Uinta Basin Railway backers want $2.4 billion in tax-exempt transportation bonds as construction costs soar

The coalition of rural Utah counties pushing the development of an 88-mile railroad connecting the Uinta Basin oilfields with the national rail network is rekindling a paused effort to finance the railroad. 

Following last month’s U.S. Supreme Court decision that overturned a federal appeals court’s rejection of the Surface Transportation Board’s 2021 approval of the railroad, the Seven County Infrastructure Coalition last week approved a plan to seek $2.4 billion in private activity bonds from the U.S. Department of Transportation to fund the railroad’s construction. That’s $500 million more in bond financing than the coalition sought in 2023. 

But the federal department of transportation is running out of private activity bonds and a new authorization may not happen until Congress considers a new transportation bill, which may not happen and if it does, not until late 2026.

The bonds are only expected to cover 70% of the cost of the project, so the bonding request pins total construction around $3.4 billion, or around $3.8 million for every mile of track. When the Surface Transportation Board first studied the project in 2020, the projected cost of the Uinta Basin Railway was $1.4 billion.

The Transportation Department’s private activity bonds fund public-private surface transportation infrastructure projects. The transportation department is authorized by Congress to distribute no more than $30 billion in the tax-exempt bonds, an amount that was doubled in the 2021 Infrastructure Investment and Jobs Act. The department’s Build America Bureau has allocated and distributed $29.4 billion in private activity bonds through early June. Most of the projects are for road and passenger rail improvements. 

(In Colorado, private activity bonds delivered $397.8 million for RTD’s passenger rail lines in metro Denver, $20.4 million for additional lanes to U.S. 36 between Denver and Boulder and $114.7 million for improvements to Central I-70.) 

The Seven County Infrastructure Coalition scheduled a required public hearing on the bonding resolution for June 12 before it submits its application for private activity bonds to the federal department of transportation. 

The decision by the Supreme Court sent a lawsuit filed by environmental groups and Eagle County protesting the Surface Transportation Board’s approval of the railroad back to the U.S. Court of Appeals in Washington, D.C. The appeals court soon will consider the case with a narrower focus on the environmental impacts the railroad may cause. The Supreme Court did not address the appeals court ruling supporting Eagle County’s concerns that increased oil tankers on tracks through Colorado threaten communities and the Colorado River.

The financial headwinds facing the railroad will likely grow as the railroad proposal navigates a second appeals court process. New tariffs on steel could increase railroad construction costs. The latest bond proposal indicates construction costs have more than doubled since 2020. 

Environmental groups fear that the increased cost of construction will drive more drilling, more oil tankers rolling on tracks across the country and more refining of Uinta Basin crude. That leads to elevated risks of spills from derailments and air pollution around refineries on the Gulf Coast. 

“And the other issue for us is that the money just isn’t there. They are going to need Congress to intervene and either renew or eliminate the cap to access those bonds,” said Ted Zukoski, an attorney with the Center for Biological Diversity group that is leading the environmental fight to block the proposed railway. “We certainly don’t think it’s a good use of taxpayer money to hand over billions of dollars in tax subsidies for an oil industry project.”