SALT LAKE CITY — A new legislative audit details how some big-ticket projects such as a new rail line in the Uinta Basin using money from mineral extraction fees could be aggravating the impacts of industry activity rather than alleviating them as the money is supposed to.
The analysis released Wednesday of how the Permanent Community Impact Board is spending those dollars stresses the projects may not have been improper, but it does point out the numerous questions raised at the time — including from the board’s staff attorney — and how the board itself lacks a policy to ensure projects adequately alleviate impacts from mineral extraction operations.
House Minority Leader Brian King, D-Salt Lake City, said the report raised some interesting issues.
“The audit seems to suggest that some of the projects aggravate rather than mitigate the impacts,” he said. “The projects have a lot more to do with economic development and the expansion of extraction of minerals in rural communities.”
Performed by the Office of the Legislative Auditor General and presented Wednesday morning to members of the Legislative Audit Subcommittee, the document detailed several projects in particular that raised questions: the Uinta Basin Railway Project, paving Seep Ridge Road and granting pass-through money to three private canal companies for flood mitigation purposes.
An opinion by the Utah Attorney General’s Office, using the provisions of the federal Mineral Leasing Act, stated that economic benefit is not an appropriate use of mineral lease funds, which are derived from the mining of coal and oil and gas development. Those monies are paid to the federal government, which then remits a portion of them to the states to be used in rural counties impacted by the large swath of federal land ownership and bearing the brunt of industry activity.
The Utah Attorney General’s Office raised concerns over the railway project in October 2018, asserting there was insufficient documentation it would alleviate truck traffic and its primary purpose appeared to be economic development, making it ineligible for funding.
Still, the project was given $27.9 million the following year, with one board member voting in opposition.
Other questions were raised over paving the 48-mile Seep Ridge Road.
According to the project’s application, it read: “This roadway provides access to recreation, hunting, ranching and the development of abundant natural resources including oil, natural gas, oil sands and oil shale.”
The audit added that the application also mentioned public benefits such as enhancing access to recreational and hunting opportunities and enhancing traveler safety.
“Rather than reducing impacts from mineral development, it appears as though the road’s primary intended purpose was to enhance mineral development, which would by extension, increase some impacts on local communities,” the audit said.
“Meeting minutes indicate that increased energy production was expected from building the road noting that, “if production increases in the Uinta Basin by about 100,000 barrels a day, that will add another 300 to 500 trucks a day,” according to the audit.
The audit said those pricey projects raised concerns.
“Given the large percentage of CIB funding awarded to these expensive projects, we are concerned that the money has not benefited the greatest number of citizens, as required by statute. The board should clearly articulate in policy how it will comply with this requirement in the future and provide information supporting it.”
While the audit notes roads are an expressly permitted use of the funds, supporting documents on this road appear to show a dominant private benefit.
Another troubling project was the board’s award of loans and grants of $10.9 million to Uintah County Municipal Building Authority for a flood mitigation project. In 2018, Uintah County Water Conservancy District applied to take over the project, which had not yet begun.
Auditors said the project — which is now underway — will pay canal companies for a 100-year rights-of-way lease to use the canals to divert floodwater should a flood occur. The money provided for this project may be an inappropriate pass-through to three private canal companies, according to auditors.
One county commissioner even raised concerns, saying that “even though my county is a beneficiary it seems odd to give such generous terms to a project with so many unstated objectives.”
Auditors said they share the commissioners’ concerns.
The document also raised questions over the board’s 50% match requirement from communities for planning efforts.
Community mayors told auditors the requirement is difficult given limited budgets, forcing some projects, such as a new master water plan, to be put on hold due to lack of funding.
Auditors noted the 50% match, while required in 94% of planning grants, was not required in the railway project as part of its planning process.
Jonathan Hardy, director of Division of Housing and Community Development in the Department of Workforce Services and chairman of the Community Impact Board, said all projects fit the definition of alleviation of industry impacts.
But Senate Minority Leader Karen Mayne, D-West Valley City, said she believes the scope of acceptable projects is overly expansive.
“It is so broad you can drive a dump truck through it,” she said.
Senate President Stuart Adams, R-Layton, and co-chairman of the committee, pointed out that if the rural economies benefit from revenue generated from mineral extraction, it makes sense to pursue projects that not only provide public benefit in terms of roadways, but also boost that revenue.
House Speaker Brad Wilson, R-Kaysville and co-chairman of the committee, said Utah’s rural communities face a much different challenge than urbanized areas.
“I think it is easy for us on the Wasatch Front to forget how difficult things can be off the Wasatch Front,” Wilson said.
Correction: An earlier version mislabeled Seep Ridge Road as Sheep Ridge Road.