Yampa Valley Data Partners report: Drilling crews leave small economic footprint in Northwest Colorado
April 16, 2012
Chris Oxley has watched oil activity in Moffat County ebb and flow for years.
The Craig Chamber of Commerce executive director said Thursday that pipeline projects and oil drilling has filled area hotels, trailer parks and rooms in private residences. It's also brought a buzz of activity to town.
But she said the buzz doesn't tend to last long and the economic impact of oil rig workers who sleep and stay in Craig when exploration activity ramps up is smaller than people may realize.
"The biggest effect it is going to have here is on government in terms of the taxes collected, mineral royalties, and the severance tax down the road," Oxley said about oil and gas activity overall.
Oxley said she and about 11 other business leaders met last week with Moffat County Natural Resources Director Jeff Comstock for a roundtable discussion that wasn't supposed to focus exclusively on oil and gas.
But with companies like Shell Oil and Quicksilver Resources continuing to explore the Niobrara shale formation below Northwest Colorado, she said that's where the conversation quickly turned.
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Oxley said the feedback she got from business owners from lodging, retail, real estate and construction companies at the meeting reaffirmed her long-held belief that drilling crews continue to have a minimal economic impact in Craig.
"We don't see a big impact on retail sales. Sometimes we get an impact on our lodging, but even that can be minimal," she said. "Most of these (drilling crews) work on a per diem, and most of them try to maximize their money so they have dollars to take home.
"I really do think there's a disconnect between what people are expecting the impact to be and what it actually is. We've already got all of this activity and all of these trucks and this drilling, and people are saying, 'Nothing is happening to my business.'"
A Yampa Valley Data Partners report released this month supports the notion that Northwest
Colorado business owners shouldn't expect drilling crews to inject significant revenues into their businesses.
However, the study acknowledged that drilling crews are just one piece of oil and gas development's overall economic impact.
A minimal impact
Scott Ford, a local economic analyst and an adviser for Yampa Valley Data Partners, said his recent analysis of the three phases of well development and his discussions with Shell Oil officials who are working in the region led him to predict the economic impact of drilling crews who work in Moffat and Routt counties will continue to be minimal.
In a study he conducted for Data Partners' second quarter economic forecast, he concluded that if 10 wells were in development annually in Moffat or Routt, spending by the crews who build and develop them would support only an additional 6.2 jobs split between the retail/trade and accommodations/food service industries.
"They are a very different kind of visitor," Ford said about drilling crews.
He noted many are subcontracted by oil companies, don't live in the communities they work in and receive a per diem for their food and lodging. They also work long days and don't have much downtime.
"They're very focused on their work, and their economic impact on a community is probably substantially less than we would think," Ford said. "They have an incentive not to spend their per diem or spend very little of it if they can get away with it."
Ford said his study assumed wells take 90 to 100 days to complete and utilize crews of six to 10 people who sometimes work 12 hours a day for two weeks straight to complete their task before being replaced by another crew.
His economic forecast stated that if drilling activity in Moffat County is as busy as it was in 2006, spending by drilling crews would result in $12,980 in sales tax revenue for Craig, and $18,221 for the state.
But some business owners in Craig, especially in the lodging industry, are adamant the economic impact of the crews help keeps them afloat.
When a well needs to be punched in Moffat County, Craig's Candlewood Suites can fill up quickly.
"And when something breaks at a mine or a power plant, or drilling ramps up, we can suddenly have an awesome year in terms of sales," said Tammie Thompson-Booker, the hotel's director of sales. "I'm a firm believer in the positive impact the community receives from the energy industry."
Drilling crews also are frequent guests at the Holiday Inn of Craig.
Sales and marketing director Renee Campbell said her hotel didn't project 2011 would be a particularly good revenue year, but strong bookings related to oil and gas exploration in the fall months made it one.
Lodging executives like Thompson-Booker and Campbell usually see their bookings thrive when Moffat County is ripe with new oil and gas projects and drilling crews need a place to stay.
Thompson-Booker said because Craig isn't much of a vacation destination, her hotel that specializes in long-term stays always is at the mercy of the business activity around it.
She said workers must be having some sort of impact beyond their hotel bills.
"I just can't believe they don't feel there is that much of an economic impact," Thompson-Booker said. "These workers have to eat. They have to gas up their vehicles. Some of them bring their wives and families out here."
Campbell has a different view.
She acknowledged that while it's easy for her to see the benefits of ongoing development to her business, she's heard from other business owners in Craig who aren't reaping the rewards of energy development.
"We see (drill crews) fill our rooms, but I've talked to some restaurant and retail owners near us recently and they tell me they aren't seeing any benefit from it," she said.
The oil and gas industry has long touted energy exploration's economic impact on communities that comes from more than just drilling crews.
Tisha Schuller, president of the Colorado Oil and Gas Association, said the economic impact of oil and gas grows as an oil play progresses.
"Early in a play, during the exploration phase, visiting drilling crews will increase hotel, restaurant and retail business," she said in an email. "As a play evolves into development, communities will experience increased local employment and the addition of new businesses to support longer-term business plans. This will have a positive effect on housing, job creation, and the creation of local businesses.
"Local oil and gas production will directly increase local tax revenues and all local economic development activities will increase the regional tax base.”
But back at the Chamber of Commerce in Craig, Oxley said it's difficult to determine just how much economic growth can be attributed to oil and gas at a given time.
"In 2006-2007 we started to see oil and gas activity gear up, and we saw some growth," she said. "People naturally wanted to attribute it to oil and gas work. But at the same time you have pipeline crews coming through, or the power plant has an outage, and you start seeing more activity that's not necessarily related to oil and gas.
"We had a lot of different activity in a lot of different sectors that contributed to that feeling of, 'Wow, the economy is really going to break loose because of oil and gas development.'"