Managing the boom
Study looks at potential consequences from fast-growing energy industry
December 5, 2007
Craig — For some, Colorado’s energy industry may be too much of a good thing.
For instance, there’s the story of a housing contractor who had to close his business – not because there wasn’t work – but because there weren’t any workers left.
His sub-contractors worked for local energy companies, and he couldn’t pay enough to keep his labor force from abandoning him, either.
It’s one example contributing to a Headwaters Economics study. The Bozeman, Mont.-based nonprofit research group conducted the economic survey across Colorado, New Mexico, Wyoming and Montana.
Headwaters looked at the economic impact to communities dealing with the energy boom and compared them to similar communities with energy-independent economies, said Ben Alexander, Headwaters associate director.
The study was funded from three to four foundation sources, Alexander said, one of which was a conservation group.
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Partial funding from an environmental organization does not represent a conflict of interest, Alexander said. Headwaters works in-depth with the Bureau of Land Management and the U.S. Forest Service and would not want to jeopardize those relationships.
Headwaters is not interested in politicizing its study, and the study is not about halting the energy industry, he added.
“We are looking at how to make sure the energy industry adds instead of detracts to the economy after the boom passes,” Alexander said. “County-based economies that are more reliant on one single industry grow slower over time. With this report we wanted to see if we can kick off the discussion on how energy can benefit Colorado in the long-term.”
That means managing the energy industry to ensure its negative side effects don’t harm other industries, Alexander said.
Negative consequences can include squeezing other industries out by taking their workforce and driving up housing costs and other inflation.
This energy boom is not like the one in the 1960s and ’70s, he added. The energy industry is not as large a factor in the state’s economy as it was then, but that doesn’t mean improperly managing the industry won’t have consequences.
What management steps the group will recommend will be published with the full report, early next year.
Headwaters does not have any plans to make a legislative push when it publishes the report, Alexander said.
His group briefed Colorado Department of Natural Resources officials, including Director Harris Sherman, a few weeks ago.
When contacted Monday, Deb Frazier, Natural Resources communication director, said the department was not taking a position regarding the study.
Natural Resources representatives told Headwaters after its presentation they would take its figures under advisement.
Those figures include statistics showing that rural communities with a growing energy industry have fewer high-wage service jobs than rural communities of similar sizes without energy activity.
High-wage service jobs are professional, educated positions such as attorneys, health care experts and accountants, Alexander said.
Headwaters is not ready to say the energy industry creates a “repellant effect” – the industry’s business acts to keep those professionals out – he added. It’s just a widespread situation his group is investigating.
What Alexander did say comfortably is the pace of development is “very important.”
“If one industry grows really quickly, it places stress on the whole geography, as far as the local government being able to keep up with the cost to infrastructure in having so many more people and so much more traffic on the roads, and to the doctors for keeping up with the population, and to the other industries in being able to compete in the job market,” Alexander said.
Although Moffat County was not specifically studied, Headwaters did look closely at Mesa and Garfield counties.
There, unemployment is around 2 percent, which is potentially harmful to the area’s economic future, Alexander said.
“When unemployment is that low, it’s inflationary,” he said. “Businesses have to keep raising their wages to attract workers and that drives up the cost of everything. That also means that businesses that are not in as lucrative a position as the energy companies can’t find employees to work for wages they can afford to pay.”
The inflation also impacts housing markets.
“What we’re seeing is housing markets are becoming too expensive for people moving to the area to afford and for people that generally live there,” Alexander said.
What was once an area strength that drew people in – affordable housing making it easier to relocate – is history, he added.
Big Energy’s benefit to the western United States cannot be underestimated but there is a responsible and an irresponsible way to handle the situation, Alexander said.
“Energy is a tremendous opportunity here,” he said. “Let’s do it right.”
Collin Smith can be reached at 824-7031, ext. 209, or email@example.com