Officials discuss impacts of Colowyo personnel cuts
December 15, 2009
Colowyo Coal Co.'s recent announcement it that would cut 10 percent of its mine staff by mid-2010 is a reminder of how delicate the local and national economies are, Moffat County Commissioner Tom Gray said.
The energy industry, which Gray said has historically benefited local residents and the community, also is susceptible to hard times.
"I think it emphasizes we are, the nation is, in the most dynamic situation that I can remember, as far as unknowns," he said. "We can't make assumptions that the great employers we've had in the county are going to be there forever. Things aren't as stable, and we can't make assumptions."
Colowyo, a coal mine south of Craig off Colorado Highway 13, announced the cuts Dec. 4. Company officials said it had not been able to secure as many long-term purchasing contracts for the mine's coal as in the past and would have to cut costs as a result.
Mine officials said they hope to achieve the cuts through employment attrition rather than layoffs.
The job losses, however, probably won't have an immediate impact on the local economy as a whole, Gray said.
Some area economists agree.
Colowyo personnel cuts may not have as big an impact on the overall local economy as it would first appear, said Scott Ford, former interim director for Craig/Moffat Economic Development Partnership and active member of Yampa Valley SCORE, a Steamboat Springs-based business development group.
The reason for that is most money spent in the community doesn't stay in the community, he said.
If two-thirds of the jobs lost are Moffat County residents — the rest being from Rio Blanco County — and the positions pay an average of $65,000 a year, that would equal about $1.3 million in lost wages inside Moffat County, Ford said.
He used statistics provided by EDP Director Darcy Trask, who formulated an average annual wage by comparing data from the Colorado Department of Labor and Employment and Colorado Mining Association.
Although $1.3 million seems high, it is only about 0.6 percent of the total money earned in the county each year, which equals about $214.9 million.
"You and I could live very well if we split this $1.3 million, but in terms of the total economy, it's actually quite small," Ford said.
Because most of the money earned in Moffat County is spent once and then it leaves the area, Ford said the financial loss to the local economy is not much more than the base wages earned.
For instance, he said, many people's major expenses are home mortgages and car loans, which usually are paid to national companies or banks outside the Yampa Valley.
Grocery purchases, because the food is not grown locally, do not feed much local economic activity because the stores are owned and purchase their goods outside the area, Ford said.
However, he added that no job loss is a small problem to the people who lose their jobs.
"When we talk about numbers on these grand scales, it can seem to diminish what happened to Joe or Bob," Ford said. "I don't want to do that. This is very important to those this is happening to."
Trask had a slightly different take on the numbers and said she was concerned about the community's ability to weather more losses after losing such well-paying jobs.
"Even though the data says that 10 percent (of Colowyo jobs) is not a big part of our economy, if we lose 10 percent of other companies, that becomes very big," she said.
Trask agreed that the cuts at Colowyo would have a limited initial impact, but only if the national economy continues to rebound as it seems to now be doing.
"That said, if the national trend were to change, this could be a sign of some future slowdown in our primary industries," she said.
Trask later added, "The need for energy follows industry demands, and we know all industries are slow right now. If the national economy rebounds, and there is demand again for energy, then I would expect Colowyo to rebound, as well."
Mark Roberts, director of commercial planning and business development for Colowyo, said the mine's future is tied directly to its ability to sell coal through long-term purchasing contracts of about 10 years each.
The federal government's emphasis on green energy likely has had some effect on the mine's ability to sell coal, particularly because of the investment needed, Roberts said.
"I think (the government's position) is affecting the industry," he said. "I think it affects Colowyo more than some because we need those long-term contracts. We're talking 10 years or so, so it's a harder commitment."
The mine has purchasing contracts through 2017, Roberts said.