Investing Abroad: Meet Uintah County
Estonian oil shale investment and its potential impact on the economy of an American county more than 8,000 kilometers away.
The size of the oil shale investment led by Eesti Energia’s activity in the United States isn’t yet known, but if all goes well it could over time amount to at least several billion dollars. So how do local leaders from Utah prepare to manage growth from an investment of such possible magnitude?
A four-person delegation from Uintah County and the State of Utah visited Estonia this week to acquaint itself with the operations of Enefit (Eesti Energia’s trade name abroad) and its oil shale technology, the backbone for the company’s US investment.
Been There, Done That
If there is something other than oil shale that unites Uintah County and Estonia, it might be the experience of living through boom and bust economies.
Still in the memory of Uintah County is the 1990s when oil prices were dramatically depressed. According to the delegation, part of the 1980s had been spent building infrastructure for the oil and gas industry, and the general collapse of the extractive economy meant communities like Uintah County were often left holding the bag. Companies pulled out, and communities had infrastructure, built at their own expense, which appeared to have been built in vain.
But not, as it turns out, in Uintah County. Some of that infrastructure is part of what has made the area so attractive to Estonia’s Enefit. “Quite frankly some of the infrastructure that’s there is carryover from what was done in the eighties,” said Utah State Senator Kevin Van Tassell.
In more recent history, Uintah benefitted greatly from the energy boom.
According to a September 2008 economic baseline study prepared by Bureau of Economic and Business Research at the University of Utah, natural gas production in Uintah county increased 15 percent annually from 85 million thousand cubic feet (Mcf) in 2000 to 218 million Mcf in 2007.
The boom was enough to shift the county’s demographics from net out-migration to net in-migration, residential construction boomed, home values increased, and retail sales went through the roof. The report characterized Uintah County's growth as "phenomenal” and noted that between 2000 and 2008, inflation-adjusted retail sales in the county increased from 205 million to 470 million dollars, an average annual growth rate of 12.6 percent.
In 2007 and 2008, the economy boomed such that a hamburger flipper at McDonald’s could demand 10 to 12 dollars an hour plus benefits. (2007 minimum wage was 5.85 dollars per hour, according to the Utah Labor Commission.)
Senator Van Tassell related a boom-time desperation-employment-tactics story which will not seem alien to Estonians who experienced the real estate boom.
“I had an employee who was eating at Burger King,” said Van Tassell, who is a banker, as well as a politician. “A guy walked in the restaurant and said, ‘I need three people. I pay 15 dollars per hour and I don’t drug test. But you have to start right now.’ One cook and one server walked out.”
Bringing Home Your Own
Thanks to the extractive industry, Uintah County has weathered the current American recession better than many, and its current unemployment figure is 5.5 percent, according to Tammie Lucero, Executive Director of Uintah’s Economic Development office.
Such a remarkably positive figure, however, is partly due to workers leaving the county for North Dakota or to Oklahoma where the extraction industry is currently thriving, said Uintah County Commissioner Mark Raymond. “We have low unemployment, but we’ve experienced a significant decrease in the jobs available.”
County population is currently around 32,000, but the delegation estimated Uintah County’s high point to once have been over 40,000 residents. Assuming Enefit’s permitting process is successful and that its technology proves viable on Utah shale, Enefit’s American project will help some Uintah workers return home to their families.
Raymond estimates that during Enefit’s construction phase 1,500 to 2,000 new jobs will be created. Post-construction, the county estimates full-time Enefit employees to be around 150.
Though 150 does not fill a gap of 8,000, many of those 150 would be well-paying jobs. It is impossible to say exactly how much the jobs would pay, but according to a University of Utah report, the 2007 average annual earnings for an oil and gas extraction worker were 81,864 dollars and 65,778 dollars for a worker in oil and gas drilling.
Hoops
While Uintah County looks forward to the Estonian-led investment, it also must fight to protect its own interests in the face of a federal government which does not always share the local outlook about the use of land.
Strikingly, only 15 percent of land in Uintah County is in private hands. The vast majority of the remaining 85 percent belongs to the federal government.
“Our local government has been extremely supportive of this [Enefit] project,” said County Commissioner Mark McKee. “The State of Utah’s support is extremely valuable. The area we may struggle with is federal support. I’m not saying they don’t support it, but there are more hoops to go through.”
McKee is a diplomat. In some respects, Uintah’s relationship to the US federal government could be called antagonistic.
Uintah currently has several ongoing lawsuits against the federal government, including one concerning the designation of “wild lands.” Lands which, as McKee told the Vernal Express in March, could be “locked up from economic development.”
According to the same article, commissioners from Uintah took “the Bureau of Land Management to task for its secretive conduct” with its Master Leasing Plans which the county claims restrict mineral leasing on federal lands and can override existing resource management plans.
Tammie Lucero was quoted by a reporter from Utah Business, indicating that it isn’t always so easy to work with the federal authorities, noting that the federal government makes it appear that Uintah County has an unfriendly environment. “Even appearances can hurt,” Lucero was quoted.
Despite any bumps in the relationship with the federal government, the Uintah delegation is nothing but welcoming of Enefit and the Estonians. And although any community might be predisposed to like a company who can bring a 3 billion dollar investment, the delegation seems to view things in a very sober light.
“The report I’ll give to the Senate,” said Van Tassell, “is that I see a very positive movement from Estonia and Enefit […] They’re going to develop the 280 here [Enefit’s retort, -ed.], work it; in the meantime they’ll be analyzing our shale which is different than your shale to some extent… As Enefit gets three to four years of operation here, I think we’ll start to see a move to the Vernal [city in Uintah County, -ed.] property.”
Van Tassell cautions that he wants to avoid “mass hysteria, the thinking that this thing is going to fire up and turn around tomorrow.”
The delegation said it likes the approach of the Estonians, terming it “very methodical” and also reported being favorably impressed with Enefit’s technology.
Extraction and the Environment
According to Commissioner McKee, 60 percent of Uintah’s economy is dependent on the extraction business. Agriculture and ranching are not an insignificant share of the remainder, and use of water has long been a sensitive issue in the high desert of the American West.
But according to the delegation who extensively toured Enefit’s facilities in Estonia, they are satisfied that the Enefit retorting process uses virtually no water.
And Utah itself will bring technology to the table which can purify water generated by the production of oil and gas.
Senator Van Tassell says a new technology has come from Utah State University and a company called Purestream. The technology purifies production water, eliminating its need for disposal, making it suitable for industrial usage, which can create surplus water. The water might be used for agriculture, cooling in industrial purposes, or dust suppression.
Not Schmoozers
The report from the delegation about Enefit is so emphatically positive that this journalist could not help but ask the delegation directly what it is that the Estonians may want from Uintah County.
Estonians, by their own admission, are not known for being great schmoozers, nor are they known as a people who adore American-style get-to-know-ya trips and meetings.
Had the delegation been asked for anything? Tax subsidies? New infrastructure at the county’s expense? Was there another agenda behind the facility tours?
“We kind of asked to come,” said Lucero. “We wanted to learn more about their facility and about them.”
“I haven’t heard one request since we’ve been here,” added McKee.
Van Tassell said he believes Enefit is very well aware of the incentives in place at the state level to do business in Uintah County and Utah, incentives which are offered to everyone. “We are not offering Enefit anything that isn’t available to anyone who wants to come to Utah,” he said. “And all of those incentives are performance-based. The real plums come after the job is completed.”
Such as two years ago when the state enacted a 10-year moratorium on Utah’s 7.5 percent severance tax on extractive minerals, which gives an exemption to anyone producing oil shale or tar sands. Van Tassell said he thinks the state legislature could be persuaded to add another few years to the moratorium on the tax to enable the Estonians to take more advantage of it.
Ready to Go
But will Uintah County have to build anything? “It somewhat depends on what the business development plan will be,” said Commissioner McKee. But the delegation is convinced things are in place.
“We have adequate hospitals,” added Raymond. “The impact Enefit will bring to our community is not anywhere near what we have already experienced with oil and gas. The infrastructure is in place. We have adequate roads, law enforcement, schools.”
“We just spent 19 million dollars on water system upgrades,” interjected McKee.
“We’re ready,” said Raymond.
And so is Estonia.
From the editor: On July 7, Commissioner Mark Raymond informed ERR News that he now understands that Enefit will employ 2,000 people full-time after the construction phase. "This is great to know," wrote Raymond. "It is far more than what I expected."
Scott Diel