Salt Lake area refineries.
Braxton said discussion is under way between state and federal agencies to find ways to try to encourage new development. "Clearly, we need to find ways to expedite" the permitting process, he said.
The U.S. Bureau of Land Management, which oversees almost 70 percent of Utah's lands, is "pedaling as fast as we can, and we're still falling behind," said Don Banks, spokesman for the state BLM office in Salt Lake City.
Since the beginning of the agency's fiscal year last October, permits have been granted for 210 wells in the Uinta Basin. "We anticipate that we'll process 450 applications before the end of this fiscal year," Banks said. To date, 274 applications have been received.
The visible effect of that activity is the number of producing oil and gas rigs dotting the horizon in the basin — 22 at present. "Last year, there were 14 or 15 and just a few years ago, fewer than 10."
For the Uinta Basin, which had been in the economic doldrums for several years, the upturn is good news.
"It's very positive for us," said County Commission chairman Cloyd G. Harrison. The only caveat that could put a damper on another basin boom would be a serious decline in the national economy or a sudden change in the energy picture.
"We need a crystal ball," he said. But lacking that, the basin counties, Uinta and Duchesne, are proceeding on the assumption that happy days are here again, Harrison said.
"We're already having signs that (energy) production will increase in our area — companies moving in, bringing crews in to drill," Harrison said.
That means new business for the firms that provide services to the production companies. Some of those service companies dried up and left town during the bust era, he said.
Boom-and-bust cycles
Wary of past boom-and-bust cycles, the county has been trying to create a hedge against another sudden economic decline, he said, by encouraging more diversity in its economy.
Even so, about 67 percent of Uinta County's tax revenues come from oil and gas-related activities, Harrison said. "It's not quite as bad as it used to be. We have some other companies and industries to take the edge off."
County and local officials are anticipating a boost in revenues and are discussing where they should apply the additional income to unmet infrastructure needs. Water, sewer, roads, law enforcement and community needs all will compete for the new money.
"We're already meeting to set some priorities," Harrison said. When there is money, there is a "tendency to over-plan." In the '80s, local government built to higher than usual standards set by federal environmental agencies, "and then the economy went flat again and our residents were left to pay the bills. It's critical that we don't overbuild, and at the same time try to meet our needs."
A Community Impact Board will be instrumental in guiding that process.
Some basin residents are aware that their boom is coming at the expense of fellow Utahns who are paying unprecedented prices for fuels.
"I can't complain, even if gas prices are relatively higher. When gasoline is $1.50 per gallon, everyone in the basin is working," said Anna Wilkins, an employee of Chevron's Roosevelt office.
A balancing act
Braxton believes that better policy at the top could help level some of the hills and valleys that come with cyclical industries.
He also sees a need to educate Americans about the nature of energy production to offset the impasses created by environmental concerns. "As a regulator, I think the effects of oil and gas drilling can be fairly well mitigated during the operational cycle and the land can be restored for post-activity use."
Not everyone agrees with that assumption, he acknowledged. They need to be convinced that there truly is an energy shortfall and quit seeing increased production as "an end run. We have to educate a broader sector of the population."
Braxton believes that if the energy need becomes great enough —and it's being characterized by top Washington officials as a deepening crisis — resources on public lands that were put off limits to development by President Clinton, including some in Utah, also will be exploited. "But it probably will take a lot of dialogue among state officials, the Department of Interior, Utah's congressional delegation and industry representatives."
Curt Burnett, vice president for public affairs in the Salt Lake offices of Questar, agrees that demand for new energy resources is likely to lead to more relaxed regulations and spur development in the Mountain West. His company has energy interests in 16 Western states, including Utah. The number of gas, oil, coal and other energy sources in the area and the size of their reserves would appear to give the industry the potential for a longer productive life than even the Persian Gulf, he said.
The proximity of Utah and other Western states to California in itself is going to be impetus for energy development in the next few years, Burnett said.
"California's needs are sucking the energy from the Western states," he said. Even though California may have contributed to its own problems through poor planning for growth and misguided approaches to regulation, the coast state likely will absorb much of the Mountain West production over the foreseeable future, Burnett said.
A current Questar project aims to convert a pipeline that has carried petroleum from the Four Corners area to California so that it can convey natural gas. The 700-mile pipeline would ultimately deliver gas to the Long Beach industrial area.
"We've been working on it for two years," Burnett said. Approval for the portion of the pipeline to the California border is imminent.
New technology in the retrieval of oil and gas probably will lead to more extensive development of Utah resources as well, Burnett said. Such technologies also may unlock some oil shale and tar sands reserves that have been deemed too expensive in the past to exploit.
E-mail: tvanleer@desnews.com