Pub.1 2019-2020 Issue 1

T he shale revolution has been good for the US and good for Utah. Not only has it reduced U.S. depen- dence on foreign energy, it has also created high paying jobs, funded local schools, and provided revenues back to the state and local counties that are home to production. If current policies continue, then the 2020 sulfur standards for the International Maritime Organiza- tion (also known as “IMO 2020”) stand to further boost Utah’s already-thriving energy sector. Eleven of Utah’s 29 counties produce oil or natural gas. When it comes to producing oil in the U.S., Utah is the 10th largest producer and is in 13th place for gas production. The oil and gas industry is a key wealth generating industry significantly contributing to the state’s economy. For example, the Utah School and Institutional Trust Lands Administration, SITLA, manages the state's 3.4 million acres of trust lands for the benefit of 12 beneficiaries, primarily public schools. In 2018, 45 percent of the $61.8M deposited into the fund was from oil and gas, the single largest contributor. The Utah Petroleum Association is proud of the role our indus- try plays in driving the state’s economy. Our members repre- sent companies across every segment of the industry, from upstream producers, primarily located in the Uintah Basin, to midstream and service companies, to the five refineries in the Wasatch Front. Our association is also proud to be a member of the Coalition for American Energy Security, which is a coa- lition of industry associations, integrated energy companies, manufacturing workers, refiners, shipping companies, and other groups that are pushing for an “on time” implementation of the IMO 2020 sulfur reduction requirements. The U.S. approved the IMO 2020 standards more than 10 years ago. These standards, which are slated to take effect on Jan. 1, 2020, will reduce the amount of sulfur in the fuel used by ships globally from 3.5 percent to 0.5 percent. Not only will the standards reduce sulfur pollution, they will also promote U.S. energy dominance. The U.S. already enforces sulfur standards that are five times more stringent than those required by IMO 2020, and it’s refining sector is positioned to be completely ready by January. As a result, the standards are a win-win for our country. We joined the coalition because the IMO 2020 standards will further solidify the US’s role as the global energy leader and support our industry in the state while also providing for reduced global sulfur levels. Energy and Environmental Research Associations released a study on May 16, 2019 to analyze the economic benefits of IMO 2020. According to the study’s co-authors, Dr. James J. Corbett from the University of Delaware and Dr. Edward W. Carr from Clark University, the U.S. is ready to provide the advanced fuels and technologies that are needed to achieve IMO 2020 standards, and they already have a competitive advantage. U.S. Coast Admiral John Nadeau agrees; he has said that the U.S. is more than ready for the standards. IMO 2020 is already providing benefits to U.S. manufacturing employees. A few years ago, PBF Energy invested upwards of $100 million in a Delaware City refinery that was about to close. Now the refinery is blending low-sulfur fuel, is running at almost full capacity, and employs approximately 600 well-paid manufacturing workers. Other refineries across the U.S. have made similar investments in order to meet the increasing demand for low-sulfur fuel. Fortunately for the U.S., many foreign refiners have not made similar investments. That has given the U.S. a significant international competitive advantage. For example, a senior research analyst at IHS Markit has said that Russia is not prepared for the standards to be implemented and cannot possibly be ready by the beginning of January 2020. Russia is not alone and an “on time” implementation of the standard will provide a significant market advantage to those that made the necessary and timely capital investments, such as the US refining sector. Columbia University’s Center on Global Energy Policy has said that a delay would be harmful to the U.S. businesses, particularly shippers and refiners in the energy industry, which have already spent a significant amount of time and money during the last 10 years preparing to comply. The countries that would benefit from a delay are those that held off on undertaking costly investments. Lawmakers in Washington are beginning to understand the opportunity that IMO 2020 presents to the American energy sector. In April 2019, 14 senators sent a letter to the Trump administration, asking it to avoid anything that would delay implementation of the standards. They said that the consequences of a delay would include market uncertainty, harm for the U.S. energy industry, and adverse effects on consumers.” President Trump has approved pipelines, reduced unnecessary regulatory burdens and has created an environment allowing the U.S. energy sector to flourish and emerge as a global leader. This global leadership is not only beneficial for the US, but sets the standard in terms of industry efficiency and environmental performance. If his administration continues to support the IMO 2020 standards, energy producing states like Utah stand to benefit and the broader U.S. energy industry can expect further gains in their dominance of the worldwide market for low-sulfur fuel. IMO 2020 Will Fuel Utah’s Economy 12 UP DATE