June 20, 2012 05:45 PM UTC

Headwaters Economics Report on Colorado's Oil and Gas Industry

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• by: Konola

(This is important stuff if you plan on living for more than a few more years. – promoted by ProgressiveCowgirl)

The first question asked of Mark Haggerty of Headwaters Economics after his presentation titled “The Status of Colorado’s Oil and Gas Industry: Activity Continues to Reflect Colorado’s Overall Share of Nation’s Fossil Fuel Reserves” came from David Ludlam, executive director of the Western Slope Colorado Oil and Gas association. His question was why the economist chose to release the report in Grand Junction. It was a good question, but to be fair it was released in three Colorado cities yesterday: Grand Junction, Colorado Springs, and Denver.

The reason it was a good question was not what was in the report, but what was not in the report. Unfortunately for people interested in what is happening with the oil and gas industry in Mesa County, there was little to paint the local picture. Rather than reflecting regional differences within the state,  the report focused on Colorado as a whole.

One example was exemplified as a pie chart in the written report which showed that in Colorado mining, which includes oil and gas, represented 1% of overall employment in 2010. Conversely, Green Jobs represented 2.2% of all employment. That is a good news, bad news story which does not translate into greater economic impact. The capital investment required in the oil and gas industry, and higher salaries offered means that oil and gas actually has a greater impact both on tax revenues and personal income than does the green energy industry.

Locals, including this observer, questioned the applicability of those statistics to the local economy. David Ludlam, Teresa Coons, and I all expressed a belief that the oil and gas industry might represent more than 1% of Mesa County employment, making some of the conclusions in the report valid for the state as a whole, but suspect when applied to our local economy.

According to the authors of the report, “the purpose of this report is to educate decision makers and the public about the current health of Colorado’s oil and gas industry, what factors are affecting the energy sector, and how the state can better benefit from its fossil fuel industry.”

Taken directly from the report, the summary of findings:

The strength of crude oil prices relative to natural gas prices has driven a dramatic shift in drilling activity from natural gas to oil across the region and within Colorado.

Colorado’s relative advantage in dry natural gas is a disadvantage in today’s energy markets that favors states with proven unconventional oil fields, including North Dakota.

Despite the challenges Colorado’s energy industry faces, it has recovered a significant share of pre-recession drilling activity.

Recent volatility in the oil and natural gas industry’s employment, personal income, and shares of the state’s gross domestic product have mirrored regional volatility in drilling activity and commodity prices.

During the most recent recession, the oil and gas industry lost jobs at a faster rate than all industries except construction in Colorado, and today make up less than one percent of total employment statewide.

Colorado’s economy has strong advantages in the renewal energy sectory. Diversifying the energy economy should be an important part of the state’s long-term energy policy.

A more effective energy tax policy could help Colorado realize the full economic benefits of energy development and mitigate its impacts. Compared to Wyoming, Colorado will collect $700,000 less tax revenue on each new well drilled. Tax incentives expose the state to revenue volatility and undermine efforts to address impacts in local areas.

Rig counts in Colorado in June 2012 are back to levels experienced during the natural gas run up in 2005 and 2006.

Copies of the report are available at the Western Colorado Congress offices in Grand Junction or at http://headwaterseconomics.org…