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March 11, 2009 09:55 PM UTC

The Perils of a Boom and Bust Economy

  • 7 Comments
  • by: ClubTwitty

( – promoted by redstateblues)

The news is grim from Grand Junction:

The unemployment rate for the Grand Junction area increased from 4.7 percent to 5.5 percent from December 2008 to January 2009, according to numbers released today by the Colorado Department of Labor and Employment.

That is a 17 percent increase. The numbers are seasonally-adjusted.

Across the state, the unemployment rate increased from 5.8 percent in December to 6.6 percent in January

And also from Garfield County:

GLENWOOD SPRINGS, Colorado – The charity LIFT-UP has seen an “astronomical” increase in people looking for free food during tough economic times, said LIFT-UP Executive Director Mike Powell.

In January 2008, LIFT-UP gave out 877 bags of food, but this January it gave out 2,115. The Extended Table typically provides 600 to 800 people free meals each month. Now the figure is up to as much as 1,100, Powell said.

“We certainly are seeing a large increase in requests for food,” he said. “We’re OK for now, but I can’t keep this pace up for the entire year.”

This is the downside that follows any boom when economies become too tilted toward one industry.  

In this case the oil and gas industry–with a long history of extreme volatility.  

The Grand Junction Chamber of Commerce, predictably, is using the downturn to attack pending oil and gas regulation before the Legislature tomorrow.

The Grand Junction Area Chamber of Commerce plans to load up a bus with a few other like-minded people and head to the Capitol this week to make a statement about the oil and gas rules on the Legislature’s table.

On Thursday the state House will have its first reading of the Colorado Oil and Gas Conservation Commission’s newly drafted rules, which govern the extraction of oil and gas in the state. Representatives of the Grand Junction and Rifle chambers of commerce, the Associated Builders and Contractors, and a few other groups hope to give legislators their two-cents worth, said Diane Schwenke, CEO and president of the Grand Junction chamber.

In the Piceance Basin the oil and gas industry is a victim of its own success, having drilled too fast here and elsewhere, leading to inflated supplies without the pipeline capacity to get it to market, pushing companies to idle rigs here and across the nation.

The glut in supply and decrease in demand has led to a drop in natural gas prices of around 60% since last autumn.  Of course companies are expected to rapidly drop production in this climate–what’s unfortunate is how quickly they sink to the desperate tactic of blaming economic woes on sensible protections for Colorado’s water, wildlife, and public health.

In fact new pipelines are being built and drilling companies that survive the international financial crisis are will-situated to renew and even expand their drilling in the Piceance soon enough, as several readily admit.    

The current slow down is in fact the best time to implement these regulations–before the next drilling wave hits that will bring tens of thousands of new wells to the state.  For a reminder of why we need to rules, each week seemingly brings a real-world example from the gaspatch.  

That the oil and gas companies are self-serving is not a surprise.  As corporations that is their right and the general expectation.  These companies want the least regulation possible.  

Of late the issue has turned toward private property, and whether drilling companies operating there should have to consult with the Colorado Division of Wildlife on impacts to wildlife.  

Wildlife of course don’t belong to the private landowners but are manged in the public’s trust by the DOW.  Herds don’t understand land boundaries–between neighbors or between private and public lands.  In any case the latest ‘controversy’ takes on new meaning when we learn that almost one-third of the private land in Garfield County is owned by energy companies.  

Colorado needs balance in the development of our energy resources.  Promoting diverse economies benefits sustainable communities just as does protection for secure water, public health and natural amenities including our shared wildlife.  

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7 thoughts on “The Perils of a Boom and Bust Economy”

  1. Oh, there’s a downside?

    Wish I could remember reading this about a month ago, but someone looked at national economies over the last twenty years or so.  The point of interest was whether they had loose or tight controls on their financial markets and how they are faring now.

    Well, no shock, the fuddy-duddy not so exciting ones are now doing great, where as the highly deregulated ones like ours are trying to figure out what to do with the load of shit in their pants that they dropped.  

  2. Grand Junction still has lower unemployment than the state right now (and this in turn is far lower than the national average), and Mesa County is the only county in the state (or for the matter almost any of the Rocky Mountain West) to have experienced a housing price boom.

    Despite falling oil and natural gas prices, Grand Junction is still nowhere near the state of distress it experienced in 1983 oil shale bust.

    And, while reduced demand in the economy has made oil and gas not quite as lucrative as it used to be, prices are still high compared to historical prices, and since they aren’t making any more of it, high cost oil and gas resources like those in Western Colorado are almost certain to come back as we approach first, peak oil, and then peak natural gas.

    Also, both Garfield County and Mesa County are somewhat more diversified than they were in 1983.  Tourism in Garfield County is more robust, and Mesa County has added manufacturing (admittedly, currently also hurting) and a bigger health care infrastructure to its economic base.  Mesa County is as much as regional center as it is an oil town now.

  3. I barely managed a “C” in statistics, but the 17 percent stat seems to overstate the problem, when the percentage of people out of work moved less than one point.

    1. In contrast, Craig Meis … well he doesn’t know how either.

      Instead, he blatantly claims that unemployment in Mesa County has gone up three times where it was this time last year. (For the delicious quote you’ll have to wait until about 1:25 into the video.)

      See, if you knew the new-fangled O&G shill math, you would know that 5.5% Jan 2009 unemployment is 3x the 4.1% Jan 2008 figure.

      Walter Mitty, you’ve been pwnd!

  4. The Industry is trying to blame the new Colorado Oil and Gas Conservation Commission rules for the downturn when in fact the rules have not even been enforced yet. And all the wells drilled before the rules are enacted will be grandfathered-in under the previous rules.

    Remember also, Colorado still has the lowest severance tax rate than most natural gas producing states. That should be a good incentive to stay.

    The Industry layoffs have everything to do with producing too much gas for too few markets causing wholesale prices to plummet. The solution? Produce less gas. Hence, the slowdown.

    The showdown over the COGCC rules no doubt will be one of the highlights of the legislative session and the HB1292 shootout continues tomorrow on the House Floor. Will the oil-and-gas lobbyists win and Colorado citizens lose once more (ie Amendment 58)? Stay tuned.

    1. I thought if we lowered the taxes enough that industry would just create job after job.  Considering the hundreds of thousands of dollars the industry is getting in sales tax refunds (in an enterprise zone, 70% of the state, gas processing equipment is manufacturing machinery and exempt from sales tax) no one should be loosing their jobs.  Or is this line about low taxes creating jobs just a way for the industry to line their pockets at the state’s expense?

  5. wasn’t the  Meis Energy Master Plan designed to save us and the industry?  Like so much Meis puts his grubby little hands in, he seems to have forgotten one thing…. Reality!  The possibility of companies laying down their rigs and people losing their jobs just wasn’t real to Meis.  Not addressed in his “plan” or I suspect, his head.  Of course, destruction of our healthy tourism trade was never much of a reality to Mies either because tourism is not where he monetarily personally benefits.  

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