investment dollars move into and out of the basin for decades. We have finally “cracked the code” of the basin; we have doubled production in a few short years and are proud to say that we are one of only two growing basins in the U.S. It seems to us a rash policy decision to shift taxes from a broad group of users to a single industry, risking the backbone of the basin economy. Combine this with the steep decline curves associated with horizontal drilling, and the loss of production and risk to transportation (and severance) funding under this new proposal, and it becomes a double whammy. Not to mention the prospect of actually selling fewer products to other states. But why? What a New Tax Would Do To Exports Utah’s refineries produce more products than the residents of Utah need. Once local demand is met, our products are sold in other states, such as Idaho and Nevada. In the 2026 session, our legislature considered an export tax on fuel sold to those states with the stated goal of raising revenue to offset a proposed decrease in the gasoline tax. No other state does this because it violates the Commerce Clause of the United States Constitution. Putting aside the (il)legality of this proposal for a moment, here’s why this proposal is unlikely to raise the desired revenue. It’s basic free market economics. If fuel produced in Utah becomes more expensive, then Idaho, Nevada and other states will find other lower-cost sellers (like Montana, Colorado, Wyoming and Canada), which means less fuel sold by Utah refiners and ultimately less money for Utah. If Utah cannot cost-effectively export excess gasoline, it will have to reduce production, making significantly less jet and diesel fuel, tightening fuel supply in Utah and the region, and driving up prices at the pump and across the economy. The ripple effects would be real and extend further than many decision-makers have likely considered. Never mind that by attempting to place an export tax on fuel, the state of Utah risks needless, costly and ultimately unsuccessful lawsuits from other states. The Commerce Clause of the U.S. Constitution limits state authority; the most fundamental of these limits is the prohibition on state taxes that discriminate against interstate commerce. Later proposals looked at a new refinery production tax, which still has legal issues following a long line of judicial precedent that says a state may not do indirectly what it may not do directly. Washington State proposed a nearly identical export tax in 2022 to compensate for the environmental externalities of fuel production exported to other states. Pressure from Idaho, Oregon and Alaska, and the threat of legal action, led Washington to withdraw the proposal. A California Case Study California has aggressively sought to move on from fossil fuels by instituting draconian regulations, setting ambitious timelines to transition its electric grid entirely to renewable resources while phasing out sales of internal combustion engines in its transportation sector, and filing absurd lawsuits against oil and gas companies. None of this has benefited the people of California, who have faced increasingly expensive energy costs and reduced electricity reliability. So, what would happen if Utah followed in California’s footsteps and adopted additional taxes on our downstream sector? Increasing the cost of finished product exports risks the stability of Utah’s refineries and could ultimately increase costs for Utahns. All five of Utah’s refineries are considered “small refineries,” where economies of scale are a disadvantage, with higher costs spread over a smaller volume of production, challenging comparative costs in Utah. Utah’s refineries are continuing to maintain and expand capacity and run at near maximum capacity, as neighboring states reduce capacity. A tax on Utah refined product sales makes Utah refineries less competitive, risking their ability to continue to run at max capacity and expand. If Utah production declines, prices will go up. Fuel refining starts with the manufacture of gasoline, and from that, jet fuel and diesel are made. If we export less gasoline because of an unfavorable price, we will produce less gasoline. Less gasoline means less diesel and jet fuel, raising the costs for Hill Air Force Base, Delta Airlines and diesel users (homebuilders, agriculture, mining, etc.) as volumes decline. Refineries require major capital investments into yearly maintenance to operate efficiently and safely. Continued future profitability is critical in supporting those regular investment decisions. Refineries in California shut down because the state’s regulatory environment prevented them from justifying the necessary capital investments in ongoing operations. Many people move to Utah from California, and many of them want to leave behind the policies that made California less desirable to live in. It would be strange, in the name of raising money from exports, to adopt a policy that would do exactly the opposite. And what about all those people who move to Utah? Cost of Housing vs. Gas Prices A headline from the Salt Lake Tribune last summer reads: “Many Utahns ‘stuck’ with hourlong commutes amid housing crisis.” Interesting. Diving in a little deeper, here’s what the article says: “‘In today’s housing market, it’s clear some households commute long distances either out of necessity or preference,’ said economist Jim Wood. Utah is now tied with Idaho and Rhode Island for the seventh-most-expensive market in the nation, with a median listing price of $599,450, according to the Federal Reserve Bank of St. Louis. That’s behind Montana and just ahead of Colorado.” The article also includes a multitude of anecdotes from people who have chosen affordable housing far from their workplaces and about the length of their commutes. One woman shares that her “drive into Salt Lake City is about 50 minutes. With traffic, it can stretch to as long as two and a half hours.” Oddly, gas prices are never mentioned in this article. 12 UPDATE
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