Obstacles mount for Uinta Basin Railway as lawsuit takes aim at public funding
Controversial project would run heated oil trains through Colorado
There comes a phase in almost any large-scale, controversial project on public or private land when the questions arise and the lawsuits begin. The proposed Uinta Basin Railway is no different.
Everything about the venture is large-scale, from its nationwide scope to potential global impacts. Although the UBR, at 88 miles, is considered a “short line,” it would create a new link in the oil supply chain connecting the vast, fracked-oil fields in northeast Utah’s Uinta Basin to the national rail network, passing through Glenwood Canyon on its way to the refineries on the Gulf Coast. The UBR, approved by the Federal Surface Transportation Board in late 2021, would provide enough transportation capacity to increase oil production in the Uinta Basin from between 80,000 and 90,000 barrels per day currently to 350,000 B/D — essentially quadrupling output.
The increase in CO2 from expanding Uinta Basin production would come at a time when scientists around the world are sounding an alarm. In 2022, the Intergovernmental Panel on Climate Change stated that global greenhouse gas emissions must peak by 2025, drop by half by 2030 with net-zero CO2 emissions by 2050 to avoid catastrophic and possibly irreversible climate changes.
Combined CO2 emissions from the estimated fracked-oil operations in the Uinta Basin as a result of the UBR and end-product combustion range from about 20 to 55 megatons per year, which, at the high end, is equal to about 1% of the U.S. or 17.5% of the United Kingdom CO2 output in 2020.
Salt Lake City refineries at capacity
The type of oil found in the Uinta Basin is tricky to transport and difficult to refine. Called “waxy crude” because of its high paraffin content, it solidifies at about 100 degrees Fahrenheit. The Utah Department of Environmental Quality states that it must be “heated in the field and transported in insulated trucks.”
As explained by Adam Sayres, president of Axia Energy II, which operates in the Uinta Basin, Uinta crude is like Chapstick. He gave a detailed presentation to the Board of Trustees of Utah’s School & Institutional Trust Lands Administration in May 2018, stating that the crude is liquid underground at about 225 degrees, but once it hits the surface, it has to be kept in heated tanks at 180 degrees. Then, it’s loaded onto insulated trucks that head for Salt Lake City refineries, about 150 miles away.
According to Matt Sands, host of the Mineral Rights Podcast, in 2019, those refineries had a total production capacity for 189,000 B/D but only about 88,000 B/D for Uinta Basin waxy crude. Salt Lake City was declared a nonattainment area by the Environmental Protection Agency for air-quality standards twice in one decade — in 2009 for fine particulate matter and in 2015 for ozone — which proved problematic for those wanting to increase Uinta Basin waxy-crude production. “Production has had to mirror the refining capacity,” Sayres told the board of Utah’s School & Institutional Trust Lands Administration.
Bryce Bird, director of the Utah Division of Air Quality, told Aspen Journalism that ozone levels have not improved and emissions from all refining operations are capped due to air-quality concerns. “Without getting permit changes or offsetting emissions, the refineries cannot increase production,” he said.
Wendy Park, an attorney for the Center for Biological Diversity, a conservation group opposed to the UBR, said Uinta Basin oil producers are locked into the Salt Lake City refinery market, which gives the refineries a distinct advantage. “The Salt Lake City refineries can ask for a discount because there isn’t much competition for this waxy crude oil, (since companies) can’t get it to other customers,” she said. “The increase in markets for Uinta Basin crude would allow oil producers to charge higher prices, which would spur increased drilling.”
The only way to increase production in the Uinta Basin is to refine the waxy crude somewhere else. Proponents of the UBR say the best way to do that is to link the Uinta Basin by rail to the national rail network, near Price, Utah, and take that crude to Gulf Coast refineries that can handle it.
Oil trains would go through Colorado
The UBR promises to add from three to 10 oil trains daily to the national railway running through Colorado. The trains would share the tracks with Amtrak and freight haulers, winding through Glenwood Canyon and up through the Moffat Tunnel before descending to Denver and then east and south. The waxy crude would be shipped in heated unit cars — approximately 110 cars per train with the capacity to carry about 642 barrels in each car.
Communities along the Colorado route, including the city of Glenwood Springs, have written to U.S. Sens. Michael Bennet and John Hickenlooper against the UBR, citing concerns about air quality, wildlife, water and public safety. Glenwood Springs Mayor Jonathan Godes told Aspen Journalism that an accident or spill in Glenwood Canyon would be disastrous all the way to the Sea of Cortez. “To say it’s a far-fetched possibility, I think, is to ignore reality,” he said. “If that waxy crude that’s heated in order to stay viscous spills into our watershed and into the Colorado River, it would be a massive cleanup where they would have to remove tons of soil and debris.”
Eagle County officials, who are party to a lawsuit challenging the Federal Surface Transportation Board’s December approval of the UBR, have also voiced concerns that the long-dormant Tennessee Pass rail line would be revived as an alternate route for the oil trains should the national rail network through Colorado — particularly the Moffat Tunnel — become crowded.
Texas-based Rio Grande Pacific Corp, which plans to build and operate the UBR, also owns Colorado, Midland & Pacific Railway, which, in late 2020, attempted to lease a portion of the Tennessee Pass line from Union Pacific for possible commuter/passenger service and freight options, and applied for fast-track approval from the Federal Surface Transportation Board. Rio Grande Pacific Corp made a point of stating that it “has no plan to operate oil trains over Tennessee Pass.” Rio Grande Pacific Corp even went so far as to amend its plan a week before the Federal Surface Transportation Board made its decision, requesting restrictions on hauling crude oil, coal and hazardous materials in the proposed lease.
But Eagle County Commissioner Matt Scherr is not convinced. “There is no way they can commit to that,” he told Aspen Journalism. “They are not allowed to officially make a promise that [they] will not do some sort of activity on a line that has a general practice of moving freight.”
The Federal Surface Transportation Board denied the application — and, by extension, Rio Grande Pacific Corp’s proposed amendment — on March 25, 2021, for a variety of reasons, including public opposition and Rio Grande Pacific Corp’s apparent rush to get it done. But the decision left the door open for Colorado, Midland & Pacific Railway to reapply with a more comprehensive impact review and a full application process. “So, the proposal could come back,” said Park.
Lawsuit alleges misuse of public funds
The Seven County Infrastructure Coalition, which spearheaded this iteration of the UBR, was created in 2014, initially with only six rural eastern Utah counties — Uintah, Duchesne, Carbon, Daggett, Emery and San Juan counties. The coalition’s mission, according to its website, is to allow “members to build essential regional infrastructure elements that span across county lines” for the economic benefit of the area. In 2017, the coalition expanded to include Sevier County.
According to a timeline provided in a Utah judge’s order issued in a pending lawsuit, the Seven County Infrastructure Coalition first applied for a $30 million grant for the UBR project from Utah’s Permanent Community Impact Fund Board on Feb. 1, 2018. The board oversees the Utah Permanent Community Impact Fund, which holds federal mineral lease money allocated to the state from oil and natural gas royalties.
Those funds are mandated by state and federal law to go to counties and municipalities on the front lines of mineral extraction, and the operable federal statute charges state legislatures to direct funds toward the “planning, construction and maintenance of public facilities, and provision of public service.”
Typically, those communities are rural, and many depend on federal mineral lease money to weather the boom-and-bust cycles of the industry. “During a boom, they need more police, hospitals, emergency services, schools, and teachers,” Park said. “And after the workers leave, communities experience a dip in their tax revenue. So this is a way to help them.”
The Seven County Infrastructure Coalition wanted the money to “complete preconstruction design and permitting for a rail line from northeastern Utah into northwestern Colorado” that would connect the UBR to the national rail network. (An early proposal for the UBR had tracks running east toward Craig, Colorado.) The Permanent Community Impact Fund Board rejected the application because it was incomplete and did not include an important feasibility study. The Seven County Infrastructure Coalition submitted a new application for $27.9 million on Sept. 13, 2018. At a Seven County Infrastructure Coalition meeting on Oct. 11, 2018, the group’s lawyer said the railroad was, based on two feasibility studies, “viable but not at the rate of return that would entice private industry” and recommended that it be funded by a “public body”.
The Permanent Community Impact Fund Board did not grant the full $27 million, however, due to questions from the Utah attorney general’s office regarding the legality of using Permanent Community Impact Fund Board funds for the railway.
An exchange between the Seven County Infrastructure Coalition’s attorney and then-Assistant Attorney General Alison Garner began with an Oct. 17, 2018, letter from Garner, questioning how the railway project would fit with federal and state laws governing the use of public funds. Those concerns included “whether the proposed project is truly a public project as defined under federal and state law, whether expending restricted mineral lease funds outside of Utah is consistent with federal and state law, and whether the proposed project constitutes improper economic development.” In a response letter, dated Oct. 23, 2018, the Seven County Infrastructure Coalition argued that the law grants local jurisdictions wide latitude in determining how to best invest mineral lease funds, and that the UBR application met applicable criteria.
“Through the [Seven County Infrastructure Coalition], local Utah officials have selected rail as the best solution, and the political preferences of California environmentalists should not be allowed to prevail,” says the letter, which asked the attorney general’s office to withdraw its letter and “invited” officials instead to write another letter in support of the Permanent Community Impact Fund Board application.
Garner responded a week later with similar concerns, including the legality of using public funds for “mere economic development.” She specifically cited part of the Seven County Infrastructure Coalition’s application that stated “the ultimate goal of the [Uinta Rail Line] is to provide prospective Uinta Basin rail shippers with the lowest cost transportation option between the Uinta Basin and national markets” and “the winners would be the producers, royalty recipients … and taxing authorities.”
At a Nov. 8, 2018, Permanent Community Impact Fund Board meeting, the AG’s office reiterated its concerns, prompting the fund’s board to grant only $6.5 million for “engineering and other technical studies.” Then, between November 2018 and June 2019, the Seven County Infrastructure Coalition chose Drexel Hamilton Infrastructure Partners, now known as the DHIP Group, an asset management firm, for a “public-private partnership to finance and develop the railway.” The DHIP Group signed a memorandum of understanding with Texas-based Rio Grande Pacific Corporation to “operate and maintain” the UBR.
In June 2019, the Permanent Community Impact Fund Board approved the Seven County Infrastructure Coalition’s application for the remaining $21.4 million for Phase II of the project despite concerns from a Permanent Community Impact Fund Board member about “the Seven County Infrastructure Coalition’s rush to fund and complete the project given its size and complexity, the lack of a robust procurement process to ensure the project‘s success, the speculative nature of the return on investment, and the potentially risky use of public funds,” as described in the judge’s order.
In August 2020, the Center for Biological Diversity and Living Rivers filed suit in Utah’s 3rd District Court in Salt Lake County, against the Seven County Infrastructure Coalition, the Permanent Community Impact Fund Board, and the Utah Department of Workforce Services’ Housing and Community Development Division for possible illegal misuse of public funds. Park represents the plaintiffs.
“Our claim is that it violated the state legislature’s and Congress’ intent for those funds to be used to alleviate the impacts of mineral development in communities that have mining and drilling on public lands,” she said. “Instead, the funds are being used to promote and increase fossil fuel development with the goal of building the Uinta Basin Railroad.”
In early December 2020, Uintah County, Duchesne County and the Uintah Transportation Special Service District filed motions to intervene on behalf of the defendants. Officials representing these jurisdictions oppose the suit on the argument that the railway falls under their responsibilities for the safety and welfare of their citizens. The counties have stated that oil production will increase in the basin with or without the railroad, and argue that moving oil by train is safer and cleaner than using tanker trucks.
Uintah County was defiant, stating that it is the county’s responsibility — not the petitioners’ — to determine whether the UBR is an appropriate way to spend mineral lease funds.
The Uintah Transportation Special Service District, almost entirely dependent on Permanent Community Impact Fund Board funds, accused the petitioners of false concerns for oil-and-gas-impacted communities. The Uintah Transportation Special Service District stated that the environmental groups suing to block the use of Permanent Community Impact Fund Board funds exist primarily to stop extraction of oil and gas. The“intent and purpose” of the litigation, the Uintah Transportation Special Service District argues, is to “deprive local communities of the very resources needed to provide vital services to residents.”
By the time of a hearing in the case last August, a representative of the Utah’s attorney general’s office provided a more favorable assessment of the UBR funding’s legal prospects. According to a Salt Lake Tribune article on the hearing, Assistant Attorney General Daniel Widdison said that investing in the UBR aligns with the Mineral Leasing Act by making oil extraction safer and helping other area industries.
“If this project can get trucks off the road, if it can create a higher viability or sustainability for other industries in the area or, frankly, if it can make extraction of the oil safer, any of those would constitute alleviation of mineral extraction,” Widdison said, according to the Tribune. “Recognizing … that mineral extraction is an inevitability.”
By the time the suit was filed, the Seven County Infrastructure Coalition had spent about $12.5 million on “preconstruction planning,” according to the judge’s timeline. By January 2021, total spending of the Permanent Community Impact Fund Board funds reached about $21 million.
Prior to March 2021, Utah law regarding use of Permanent Community Impact Fund Board funds required that the money go to front-line communities in need and included multiple provisions stating that the funds be used to alleviate the impacts of resource development. But between the time the suit was filed and the initial evidentiary hearing, state legislators changed the law.
2021’s Senate Bill 176, titled Mineral Lease Fund Amendments, replaced language stating that the funds shall be used “for the alleviation of social, economic and public finance impacts resulting from the development of natural resources in this state” with “planning, construction and maintenance of public facilities, and provision of public service.” Lawmakers also added a subsection, defining the word and intention of “planning,” to include studies, analyses, plans and surveys among other changes.
In September, 3rd District Court Judge Adam Mow ruled against the plaintiffs’ motion for summary judgment, finding that sufficient evidence had been presented to establish “a genuine issue of material fact” as to whether the railway would mitigate the burden on local communities caused by resource extraction.
Mow also ruled for more discovery, pertaining to one of the plaintiffs’ concerns having to do with what the impacts would be if the UBR was allowed to continue. Park puts it this way: “Essentially, the court said there was little evidence showing what harms would result from funding the railway, so it ordered that discovery continue on that issue,” she said. “But, by that time, discovery was already closed, so there was no real opportunity to develop evidence on that point.”
The most recent hearing occurred May 25. Park said if the judge rules in favor of the plaintiffs, remedies include returning the money to the Utah Permanent Community Impact Fund. The judge plans to have a decision by late July.
Federal Surface Transportation Board decision prompts second lawsuit
The Seven County Infrastructure Coalition filed a petition for UBR approval from the Federal Surface Transportation Board in May 2020, and the Permanent Community Impact Fund Board funds paid for ICF, an environmental consulting firm, to write the environmental impact statement upon which the Federal Surface Transportation Board relied to make its decision.
The Federal Surface Transportation Board gave the green light to the UBR in December. Federal Surface Transportation Board Board Chair Martin Oberman cast the sole dissenting vote, stating that the “environmental impacts outweigh the transportation merits.” Oberman’s lengthy opinion questions the board’s evaluation of the downstream impacts and the overall contribution to climate change. He also cited the financial viability of the UBR given volatile oil prices and the shifting fossil fuel industry.
The same conservation groups that sued in Utah district court filed a second lawsuit on Feb. 11, 2022, in federal court in Washington, D.C., challenging the Federal Surface Transportation Board’s environmental review and the U.S. Fish and Wildlife Service’s biological assessment.
Eagle County had already filed suit against the Federal Surface Transportation Board on Feb. 10, asking the court to vacate the decision. The county stated that, among other reasons, the decision “exceeded the [Federal Surface Transportation Board’s] statutory authority” and violated several federal laws.
Nathanial Hunt, outside counsel for Eagle County, told Aspen Journalism in an email that the board “failed to adequately review the environmental impacts of the project, failed to adequately determine whether the project is needed, financially viable, and in the public interest.” The court combined the cases, due to similarities, on Feb. 14.
Park told Aspen Journalism in an email that the case is in its early stages. “We are now reviewing the administrative record and the parties will propose a briefing schedule to the court toward the end of [June],” she said.
The proposed cost of the preferred Whitmore Park route for the UBR is $1.5 billion for 88 miles of track. The DHIP Group, as part of the public-private partnership including Seven County Infrastructure Coalition and Rio Grande Pacific Corporation, has agreed to finance the project with a $1.5 billion commitment.
Construction of the rail line also hinges on commitments from shippers and refineries before it can move forward, and those commitments depend on increased production at a time when the ability to transport significant amounts of the basin’s waxy crude to markets outside Salt Lake City is limited. Mark Hemphill, senior vice president of Rio Grande Pacific Corporation, told ENR Mountain States in October 2019, that the UBR needs customers. “A billion-and-a-half-dollar railroad cannot be built on an ‘If you build it, they will come’ basis,” he said. (Hemphill did not respond to Aspen Journalism’s requests for comment.)
But refineries are reluctant to climb aboard the UBR until there is more oil coming out of the basin. Jim Finley of Finley Resources, the largest crude oil producer in the basin at 28,000 B/D, told the Seven County Infrastructure Coalition at its Oct. 22 meeting that it’s a catch-22. “In order to increase the volume, we have to have transportation, and in order to have improved transportation, we have to have the volume,” Finley said, according to the meeting’s minutes.
It is difficult to say whether railroad proponents have secured the necessary commitments; Finley did not respond to Aspen Journalism’s requests for comment. In fact, he failed to show up for two scheduled telephone interviews. DHIP Group representatives also did not respond to requests for comment.
Tom Shaw, a Houston-based independent energy consultant, told Aspen Journalism that the UBR and similar projects are caught between the high price of oil and the urgent need to reduce fossil fuel extraction and use due to climate change. “That’s the whole issue with oil and gas right now,” he said. “Oil prices are at a historic level, but there is very little investment in the sector because of climate change.” That means higher prices at the pump. “If you can’t drill for it, you can’t produce it,” he said. “And if you can’t produce it, you can’t sell it.”
In order to proceed, UBR still needs final authorization from Utah’s Ashley National Forest for the 12 miles of tracks that would run through an inventoried roadless area. Those tracks would closely follow U.S. Highway 191, but approving the railroad through the roadless area could prompt an additional legal challenge. Look for more on that facet of the proposal in an Aspen Journalism article later this summer.
Amy Hadden Marsh is a freelance journalist and longtime resident of the Roaring Fork Valley. Aspen Journalism is a local, nonprofit, investigative organization covering the environment in collaboration with The Aspen Times and Vail Daily. For more, go to AspenJournalism.org.