Gulf Coast demand for waxy crude fuels job creation and retail sales in Duchesne County.
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The wheels of the Uinta Basin economy are turning again.
With petroleum production in Utah rising to record levels, the oil-rich basin of eastern Utah is experiencing a boom again.
Employment in Utah’s oil and gas industry increased 16% between 2021 and 2022, adding more than a thousand workers and bringing the total to 7,449. Most of these jobs are in Duchesne and Uinta counties, where 85% of Utah’s petroleum production occurs.
And these workers spend money. Duchesne County’s sales tax revenue has increased 19% in a year.
“We make no secret of the fact that it is our main industry. Farming is our backbone, but oil and gas is our bread and butter,” said Duchesne County Commissioner Irene Hansen.
Thomas Holst, senior energy economist at the Kem C. Gardner Policy Institute, who previously worked for Exxon Mobil and Chevron, said after drilling operations dropped to zero during the pandemic, there are about 15 active drilling projects currently underway in the state.
And while Utah refiners continue to extract about 85,000 barrels a day from the basin, growth is coming from Texas and Louisiana.
“It needs to find a buyer,” Holst said. “What’s happening is Gulf Coast refiners are developing an appetite for waxy crude oil from the Uinta Basin.”
Oil from the basin has a high paraffin content which makes it a solid instead of a liquid at temperatures below 110 degrees. This has historically made it less valuable due to the need for heated containers to transport it.
“It can’t be put in a pipeline,” Holst said. “If it’s going to go anywhere, it has to be transported in an insulated truck.”
Hundreds of daily truck trips deliver the crude oil to refineries north of Salt Lake City and to a train station in Wellington, Carbon County, where it is loaded onto heated railcars for the trip to the Gulf. Growing demand is driving plans to build a controversial rail line into the basin.
Demand has increased, among other things, because the high wax content is well suited for the production of lubricants. It is also low in sulphur, which reduces emissions during combustion. Holst pointed out that the International Maritime Organization has recently started requiring international ships to switch to low-sulfur fuels, which has helped boost demand for the waxy crude.
“We’re excited to see this prosperity for our people,” said Hansen, who believes her county is also benefiting from the post-pandemic world of having to work from anywhere. She said remote workers are drawn to outdoor recreation and lower housing costs. “We have teachers teaching in China,” she said.
While sales taxes have taken a huge leap in recent years, Hansen said it hasn’t impacted new stores and restaurants. “We see our Amazon sales increasing. If you talk to your big chains, they will not be expanding their locations at this time.”
But some businesses are expanding their footprints, she said, pointing to a coffee shop in Roosevelt that now serves lunch and dinner.
But finding workers is still a challenge. “A restaurant cannot survive if it has to pay its employees $20 an hour,” she said.
Holst said the USEER employment numbers only include direct employment from oil and gas companies, ignoring the multiplier effect of other companies that support the industry, everything from trucking companies to restaurants.
The million dollar question – or maybe the billion dollar question – is how long it will last. The basin has had a long history of booms and busts due to fluctuating oil prices, and now there is a global effort to reduce fossil fuel use in a bid to curb climate change.
Hansen is optimistic. “In the next 30 to 50 years, it’s going to be a very important part of the mix.” She said power from oil offers certainty, and “I don’t think Americans are ready to give up on it.” … We regard the Uinta Basin as a crucial part of national security.”
Holst acknowledges that oil demand will peak, but “my honest answer is I don’t know” when that will happen, he said.
According to the International Energy Agency, global oil demand is expected to peak around 2028. Demand will not end then, but is expected to decrease as transport switches to electricity.
The American Petroleum Institute, a trade organization of oil companies, concedes demand will slow but expects the peak to come later.
And in a sign of how difficult the future is to predict, recent research shows that international shipping’s switch to low-sulphur fuels, such as those made from Uinta crude oil, is having climate-damaging effects.
The sulfur dioxide that ships produce when burning high-sulfur fuels actually creates clouds. The cargo ships with high-sulphur fuels create “ship tracks”, clouds that effectively block part of the sun’s radiation from reaching the earth. Some research suggests that the reduction in shipping routes due to the fuel switch has resulted in hotter summers.