Pub.1 2019-2020 Issue 3

President's Message Rikki Hrenko-Browning Dear UPA members and friends, T o say times are uncertain is an overused statement, but also the most fitting description for the businesses and employees working in Utah's oil and gas industry. Life in the US and much of the world has ground to a halt and who knows where we will by the time this is printed and you are reading it. So much has changed in the short window of time between first draft and final proof that we have had more than one re-write. For many of us, myself included, the concept of time has fractured, simultaneously slowing down and speeding up. The impacts of the COVID-19 virus have been felt in nearly every facet of daily life in America. The oil and gas industry in Utah, upstream, midstream and downstream companies, are continuing to meet energy demands while mobilizing crisis management teams and installing enhanced safety measures that protect the health of industry workers and neighbors. I sincerely want to thank our operators who continue to prioritize safety as they work to provide all Utah residents with the energy that powers our way of life. Our industry’s top priority will always be the health and safety of their workforce, partners and the communities in which we operate. At this time, our primary focus is on giving our society the greatest chance of “flattening the curve” to keep as many of our loved ones safe as possible and shorten the long-term economic implications of COVID-19. Looking at what lies ahead, already the early consequences of this pandemic have led to a significant global slowdown and abruptly plum- meting demand, which coupled with geopolitical decisions from competing energy rich countries, have led to plunging crude prices at levels we hav- en’t seen since the 2016 crash. This has triggered budget cuts across North American operators and the basin is sure to be hard hit. The Trump administration has contemplated large purchases for the Strategic Petroleum Reserve, Congress has rolled out the CARES Act, with additional stimulus packages on the way, and federal and state agencies are evaluating how they can adjust both fiscal and regulatory policies. However, dramatic impacts on our industry and on the recently announced growth we had eagerly looked forward to in the state’s upstream sector are inevitable. My crystal ball is broken beyond repair so I don’t dare to predict where the dust will settle. However, witnessing our industry respond and adapt to today's crisis has been a source of immense pride. The oil and gas sector is stepping up to ensure Utah has the energy needed to power our first responders, hospitals, and homes to make sure we weather this storm as a community. In the middle of a historic rescue effort — to save lives, prevent the spread of a pandemic, and soften the blow to our economy — I would like to thank our sector employees for showing us the way forward. On the downstream side, the same stressors apply. Add to those recent changes to the Renewable Fuel Standard (RFS) program that could allow EPA to require refineries previously exempted from the standard to make up those renewable fuel volumes they were previously exempted from. If allowed to stand, this could put all five of our refineries under severe financial strain. All at a time when we need to recognize the role of our energy system — upstream, midstream, and downstream oil and gas — as critical infrastructure. As we work through how the world and US respond to the COVID-19 pandemic, our industry will be needed to provide essential services that underpin our public health and safety and economic stability. Just emerging from the legislative session, the closing days were complicated by recommenda- tions discouraging face to face interactions, fol- lowed by official and often conflicting federal, state and local guidelines about social distancing, and finally announcements of school closures. Those of us who typically watch — and assess — the final days of session kept up virtual interactions with policymakers and tracked livestream hearings and public discussion about issues impacting the industry. The general consensus was the 2020 session ended the same way it began — full of uncertainty. The first days of the session started with a repeal of the newly minted tax reform pack- age just passed in a December special session. Following months of intense public meetings and legislative and policy deliberations, a surprising victory for the opposition to the package meant a voter referendum lay ahead. Legislators needed to set a state budget for the year and so were left no choice but to repeal tax reform to remove the uncertainty the referendum brought. The session closed with passage of a bill that opens up the income tax to education earmark to a limited win- dow of services for disabled Utahns and children — if the constitutional change is approved by Utah voters in November. While far from sweeping tax reform, it could free up an estimated $500 million from the General Fund annually, giving some much-desired budget flexibility, particularly as our next budget cycle looks set to be significantly more challenging than the last several have been. Overall, the question remains as to how best to address the structural imbalance that for the last several years has left the state with an overall bud- get surplus but dwindling resources in the general fund — which pay for nearly everything outside of education. The tax reform saga will continue, intensified by the imminent budget stresses. I suspect it’s fair to say that we are all working through jarring changes. Coming out of the busy legislative season UPA had a host of urgent issues waiting to be tackled, ranging from multiple rulemakings to important events meant to bolster the strength of our industry, including our inaugural health and safety awards and EMpower employee communications training amongst others. Many of those items are being re-prioritized with plans to revisit once we address this current crisis. As we all take stock, I wish you strength and calm in navigating these uncertain times, but also ask that we all continue to be mindful and prepare for what are surely to be brighter days ahead. 5 UP DATE