MEETING MINUTES
UGS Conference Room
January 12, 2007
8:30 a.m. – 11:15 p.m.

Attendance

Board Members:

• Geoffrey Bedell
• Charles Semborski
• Kathleen Ochsenbein –Excused
• David Simon
• Stephen Church
• Robert Robison
• Jack Hamilton
• Ex Offico: Tom Faddis

Staff:

• Richard Allis
• Kimm Harty
• Jo Lynn Campbell
• Kathi Galusha
• James Kirkland
• Mike Lowe

Chair Church called the meeting to order. Kathi Galusha was introduced to the board members.

APPROVAL OF MINUTES
Chair Church asked if members had reviewed the minutes and then asked for a motion to approve. Jack Hamilton motioned to approve the minutes as written and Robert Robison made a second. The motion carried unanimously.

DIRECTOR’S REPORT
Financial Position

Director Allis discussed how the UGS has a relatively stable staff, and funding is reasonably secure due to revenue streams and the Mineral Lease carry-forward from last fiscal year. The UGS now operates in a financial environment where Mineral Lease revenue can vary by at least $0.5 million in a year, requiring cautious financial management. The usual uncertainties are present with the upcoming legislative session, and our primary issue this year is to restore the one-time recession of General Funds made during the 2006 session. The Mineral Lease revenue for FY07 is expected to be about $2.1 million and this has been built into the operating budget. If the operating budget is followed for both expenditure and revenue, the carry-forward at the start of this year of $700k will be reduced to about $300k by the end of the year. Reduced Mineral Lease revenue this year compared to last year will be balanced by reduced expenditure. The key factor influencing Mineral Lease revenue is the natural gas price. Unusually high natural gas prices due to the effects of Hurricane Katrina closing down Gulf Coast production resulted in a spike in Mineral Lease revenue last FY. Prices have subsequently declined to between $2/mcf and $6/mcf, with winter natural gas prices probably going to be close to $5/mcf (compared to the $11/mcf price after Hurricane Katrina).

CONTRACTS AND GRANTS

Contract and grant revenue for the first quarter of the fiscal year is 26% and close to target. There are fewer opportunities for winning federal funds as the effects of budget tightening affect agency budgets. In SEP, the program has been trimmed, and less funding is available to outside contractors for energy efficiency and renewable energy projects. In the Energy and Mineral Program, there has been a lack of oil and gas solicitations from DOE for over a year, and new funding from CO2 sequestration initiatives has filled the gap left by more traditional research projects. Opportunities for local ground-water projects continue, and the Ground-Water Section continues to be successful in attracting outside funding. The paleontology section has just heard that the Discovery Network will be contracting the UGS for media presentations focusing on new dinosaur excavations in eastern Utah and contrasting this with similar work in China. The contract will be for $100k spread over two years.

Subcontracts
UGS has used some Mineral Lease funding to support external contract work that improves understanding of Utah’s oil and gas potential. This has been very successful, receiving positive comment from the “oil patch”. Typically the annual commitment has been $200k and five contacts have been awarded. This year, due to the reduced Mineral Lease revenue, five awards have again been made, but the start dates have been staggered so that the financial cost this year is about $110k, and some cost carry over to next FY.

Personnel
There have been no changes with personnel. Carl Ege’s position is currently being announced and will go out in the first part of January.

Department of Human Resources Management Survey
DHRM have recently surveyed staff trends in state government, and supplied DNR with graphs or the whole Department and each Division. Notable trends and differences are the bimodal peak for age in the UGS, the strong trend in the UGS of salaries being in the first quartile of the pay scales, and the plateau of years of service between 10 and about 25 years. The relatively large number of staff in the first quartile of the pay scales indicates a continuing problem of salary compression resulting from pay scale movement, but not salary movement. The UGS has tried to internally support step increases that rectify the salary compression, but there is still a significant problem. The Governor has recommended to the legislature in this year’s budget that there be a discretionary amount of ongoing funding awarded to each Department to rectify pressing salary issues.

Legislative News
The highest priority for the UGS in the upcoming legislative session is for last year’s one-time cut to our General Funds of $150k be restored. UGS administration has pointed out to both the Governor’s fiscal analyst and the legislative fiscal analysts for DNR that Mineral Lease funds have decreased significantly this year, and the General Funds need to be restored.

UGS is watching for signs of bills that may attempt to change the Mineral Lease formulas. There may be changes to the allocation of Severance Taxes, and a change to disbursement of Mineral Lease funds received by SITLA for exchanged lands, but so far there is no sign of attempts to change the way the bulk of Mineral Lease funds are disbursed. Deputy Director Kimm Harty mentioned there are three bills that UGS are watching and that they are all energy related bills.

UGS Board Changes
Three board members terms will end in March 2007. Outgoing board members are Chuck Semborski, Robert Robison, and Kathleen Oschsenbein. Director Allis presented each of the outgoing members with a plaque expressing the UGS’ appreciation of their time and efforts committed to the board during their tenure.

Appointment of New Board Chair and Vice-Chair
Chair Church asked for Chair and Vice-Chair nominations. Jack Hamilton motioned to nominate Geoffrey Bedell as Chair, Robert Robison made a second. The motion carried unanimously. Robert Robison motioned to nominate Jack Hamilton as Vice-Chair. Chuck Semborski made a second. The motion carried unanimously.

Board Meeting Dates
The 2007 meeting dates of April 6, June 8, Sept 21-22 (annual board field trip), and January 11, 2008 were approved by all board members.

UGS Services
Director Allis summarized the UGS board policy and UGS code criteria where it states the UGS is to assist local jurisdictions on geologic matters. In the policy it states that any work over $20,000 by UGS within a year requires board approval. It was suggested the amount be raised. After some discussion, the board agreed to leave the policy status quo.

Adjournment
Robert Robision motioned to adjournment the board meeting of January 12, 2007. Chuck Semborski made a second. The motion was carried unanimously. The meeting was adjourned at 11:15 a.m.