Energy rush creates haves and have-nots

By Gargi Chakrabarty, Rocky Mountain News (Contact)

Wednesday, December 12, 2007

Photo by Matt McClain

Megan Klatt rocks her infant son, Gunnar, before putting him down for an afternoon nap at their home atop Grass Mesa outside Rifle, where evidence of the gas boom is as close as a glance out their window. Klatt's husband, Brian, is a gas worker.

Graphic by Michael Hall

Colorado's top seven oil -and gas- producing counties - a snapshot

David Smucker has traveled to Utah, Wyoming and Minnesota to successfully recruit schoolteachers.

But the 47-year-old assistant superintendent of Garfield County School District Re-2 also has suffered his losses. Nearly a dozen new teachers he hired this spring came to the county, scoped out the soaring cost of living, the helter-skelter pace of life, and said no thanks.

The district of 4,270 students hired 68 teachers in August, replacing 54 who left and adding 14 new positions in an attempt to keep up with growth.

Smucker attributes the instability to the region's booming natural gas fields, and a supercharged economy that is creating whole new classes of haves and have-nots. Schoolteachers in their initial years, for example, earn about half as much as the average gas worker - who might not be a high school graduate.

"Oil and gas companies have an awful lot of money," Smucker said. "We cannot offer dollars that can compete with the companies. It is difficult for first- and second-year teachers to be able to afford a down payment on a home here."

A rising tide may lift all boats, except perhaps those anchored by salary structures unrelated to the boom.

Western Slope municipalities including Rifle, Silt and Parachute are struggling to retain hospital workers, school bus drivers and maintenance workers.

"Now hiring" signs are posted everywhere in store and restaurant windows. Burger King offered $300 signing bonuses to those willing to flip hamburgers.

In a reversal of a well-documented national trend, area newspaper classified sections are stacked with help-wanted ads.

Residents complain about long waits for electricians, mechanics, plumbers and at store checkout lines.

In short, the economy here is shooting up, up and out of sight, and analysts studying the boom say it isn't coming back down anytime soon.

Garfield County is located atop the Piceance (pronounced PEA-awnce) Basin, one of the nation's richest natural gas plays. With enough natural gas to heat one and a half billion homes for one year, the Piceance is one of the hot spots in Colorado's $23 billion natural gas juggernaut.

Dozens of energy companies have descended upon the region, drawn by rising prices for natural gas and equipped with new technology that made feasible drilling for deposits buried deep in the Rockies.

The boom also has attracted thousands of new workers, created well-paying jobs and poured hundreds of millions of dollars into local economies, all of which is playing out to tumultuous effect.

"These are some of the least-populated areas of the West, small communities with little infrastructure where, traditionally, growth has been slow," said Ford Frick, managing director of Denver-based BBC Research and Consulting, which has been hired by some county governments to study the boom.

"Suddenly there's this influx of a new (oil and gas) industry, it's growing rapidly and able to pay high wages, but it's also putting an enormous strain on communities, both from a social and financial perspective."

Many of Garfield County's longer-term residents - there are some 52,000 living there now - are familiar with the highs of an energy boom, then the lows of a bust.

It was 27 years ago that Exxon U.S. (now Exxon Mobil) began developing a $5 billion oil shale industry near Parachute, about 17 miles west of Rifle on Interstate 70. But oil prices dropped, and 18 months later Exxon scrapped the project, laying off 2,100 workers and sending the Western Slope economy into a tailspin.

This time, the nation is increasingly thirsty for natural gas, and Colorado has plenty of it.

Colorado's other top-producing counties - Weld, Yuma, La Plata, Las Animas and Rio Blanco - are also in the throes of the energy boom. The first rumblings were in 2002 and it has been luring away local workers with big wages and driving up living costs ever since.

The incursion of industry and its many transient workers also has its downsides in torn-up roads, congested neighborhoods, strained emergency services, stressed water and sewage plants, and spiking crime rates. Consider:

* Officials from La Plata, Rio Blanco, Yuma and Garfield counties and others say they will have to spend hundreds of millions of dollars over the next two decades to repair their roads from industry wear, with the cost estimated at about $2.5 million per mile.

"They just tear the hell out of our roads," said Yuma County Commissioner Dean Wingfield, at a hearing by state lawmakers on areas impacted by gas production.

* Rio Blanco County Commission Chairman Ken Parsons said that the county has 4,000 to 5,000 transient workers, the majority employed by gas companies. About a third live in trailer or RV parks because of a shortage of affordable homes.

The county has imposed emergency impact fees for road repair of $6,000 for the first well on a pad, and $5,000 for each subsequent well drilled from the same pad.

* Garfield County Assistant Manager Jess Smith says the gas industry pays drivers or maintenance workers at least $10 more than the county's rate of $18 per hour, luring away workers and hurting the county's ability to complete public works.

The projected cost of Rifle's new wastewater treatment plant has climbed from $14 million to $23 million as construction begins, which reflects not only the rising cost of materials, but also labor costs and a lack of competitive bids from contractors engaged in more lucrative ventures.

* Weld County has about 19,500 wells over 4,000 square miles, and is now experiencing a confrontation between two powerful economic forces - energy and housing. During the past four years, the southwest sector of the county recorded the highest number of new oil and gas wells - about 1,800 - along with the highest number of new housing subdivisions.

For example, in the tri-town area of Firestone, Frederick and Dacono, building permits for new houses increased three-fold in the past four years to 2,558 this year.

"There is a conflict between development and energy production," said Weld County Finance Director Don Warden.

* Garfield County's Smith said the sheriff's department asked for 25 new positions in 2008, nearly 20 percent over its current force level, to combat escalating crimes. "That blew us right out of the water," Smith said.

The county commissioners have yet to approve any new positions.

Although the county's crime rate is increasing at 20 percent a year, the same as its population, certain types of crime - such as drunken driving and drug busts - are rising at a higher rate.

* Garfield County's population is expected to swell to 90,000 in the next eight years, putting continued pressure on a housing market that has seen the median home price jump by $90,300 in just six years to $291,000.

Energy companies stepped up drilling in the vicinity of Rifle, Silt and Parachute about four years ago, extracting natural gas from depths of about 8,000 feet, and piping the gas to heat homes and fire power plants in the Midwest and California, as well as for in-state use.

Since state and federal agencies approve drilling permits, some Garfield County officials believe they haven't had much say in what goes where.

"For years, we have been a reactive county," said Tresi Houpt, a Democratic Garfield County commissioner who recently was appointed by Gov. Bill Ritter as a state oil and gas regulator. "I don't think we were prepared well enough, or to date have taken an approach active enough, to advocate appropriate uses of land and issues of growth as a result of the gas industry."

Houpt said the county could exert more authority regarding how far companies should keep drilling rigs from homes to make it safer for residents (the state rule is at least 150 feet, which Houpt says is too close), enact appropriate land-use plans and help provide affordable housing.

She said Garfield County also should discuss an impact fee for new wells. Neighboring Rio Blanco County not only has an emergency impact fee, but is discussing doubling it and making it permanent.

John Martin, a Republican county commissioner, disagrees with Houpt, saying such rules would impede the industry.

He believes gas companies are unfairly blamed for the county's woes, particularly traffic and housing. Garfield County residents who commute to work in the tourist meccas of Aspen and Vail are responsible for most of those problems, he said.

Martin said neighboring Eagle and Pitkin counties push service workers into Garfield County, and that wealthy residents of those two counties exacerbate the county's housing shortage by buying up second homes or rental properties in new subdivisions.

"Oil and gas companies have impacts, but they pay their way," Martin said. "These folks have impacts but have never paid their way. And these folks are the ones throwing stones at the gas industry."

The industry, meanwhile, can point to evidence of its good neighbor policies.

Colorado Mountain College has a gleaming new campus in Rifle that opened this fall, thanks in large part to EnCana Oil and Gas, which donated $3 million; Williams Cos., $1 million; and Shell, $600,000. The college has the lowest tuition fees in the state at $43 per credit, thanks to rising property tax revenue from gas production.

Pioneer Natural Resources gave more than $100,000 of heavy equipment to Trinidad State Junior College in October.

Williams recently built a 4.5-mile road and dug a 3,200-foot tunnel into a mountain north of Parachute that diverts some gas traffic away from highways and county roads. EnCana has installed pipelines to bring water from the Colorado River to its wells instead of trucking it in.

Williams and EnCana also are operating "man camps" near drilling sites to house gas workers and ease the pressures on municipalities faced with housing shortages.

Gas companies have contributed $100,000 for Rifle's new police and courts building, and are training workers to behave cordially with residents. They're also seeking to negotiate surface-use deals amicably with landowners.

"Colorado is not like Wyoming where there are just prairie dogs, or Texas where oil rigs are part of the landscape," Sher Long, spokeswoman for EnCana, told state lawmakers this summer.

EnCana alone has five employees dedicated to community relations in Garfield. But enhancing those relations can be difficult when an average industry worker earns at least $60,000 a year, while a beginning schoolteacher makes about $34,000.

"It is a beautiful place to live here," said Smucker, the assistant school superintendent. "But the higher prices make it a difficult place to live."