Keeping Energy’s Golden Goose from Becoming a Golden Noose: Part Two

The rest of the Rocky Mountain West needs to learn from Wyoming’s love affair with fossil fuels. Here’s why: The economic and political pressure to drill for gas and oil and to mine coal is probably too great for Colorado and Wyoming’s other neighbors to fight off.The pressure doesn’t sit well with hard-core environmentalists, such as University of Colorado math professor Marty Walter.

Walter wants to scrap all fossil fuel exploration. He talks of a revolution of renewable energy.

“The more solar, wind and geothermal infrastructure we can get in place, the better off we are,” Walter said. “Anything you get from drilling pales in comparison to global warming. To even think about impacting the Roan Plateau for a dead-end strategy is wrong.

“The middle road,” he proclaimed, “leads straight to hell.”

Welcome to Hades.

Listening to politicians talk and watching the need for better health care, colleges and roads increase, the good money is on a compromise that keeps energy drill bits turning.

Even Steve Smith, the assistant regional director of the Wilderness Society, sees that Colorado and other Rocky Mountain states likely will build at least part of their financial strategies around well-managed and highly regulated energy extraction.

Smith blasted as “contrived economics” a recent energy-industry study showing a $1.2 billion windfall for Colorado if the state allows drilling on the Roan’s U.S. Naval Oil Shale Reserves. But as much as he believes in renewable energy as an environmental policy, Smith also sees states with energy resources using them to fill their bank accounts, whether he likes it or not. So he takes the middle road.

In Colorado, that doesn’t have to mean drilling the Roan or approving any new extraction permits, Smith insists.

It can mean raising Colorado’s tax rate on fossil fuels already being pulled from the earth.

Colorado’s severance tax on energy resources is a percent or two lower than Wyoming’s or New Mexico’s. Earlier this month, a report written by Randy Udall of the Community Office for Resource Management (CORE) made the case for increasing Colorado’s severance tax rate and doing away with some tax exemptions and deductions for energy companies harvesting fossil fuels in the state.

The report, titled “Torched and Burned: Why Does Colorado Subsidize the World’s Most Profitable Industry?”, argued that if Colorado’s oil and natural gas wells were operating in Wyoming their owners would have paid $1.3 billion in additional severance taxes between 2002 and 2006.

Putting Colorado’s policies on a par with Wyoming and New Mexico clearly will produce more money. But it will also marry the state’s financial future to fossil fuels.

For guys like CU’s Walter, that wedding presages eventual disaster. For guys like the Wilderness Society’s Smith, the nuptials offer a nod to reality.

In a state like Colorado, a state badly in need of revenue sources for health-care reform, higher education and road construction, going green may have to include greenbacks from the fossil fuels as well as windmills and solar panels.

What those petro-dollars buy is time – time for renewable energy initiatives to kick in, time for drilling technology to become less harmful to the eco-system.

“At the Roan, we’re saying no new drilling now on the top or the cliffs,” Smith said. By waiting, he explained, “we’re confident there will be a way to get those oil and gas reserves out without doing as much environmental damage.”

Smith says there is an “industry backlog” where  70 percent of currently approved drilling sites are not actually being mined. Working on the those sites before allowing drilling on new ones can keep the energy industry busy for decades, Smith insisted. Meanwhile, more environmentally friendly mining methods can hopefully be developed by the time new lands go under excavation.

A hundred miles to the north, guys like Don Likwartz, director of Wyoming’s Oil and Gas Commission, and Buck McVeigh, administrator of Wyoming’s economic analysis divison, may have identified the fallacy in that theory. Both men say any slowdown in extraction results from a lack of pipeline capacity, not an oversupply of fuel. Both men talk about the need to build more pipelines, including the Rockies Express pipeline that McVeigh says will deliver fuel from Colorado and Utah, as well as Wyoming, to lucrative Midwestern markets.

The Rockies Express is scheduled to open in July 2009, McVeigh pointed out.

That means even more pressure on Rocky Mountain states to embrace the Golden Goose of the energy economy.

The battle, said Smith, is not to give in to rampant drilling.

“The scramble for revenue shouldn’t accelerate drilling just because that revenue might go someplace good,” he said.

“If you’re going to use the Aesop fable analogy, you’ve got to take care of the goose. That includes the land.”

It also includes an admission: The strategic use of natural resources can fix a lot of problems. What’s left is trying to do what Wyoming has been trying to do for decades.

Keep the Golden Goose from turning into a golden noose.

Read part one of this series here.