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Power struggle in western Colorado

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The slump in Aspen’s home-building economy is magnifying the influence of the oil and gas industry on the West Slope ” bringing both blessings and curses.

Researchers say the second-home industry that dominates Aspen, Vail and, to a lesser extent, parts of Garfield County will suck wind for the foreseeable future because of national economic turmoil.

“Second-home activity will obviously slow quite considerably, immensely so,” said Jim Westkott, senior state demographer for the Colorado Department of Local Affairs.

The second-home economy that has displaced tourism as the main economic driver in Colorado resort towns involves the design, construction and remodeling of vacation residences as well as ongoing maintenance of unoccupied homes, from landscaping to snow shoveling. In addition, when the homeowners are in town they tend to support vast numbers of service workers, from baby-sitters to chefs to massage therapists.

When fewer second-home owners are building new residences or spending time in existing homes in Pitkin County, there is a ripple effect in the economy. Architects and investment advisors will have fewer clients. Construction companies will have fewer homes to build. Landscapers won’t manicure as many lawns and gardens.

Westkott believes retreats like Aspen face a temporary slump. Aging baby boomers won’t flock to the mountains in such great numbers until the national economy regains strength, but they will be back. Exactly when is a mystery.

Meanwhile, the face of the economy everywhere from Grand Junction to Aspen will be further defined by the oil and gas industry. The energy boom that western Colorado has experienced throughout this decade will likely slow down, according to economic researchers, but it will probably continue to grow.

Speaking at the annual State of the Valley conference in Glenwood Springs last week, Westkott explained that natural gas extraction in Colorado depends on pipelines taking the product out of state. Pipeline capacity is in short supply, placing a practical barrier on the level of well drilling and production.

“New development in natural gas ” new wells ” is likely to be slow for a couple of years, but we still expect some employment growth for the industry in general,” Westkott said. “People still need to heat their homes.”

The growth of the energy industry in Garfield County has been explosive. In 2001, only 384 people were employed in the “mining” sector of the economy, which includes the oil and gas industry, according to statistics collected by the state government and compiled in an economic profile by an independent, Montana-based, nonprofit research group called Headwaters Economics.

By 2006, however, 1,909 new jobs had been created in the energy industry, swelling the total number of workers in the sector to 2,293. They accounted for 6 percent of Garfield County’s total work force in 2006, the latest year that statistics are available.

Garfield County’s construction industry also is heavily dependent on oil and gas production. Firms are hired to clear roads and scrape pads for drilling rigs. Workers in the home building trade, who once possibly made the commute to Aspen, are staying closer to home, lured by high-paying jobs in the gas patches, said Ben Alexander, associate director of Headwaters Economics.

Alexander was a featured speaker with Westkott at Healthy Mountain Communities’ State of the Valley conference, which explores issues and their solutions in the Aspen to Parachute region.

Despite the energy industry’s resurgence this decade, Alexander said, it remains a relatively small part of Garfield County’s overall economy. Still, the industry has big impacts.

“The wages offered in the energy sector are considerably higher than most other sectors,” Alexander said. “As a result, people are migrating out of other industries into the energy sector.”

Roaring Fork Valley businesses feel a direct impact from that competition. The Roaring Fork Transportation Authority had trouble hiring enough bus drivers and mechanics at times last winter. RFTA Chief Executive Officer Dan Blankenship said people in RFTA’s traditional labor pool took jobs in the gas fields instead.

Rick Stevens, president and CEO of Aspen Earthmoving, said recently that the well-established construction firm rooted in the Roaring Fork Valley faces competition for workers with the energy industry. Most blue-collar workers in the region live in western Garfield County. They are leaping at chances to work closer to home, now that high-paying jobs are available.

Now that the construction industry is slowing in the resort areas, it raises the prospect that workers who receive pink slips might turn to the gas patches for work. Once they are there, will they come back once the resort economies recover?

Before the latest energy boom, Garfield County and the entire western Colorado region were “over-reliant” on home-building and tourism, Alexander said. The energy industry helped bring economic diversity. Now, it has grown so rapidly that it threatens to become an economic sector Garfield County depends on too heavily, he said.

The energy industry’s influence on the regional economy extends well beyond its employment numbers. The personal income of all workers in the energy trade was $184.4 million in 2006 or about 10 percent of total personal income in Garfield County, state statistics show.

But the wages being paid in the gas patch is causing “friction” with the economy as a whole, according to Alexander. The average annual wage of workers in the energy industry was $65,634 annually in 2006. The average annual wage in Garfield County as a whole was $38,785. (By contrast, the average wage for workers in leisure and hospitality was $16,247. With competition from the energy industry, positions that the tourism industry depends on become increasingly difficult to fill.)

Wages in the energy industry have grown about 7 percent annually in recent years compared to only 1 percent on average for all other wages, Alexander said. That spells trouble for the 94 percent of the people outside of the energy industry.

“Those folks are struggling to keep up,” Alexander said, “because (energy workers) are suddenly setting prices for a lot of commodities.” It causes stress throughout the regional work force because the cost of housing and the overall cost of living keeps rising, he said.

Western Colorado towns like New Castle and Rifle were once the bedroom communities for Aspen’s construction industry. Now, there is no cheap housing. The affordable housing shortages that has long plagued the Roaring Fork and Eagle valleys has spread west. A state survey recently found that Grand Junction has the tightest housing market in Colorado, Alexander said.

A labor shortage and competition for workers was another point of friction in the regional economy, at least until the second-home market cooled recently. Alexander expects the labor shortage to remain a problem, even if it temporarily eases.

“This labor market is tight, tight, tight,” he said. “You can’t supply new people for new jobs within the West Slope anymore. So any time you create new jobs, you’re bringing in new people.”

Those new workers further fuel growth. They need housing and services and eventually teachers when their children attend schools. More people must be imported to build those houses, provide those services and teach those kids.

Headwaters Economics believe the energy industry can play a vital role in a sustainable Western economy as long as problems associated with its boom are mitigated. Alexander stressed that leaders in areas like Garfield County must recognize the chances for a bust and take precautions.

Garfield County is one of 26 counties out of 416 counties in 11 western states that are truly “energy focused,” according to research by Headwaters Economics. Those counties are at greatest risk of a hard fall in the event of tumbling natural gas prices.

The key to a resilient economy is diversity, Alexander said. Garfield County, Pitkin County and much of the West are keeping pace with national economic changes and creating a healthy share of higher-paying service and professional jobs, he said, like architects and engineers as well as legal, financial and health services. Nationally, nine of every 10 new jobs are in the professional service sector, Alexander said, so it is vital that the West compete for those jobs to maintain a healthy, diverse economy.

Statistics for 2000, the latest available, showed the professional and service sector accounted for $566.4 million in personal income in 2006 dollars, or about 39 percent of the total in Garfield County. Non-labor sources, such as investments, rents from property and retirement benefits, accounted for another $370.2 million or 25 percent.

Garfield County pulls in much of its income from hunters, anglers and other outdoor enthusiasts. It also used an abundance of inexpensive housing after the energy bust in the early 1980s to attract retirees. But its ability to create professional and service jobs has been key, Alexander said.

“It’s not just a dirt-bag recreational economy and it’s not just retirees,” he said. “It’s actually quite a bit of diversity around the service economy.”

County leaders would be wise not to let natural gas extraction ruin the landscape that attracts hunters and retirees, because the economic blow could be devastating. The leaders also need to keep encouraging diversification, in ways such as finding out what existing firms need to grow their business. Maybe it is greater educational opportunities for their employees or maybe it is more affordable housing.

“Make no mistake ” the energy industry is going to remain highly volatile,” he said. “The best hedge against volatility is diversifying the economy.”

scondon@aspentimes.com


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