Black Sunday again!?!
Does anyone else feel like this whole economic crash has somehow tweaked our very perception of time? Just a few months ago, High Country News was writing stories about the unprecedented pace and size of the natural gas boom. In order to provide historical context, the stories often mentioned Black Sunday, the dark day in 1982 when Colorado's brand new oil shale boom went belly up and thousands lost their jobs in Western Colorado. Those who were alarmed by the pace of the boom also warned that we were headed for a repeat of Black Sunday.
And they probably believed that. Still, I think most folks saw the bust as something that would happen years in the future, not months. But check out the news today, and there's that Black Sunday word again. And some say it's happening right now.
From today's Durango Herald:
Just a few months ago, economists were saying Colorado's outlook was not so bad, thanks in part to a strong energy industry.
But those happy days are over, said five industry experts on a panel discussion sponsored by the Independent Petroleum Association of Mountain States.
Energy companies are facing the worst conditions they have seen since the early 1980s, said Ward Polzin of Tudor, Pickering, Holt & Co., a Texas-based energy investment firm.
EnCana, one of the big companies in this region, is pulling back its operations and planning on drilling half as many wells as it did last year. Other companies have similar plans. It's thanks to that old double whammy: Natural gas prices have dropped along with crude oil, and credit for new projects is harder to come by. There's no end in sight.
Again, from the Herald, that Black Sunday reference:
Longtime Coloradans remember the early '80s for a catastrophic energy bust that came after Black Sunday, when Exxon pulled out of the Western Slope.
"This isn't a speed bump. It's a stop sign," Polzin said. "This isn't anything we can get out of in a few months."
What's alarming is the speed with which the bust hit the gasfields. Keep in mind that the announcement of drilling reductions are coming even as a record high number of drilling permits have been issued this year. No one saw it coming, including the energy companies and, apparently, some economists who were studying the boom.
Just about a week ago, Headwaters Economics, out of Montana, released its report titled: Impacts of Energy Development in Colorado. It's an interesting report, even if it does seem a bit outdated already. It includes this nugget in its summary:
The most recent evidence suggests that the natural gas surge on the West Slope is making it harder, not easier, for other sectors of the regional economy to thrive. The concern is that the energy industry will grow to a large enough scale, while making it hard for other industries to compete for labor, that the regional economy once again becomes more narrowly specialized and subject to slower long-term growth as well as greater volatility.
Yet it is today’s more diverse industry mix that brought the region out of its last energy bust, and currently sustains most households on the West Slope. The challenge and opportunity facing the West Slope is to manage the surge in natural gas development so that it expands regional employment, wages, and tax revenue without undercutting affordability, an attractive environment, and the health of local government finances.
Great points, all of them. But it looks like it may be a while before the gas industry grows so big it blots out the rest of the economy. Meanwhile, it looks like the West suddenly faces a much different challenge: Pulling through a bust that ripples not only through the extractive economy, but through the amenities economy, as well.