Oil and gas industry will yield employment — if local wells can produce

Colorado Springs politicians and business leaders are hoping to capitalize on the increasing global thirst for oil and gas, opening the way to many new local jobs.

Their hope rests largely on Ultra Petroleum’s efforts to find oil and gas in eastern El Paso County’s Niobrara shale. The company holds most of the county’s 2,500 oil and gas leases and owns 18,000 acres in Banning Lewis Ranch.

Ultra started drilling in the county in February. Colorado Springs City Council, however, has yet to approve regulations that would allow drilling inside city limits at Banning Lewis.

As Ultra prepares to back its multi-million investment in Banning Lewis with exploratory drilling, local economic developers are counting on that drilling to cut a pathway from the city’s 9.8 percent unemployment rate back toward a more acceptable 5 percent rate.

Reliance on drilling, however, is a gamble.

A successful well has never been drilled in El Paso County, but new technology has unlocked oil and natural gas in other places once thought to be barren, which gives reason for renewed optimism locally.

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According to the Western Energy Alliance, the oil and gas industry already represents a $1 billion economic impact in the Fifth Congressional District, which includes Colorado Springs.

“The region already benefits,” said Kathleen Sgamma, vice president for government and public affairs for the alliance, an industry trade group. “There are 4,270 jobs already — and that includes places like El Paso Gas in the Springs.”

Sgamma said the potential for more jobs in the Springs could be dramatic. Each well has the potential for 26 direct and indirect jobs. If oil or gas is found, the rigs will create 150 jobs.

“And that’s not for a single year,” she said. “Those jobs are good for 20 or 30 years.”

New technology and techniques have led gas production to increase nationally by nearly 50 percent between 2008 and 2009 alone, according to a Brookings Institution report. Employment in natural gas extraction increased by 28,000 from 2007 to 2011, with an additional 45,000 jobs in mining support activities.

“During this period of economic recovery, these jobs have also boosted employment in a wide variety of other industries that likely add up to tens of thousands of additional jobs,” the report said.

Local potential

It could be exactly what’s needed for Colorado Springs’ ailing economy and unemployment rate, said City Councilor Tim Leigh, who recently made a trip to his native North Dakota to explore the oil and gas boom there.

“People don’t realize what the potential is. They haven’t got a clue what is about to happen,” he said. “When Romney says he can create 12 million jobs in four years — he can do it easily if he eases the oil and gas caps. This is a growth industry.”

Closer to home, Mayor Steve Bach has promised to create 6,000 jobs a year for the next three years, and has publicly said he supports growth in oil and gas in the Springs. Bach declined interview requests for this story.

But the oil and gas jobs created if Ultra hits a gusher have a further reach than Colorado Springs, Sgamma said. In fact, the 13 states in the Western Energy Alliance create jobs all over the country — even as far away as Brooklyn, N.Y.

“Oil and gas jobs touch the entire country,” she said. “So it’s definitely a growth industry, a job-creating enterprise. These aren’t jobs like government jobs, using taxpayer money. Instead, each new job creates new wealth — and that’s something that’s desperately needed.”

Fred Crowley, professor of economics at the University of Colorado at Colorado Springs and principal of the Southern Colorado Economic Forum, said the city should be rolling out the red carpet for Ultra.

“These are jobs that have good wages,” he said. “And there’s a strong secondary job market. Those machines break down, they need mechanics. They need truck drivers. They need machinists and engineers. They need to buy replacement parts. Oil and gas jobs are great jobs to have. Not because they create that many jobs to begin with, but because of the multiplier effect that they bring.”

And there’s no reason to worry about the historical boom-and-bust cycle of the oil industry, Leigh said. He believes those days are gone.

“There is a global demand for power and energy,” he said. “It’s going up faster than we can meet the need. So, this isn’t like the oil shale up in Rifle. This is different — the gross demand is global for oil and gas. If it’s here, it’ll be a big economic boost.”

Success elsewhere

Leigh said the growth in North Dakota’s oil field has to be seen to be believed. People are buying commercial property at unheard-of rates, hotel rooms are always full and restaurants have hours-long waits. According to the Brookings report, mining employment has tripled in North Dakota.

“They have a billion-and-a-half surplus every year,” Leigh said. “And they’re putting it in a trust fund for infrastructure. And, they’re talking about taking $100,000 (in assessed value of each home) off property taxes statewide. Imagine the economic impact if you didn’t have to pay that property tax — you could invest it in the economy.”

North Dakotans believe that the next level — below their current drilling — will produce five or 10 times as much oil and gas as they are producing today, Leigh said. Colorado Springs’ oil and gas fields are at that lower level, about 5,000 feet down.

“We’re on the edge of it,” he said. “So if it extends this far, we’ll definitely benefit.”

City Council is scheduled to hear suggested oil and gas regulations this month, and Leigh hopes the city “won’t outsmart itself.”

“We want to be reasonable,” he said. “We want to welcome them; we want to make it as easy as possible. We shouldn’t over-regulate. The state and the federal government already have regulations — and those are working.”

Leigh said the stories of hydraulic fracturing fluid bleeding into water tables are largely exaggerated.

“The people who are making these claims — the facts don’t add up to the hyperbole,” he said. “Oil and gas is being drilled in large volumes, and it’s largely very safe. You can’t regulate for every instance, because you just over-regulate and people can’t do business.”

If the oil and gas boom takes place in Colorado Springs, it could be the answer to job woes. Without it, the Brookings Institution says it could take a decade to regain the jobs lost during the recession.

And if the drilling finds oil on the eastern plains, Crowley said Ultra will end up creating not only jobs — but millionaires.

“That’s if they find it,” he said. “And they seem to be placing a lot of resources behind finding it. If they find oil, they’ll definitely create jobs, create wealth.”