Study: Energy boom takes toll on Western Slope economy
December 4, 2008
GARFIELD COUNTY ” A new study indicates that the natural gas boom on Colorado’s Western Slope has made it harder for other sectors of the regional economy to thrive.
Those business segments ” such as the service, professional, construction and tourism ” helped the local economy recover from the oil shale bust of the early 1980s and currently sustain most households on the Western Slope, according a report from Headwaters Economics, a Bozeman-Mont. nonprofit research group.
“If you can maintain those sectors through the energy surge, through the boom period, you are going to be better off coming out at the other side,” said Mark Haggerty, one of the authors of the report.
The release of the study, which focused on energy development’s impacts on the state and analyzed Mesa and Garfield counties as a case study, comes at a time when natural gas companies are cutting back on drilling in the Piceance Basin, which stretches across Garfield, Rio Blanco and Mesa counties.
Representatives of several companies have said those decisions have been spurred by the problems affecting the credit markets, declining price of natural gas, limited pipeline capacity in the area and the prospect of new rules for the state’s oil and gas industry.
The report’s authors said energy development on the Western Slope has created new “economic opportunities, reduced unemployment, and raised wages for many workers.”
Recommended Stories For You
But on the negative side, that boom has exacerbated inflation, contributed to a growing wage and wealth gap, increased pressure on housing and commuting, and has made it “difficult for other industries to thrive.”
“The energy surge also raises the danger of returning to a more specialized economy subject to slower long-term growth as well as greater volatility,” the study said.
Garfield County Commissioner John Martin, a Republican who recently won re-election, largely disputed the study’s contention that the natural gas development in the area has made it difficult for other sectors of the regional economy to be successful.
“I think it has stimulated most of the economies of the local areas,” he said.
The study said the natural gas boom in Garfield and Mesa counties has generated considerable new revenue, but that it isn’t enough to cover associated impacts on roads and other capital facilities.
“In terms of day-and-day workings, it appears (the counties) can cover the costs,” Haggerty said. “The problem is that infrastructure demands are outstripping the revenues coming in. That is where we see the long-term problem.”
Garfield County currently receives about two-thirds of its property taxes from natural gas operations in the area. Revenue from the natural gas boom has spared the county from making painful cuts that may be affecting other local governments in the state.
“Before the (natural gas boom) started, we adjusted our lifestyles, our budgeting process,” Martin said. “We put as much money away as possible preparing for the future and diversified our other revenues streams as much as possible.”
The report also reported that of the 3 million jobs in Colorado in 2005, less than 27,000 were “directly related to the mining sector, which includes energy development.” It also said that mining and energy development in the state accounted for $4 billion in personal income in 2005.
“Fossil fuel extraction in Colorado is a small part of the state economy, but it has added new jobs, income and taxes in the recent surge,” said Ben Alexander, one of the report authors. “As we move deeper into the current recession, it is good news for the state that this industry, because of its volatility, is not a large part of the overall economy.”
John Swartout, senior vice president for policy and government affairs for the Colorado Oil and Gas Association, said the trade group was “baffled by Headwaters’ claim that our industry is only a small part of Colorado’s economy.” He encouraged the authors to review a 2007 study conducted by Colorado School of Mines’ Colorado Energy Research Institute and Booz Allen Hamilton.
That study, based on 2005 data, indicated that oil and gas activity in the state employed 71,000 people. It also found that the economic contribution to the state from all oil and gas related activities in the state was $22.9 billion.
Swartout added that Todd Saliman, the director of the Office of State Planning and Budgeting, has “cited the energy sector as the sole industry allowing Colorado to weather any impending financial storm.”