Utah Mining Association
2012 Legislative Session Final Report

The 2012 Legislative Session has come and gone. As most of you know it is a wild 45-day ride that seems to start slow and yet finish in a crazy rush to try and pass bills.  Although things tend to ramp up as you move along, UMA had several bills in committee hearings the first afternoon of this session.  That is a first for me. 

The mining industry has been relatively strong through the recent recession with employment up slightly and commodities in some areas hitting an all time high.  With that being said the message for the Utah Legislature.  The industry has locally and nationally one of the only bright spots in the employment sectors as well as a constant economic impact during the recent past.  Please, don’t do anything intentionally or unintentionally that would upset this as we continue to climb from this challenging time in the state’s economy. 

The following is a review of some of the bills considered the last 45 days, together with the UMA position and efforts. As you will see, overall this was a successful session for UMA and the mining industry throughout the state. Should you have specific questions about bills on the UMA tracking list on the website, please contact the office directly. 

There were significant issues discussed yet, in the end there really wasn’t a lot of damage done.  Lawmakers filed 76 resolutions, and as you know these generally are for the interest of constituents in sending a message, which generally doesn’t generate any action to Washington D.C. Message bills, they are called.  However, a group bills in general was of particular interest to the mining community. There was a package of bills that addressed public lands in the state and the need to send the message to the federal government that those lands should have been given to the state as part of the enabling act at statehood. HB 148 by Representative Ivory addresses this by stating to the federal government that all public lands in the state minus national parks are the property of the state and the federal government is instructed to turn these lands over to the state. There were several other bills of a similar nature including HCR 3 by Representative Barrus, as well as HCR 1 by Representative Herrod.  Several of these bills died in the final hours, however HB 148 was passed with several amendments that requires the study of the potential of requiring the Federal Government to turn over these lands. 

Senate Bill 11 and Senate Bill 21 – Department of Environmental Quality Boards Adjudicative Proceedings and Department of Environmental Quality Boards Revisions
Two bills that the Utah Mining Association as well as the Utah Manufacturers Association worked on during the interim in preparation for the session were Senate Bill 11 and Senate Bill 21. Senator Margaret Dayton worked with us in preparation for these two bills as the sponsor.  These two bills address the Department of Environmental Quality and both the adjudicative proceedings as well as the structure of the Department boards.  Senate bill 21 in particular segregates the adjudication of individual permit actions from the public information gathering and rule-making function. The adjudication of permit and licensing decisions will follow the administrative law judge (ALJ) process currently used by DEQ.  Each Board will continue its rule-making functions and facilitate robust public discussion of relevant issues. Board members will no longer be constrained in communicating with the public because they might later have to sit in judgment on a specific permit.  Removes the authority of the boards to approve, disapprove or modify a proposed administrative law judge decision on a permit appeal and moves that authority to the DEQ executive director. The bill assures that the DEQ executive director will utilize legal and technical expertise in making her decision on a recommended decision of the ALJ.

Reduces the size of each of the five boards to nine members. As under existing law, one of the members of each board is the executive director of DEQ, and the others are appointed by the governor from different interests and expertise, including representatives of local government, the regulated industry, environmental groups and public health professionals.  Provides that the DEQ executive director votes only in the case of a tie.  Assures that board members have the necessary qualifications to deal with complex environmental regulatory issues.
The two bills passed and are awaiting the signature of the Governor.      

DEQ Funding

UMA also worked hard to ensure that funding for the DEQ was not removed from the Department. There was an attempt to remove some $228,000 in funding from the division of Air Quality that would have removed two individuals from their permitting functions.  Along with other organizations, UMA was successful in ensuring that the funding stayed intact.  

House Bill 28 – Economic Development Task Force

Representative Brad Wilson sponsored a bill that would create an Economic Development Taskforce.  The bill passed and was used as a tool to address economic development from industry in the state.  The taskforce will address how to increase jobs and economic development in the state as well as the barriers to creating such economic development. 

House Bill 48 Coalition of Energy Producing States
This bill amends the current coalition membership of the slightly in regards to it membership of state legislators.  The proposed energy producer states' agreement has the following goals:

(a) to encourage domestic development of energy in the United States;
(b) to ensure the continued development of each state's domestic natural resources;
(c) to deliver a unified message to the federal government from energy producing states by participating in the development of proposed federal legislation and regulations; and making recommendations regarding existing federal law and regulations including the Environmental Protection Act, the Endangered Species Act; and federal land access issues that affect the
production of energy, to eliminate or reduce overly broad federal legislation; and to identify
and address consequences of delays and cancellations of viable energy projects.

Senate Bill 94 Electric Power Facilities Amendments.

Senate bill 94.  Electric Power Facilities Amendments. The bill attempts to facilitate the potential signing of long term contracts with its California purchasers beyond 2027.  Although, IPA stated that there is no intention of shifting to natural gas or other fuels source in the near future the concern still arose that this bill facilitates a fuel shift by allowing California to apply pressure on IPA and require them to change fuel sources to meet lower emission requirements that will take effect in 2027. 

The bill in its simplest form defines terms amends provisions in the Interlocal Cooperation Act that govern a project entity, it excludes certain facilities that provide replacement project capacity from the certificate of public convenience and necessity requirement and describes the scope of the Electric Power Facilities Act. 

The bill creates a new term, “replacement project capacity” (or facilities that replace all or a portion of IPP’s current generation or transmission capacity). SB94 exempts IPA from the obligation to offer to Utah entities at least 50% of the power resulting from replacement project capacity. The 50% requirement still would apply to “additional” project capacity (or facilities that would result in capacity in addition to existing generation capacity at IPP).

Below are several of the issues and answers pointed out by the UMA as the bill was introduced and discussed. 

UMA supports the efforts to facilitate the long-term viability of IPP as an economic engine. We do not, however, support legislation that we believe potentially facilitates the expedited transition from Utah coal to natural gas as a fuel source for IPP.   This action would produce disastrous effects on Utah communities that rely on Utah’s coal industry as their economic driver.

The Intermountain Power Project (“IPP”) is the largest single coal consumer in Utah.  Approximately 25% of the nearly 20 million tons of coal produced in Utah annually is currently being supplied to IPP.  SB 94 would remove the longstanding requirements to offer 50% of new generation to Utah municipalities, allowing all new capacity to be sold out of state.  

SB 94 would remove the requirement for a Certificate of Convenience.  This, we believe would facilitate the conversion from coal as the fuel source for electric power generation prior to the anticipated 2027 timeline.  The loss of coal supply with IPA will result in the loss of jobs in the mining industry, rail and trucking industries and affiliated support industries. 

Federal leases provide the main source of Utah’s coal production. Coal production on federal land is subject to a royalty payment of 8% of gross value.  Fifty percent of the federal mineral royalties generated in the State is returned to Utah.  This means approximately $12 million annually is returned to the state. 

The School and Institutional Trust Lands Administration (SITLA) controls mineral rights on approximately 4.4 million acres in Utah. Recent royalties on SITLA lands totaled more than $16 million. Property taxes and federal royalties levied on coal mines accounts for approximately $51 million -in addition to an estimated combined $41 million dollars of tax revenue.

The coal mining industry accounted for approximately 4,700 jobs- 1,900 directly, with another 2,800 through indirect "ripple effects."  The three coal-producing counties, Carbon, Emery and Sevier, held 85% of those jobs.  The industry's direct financial impact is $196 million annually, two-thirds of this total going to Carbon, Emery and Sevier Counties. Utah jobs, communities, economy and the Utah Coal industry should not negatively impacted in an effort to address potential out of state political concerns.  

UMA worked hard to attempt to get language inserted in to the bill that required the use of coal in these facilities until the reduced emissions requirements take affect, which is 2027.  We were unsuccessful in getting the language into the bill, however, we did get intent language read onto the pages of the journal which indicates the intent of the legislature in passing the legislation. 

The question was asked several times.  Why do this now?  IPP’s California purchasers are prohibited from entering into new contracts for coal-fueled power. As such, they must determine how they will replace, post-2027, the significant amount of power they currently buy from IPP. Currently, LADWP favors eventually replacing that power through the construction of combined cycle gas units at IPP. LADWP has also begun to review other projects that would provide that replacement power. If SB94 is not enacted, then LADWP must begin serious consideration of the proposals for alternatives to IPP. At that point, IPP may lose LADWP as a renewal purchaser. Passing SB94  it was stated would greatly reduce, if not eliminate, the risk that IPP would lose the California power purchasers that to date have absorbed nearly all of IPP’s power production.

UMA also asked the question, does SB94 dictate the source of fuel to be used at IPP? We were told repeatedly that SB94 is neutral as to the fuel to be used at IPP, including any replacement project capacity. Nothing in Utah state law (including state statute) requires IPA to use any particular type of fuel in producing power. IPA is committed to burn Utah coal until legal or economic constraints prevent it from doing so. SB94 does not lessen the myriad of steps still required before IPP could produce gas-fueled power. Furthermore, SB94 does not preclude the burning of coal at IPP beyond 2027.

With this being said, UMA facilitated a letter requiring IPA to notify and inform the Governor, Senate President, Speaker of the House and the UMA before entering into any contracts that would shift fuels source from coal. This was read into the bill as intent language provides notification not currently required in statute that would allow the legislature to and the Governor ample time to call a special session to address the economic impacts of a fuel switch at IPA. 

UMA also inserted language into the Master Study Resolution creating a study issue this coming interim regarding the economic impacts of switching from coal as the fuel source at IPA and other power generating facilities.  A premature change in fuel source could have a drastic impact on the economies in coal communities.  UMA will present information including an accurate study of taxes, lease payments and royalties, wages and direct and indirect jobs created through the coal industry in the state of Utah. 

As UMA continued through the session it became very apparent that the legislature was far more concerned with what was being presented as the imminent danger for IPA going dark should they not be able to negotiate contracts beyond 2027 by this legislation and not the potential loss of coal jobs that may occur in the future.  The legislature was also not interested in hearing the argument that they were caving into the political pressure from California in making the coal industry bear the burden of the modifications to current statute.  (This was a surprise and something I hope does not come back to bite them).  UMA worked to get intent language as well as the issue addressed in the Master Study Resolution and have ample time to address the issue at that level rather than have the issue addressed as has been done in surrounding states without a chance for the industry to control the discussion and the dialogue and data. 

The bill ultimately passed and is awaiting the signature of the Governor.  UMA messaged to the Governor the importance of addressing the concerns of the potential of a fuel switch should it occur prior to the current requirements by California law post 2027.

House Bill 102 Blasting Regulations

This bill was an attempt to implement potential regulations and rulemaking authority by DOGM to regulate surface operations that blast within a certain distance of a residential structure.   UMA argued that this is an issue of federal preemption.  The regulation of all explosives is already controlled and managed at a federal level by the Department of Homeland Security and Mine Safety Health Administration.  Any increase in reporting or notification, rulemaking etc would be duplicative and confusing to the industry and an unnecessary burden on business.  The bill was heard in committee twice, yet failed to make it out to the floor. 

Senate Bill 77 Surface Owner Protection Act

This bill is an attempt to address an ever-increasing issue between surface right owners and mineral estate owner primarily in the Uintah Basin in reference to oil and gas exploration on private ground.  The issue has been bubbling up for some time and this year’s legislation attempts to create a process by which the parties will participate in mediation should they not be able to agree on a surface owner agreement.  The mediation is non binding and UMA inserted intent language in the house that states that it is the intent of the legislature that this pertain to oil and gas operations and not the mining industry.  The bill passed and is awaiting the signature of the Governor. 

House Bill 74 – Eminent Domain Amendments

This bill amends Title 78 of state code allowing the taking of property by eminent domain.  It addresses a recent court case in which the court found that oil and gas was not a mineral and therefore didn’t qualify for the right for the use of eminent domain for access to the liquid mineral.  A bill was drafted to attempt to fix the court decision and revert back to what has been a state statute for decades. The concern of the UMA was to not raise the issue of eminent domain in such a way that the legislature did not begin the discussion as to who should have the right to utilize eminent domain.  The issue was raised briefly in the first committee meeting at which point the bill was held in committee and the sponsor substituted the bill and simply added language to insert oil and gas.  The bill then proceeded through both bodies without additional discussion related to mining companies and their ability to use eminent domain. 

The bill passed and is awaiting the signature of the Governor. 

There were several water bills that the industry monitored.   None of them are of great concern to the industry.  The Executive Water task force vetted the water bills in the interim and for the most part these bills had been worked on extensively during the interim.  UMA has historically taken the position of protecting the current and longstanding practice of the prior appropriation doctrine, meaning first in time, first in right.   Mining Companies across the state hold some of the most senior water rights and want to protect those rights.  Several of them died on the board the last night without time remaining.  This simply means they will have to try again this coming year to facilitate their passage.

This year the state of Utah enjoyed a budget surplus. However, even with a surplus of nearly 450 million the money was quickly appropriated to areas of the state budget and was gone just as quickly as the numbers appeared.  Utah enjoyed a budget surplus this year when many states in the nation still are dealing with deficits. 

Mining in the state has been instrumental in the economic recovery of the state with increases in employment and commodity prices doing well. 

The House of Representatives took an early caucus position of no tax increases and held to that line thru the end of the session.  The Senate also was not inclined to increase taxes in the midst of a recovery from a recession and held the line also.  In the end the budget was balanced with the slight surplus enjoyed by the state.

As usual, it is a pleasure to represent the industry at the legislature and educate legislators about an industry that is a driving force in the economy in the state, develops and extracts natural resources in a sustainable manner and does so in a effective and safe manner.  Mining IS at the center of industry. 

To view the contents of a bill, click on the bill number.

Dayton

S.B. 11

Dayton       

S.B. 12s1

Madsen

S.B. 21s1

Department of Environmental Quality Boards Revisions

S.B. 24

Valentine

S.B. 27s2

Stephenson

HP-S (Part 1)