Posted 06.01.2008
Energy boom fires up Western Slope economy
The Economist
By Tucker Hart AdamsI recently gave a series of speeches in western Colorado — Montrose, Grand Junction and Glenwood Springs. It was refreshing, after months of negative national and Front Range headlines, to be in a part of the state where the economy is perking along at a satisfactory clip.
I first visited Montrose about 28 years ago, flying into the small airport on a gray overcast afternoon. “Now, don’t you folks worry,” the pilot assured us. “The cloud cover is pretty heavy, but we’re gonna keep circling until a hole opens up and I can shoot the runway.” Any numbers person knows that the most dangerous part of the trip is the drive to the airport. But I never fly into the Montrose Airport without remembering that trip.
The population of Montrose County has almost doubled since I was first there — from 24,352 in the 1980 census to an estimated 41,000 today. The county generates more than $1 billion in personal income, for an average per capita income of $27,402 (2005). Annual retail sales also exceeded $1 billion last year, so the county clearly attracts shoppers from surrounding areas, as well as tourist spending. With an average weekly wage of $597 in the third quarter of 2007 (relative to $845 for the state), it is a cost-effective place for a business to locate.
Grand Junction (Mesa County), with an estimated population of 142,462 in 2008, is the regional market center for the energy boom in western Colorado, which is being driven by drilling for natural gas. The county leads the state in employment growth — 5.1 percent in 2006 and 5.7 percent in 2007. Retail sales soared 14.4 percent in 2007 on top of a 17.8 percent gain in 2006. With a per capita income of $30,503 in 2006, up 5.7 percent, the city is 217th among metropolitan statistical areas in the United States.
The value of new nonresidential construction contracts surged an amazing 210 percent last year. The tightness of the housing market is reflected in the 1.8 percent apartment vacancy rate.
Glenwood Springs (Garfield County) has the highest per capita income, $32,672, of the three towns I visited. This is 53 percent above what it was 10 years ago. Retail sales have surged at double-digit rates for the last four years. Real estate sales increased 17 percent in 2007 to $1.22 billion. The city has one of the highest hotel occupancy rates in the state. I spent a night in a local hotel, where the bar was full of oil field workers drinking longnecks and winding down from a day on the job.
In 2007, 40 percent of Colorado’s 6,335 oil and gas drilling permits were issued in Garfield County, and another 5 percent were issued in Mesa County. This 234 percent increase over 2004 has brought more than 4,000 high-paid mining industry jobs into the region. Of the 5,502 mining jobs in the third quarter 2007, almost 90 percent were in mining support services. With a 343 percent increase in jobs paying an average weekly wage of more than $1,325, it is no surprise that the region is booming.
Rapid growth strains the infrastructure of small communities, which suddenly find themselves short of housing, schools, water and such. The tourist industry is negatively impacted by a shortage of hotel space, as hotel rooms fill up with oil field workers unable to find apartments. Local retailers benefit as the new arrivals spend their big paychecks, and I’m sure the hotel industry benefits from the nonseasonal demand for rooms.
It is important to remember that exploration and drilling activity creates the jobs. Once the wells are in production, only a few workers are required to keep them operating. The drilling crews move on to new parts of the country, leaving vacant apartments, empty classrooms and markets saturated with homes for sale.
A new study by BBC Research and Consulting suggests that more than 42,000 new gas wells will be drilled in Moffat, Garfield, Mesa and Rio Blanco counties over the next 30 years, up from 7,500 currently in production. This will cause the local population to double to more than 400,000.
If drilling activity continues at that pace, northwest Colorado will remain a positive force in Colorado’s economy.
Tucker Hart Adams, president of the Adams Group, monitored and analyzed the Colorado economy for 30 years. She can be reached via her website, coloradoeconomy.com. Enjoy this video? Share it with others.
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