7:14am

Fri December 28, 2012
Business

As Oil Boom Grows, Cities Plan For Possible Bust

Even with concerns over water quality and drill rigs popping up close to homes, oil and gas companies are continuing to invest heavily in the Northern Colorado area.

KUNC's Nathan Heffel reports for Morning Edition.

Greeley is in the midst of this new boom and city planners are trying to avoid the consequences if there is a bust. Thirty years ago, the lure of huge profits from oil shale resulted in one of the largest busts ever seen in western Colorado. Thousands lost their jobs on “Black Sunday” in the town of Parachute. It took years for investment in new growth to recover.

Greeley Community Planner Brad Mueller doesn’t think there's a chance his city could end up like Parachute. “I think the comparison is healthy. The difference between Greeley, situated along the Front Range, and a Parachute is it's in a more isolated location from larger population bases.”

Driving The New Boom

This time around the vast Niobrara Shale Formation is the driving factor behind the latest boom. Situated under parts of three states – the shale play could produce up to 3.1 billion barrels of oil.

File: An oil rig along Colorado's Front Range.
Credit KUNC

John Christiansen, a spokesman for Anadarko Petroleum Corporation, says the Niobrara is outpacing all estimates on production. “In terms of our U.S. on-shore portfolio the Wattenberg field right

now is one of our hottest areas, and certainly one of our most rapidly growing area.”

The Wattenberg field is just one part of the vast Niobrara. Anadarko couldn’t provide exact hiring numbers for 2013, but Christiansen says his company is planning to invest two to three billion dollars in the field over the next two years.

Diversity The Key To Bust Protection

New city development is indicative of Greeley moving away from its agricultural heritage to a more diversified economy. Part of that economy includes future oil and gas development. "We do recognize that some of that activity and maybe even a significant part of that activity [in Greeley] is due to oil and gas.”

Mueller adds that Greeley learned a lot about banking too heavily on growth projections from a small housing bust during the economic downturn in 2008. At that time, public infrastructure outpaced demand. "Because things were ramping up or following a generalized growth curve. But then things slowed down. There were some areas left where we had streets but no houses yet."

Companies like Anadarko and Noble Energy say they’ve invested in Weld County and Greeley because historically it's been more stable than other counties grappling with new regulations like Boulder and Larimer County.

Too Soon To Bank On Boom?

Even with steady production, Colorado Oil and Gas Association President Tisha Schuller says it might not be time to bank on this boom. “Companies that are members of COGA are already asking us, ‘is Colorado going to be a predictable place to do business going forward things like local regulations or ban fracking initiatives those are of enormous concern to companies that really can invest anywhere in the world.”

Christiansen agrees that Colorado regulations are some of the strictest in the country, but so far they’re stable. “As long as we continue to have the regulatory frameworks that is stable, that can be navigated…there’s absolutely no reason this shouldn’t continue to grow and continue to be a huge part of Colorado’s economy.”

Just how large a part industry growth could play was summed up in a recent U.S. Chamber of Commerce report [.pdf]. It estimates that 120,000 jobs would be supported by oil and gas production in Colorado by 2020 – if the Niobrara continues to play out at its current pace.

Those extremely positive projections are eerily similar to forecasts made during the oil shale boom in 1982.