Refiner's fire: Uinta Basin on a quest for its own refinery

No one has built an oil refinery in the United States for 30 years. But some say eastern Utah's most promising resource is being held hostage by powerful Wasatch Front refineries, and support is building for a facility dedicated to home-grown product in this part of the state.

Utah lawmakers are looking closely at a proposal to build a small refinery on the Ute Indian Reservation — and studying the underlying David-and-Goliath market issues that may make it necessary.

"I have a number of questions that still need to be answered," says Utah Senate President John Valentine. "But the need is obvious and real."

Others, including state officials, say the near-stalemate is simply the way the market works.

The controversy, which has been simmering for the past year, pits the five Salt Lake-area refineries against about a dozen smaller Utah oil producers.

Salt Lake-area refineries have shunned a type of crude oil called "black wax," the type drawn from the state's Uinta Basin, in favor of a cheaper crude imported from Canada. In addition, refineries are paying less and less for the Utah oil.

"There is a clear problem with the existing refinery capacity taking the additional production that we can do in Utah," said Valentine, R-Orem.

The result is a refinery plan backed by most oil producers in eastern Utah that is now being publicly promoted by the Ute Tribe and John Jurrius, a Texas oil man supervising the tribe's finances and oil interests.

"We are looking for some light at the end of the tunnel," Jurrius said. "We have absolutely got to do something — and we've got to have some help."

The issue sets up the age-old argument about market forces versus the state's responsibility to bolster economic development, make good use of natural resources and support local businesses.

The Deseret Morning News made numerous requests for interviews to individual refineries and to Lee Peacock, head of the Utah Petroleum Association. None of the requests was acknowledged.

No place to go

"Rocky Mountain oil refineries are enjoying record profit margins, while local oil and gas exploration companies are experiencing 30 percent reductions in their crude oil prices from the Salt Lake refineries, if the refineries will even accept black wax production," according to a report written by local oil producers.

Though well suited for making gasoline and diesel fuel, the black wax crude produced in the Uinta Basin has a consistency that makes it difficult to transport. It can travel only about four hours in an insulated truck before it solidifies. Producers in the basin can't ship it farther than Salt Lake City.