The energy boom next door.

Wednesday, June 04, 2008

By Francisco Tharp

RIFLE, Colo. - 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, 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 said.

Rifle is conveniently located near two major Colorado financial powers: Pitkin and Eagle counties, the respective homes of Aspen and Vail. As those communities scaled up, high housing costs pushed the working class farther and farther down valley. Eventually, the refugees reached Rifle, which, despite being 70 miles away, became a man-camp of sorts for Aspen’s service and construction workers. A 2007 study estimated that, in the 1990s, Garfield County residents filled 43 percent of the new jobs in Pitkin County and 10 percent in Eagle County. Despite the lengthy commute and occasional rural traffic jams, the relationship worked in its own way. “We were a bedroom community,” Lambert said. “That’s what drove our recovery.”

Rifle and its neighbors - towns like Parachute to the west and Glenwood Springs to the east - also became popular places for people to retire, with their easy access to public lands, hot springs and downhill skiing. Darla Dean was one of these amenity migrants, moving to Glenwood Springs from Austin, Texas, in 1996. She soon found herself drawn to Rifle’s even more rural atmosphere. She would head down valley for dancing and small-town nightlife, the kind that sometimes featured someone getting drunk and riding a horse into the bar. “It was like stepping back in time. The town was Old West, quaint, like it hadn’t changed in 100 years,” she said. Dean moved to Rifle three years ago and started her own business detailing cars, becoming part of the region’s slow but steady rebirth.

Within two decades of the bust, Rifle and the surrounding communities were back on their feet without the help of the energy industry, Lambert said. 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, said Mike Wood, the 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 said. “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 percent, 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,” said 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, said 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.

“It’s hard to keep skilled, committed workers these days,” said 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, said Annick Pruett, executive director of Rifle’s Chamber of Commerce.
 
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. It’s a common phenomenon in energy country.

Homeless shelters are also feeling the pinch. With a rental vacancy rate near 5 percent and hotel rooms going for $800 a week (on the rare occasions a room is available), energy workers may go to extremes to find a bed. One Grand Junction homeless shelter is in high demand even for the employed, said Theresa Black, executive director of the shelter’s managing nonprofit. She’s seen “guys with a big roll of cash” stay there, and gas workers take about 10 percent of the bed space, she said.

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. But that may not be enough to cover the costs to replace and repair stressed roads and infrastructure.

Gabe Preston, an analyst with RPI Consulting, a planning firm that works with rural counties on fiscal impacts of development, says it’s partly up to the county to work the system to its advantage. “There’s no way to say generally whether counties are losing or winning,” Preston said. “It depends on the fiscal structure that the county has in place. If you look at a county like La Plata (in southwestern Colorado) that has been a focus of energy development for decades, the government has adapted their fiscal structures over time to do a pretty good job to address the impacts.”

Economic diversity is key to long-term growth, said Ben Alexander of Headwaters Economics, an independent nonprofit research group. But, he warned, regions with economies that are overly dependent on energy development - places like Gillette and Rock Springs, Wyo., southeast New Mexico, and Big Horn, Mont. - are “less resilient, more volatile, and over the long run, they can grow more slowly.”

Ultimately, something much less tangible than drill rigs may determine the future of the gas patch communities.

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 (funded by Shell, the Wyoming Game and Fish Department and others) found that oil and gas development pushed pronghorn antelope off winter range.

“I would hate to see us so blinded by the notion of a boom time that we aren’t careful about the area,” said 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.”

Courtesy photo
Mike Wood, owner of Rifle’s Buckshot Barber Shoppe, cuts hair the old fashion way. Despite a slowdown in the national economy, Wood says local businesses like his are doing well thanks to the region’s boom.

PERMALINK:
The energy boom next door. | Planet JH News Article: Cover Stories

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