In a matter of weeks, the International Maritime Organization’s (IMO) new global shipping regulations, commonly referred to as “IMO 2020,” will go into effect. The new lower sulfur emission standards not only will reduce air pollution worldwide, but also will strengthen Utah’s economy and reinforce America’s role as a global energy leader.
More than a decade ago, 171 member states of the IMO agreed to a gradual reduction of sulfur emissions in marine fuels from 3.5% to 0.5% by Jan. 1, 2020. As these standards approach, some foreign oil producers and refiners have begun to fret that they lack the capability to produce low-sulfur “sweet” crude oils or compliant alternatives, such as liquified natural gas. Yet, thanks to the shale revolution and the foresight of our oil producers to invest in long-term refining upgrades, the U.S. is more than just prepared for IMO 2020. It has much to gain from the new marine shipping standards.
The regulations are an economic boon to American fuel exporters, who have been required to use low-sulfur fuels in North American waters since 2015. They will also favor our refiners, who currently supply marine fuel five times more stringent than IMO 2020 standards will require. Equipped with an immense supply of natural gas and more than $100 billion in refining investments, the U.S. energy industry is primed to benefit from this shift to “sweet” oil and IMO-compliant fuel alternatives.
The payout from IMO 2020 is well illustrated in the state of Utah. As Abraham Lincoln said, “Utah will yet become the treasure-house of the nation.” From its arid deserts to snow-covered peaks, Utah is a state rich with energy resources. The state uses and produces a vast energy mix, including crude oil, natural gas, coal, and multiple renewable resources, and has abundant gold, silver, copper, and other valuable mineral resources.
Utah is an energy powerhouse, producing more energy than it consumes and serving as the 10th largest crude oil producer in the United States. These energy resources have allowed Utah’s cost of electricity to stay well below the national average and drive economic development in the state. In the Salt Lake City area, Utah has five refineries that predominately run on locally produced Utah crude, but also pipe in crude from Colorado, Wyoming and Canada. The finished, refined oil products are then distributed to markets in Utah, Idaho, Nevada, Wyoming, and eastern Washington and Oregon. Clearly, Utah is an essential energy partner for consumers in the West.
But now, Utah will be prominent for anyone in search of IMO-compliant fuel. Unlike some competitors in other countries, American refineries (including those in Utah) invested in infrastructure upgrades that allow them to refine IMO-2020 compliant fuel. With the growing demand for light, sweet oil, Utah is well positioned to see additional production of its low-sulfur crude and increased volumes move through its refineries to help customers adhere to the standards. Growing interest in Utah’s high-quality fuel could even drive investments in energy infrastructure to connect our abundant resources to growing global markets.
But it’s not just Utah’s energy producers and their employees who will benefit from IMO 2020. Energy is a booming $5.3 billion industry in Utah and generates roughly $543 million in state and local revenues, meaning nearly every Utahan reaps the rewards of our state’s energy production. Energy development supports the Ute and Navajo tribes through royalties and taxes, annually finances the majority of the state’s Permanent School Fund, and regularly contributes to state and county infrastructure. In fact, even from Federal acreage, Utah agencies and counties receive anywhere from 42% to 45% of oil and gas federal royalty payments.
Utah’s energy sector helps create high-paying jobs, as many as 16,500 — many in rural Utah — and generates billions of dollars in state revenue. Timely and full implementation of IMO 2020 will fortify Utah’s energy industry and economy, and guarantee American energy security well into the future, while improving air quality around the world.