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    PRODUCTION

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Utah is a significant producer of both oil and natural gas with the prospects to play an even bigger role nationwide. Utah ranks 10th nationally in natural gas production and 11th for oil production. Significant investment and new technologies are pushing Utah's production totals consistently higher.

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The Completion Process

After a well is drilled a critical decision must be made – whether or not to complete the well. This is the decision that says, yes, we’re pretty sure we’ve got a productive well here, and will move ahead in purchasing casing, tubing, surface equipment, and possibly constructing a pipeline. Or, the alternative, to plug and abandon (P&A) the well, declaring it a dry hole. While sometimes a very simple decision, at other times this can elicit differing judgment calls from reasonable minds. This is one of the most technically important decisions ever made in the life of an oil or gas well. The completion process typically takes from a few weeks to a few months, sometimes longer.

Well completion incorporates the steps taken to transform a drilled well into a producing one. These steps include casing, cementing, perforating, gravel packing and installing a production tree.

Most wells are also hydraulically fractured to increase production capacity. Click here for more information on the hydraulic fracturing process.

After the flurry of activity surrounding drilling, completing, testing and getting the ownership and payment paperwork in order, finally comes what both oil company and mineral owner look forward to – the production phase. Crude oil and natural gas begin to flow. And hopefully they flow in sufficient quantities to recoup the tremendous investment that has gone into drilling and completing the well. The oil and gas industry is one of large risks and rewards. Not all wells are good producers, but the hope is that enough are to make the whole process work.

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Well Completion

source: OERB

How Much Oil and Gas Is Produced in Utah?

Oil and gas have been produced in Utah for over 100 years. The State has become a significant player nationally in oil and gas production and the future potential is tremendous. In 2014, Utah produced nearly 41 million barrels of oil (a barrel of oil contains 42 gallons). The 2014 total was just shy of the State’s all-time high oil production set way back in 1985. 2014 natural gas production saw 453,208,768 mcf (1 mcf = 1000 cubic feet) produced in Utah, down slightly from the State’s all-time high production reached in 2012.

Oil and gas is currently produced in 11 of Utah’s 29 counties with Duchesne county leading the way in oil production and Uintah county on top in natural gas production.

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source: Utah Division of Oil, Gas and Mining

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source: Utah Division of Oil, Gas and Mining

Utah's Unique Crudes

Of note about Utah oil production is the type of oil produced out of the Uinta Basin. More traditional light, sweet crudes are produced in Utah outside of the Basin, but the Black and Yellow Waxy Crudes produced in Duchesne and Uintah Counties are certainly unique. At room temperature, these highly paraffinic crudes solidify much like shoe polish. While the waxy crudes have many highly desirable features, such as being very low in sulfur, their physical characteristics pose numerous logistical challenges for the industry, including transportation constraints. The waxy crudes are difficult to transport via pipeline, so the vast majority of waxy crude production in the Uinta Basin is trucked to Salt Lake refineries.

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How Do We Compare with Other States?

Utah ranks 11th among states in national oil production and 10th in natural gas production. While we produce a lot of oil and gas in Utah, from the graph below you can see that our industry is no where near the size of some other producing states’, such as Texas. While not as large as some states, our production is regionally significant and critical to Utah. The oil and gas produced in Utah powers Utah’s growing economy, keeps our transportation system moving and heats our homes and businesses. It also drives local economies and contributes significantly to the quality of life we enjoy in Utah.

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source: U.S. Energy Information Administration

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source: U.S. Energy Information Administration

Who Benefits from Oil & Gas Production?

The simple answer is “We All Do”. The more detailed answer recognizes that oil and gas production in Utah benefits the oil company, the mineral owners, the local communities through tax revenue, economic development, and high-paying jobs, the state and federal governments through tax revenues, rents, royalties and bonuses, etc. In Utah, the Ute and Navajo tribes benefit from royalties on oil and gas produced on their lands as well as taxes generated from that production.

Of particular interest and importance to the oil and gas industry is the fact that we’re the largest contributing sector into the State’s Permanent School Fund through oil and gas production on the State’s School Trust Lands. In 2014, oil and gas production accounted for $90.4 million of SITLA’s $138.9 million in revenue. Of that money, $40.4 million in interest from the Fund went directly to the State’s public schools and other beneficiaries of the Trust. Every public school in Utah got a check through the Trust Lands Administration, largely funded by oil and gas development. We’re proud of the fact that what we do makes a positive difference in the lives of every Utah citizen.

The oil and gas industry also contributes greatly to local communities through the mineral lease revenues that are generated by production from federally managed lands. Rents, royalties and bonuses from federal oil and gas production are paid to the federal government and then 50% of that money is returned to the state through the mineral lease program. That revenue is then distributed, by a statutory formula to various governmental entities throughout Utah. In 2012, mineral lease revenue back to Utah totaled $164,602,984. That money is used for roads, infrastructure and other community projects throughout the State.

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Frequently Asked Questions

  • What about all those unused leases?

    Attacks on American oil and natural gas producers on the grounds that existing federal leases are not being developed ignore the realities of the leasing, exploration and permitting process. This is a process created by federal law, complicated by federal regulations and used by anti-development interests to delay and discourage new American oil and natural gas production.

    False accusations about oil and natural gas production are obscuring its complexity to make America’s independent producers a scapegoat for failed national energy policies.

    IPAA represents more than 7,000 companies who drill 95 percent of the U.S. oil and gas wells both onshore and offshore. Our companies are in the business of supplying energy. They supply it, not sit on it. They supply energy where you want it, when you need it, every single day.

    America’s oil and natural gas producers pay for the right to explore on leased land as well as a rental fee. The government is not losing money.

    Leases don’t come with MapQuest directions that say, “Drill here for 50 million barrels.” Companies do develop their leases, but producing oil and natural gas requires many steps: gathering funding, exploring, getting permits, drilling, and finally producing the oil or natural gas. Then they have to be able to transport it to market. The entire process can take years. Another delay we have seen is widespread litigation from anti-development organizations.

    So-called “idle” leases aren’t idle at all – leases that are in the exploration phase are considered by some to be “idle” even though companies are actively exploring for oil and gas and risking hundreds of millions of dollars in the process, such as with seismic surveys and other tests.

    Many offshore leases are five years old or less – with a moratorium in between, it’s not surprising that they aren’t producing energy yet.

    An oil company with a lease by law must “use it or lose it.” If energy isn’t produced within the lease term, the lease reverts to the government and the company forfeits all the money invested, which can be hundreds of millions of dollars.

    • As of 2015, Utah ranks 11th nationally in oil production and 12th among states in natural gas production.
    • There are currently 141 operating refineries in the United States with 5 located in Utah. Utah refineries produced over 36 million barrels (1.5 billion gallons) of motor gasoline in 2015 and over 19 million barrels (798 million gallons) of distillate fuel (diesel).
    • Well completions in Utah (both oil and gas) have declined dramatically over recent years as commodity prices plummeted and have stayed low. There were 1243 completions in 2008, 925 in 2014 and only 305 in 2015.
    • Duchesne (46%), Uintah (34%) and San Juan (12%) Counties accounted for 92% of oil production in Utah in 2015. The balance was produced collectively from Sevier, Grand, Summit, Carbon and Emery Counties.
    • The ratio of oil wells drilled in Utah versus natural gas wells has shifted significantly over recent years as commodity prices have affected company's drilling programs. In 2008, only 28% of wells drilled were for oil while in 2014, 76% of all wells drilled were primarily seeking oil.
    • Wages for energy-related jobs are nearly double the average annual wage for all employment in Utah.
    • In 2015 petroleum products and natural gas accounted for 59% of total energy consumed in Utah. Coal was responsible for 38% while all renewables combined made up 3% of energy use.
    • Utah refineries received record amounts of crude oil in 2014 and only slightly less in 2015, with 43% coming from in-state and 8% coming from Canada.
    • Fossil fuels made up 98% of Utah’s total energy production in 2015, while renewable sources accounted for only 2% of Utah’s production portfolio.
    • Property taxes charged against Utah oil and gas activities have increased more than six times since 1996, totaling nearly $64 million in 2015.
    • The value of crude oil produced in Utah reached an all-time inflation-adjusted high of $3.2 billion in 2014, but then dropped to only $1.5 billion in 2015 as commodity prices sank.
    • Natural gas production in Utah reached a record high in 2012 of 491 billion cubic feet, but has since dropped to 423 billion cubic feet in 2015.
    • Oil and gas operations in Utah account for about 1.3% of the State's gross state product. Utilities (including some non-energy sectors), refineries, and pipeline transportation and maintenance account for an additional 1.9%.
    • The last major refinery built in the United States was put into operation in 1977.
    • Utah’s average price of residential natural gas in 2015 was $9.72 per thousand cubic feet, the 17th lowest in the nation. As recently as 2011, Utah’s price was the third lowest in the nation, but new natural gas pipelines have better connected our once captive market with the rest of the United States.
    • Natural gas is the largest source of annual energy production in Utah, surpassing coal for the first time in 2010.
    • In 2015, 76% of the electricity generated in Utah was from coal-burning power plants. Electricity generation from natural-gas power plants more than doubled since 2007, increasing its total share in 2015 to 19%.
    • Utah produced 18% more energy than it consumed in 2015, continuing its status as a net-energy exporter. This percentage is usually closer to 30%, but production of fossil fuels was significantly down in 2015.
    • Energy-related employment in Utah declined to 15,367 in September of 2015 (down 16% from the 18,236 recorded in October 2014 prior to the oil price crash), of which the majority (30%) came from the oil and gas sector.
    • Average yearly wages in the energy sector ($83,400, first three quarters of 2015) are more than double the statewide average annual wage ($41,500, first three quarters of 2015).

UPA's voice is strengthened by companies like yours joining forces with us to work towards maintaining and improving Utah's favorable business climate.

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