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Oil props up declining value of Utah mineral production

Published December 19, 2013 1:01 am

Industry • Coal fades, but potash is becoming a bigger player.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The value of the minerals extracted from under Utah dipped 12.5 percent in 2012 to $8.2 billion, accounting for nearly 2 percent of the state's gross domestic product.

Declining metal and natural gas prices were a big reason for the drop, but rising oil prices have accelerated the quest for crude, according to an annual report on mineral and energy production compiled by the Utah Geological Survey.

Production from Utah's 4,300 oil wells climbed to 30.3 million barrels, worth $2.5 billion, making Utah the nation's 11th leading producer, according to the Division of Oil, Gas and Mining. The 6,900 gas wells yielded $1.33 billion in natural gas, a drop of 25 percent even though production increased to 490 billion cubic feet.

"There is a glut of natural gas so most the operators are doing the minimum amount to fill the pipelines and keep the contracts going," said report co-author Dave Tabet. "They are not expanding and are in the process of cutting costs to stay alive."

Growth in oil exploration and production has spurred a boom in another mineral. Utah is the only U.S. state to produce gilsonite, a shiny solid hydrocarbon that drillers use as a well bore sealant.

While gilsonite production remained flat at about 74,400 tons, the mineral's price climbed by 35 percent, driving the value of Utah production up to $89 million. Tabet believes Utah's two gilsonite mines, located in southern Uintah County, have increased production this year.

Utah is also the nation's only source of magnesium metal and beryllium concentrate, and it was a leading producer of uranium. But uranium prices tanked after the 2011 Fukushima nuclear power plant meltdown, which has put an end to uranium production in Utah.

In the face of falling demand, production from Utah's nine coal mines dropped 14.5 percent to 15.6 million tons, valued at $614 million. Driving this decline is the conversion of California power plants to natural gas, but another important factor was a catastrophic generator failure at the Intermountain Power Plant near Delta, according to Tabet.

Copper remained king among non-fuel minerals last year. At $1.38 billion, Utah copper's contribution exceeded that of natural gas.

But that will likely change for 2013, thanks to an April wall collapse that impeded ore production at Kennecott Utah Copper's Bingham Canyon Mine, which also yields gold, silver and molybdenum. The mine's metals output is expect to fall by half in 2013, knocking Utah's non-fuel mineral production down to a 10-year low, according to Tabet.





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