Bust! Bust!
Last summer, it seemed Colorado might take decades to descend from the staggering height of its natural gas boom. High-paying jobs out on the drill rigs were drawing everyone from heavy equipment operators to senior center chefs to unskilled laborers who might otherwise work in a grocery checkout line or the local 7-11. As a result, High Country News reported last May, help wanted signs flagged the windows of businesses in Rifle, at the center of the boom, and Grand Junction, where one Burger King even offered a $300 signing bonus. On top of that, it was difficult to find a hotel room to stay, let alone a place to rent, since most temporary housing was taken up by oil and gas workers. Meanwhile, just up the Roaring Fork Valley towards affluent Aspen, the real estate market in Pitkin County racked up a record $2.6 billion in sales in 2006 and kept drawing its own slew of temporary workers, thanks to another booming sector of the Colorado economy: Amenities.
But that push and pull is changing quickly.
The Denver Post is the latest to weigh in:
In towns that have been racing to keep up with the big-spender (natural gas) boom of the past four years, rentals are no longer snapped up quickly. Lines form for jobs that once couldn't be filled because workers gravitated to the higher pay in the oil fields.
When Leitner-Poma, a Grand Junction manufacturer of ski lifts, celebrated an expansion last week, 40 people were outside the door the next morning hoping for work. The Rifle Wal-Mart has a full roster of employees for the first time in years.
Cindy Hoppe, property manager for Bray Real Estate in Grand Junction, said rental homes in the $1,200-and-above range that previously were rented as quickly as they were advertised now sit on the market for weeks. Rental rates have dropped for those homes while the demand for low-cost homes still exceeds the supply.
Encana Oil & Gas has cut five of its 15 rigs in the area's Piceance Basin and dropped its budget from $700 million to $400 million, the Post reports. (Though some sources speculate the local changes stem at least in part from the fact that the company's reshuffling resources to another lucrative play in the southeastern U.S.) "Williams (Production) has idled six of the 26 rigs it was operating at the height of the boom," the Post adds. Even so, it's going to take awhile for the boom to lose momentum:
"People need to keep in mind we still have 3,000 active gas wells that are producing 850 million cubic feet per day. We are continuing to build a $350 million gas-processing plant in Rio Blanco County," said Susan Alvillar, spokeswoman for Williams Production, one of the largest producers in the Piceance Basin.
The primary culprit is the continuing decline of natural gas prices, not to mention the fact that the current credit crisis has made building pipeline capacity to get Rocky Mountain gas to urban markets in the Midwest and on the West Coast less economically feasible. (And some companies still pin the blame on Colorado's strict new rules governing gas extraction.) Meanwhile, the amenities economy has taken its own hit. Local ski area visits are down, and real estate sales in the Aspen area have declined significantly over the last year, the Aspen Daily News reports:
Pitkin County ended 2008 with almost half the real estate sales volume it had in 2007, and 10 percent to 15 percent higher home prices, according to a report released Monday by Land Title Guarantee Company.
. . .dollar volume was down 46 percent over 2007, for a total of $1.37 billion in real estate sales. The number of transactions, 828, is 40 percent down from the prior year. . .
The totals for 2008 represent a five-year low in real estate transactions — higher than the $1.1 billion in 2003, when Aspen was still climbing out of a post-9/11 slump, but lower than the $1.6 billion recorded in 2004.
Maybe things will be getting quieter in these here parts in the coming months. But I'm willing to bet that it won't last.
