State auditor questions use of mineral lease funds
A state auditor told legislators last week that Utah's top oil and gas producing counties shouldn't receive additional funding they've requested for roads, based on the manner in which they've used federal mineral lease monies over the past five years.
Janice Coleman told members of the state legislative audit subcommittee that Duchesne and Uintah counties have each allocated only 42 percent of all the federal mineral lease and state severance tax monies they received for fiscal years 2003 to 2007 toward transportation projects.
"Since the Uintah Basin has been saying that they need more money for roads, we expected to see a heavy weighting of mineral-related funding toward transportation, but we didn't see that," Coleman said. "We reached the conclusion that their assertions for more road money weren't very compelling."
Uintah County leads the state in natural gas production and generated $234.2 million in mineral lease money for Utah during the audit period. Duchesne County leads the state in oil production and generated nearly $27 million in mineral lease money for Utah during the audit period.
From 2003 through 2007 Carbon County generated total mineral lease funds of $127 million while $69 million was allocated back to it during that same period.
"They came and did an audit on our county last summer and we did fine," said Carbon County Commissioner Bill Krompel. "We have a lot of road projects going on and much of our money has gone to those. But our special service district (Carbon County Transportation and Recreation Special Service District) likes to think of what we are doing more to do with total transportation as much as it has to do with roads alone. Along with roads the airport gets used heavily by the energy industry and certainly the rails do too."
The in the four years of the audit the county spent a lot of money paying on roads they built for various energy producers that work in the county. Those roads include Ridge Road, Consumers Road, Dugout Road, Soldier Creek and Westridge.
"The truth is that we are basically strapped to some bond payments we have to make on these roads so our money does go into those," said County Commissioner Mike Milovich. "We have and are now incurring some pretty big costs on Nine Mile Canyon Road. That washed out last summer during heavy rains. We had to repair it."
Neither commissioner had exact percentages on how much of the returned mineral lease money was being spent on road in the county but Milovich said he thought it was at least 85 percent.
County leaders in the Uintah Basin have appealed to the legislature in recent years for more money to help with road construction and maintenance. They argue that their budgets can't keep up with the damage done by the increase in heavy truck traffic related to the booming energy industry in the region despite the return of money from the mineral lease collections.
County Money Generated
Uintah $243 million
Carbon $127 million
Emery $ 68 million
Sevier $ 46 million
Duchesne $ 27 million
San Juan $ 16 million
Grand $ 13 million
Sanpete $ 10 million
Iron $ 3 million
Beaver $ 3 million
Uintah $132 million
Carbon $ 69 million
Emery $ 43 million
Sevier $ 56 million
Duchesne $ 35 million
San Juan $ 11 million
Grand $ 14 million
Sanpete $ 26 million
Iron $ 11 million
Beaver $ 19 million
Utah accepts its share of federal mineral release monies - collected from oil and gas exploration companies drilling on federal and tribal lands - through two entities: the state Permanent Community Impact Fund and the Utah Department of Transportation.
The money in the PCIF is distributed in the form of low-interest loans and grants by the state Permanent Community Impact Board to counties and cities that apply for funding and are approved. UDOT though merely receives the money and passes it on to counties, which in turn allocate the money to single-purpose special service districts established to mitigate the various impacts of energy development.
Utah has identified 14 areas, besides transportation, for which mineral lease-funded special service districts can be created, including water, sewer, recreation, health care and fire protection.
However, Coleman noted that there is "intent language" attached by the state legislature to the money that passes through UDOT indicating that it "shall be used for improvement or reconstruction of highways" in impacted counties. The audit recommends that the legislature mandate that federal mineral lease monies channeled through UDOT be prioritized toward transportation projects.
But subcommittee member Senator Mike Dmitrich, D-Price, noted that UDOT only accepts mineral lease money on the state's behalf and that the federal government recognizes other legitimate uses for that money besides transportation projects.
"You refer to UDOT a lot," Dmitrich told Coleman, but "that was just a mechanism to get money into these special districts. But once the money gets to the special district in that county then it's set by statute what they have to use that for."
"I think it's kind of unfair to say that all that money should be used for transportation, where it shouldn't," Dmitrich added. "It's really not UDOT money, it's county money."
The audit's 42-percent mark for each county was reached by including the PCIF and revitalization monies, something Peterson called "fully inappropriate." He added that following the audit's recommendation would be contrary to federal congressional intent and a 1992 legal opinion from the Utah Attorney General's Office.
"I think it violates federal statutory law," said Peterson of the recommendation. "It should not be adopted."
He suggested that instead of limiting counties' use of mineral lease monies, the legislature should examine whether UDOT is the proper state agency to collect the funds on Utah's behalf.
The subcommittee, noting the counties' protests, voted to forward the audit to the Interim Transportation Committee, the Political Subdivisions Committee, and the Transportation, Environmental Quality, and National Guard Appropriations Subcommittee.
Richard Shaw, publisher of the Sun Advocate also contributed to this article.