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In western Colorado, an energy boom of unprecedented proportions has been layered on top of a thriving amenity economy. Which will come out on top?
RIFLE — The glass eyes of a trophy elk stare across the dining room at a tarnished, double-barreled shotgun and a couple of old lever-action rifles. On another wall in the Basecamp Cafe, a four-pound rainbow trout is forever frozen in flight. Men in boots and NASCAR ball caps sit beneath the trophies, digging into their eggs and bacon. At the horseshoe-shaped counter, a woman answers her cell phone in Mexican Spanish, and a guy with a salt-and-pepper beard, wire specs and a felt hat slouches over a mug of black coffee.
And just down the counter, with a shaved head, pierced ears and a Sanskrit “Om” tattoo, sits Ganesha. He sips green tea from a Styrofoam cup and tries to recruit the waitresses to his full-moon drum circle and daily yoga classes. Folks seem to take it in stride. This type of socioeconomic layering is pretty typical in Rifle, Colo., where immigrant service workers, retirees, roughnecks and even a yogi or two regularly rub elbows.
After an energy bust flattened the region 26 years ago, Rifle slowly rebuilt itself as a tourist and retirement town and bedroom community for the flourishing nearby resort towns of Aspen and Vail. Then, about five years ago, the energy industry invaded. High-wage workers poured in by the thousands to man the drill rigs that popped up to tap one of the nation’s largest natural gas reserves. The result, says one Rifle economic planner, has been a “perfect storm” of industry in Garfield County on Colorado’s Western Slope.
The tempest rages across the region: southwest to Mesa County and the 50,000-person metropolis of Grand Junction, north into rural Rio Blanco and Moffat counties. And it’s enabled these communities to thrive while other Western cities are dragged down by a sinking national economy. There is almost no unemployment here, real estate values are soaring, and the breakneck pace of development is hampered only by construction companies’ inability to scrape up enough workers.
In other words, the long-running struggle to build a post-bust economy in western Colorado appears to be over. With the gas industry’s $80,000-plus average annual wages and its contributions to county coffers through property and severance taxes, the region should remain flush for quite a while.
However, a few cracks have split the shiny veneer of prosperity. Traffic sometimes piles up for the entire length of Rifle’s once-sleepy main drag, and roughnecks pack the hotel rooms, leaving tourists without a bed. Fast food joints have a hard time coaxing people to flip burgers — Grand Junction’s Burger King even offered a $300 signing bonus to lure new employees. It leads to the region’s essential question: What will this storm mean for the identities of these communities? Will today’s influx of cash and commerce help lay the foundation for tomorrow’s sustainable economy? Or will the thousands of drill rigs and thousands more workers reduce the amenity economy — not to mention the landscape — to a shambles, like a tornado tearing through a trailer park?
Rifle is no stranger to energy booms and their painful busts. The town is the access point to the rugged Piceance (pronounced PEE-awnce) Basin. Underneath these scrub- and conifer-covered mesas and narrow canyons lies a virtually untapped trove of fossil fuels, including one of the continent’s largest natural gas reservoirs and 1 trillion barrels of shale oil. In the late 1970s, Exxon and other energy companies responded to President Jimmy Carter’s call for energy self-sufficiency by making a play for the oil shale. Then, in 1982, came a sudden drop in oil prices, and on what’s now known as “Black Sunday,” Exxon abandoned its $5 billion venture overnight. More than 2,000 jobs were lost in a community of about 5,000, and property values washed out faster than the Colorado River’s banks in a high spring runoff. Mayor Keith Lambert recalls that his house, bought in 1981, depreciated by $40,000 in one week. Suddenly, about 60 percent of the houses on his block were empty. “It looked like a modern-day ghost town, and those houses had just been completed that year,”he says.
Within two decades of the bust, Rifle and the surrounding communities were back on their feet without the help of the energy industry, says Lambert. Rifle’s population had grown from just over 3,000 people in 1980 to nearly 7,000 in 2000. Super Wal-Mart and Taco Bell abutted still-thriving old-time establishments like the Winchester Motel and the Cowboy Calf-A. Each fall, hunters streamed through town on their way to the nearby Roan Plateau and other wildlife-rich areas, spending some $30 million per year on hotels and food and gear. Upstream, Glenwood Springs bustled with growth, while downstream, new McMansions sprang up around the emerald-green golf courses of Parachute and Battlement Mesa – small communities that served as man-camps before Black Sunday. Grand Junction, meanwhile, fed off the national housing boom, and provided services for the rest of the growing Western Slope.
Then, in 2001, just when many of the nation’s traditional oil and gas fields were nearing their limits, the Sept. 11 terrorist attacks drove home the need for increased energy independence. The Bush administration had already begun pushing for aggressive energy development on federal land. New technology became available to tap previously inaccessible gas deposits. On top of all this, natural gas prices shot through the roof.
The energy boom hit Garfield County hard and fast, whipping the already smoldering economy into an inferno. Since 2000, natural gas production in the county has increased fivefold, wells are being drilled at a rate never before seen in Colorado, and Garfield is poised to surpass La Plata County as the leading gas producer in the state.
The Buckshot Barber Shoppe sits just around the corner from the Basecamp Cafe. It’s one of the last true barbershops around, says Mike Wood, owner and barber for 29 years. Bullets, trophy heads, rusty tools and an old barber pole deck what he jokingly calls his “walls of shame.”
Wood, who makes it clear he’s a barber, not a stylist, wears his own hair short and spiky in the front with a long braid down the back. He treats his regulars well, with a straight-razor neck shave, a slap of Bay Rum, a shoulder massage and detailed haircut analysis after every trim. With the gas boys in town, business is “clipping right along,” he says. “That’s a rough-and-tumble bunch, and that’s good for me, because I don’t do no foo-foo haircuts.”
Wood’s community has so far been able to glide through the national economic slump largely unscathed, thanks mostly to the omnipresent energy industry.
National unemployment rates have climbed to just over 5 percent, but northwest Colorado boasts a rate of 3.6, dipping down to 2.2 percent in Garfield County. Rifle’s population, which rose to nearly 9,000 in 2006, continues to grow, and building permits shot up by 50 percent between 2003 and 2005. In contrast to the nation’s housing crash, the average home price in Rifle has gone from about $250,000 to $350,000 in a year, mostly due to high demand from oil and gas workers. Commuting patterns have changed, too: Today, more and more workers are driving in to Garfield County, mostly from neighboring Mesa County and Grand Junction.
And sometimes industry just hands out money to the community. Colorado Mountain College recently built a new campus in Rifle with $4.6 million donated by EnCana, Williams and Shell. The new campus offers a course load of oil and gas support training, among other programs. At the county fairgrounds, underneath “4-H Pig Sale, March 29”and “Free Manure — You Haul,” a new electronic sign sports the logos of Williams Oil and EnCana; the two companies split the cost of the $36,000 sign.
Like most barbers, Wood has an insider’s perspective on his clients’ woes, so he sees the dark side of the boom, too. One Battlement Mesa retiree saw her monthly rent go from $750 to $1,000 overnight, and her fixed income isn’t going to change, no matter how big the energy industry gets.
For some residents, especially public employees, the rising real estate and living costs are unbearable. “It would be a frightening time to be renting,” says Garfield County Commissioner Tresi Houpt. “I think we’ve hit a crisis point when those people you want — police officers, teachers, hospital employees — can’t live and work in your community unless they owned a house before.” Teachers have been in high demand since 2002, when the local school district began growing by about 6 percent per year (previously it was a more manageable 1.5 percent). But despite being the 17th highest paying district in the state, the district has a hard time keeping educators, says Garfield RE-2 Superintendent Gary Pack. “(Teachers) usually realize within a year or so that if they’re single, they’re not going to be able to buy a home here.” In 2007, the district lost 54 teachers, with many citing the cost of living as a reason for leaving.
Both local government and the private sector are struggling to attract and retain employees during a time when they are desperately needed.
Construction workers can make significantly more money working in the gas fields than pounding nails, and other industries have a hard time paying wages in line with the cost of living. Many contracting firms have either downsized or shut down altogether for lack of workers.
“It’s hard to keep skilled, committed workers these days,”says Duke Cox, a general contractor who has done business in western Colorado for 32 years. He’s reduced his business from eight employees to zero, thanks to competition from drilling jobs, and now has to rely on subcontractors.
The boom has been a mixed blessing for businesses that traditionally catered to tourists. Gas companies often put up their transient workers in hotels, and occupancy rates in Rifle have been at about 97 percent, says Annick Pruett, executive director of Rifle’s Chamber of Commerce.
“If tourists don’t have a place to stay, they’re going to go down the road and spend their money somewhere else,”says Kris Daler, president of the Rifle Economic Development Corporation.
The boom is also straining the area’s social services. The Garfield County Sheriff’s Department has had to hire 15 new deputies since 2002 in order to deal with a spiraling crime rate; since 2001, total offenses have shot up from 100 to 600 per year, with sharp increases in assaults, DUIs and drug-related violations. It’s a common phenomenon in energy country. Just north of Garfield County, the Rio Blanco County Sheriff’s Department saw its calls in the Piceance Basin increase from a mere five in 2003 to 1,675 in 2007.
Traffic volume — much of it from big gas trucks — has increased at a rate three times greater than the population growth of the region as a whole, recent studies report. Roads are not only congested they’re also deteriorating under all the heavy use. The direct and indirect impacts of the boom have put a huge burden on local government coffers. Officials in Rifle anticipate that they will need about $67 million of infrastructure improvements over the next five years, while Garfield County will need hundreds of millions of dollars in coming decades to cover the impacts to roads and other services.
That’s not to say that industry isn’t doing its part. Counties collect property taxes on gas companies twice, first on the land they own, and second, and more significantly, on the value of the gas they produce — the ad valorem tax. For Garfield County, that adds up to around $85 million in revenue per year (about 65 percent of total revenues) distributed between the county and its various taxing districts. But that may not be enough to cover the costs to replace and repair stressed roads and infrastructure.
Rio Blanco County, which sits just north of Garfield County and is expected to bear the brunt of the boom in coming decades, charges gas companies impact fees for each well they drill in order to cover costs to roads and other infrastructure. Garfield County’s commissioners, however, rely on the companies to voluntarily pony up for costs; they yielded over $3 million for road repairs last year. Requiring companies to pay impact fees could damage the cooperative approach, says Garfield County Commissioner John Martin, who feels that the industry is already regulated enough.
Current forecasts show that Garfield County will be able to cover operating costs. But even with all of its tax revenues, the county may come up short on capital costs in the next three decades. And towns in the gas patch face an even tougher future. Rifle’s sales tax revenues — cities don’t collect property or ad valorem taxes — have shot up an average of 16 percent each year thanks to the boost in retail trade brought by the workers. But that’s short of what’s required to build badly needed infrastructure.
So both counties and muncipalities must rely on state mineral severance tax revenues (85 percent of which come from oil and gas) to cover funding shortfalls. In recent years, the county and its communities have received some $37 million to refurbish a town hall, construct traffic roundabouts and help Rifle build a community park. But relying on those taxes is a bit of a gamble. Because of its taxing structure, Colorado has one of the lowest severance tax rates in energy country (due to a provision that allows energy companies to deduct their property tax payments from their severance tax liabilities). And the money is distributed to local communities in ways that don’t always equate with the energy industry’s impacts.
Garfield County, for example, produces about 20 times more natural gas than neighboring Mesa County, yet over a five-year period collected $23 million less in severance tax funds. This is partly because Mesa houses so many of the region’s energy workers, but it’s also because a good portion of the severance tax funds are doled out in the form of grants, which are scattered around the state.
Ultimately, something much less tangible than drill rigs may determine the future of the gas patch communities. Rural communities like Rifle appeal to tourists and long-term residents largely because of their “quality of life.” It’s an elusive, and subjective, concept, but an important one for non-energy economies. And it is something that could be destroyed by rapid gas development.
Duke Cox, the contractor, loved living in the town of Silt, just east of Rifle. But he recently left, moving from the center of the boom to its fringe, in Palisade, Colo., where peach orchards and vineyards still outnumber gas wells. “Silt was a little piece of Colorado heaven, and we chose to abandon that,”says Cox. “We want to live somewhere where you can find clean air and relative peace and quiet, none of which you’ll have in a gas patch, by the way.” He followed the lead of his family doctor, who left for the same reasons.
Meanwhile, the public lands — most notably the wildlife-rich Roan Plateau — are targeted for more gas development. A new study was just launched to determine how energy companies can ease their impacts on wildlife in the region. A 2006 report from the Pinedale Anticline gas field in Wyoming’s Upper Green River Valley found that winter mule deer populations declined 46 percent — much more than herds on the study’s nearby control area. Another study in that area found that oil and gas development pushed pronghorn antelope off winter range.
Local officials hold out hope that stronger regulations can mitigate impacts. “I would hate to see us so blinded by the notion of a boom time that we aren’t careful about the area,”says Garfield County Commissioner Tresi Houpt. “If we don’t have responsible regulation in place, we won’t be in control of our destiny. Industry will be.”
A lot of people in western Colorado are bracing themselves for the next Black Sunday, when the energy storm subsides. They may have to wait a while.
Even if all the drilling stopped tomorrow, the bottom would not drop out of the energy economy the way it did in 1982. Thousands of wells would continue to suck gas from the earth and pump taxes into local and state coffers, and they’d provide jobs for hundreds of workers — one person is needed to service and maintain every six wells or so. EnCana, one of the largest operators in the region, expects to have about 1,000 employees and contractors in the field during every phase of production, from drilling to reclamation, says company spokesman Doug Hock. That should keep paychecks rolling until at least 2030.
In all likelihood, the drilling phase, which requires 35 workers for each rig, will continue for a long time, however. Natural gas prices have cranked up tremendously since 2000, and are expected to stay high. New pipelines are opening up new markets. And even if the next administration in Washington is less friendly to industry, it may not hamper drilling much. The energy companies already have purchased enough mineral rights to leave them with a huge backlog of drillable land.
Current economic forecasts predict that some 1,000 or more new wells will be drilled in the Piceance Basin every year for the next few decades. By 2035, there will likely be more than 37,000 producing wells in the region — about five times the current number.
And that’s just the baseline. Though it may seem like a cruel joke to those who lived through the last bust, oil shale is poised to return. The Energy Policy Act of 2005 mandated aggressive leasing of federal lands in oil shale country, and Shell jumped on the opportunity. It is currently testing a new extraction technique about 25 miles northwest of Rifle called “in-situ”drilling, in which an entire oil shale formation is heated for a few years to coax the fuel out. Recent results look promising, says company spokesman Tracy Boyd, and the company expects to have what Exxon didn’t 30 years ago: a “positive energy balance,”meaning more energy comes from the shale than is used extracting it.
It may prove profitable this time. A 2005 RAND Corp. report warned oil shale, extracted using the 1970s method, would not be profitable unless oil topped $70 per barrel. Back then, that seemed inconceivable. Today, of course, oil prices are in the $120 range, and Shell’s in-situ technology could bring oil shale production costs down further. Oil shale could double western Colorado’s gas boom, with some 25,000 employed directly by the energy industry by 2035.
Francisco Tharp is the first High Country News intern of the new millennium to write an HCN cover story.