Pub 2 2020-2021 Issue 3

Industry Updates Financing The Biden administration’s energy and fossil-related policies are broadening, as anticipated. An initiative led by special presidential climate envoy John Kerry to utilize the financial sector to bolster the administration’s U.S. carbon emission reduction goals looks to block financing and services to fossil-related energy clients. In response, Republican lawmakers and state treasurers have vocally criticized ef forts to “de-bank” conventional energy and fossil fuel companies. Fif teen Republican state treasurers – and possibly more to come – are threatening to pull assets from large financial institutions if they make moves to decarbonize their lending and investment portfolios. To date, those treasurers signed on collectively manage more than $600 billion in assets in state treasuries, pension funds and other government accounts. We can expect to see more of such moves from the administration: ratcheting up pressure to reduce emissions through direct regulation and broader indirect policies and pressures. To put the implications into context, at the time of this writing, the Baker Hughes rig count shows Utah has nine drill rigs, with eight of those rigs active in the Uintah Basin. (That is currently more than the entire state of Wyoming, weighing in with four rigs). To continue to grow the Basin sustainably and create new crude export markets, access to financing will be critical. This initiative threatens every segment of our industry - from exploration all the way down the value chain to finished fuels. Upstream On the upstream side, the regulatory environment has continued to evolve with the passing of a significant new rule, R649-11 Administrative Penalties 1 . Ef fective May 27, 2021, the Division of Oil Gas and Mining and the Board of Oil Gas and Mining now can directly levy and collect fines and penalties for various violations, a rule that resulted from SB148 passed during the 2020 legislative session. UPA was actively involved in developing both the legislation and this new rule. We support giving the Division the needed tools to promptly and appropriately address noncompliance while balancing the ability for responsible operators to promptly correct issues without further penalties. Highlights for the Board and Division include: • The authority to impose administrative penalties, not to exceed $5,000 per day for each day of violation when a person violates Utah Code Title 40, Chapter 6, or a permit, rule, or order made thereunder. The penalty cannot exceed $10,000 for each day of violation when the Board determines the violation was willful. • Establishing a standardized violation schedule with penalty adjustments increasing or decreasing based on aggravating and mitigating factors. • Requiring notice that sets forth the actions necessary to cure violations before any penalty is levied and provides a transparent appeals process. The upstream regulatory march will continue with informal stakeholder discussions with the Division beginning a new bonding rule in June or July. We expect the rule to include significant and broad changes, and UPA is already preparing and coordinating our position. If you have not engaged with us on this issue yet, please contact UPA President Rikki Hrenko-Browning at rhrenko-browning@utahpetroleum.org so we can make sure to include your input. Downstream A significant development for our downstream sector and other businesses, both large and small, across the Wasatch Front is the Division of Air Quality’s (DAQ) development of the 179B package as allowed by the Clean Air Act. A 179B(b) demonstration would prevent a bump-up in nonattainment status 14 UP DATE