Posting from Boulder

You know the bust is officially underway when the reporters from the large metro dailies start showing up. That’s the case in Parachute, Colo., just off I-25 on the Western Slope, which has benefited the last four years in the natural gas boom as high energy prices have sent wages, jobs, and crowded saloons soaring in the region.

No more.

“Falling natural gas prices … led energy firms to abruptly curtail their work here last month, battering the last sector of the U.S. economy that had prospered despite the recession,” reports the Los Angeles Times.

With falling house prices, increasing unemployment and emptying hotels, the Western Slope is experiencing nasty flashbacks to 1982, when the oil-shale bust devastated local economies for two decades – until, in fact, the most recent energy boom.

“It’s coming to an end again,” laid-off oilfield worker Rick Roth told the Denver Post.

That’s caused Gov. Ritter, not exactly considered the oil and gas business’ best friend, to visit Grand Junction, the center of the region’s energy industry, twice in the last month. 

Last week, appearing at a one-day conference on “Surviving Tough Times” at Grand Junction’s Double Tree Hotel, he noted that, “Small businesses in Colorado are a really important driver of the economy” – many of them, on the Western Slope, oilfield services businesses getting hammered in the downturn.

Even in a recession, all things are relative, and while the region’s energy economy is suffering it’s still doing better than many industries in many other areas. Mesa County led the state in employment growth and real-income rises the last two years. While oil-and-gas jobs are notoriously fickle, those gains are unlikely to disappear completely in the recession.

In fact, the annual economic forecast  from the University of
Colorado’s Leeds School of Business actually sees jobs in the
energy sector continuing to expand this year.

What’s more, the Western Slope has been less seriously burned by the housing collapse than many Front Range communities. Ouray County Assessor Susie Mayfield told commissioners last week that, despite bust, property values are not expected to drop significantly in western Colorado.

And this bust is unlikely to wreak the long-term damage the
shut-down of the early 1980s caused. Though oil prices continue
to linger around the $40 a barrel mark, energy futures for
April and beyond have actually seen an uptick – “The price of
oil for delivery in April is $3.92 a barrel higher than for
March,” reports Bloomberg News, with December futures up a
full $13.29. That situation, where future prices rise
month-over-month, is known as a “contango” – and it indicates
that traders don’t believe the predictions of $20-a-barrel oil.

“Earlier today, I couldn’t help but laugh after reading one
[forecast] that said oil would stay below $50 for the next five
years,” writes Keith Kohl of Energy and Capital .

“Five years?!”

Sharing Kohl’s conviction that energy prices must inevitably
rise again, energy companies are making long-term investments
on the Western Slope. For example, Williams Production, a large
gas producer in the Piceance Basin in western Colorado, is
going forward with plans for a $350 million gas-processing
plant in Rio Blanco County.

“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,” wrote
economist Tucker Adams last June in Colorado Biz magazine,
“up from 7,500 currently in production.”

For now, though, such rosy predictions seem like a distant
memory of a different era.

“We had hoped for a seven to 10 year run this time,” Bud Pease,
who’s worked in the Western Slope oilfields for four decades,
told the Post. “But I guess four years ain’t too bad.”