Busted in Rio Blanco

A gas boom community feels the pain

 

The frozen mud in Elaine and Stephen Urie's parking lot still holds the imprint of a prosperity that has faded. Just a few months ago, their flatbed semi-trucks tracked in and out of here daily, maintaining roads and hauling rigs and equipment out to natural gas drillers in nearby Piceance Creek. Today, beneath a crisp blue sky, all seven of their semis rest in the mud, facing the highway expectantly.

"We basically have no work," says Elaine, 55, looking out of her office window onto the equipment-littered lot. "It hurts." Since September, they've laid off 10 of their 14 employees, scaling back to themselves and their two sons. "We're facing devastation, and it's coming fast."

This wasn't supposed to happen. Not for a while, anyhow. As recently as last summer, natural gas companies such as Exxon and Williams predicted that they would be busy in the area for at least the next five years, possibly for several decades, drilling tens of thousands of new wells into the tight sands of northwest Colorado.

Then the economy tanked. Suddenly, manufacturers needed less electricity and therefore less gas in their power plants. This largely explains why gas prices hurtled from $13 per thousand cubic feet last summer to about $3 per thousand cubic feet, leading companies working in the area to scale back the number of drilling rigs by more than 65 percent. For Western communities that host gas development, the bust compounds the economic strains created just by the recent boom.

"What we have now is a system of energy development almost guaranteed to leave people in small towns worse off," says sociologist Bill Freudenburg, a professor at UC Santa Barbara. "It's resource roulette. Every now and then, it looks like finally we're beating off those pesky enviros and we're going to make it big, oh boy, but by the time you pay off your (infrastructure) investments, the boom has gone bust."

In Rio Blanco County, Deputy Sheriff Corey Dilka bumps up and down over a deeply rutted dirt road that winds past drill rigs, outhouses, and trucks hauling water in huge cylindrical containers. Silver and green pipes snake out of the ground; flames fly from tall metal pipes like flags in the wind. In the valley below, home to the longest stretch of asphalt in the heart of drilling activity, potholes stretch across the entire road. Graded to accommodate ranching, these roads fail under the heavy industrial loads, which can weigh 1 million pounds.

Due to the drilling surge, the Rio Blanco Sheriff's Department responded to nearly 2,000 incidents last year -- up from just over 100 in 2003. The county jail, located on the third floor of a red-brick building in the middle of Meeker, has been over capacity since 2005, something unheard of in its 82 years. Calls to the volunteer fire and ambulance crews have tripled since the gas came to town. Two new trailers took over part of the Meeker elementary school playground in order to house the additional children. Apartment and home rental prices have doubled. With the population influx, the county needs a new water treatment facility and sewer system.
Communities affected by gas development are unable to maintain infrastructure due in large part to ineffective state tax policy, says a group of local northwest Colorado governments. Despite the billions of dollars that gas companies working in western Colorado say they've created for the state in recent years, Rio Blanco hasn't been able to cover its costs.

Partly this is because the effective tax rate on energy development is just over 6 percent in Colorado, compared to Wyoming, where the effective rate is 13 percent. There, the state's permanent fund has ballooned to $4 billion. Wyoming's Sublette County, home to large-scale gas extraction, had enough money in 2005 to provide classroom laptops for the entire fifth grade.

The energy policies of the Bush administration, which expedited drilling, simply exacerbated the challenges posed by state tax policies, says Ben Alexander, associate director of Headwaters Economics, an independent research group. When gas development occurs in a rush, it makes it harder for communities to develop tourism or attract second-home owners. Ranchers and farmers, who are the bedrock of rural places, struggle to keep going during a gas boom, as their workers leave for richer jobs in the gasfields. (In Rio Blanco's Piceance Creek, 20 percent of ranchers have sold out to gas companies in the past five years.) Unfortunately, according to Alexander, the kind of economic diversification threatened by drilling is key to minimizing the impacts of the boom times and surviving the busts.

"This unbridled energy development has impaired the future competitiveness of the rural West," says Alexander, who is based in Bozeman, Mont.

Though the energy slowdown will give communities time to make improvements to roads and schools, there's a paralyzing sense of uncertainty about whether to even proceed with such expensive projects.

"The oil and gas companies tell us that they'll be back to drill," says Pat Hooker, Rio Blanco's county administrator. "That's great, but when? Two years? Five years?"

Rebecca Clarren, a former HCN associate editor, is a 2009 Alicia Patterson Foundation fellow.

 

Natural gas drilling
Alan Gregory
Alan Gregory
May 08, 2009 09:14 AM
I've not heard or read of any downturn in the number and extent of natural gas drilling operations in the Marcellus Shale formation (which underlays most of Pennsylvania and large regions of New York State, Maryland and West Virginia. Regardless, though, of the economic scenario, the boom-and-bust cycle will play out, just as it did in Idaho and many other states during the heyday of gold mining in the 1800s.
Rio Blanco energy bust
Peggy Baxter
Peggy Baxter
May 14, 2009 07:28 AM
My family lived in Meeker in the mid 70's and Grand Junction in the early 80's. My husband and I worked in a lumber yard and a bank. It is so much easier to talk about just letting the cycle "play out" when you're not in the middle of the boom and bust. We struggled to find a place to live during the boom only to find that our home was worth a fraction of what we paid and our jobs were evaporating during the bust. A very tough way for normal families to live.