Is oil and gas overrated?

(Photo/Jason Kosena)

(Photo/Jason Kosena)

Colorado’s recent energy boom has impacted the environment without having economic benefits as great as those generated by other industries, according to a new study.

The report produced by the nonprofit research group Headwaters Economics, concludes that Colorado needs to lobby the federal government harder in order to control the pace of energy development on public lands, use state authority to protect the landscape of impacted communities and change the mineral tax structure to capture more value.

The group, based in Bozeman, Montana, is funded by economic analysis contracts with the U.S. Bureau of Land Management and the U.S. Forest Service. It also contracts with towns, state agencies and other nonprofits, and derives some of its funding from foundations and grants.

Focusing primarily on Garfield and Mesa counties on the state’s Western Slope, the study’s authors conclude that more revenue needs to be captured and set aside to guard against the kind of bust that devastated those counties in 1980s.

Even at the relatively robust pace of recent years, oil and gas severance taxes have been insufficient to adequately fund needed transportation and growth infrastructure in the state’s natural-gas hotbeds. Now plummeting gas prices due to a year-long recession indicate the energy sector will slow down significantly in the near future, meaning fewer tax dollars and jobs.

“The West Slope’s recovery from the economic bust of the early 1980s parallels broader economic trends in Colorado and across the West,” the study says. “High amenity areas that offer a mix of transportation infrastructure, recreational opportunities, attractive scenery, and in some cases affordability, have developed a thriving modern service and knowledge-based economy while also capturing retirements and investment dollars.”

In other words, tourism, real estate development, tech-sector and education jobs that depend on the state’s natural beauty have carried Colorado since the last energy boom and bust in the 80s. The energy sector threatens those industries because of its impact on the environment and demands on industrial infrastructure without generating the job and revenue benefits to offset the harm.

“More recently, Mesa and Garfield counties successfully trade on quality of life as a way to attract and retain new residents and businesses across a range of industries,” the report continues.

While the energy industry’s overall share of the state’s economic growth in recent years is fairly minimal, Headwaters does acknowledge that oil and gas jobs pay better. But the study concludes that can be seen as a negative because workers are pulled away from other more consistent industries.

Headwaters found that in 2005 Colorado’s economy employed more than 3 million people and produced $175 billion in personal income, with only 27,000 of those jobs (0.9 percent of the state total) and $4 billion of the personal income (2.3 percent) coming from the energy sector. Energy sector jobs paid more than $31,000 more per year than jobs in other industries, making it harder for those industries to compete, the report concluded.

“We haven’t replaced high-paying industry jobs with low-paying tourism jobs,” said Mark Haggerty of Headwaters, one of the report’s authors. “In fact, it’s something quite different. It’s a whole new economy on the West Slope.”

Haggerty points to better-paying jobs in health care and social services, management of businesses and enterprises, professional and technical services, finance, insurance and information. And he also cites what he calls “non-labor” income generated from transfer payments from the federal government and the personal-investment income of retirees moving to the Western Slope. He therefore warns against overreliance on the cyclical energy sector.

But even some Western Slope politicians who were firsthand witnesses to the 1980’s bust that left some communities like Parachute and Battlement Mesa virtual overnight ghost towns, say the retirement/recreation/tourism boom comes with its own set of pitfalls.

But even some Western Slope politicians who were firsthand witnesses to the bust that left some communities like Parachute and Battlement Mesa virtual overnight ghost towns, took issue with the report’s findings. They say the second home/recreation/tourism boom comes with its own set of pitfalls.

John Martin, a Republican Garfield County commissioner, said hunters who constantly complain that energy development is killing their cash cow for the state are no more than “thrill seekers and trophy hunters” practicing a “sport for the rich” that’s equally subject to the vagaries of the global economy.

“So hunting isn’t going to do it for you. The ski areas are going to experience a tremendous downturn because of the economy and then what do have except for the extremely rich and those who have a good trust fund?” Martin said of the recreation-based economy. “We’ve got a whole bunch of people in between, and those are the people I think of when I do my stuff in Garfield County. How the heck are they going to survive?”

Martin argues energy sector jobs should not be turned away but that local communities need to do a better job of getting their share of mineral severance tax funds to pay for current infrastructure demands and to put away for the inevitable downturn. He argues all the state’s industries can coexist with oil and gas.

“That’s where my focus is going to be. It’s not going to be saying energy is everything, open the door and we sell our souls,” Martin said. “No, that’ll come and that’ll go. We know that, but we’re ready to gear up for it and we’re putting away every penny we can so that those people in between the extremely rich and the extremely poor they can survive as well.”

Haggerty agrees that a more economically diverse Western Slope can and should coexist with the energy sector, and that no one industry should dominate, including tourism.

“We also know that there’s been a lot of tourism and a lot of low-paying job associated with that, but that’s not the future that we’re recommending people look to,” Haggerty said. “We want communities on the West Slope to try to capture that diverse and high-paying sector of the services and also try to capture that wealth that’s associated with retirement and non-labor income.”

Former Western Slope Republican U.S. Rep. Scott McInnis, now an attorney and oil and gas lobbyist, predicted earlier this fall that the natural gas boom was just about to run its course on the Western Slope, in part because of overregulation but also because of falling prices.

But he added that not only can energy development coexist with recreation, tourism and real estate, it is in some ways preferable and that those industries should be held to the same environmental standards.

“There’s something to be said about a job with good income,” McInnis said of energy employment. “My guess is most [energy opponents] would say let’s be hands off, and I say then let’s apply that across the board. Let’s not allow you to drive your truck up there when you want to haul your elk out of there. Why don’t you guys go back to bows and arrows if you want to go back to Day 1. Let’s not allow City Market to drive its trucks over the mountain to bring food over here.”

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About the Author

David O. Williams

is an award-winning reporter who has covered energy, environmental and political issues for years. His work has appeared in the New York Times, Chicago Tribune and Denver Post. He's founder of Real Vail
and Real Aspen.