10-03-06
On a blustery winter day on the rolling plains north of Denver, a herd of
cattle stood grazing a few yards from an idled natural gas pump in a dormant
field as traffic rumbled by on a black-topped, two-lane highway.
Children play near an oil pump surrounded by a housing development in Frederick,
Colorado. Just down the road are shopping centres and subdivisions packed with
new homes, gobbling up land around this once-sleepy agricultural town that just
happens to sit atop the Wattenberg gas field, one of the nation's most
productive.
Ed Orr knows this land well. A rancher and developer whose family roots in
Colorado date back more than a century, Orr says the real estate business is
growing increasingly difficult because gas producers want access no matter what
the plans are for the property.
"The conflict of the cultures is certainly more prevalent. You have two
industries that are both growing," Orr said. "They think that we have no valid
rights to get any accommodation for development use of the surface."
Twin engines of growth -- in population and within the oil and natural gas
industry -- are colliding in Greeley, the fastest-growing metropolitan area in
the nation. Developers looking to cash in on rising land values are running into
companies eager to sink more wells and drawing up plans for multibillion-dollar
pipelines to carry gas to the East Coast.
Similar conflicts are playing out from Montana to New Mexico because the
Rockies' energy boom is in full bloom, prompting worries about the environment,
property rights and the changing character of small towns swelling with new
workers. Many fear another Western rush to fortune will be followed by hard
times -- again.
The gas boom, however, seems to be setting up for an extended run, according
to industry experts. That poses a new set of issues for communities that have
diversified their economies by attracting tourism, manufacturing, construction
and technology companies after the last bust in the 1980s.
Cities such as Grand Junction and Montrose in western Colorado have become
havens for retirees, while mountain communities that are home to
celebrity-magnet ski resorts are filled with wealthy property owners who buy up
ranches and build second homes.
Even as the West's population grew by nearly 20 % in the 1990s, the oil and
gas industry has returned its focus to the Rockies, thanks to skyrocketing
prices and technology that make the resources easier to retrieve. Drilling has
slowed in other gas fields, and Hurricane Katrina forced Gulf Coast-oriented
companies to consider other options.
Producers -- including EnCana, Kerr-McGee, Noble Energy and Bill Barrett -- are
sinking traditional oil and gas wells across the West, tapping coal-bed methane
reserves and even experimenting with hard-to-get resources such as oil shale.
According to federal statistics, US gas production has been relatively flat
for years (18.1 tcf in 1993 compared with 18.6 tcf in 2004). But exploration is
red-hot: In New Mexico, Colorado, Utah,Wyoming and Montana, gas reserves in 2004
totalled 60.7 bn cf, up from 58.8 bn cf in 2003. And the number of producing
wells rose from 73,796 in 2000 to 84,164 in 2004.
The quick pace of production has filled pipelines to capacity, prompting at
least three new pipeline proposals, including a $ 20 bn project to bring gas
from Alaska's North Slope to the Midwest. The other projects are in the West.
"The Rockies is sort of in its infancy," said Ron Gist, senior principal of
Purvin and Gertz, an industry consulting company in Houston. "One of the reasons
the Rockies has not been developed as quickly is the local demand isn't that big
so then you need an infrastructure to get it to market."
Kinder Morgan Energy Partners LP and Sempra Energy are building a $ 4 bn,
1,323-mile pipeline to carry up to 2 bn cf of natural gas from Colorado's Weld
County -- home to Greeley -- to Monroe County, Ohio, for delivery to Midwestern
and Eastern markets by June 2009. Kinder Morgan is also expected to buy another
pipeline from EnCana that will run from Rio Blanco County in western Colorado
through Wyoming to the Weld County hub.
Separately, El Paso has proposed a 1,000-mile pipeline called the Continental
Connector to move up to 2 bn cf of natural gas from Weld County to Kansas and
then into existing pipelines that serve markets in the Midwest, Southeast and
Northeast. The costs have not been disclosed, but El Paso said it could be in
operation by November 2008.
Don Santa, president of the Interstate Natural Gas Association of America, said
the companies will need adequate pledges from producers for gas before they can
get federal approval for the sprawling projects. He said rising levels of
production and the need for gas in the East suggests a need for the Kinder
Morgan-Sempra and El Paso projects.
"Those two are of a magnitude that we haven't seen in a while," he said.
Most analysts believe the gas boom will remain strong, noting there is an
insatiable demand not only in the United States but overseas.
"We're looking for continued production increases for 10, 15 years at least and
perhaps longer than that," Gist said. "Our view of things out to 2020 has gas
production in the region continuing to increase. This is indeed a long-term
trend."
Environmentalists are increasingly concerned the operations could threaten
wilderness areas, wildlife habitat, the air and water supplies. Pete Morton, an
economist with The Wilderness Society in Denver, isn't sure how long the boom
will last, given the cyclical nature of the industry.
"When you see this almost universal response of, 'Oh, high prices are here to
stay and demand is here to stay,' that's when you know it's not going to
happen," Morton said. "These are the same people who were telling you to buy
high tech before the bubble burst."
When liquefied natural gas imports become common and cheap gas from overseas
starts flowing, he said, "boom, the Rockies lose out." EnCana, meanwhile,
recently cut $ 800 mm from its capital spending forecastfor 2006.
Still, the boom has already overwhelmed towns lacking adequate housing, social
services and infrastructure, and authorities say it has led to more crime. A
labour shortage is hitting energy companies and businesses trying to serve them.
In bustling Rock Springs, Wyoming, energy workers have filled all 1,850 motel
rooms. On any given day, there are more than 500 available jobs posted with the
Sweetwater County Economic Development Association, though director Pat Robbins
said as many as 1,000 jobs may be open.
For example, Halliburton would like to double its work force of 755, and
Wal-Mart needs about 200 people to be fully staffed, Robbins said. She and her
counterparts in Campbell and Natrona counties recently held job fairs in
Michigan in hopes of landing laid-off auto workers.
County voters, meanwhile, recently approved a tax increase to help pay for
improvements, including repairs for hundreds of miles of dirt roads leading to
oil- and-gas operations, Robbins said. Despite the headaches, she said the town
of 23,000 people welcomed the growth.
"I got excited when Halliburton did their new building," Robbins said. "Other
people got excited when IHOP opened."
Across the state in Gillette, Wyoming, the labour shortage is getting acute
for Robin Shea, general manager of mine equipment and services company P&H
Minepro Services. In early February, he had 17 jobs open.
"There are not enough people here to do the jobs that are available," said Shea,
who sent two employees to the Michigan job fairs and watched them return with
250 resumes.
Within the industry, meanwhile, workers are retiring and not all are being
replaced.
"It's been a boom-and-bust industry," said Gist, the Houston analyst. "You see
your father get laid off from a job two or three times, you're probably not
interested in going into the same business."
The boom also has taken its toll on ranchers, developers and homeowners who have
little recourse when an oil company with underground mineral rights elects to
drill on their land.
Rancher Chris Velasquez believes his cattle have suffered because of problems
associated with oil-and-gas drilling on 22,000 acres he leases east of
Farmington, New Mexico. There has been lost forage, and he has had cows killed
in collisions. He said his calves have lost weight and hair.
"They have affected my operation a lot," he said. "It's an ongoing thing." He
isn't opposed to energy production but wants the companies to be responsible. If
the problems continue, he says he may have to sell the herd and find another
line of work.
Orr, the developer, bought property along the Poudre River west of Greeley
several years ago where he wintered his cattle. As the population grew, a golf
course was built nearby and then a high school, both of which made ranching more
difficult. Today, he has turned that ranch into a mixed-use subdivision and
become primarily a developer with a small herd of cattle. He plans to develop
gas wells on his property.
"There's an agriculture way of life that you know certainly has some emotion
tied to it and that you hate to see go away -- but on the other hand I see it as
progress and I think that change is good," he said. "I think that ultimately all
property should reach its highest and best use. In this area that is no longer
raising cows."
Source: Associated Press