The legislature’s sixth special session in August included two big wins for the oil and gas industry. First, SB 6004 was passed, providing much-needed relief for the upstream oil and gas industry — see the upstream update for details. The August session also saw SB 6009 passed to create the Oil, Gas, and Mining grant program, which allocated $5M of the state’s CARES Act funding to cover lost revenue in our energy sector. The grant was managed by the Governor’s Office of Economic Development (GOED) and required applicants meet the following eligibility requirements:

• Be substantially involved in the extraction of oil, gas, and minerals in Utah or directly provide services to oil, gas, or mining businesses in Utah
• Have experienced a Utah revenue decline related to COVID-19
• Have fewer than 250 full-time equivalent Utah employees
• Attest that the use of funds will benefit Utah’s economy

For applicants demonstrating a year on year revenue decline of 50% or more, they were eligible to receive a grant covering either 75% of the revenue decline or up to $250,000. A revenue decline of at least 25% and below 50% provided for 50% of lost revenue or up to $150,000. For revenue decline under 25%, the lesser of 25% of revenue decline or up to $75,000 in grant funding was provided.

The grant opened on Sept 15th, and on day one (within eight hours) funding requests exceeded the $5M allocated. Just from the initial round there are nearly 25 applications that will not be funded, and likely many new applications which would have been submitted with more notice or if a second funding round were available. This certainly demonstrated the significant need being met by this program.

We are very grateful of the view the state has taken as to the value of the energy industry as an investment in the long term and the importance of reliable, affordable and local energy production. Recovery of the industry is certainly in the state’s best interest. Our oil and gas companies play a vital role in Utah’s economy and particularly in rural Utah. Setting aside revenues to SITLA and federal royalties that come back to the state, the industry paid roughly $30 million in annual severance taxes in both 2018 and 2019. That’s approaching 75% of the total severance tax collections from all industries. Severance tax dollars collected from the industry go into Utah’s general fund to pay for things like social services, public safety, higher education, Medicaid and transportation infrastructure. The natural resource industry makes significant contributions to other vital state programs.

Recent legislative interim meetings have also reviewed DOGM’s response to the 2019 legislative audit, DNR’s response(1) to An In-Depth Budget Review of the Department of Natural Resources, and reported on multiple new audits(2) including An In-Depth Budget Review of the Department of Environmental Quality, and a performance audit of the Division of Air Quality.

If you are interested in staying up to speed on legislative issues affecting the oil and gas industry, of which there are several on topics ranging from natural resources to tax reform to agency budgets, you are welcome to join UPA’s legislative committee. As we prepare for the quickly approaching 2021 general session starting on Jan 19th, let Rikki or Jennette know if you want to get more involved!