July 20, 2005

Natural Gas Fields Drive Rock Springs, Wyo.’s Booming Economy

Jul. 17--ROCK SPRINGS, Wyo. -- The joke plays well in energy-dependent southwest Wyoming.

"We've got a diversified economy," deadpans local business leader Don Hartley. "We've got both oil and gas."

Laughing comes easy these days in Sweetwater County. Near-record highs in energy prices have the region's historic boom-and-bust cycle in the midst of a robust boom.

While geologists have always suspected that large deposits of oil and natural gas lay hidden under the area's sage-dotted prairie, new exploration techniques have proven the presence of two world-class natural-gas fields north of Rock Springs.

News of the discoveries three years ago made Rock Springs the epicenter of a drilling surge that has since created thousands of jobs and hundreds of millions of dollars in new spending and investment.

Tax revenues are soaring. Unemployment is virtually nonexistent. Motels are filled to capacity. Merchants of every variety are doing big business -- as long as they can find clerks to handle the cash registers.

Many Western communities are seeing the impact of high energy prices and increased drilling, but few are seeing it as powerfully as Rock Springs.

The boom's positives are so visible that they tend to overshadow some of the upcycle's less-attractive aspects -- rising housing prices and scarce inventories, greater demands on social services and a resurgence in drug trafficking and prostitution.

Yet, even Rock Springs' police chief, Mike Lowell, is willing to trade his department's overworked status for the benefits of the boom.

"Crime statistics are up across the board," he said. "But for all the trouble that comes with being a boomtown, growth is better than no growth."

The boom has made southwest Wyoming a job-seeker's mecca. Even at the bottom end of the employment chain, retail workers are benefiting from an inflationary wage spiral caused by needy employers.

"The minimum wage doesn't exist here any more," said Pat Robbins, director of the Sweetwater Economic Development Association. "I had a call-center prospect that wanted to offer $8 an hour. I said no way. Arby's is paying $7.50 an hour plus a free meal."

Roughnecks -- entry-level laborers on drilling rigs -- can make as much as $40,000 a year to start. Petroleum engineers and geologists earn up to $120,000. That leaves workers with plenty of discretionary cash. Favored toys are four- wheel-drive pickups, all-terrain vehicles and motorcycles.

Business at the Harley-Davidson dealership in Rock Springs runs full throttle every day, fueled by free-spending customers.

Motorcycle prices ranging from $7,600 for the entry-level Sportster model to $30,000 for the high-end Screaming Eagle elicit barely a blink from energy workers, said Ray Kemp, a salesman at Flaming Gorge Harley-Davidson.

"We're going gangbusters, and it's pretty much because of the energy boom," he said.

The boom has made jobs and wages plentiful, but housing is in short supply.

Erik Scheer recently moved to Rock Springs and had no trouble landing a job as a mechanic with oil-field services firm Halliburton Inc.

"It's pretty easy to get in the door," said the 22-year-old Air Force veteran. "If you can pass your drug test, they want you."

But finding housing was a challenge. In the price range Scheer sought -- about $150,000 -- there is little inventory. When one comes on the market, it's almost instantly snatched up.

When Scheer and his wife, Stephanie, found a 3-bedroom clapboard house for sale by owner at $146,000, they made a full-price offer the day it came on the market.

"We got lucky," Scheer said. "We were the first people to call." While still affordable by most Colorado standards, the Sweetwater County housing market is appreciating at a steep rate, said agent Mary Manatos of High Country Realty LLC. A Rock Springs home that sold for $105,000 three years ago sold again last month for $175,000 -- 67 percent appreciation.

"It's really frustrating for a buyer," Manatos said. "You have squat for choices. As soon as the property is listed, you'd better write the (purchase) contract that day."

A tight housing market and labor shortages add an unusual dimension to the work of economic development officials.

In most cities, business development entails prospecting for new companies and trying to entice them to set up shop.

No such efforts are needed in Rock Springs.

"Six years ago, we had plenty of housing, plenty of workers, and our focus was on landing the 'big win,' " said Robbins of the Sweetwater Economic Development Association. "Now I have at least one company a week coming in and telling me they're going to relocate."

Instead of recruiting businesses, Robbins now focuses on recruitment of workers, homebuilders, day-care providers and other services needed to support the boom.

Civic leaders dislike the "b" word, as they call it. Talk of a boom suggests an inevitable bust. Yet they won't deny that energy development is driving an economic renaissance in southwest Wyoming.

Four factors have coalesced to bring about the boom:

--Natural-gas prices have more than tripled in the past three years, bringing record profits to energy companies. Rocky Mountain gas that sold for $2 per 1,000 cubic feet in 2002 was priced last week at $6.75.

--Construction of a major pipeline from Wyoming to the West Coast has created a big new market for Wyoming gas.

Before completion of the Kern River pipeline in 2003, Wyoming energy producers had little incentive to drill for natural gas because they couldn't move it to out-of-state buyers.

--Energy experts in the past decade have found new ways to unlock gas trapped in the low- porosity sands and shales that characterize Wyoming and Colorado fields. For example, improvements in fracturing -- a process that uses pressurized fluids and minerals to crack open the subsurface formations -- have turned previously marginal gas fields into lucrative plays.

--Producers have discovered that two of the region's natural-gas fields, Jonah and Pinedale, are much bigger than thought and may provide large quantities of gas for decades.

"It's a huge, huge deal," said John Robitaille, vice president of the Petroleum Association of Wyoming. "Those fields are some of the biggest we've found in the U.S. in decades."

Jonah's recoverable gas is estimated at 8 trillion cubic feet. The larger Pinedale field contains an estimated 25 trillion cubic feet that might be recovered, according to Rod De Bruin of the Wyoming Geologic Survey.

The two fields' 33 trillion cubic feet would supply enough natural gas to serve the entire United States for nearly two years.

The presumed longevity of the fields -- they're expected to yield gas for 20 to 30 years -- leaves business and government leaders hopeful that this economic surge won't be quickly followed by another bust.

Rock Springs has had its share of both extremes.

The booms date to the 1860s when Union Pacific built its rail line across southern Wyoming, bringing jobs and demand for coal to fuel steam locomotives.

But with each boom has come a bust. After Union Pacific switched to diesel engines in the 1950s, the coal market fell flat, leaving hundreds of miners unemployed.

The first modern-day boom occurred in the early 1970s. Thousands of workers flocked to the city to build the $1 billion Jim Bridger Electric Power Plant and to work in the nearby coal mines that fed the plant.

"It was crazy," said Ray Sarcletti, a native of the area and now southwest regional director of the Wyoming Business Council.

"Rock Springs was a little town of 9,000 with no tax base," he said. "Suddenly, we had 40,000 people here and in (nearby) Green River, with no infrastructure to serve them. Parks and canyons just filled up with tents and camper trailers."

The '70s boom led Rock Springs to national notoriety -- a scathing "60 Minutes" report showing prostitutes and drug dealers serving local miners while police looked away.

This time around, local business leaders say the nation's insatiable appetite for energy, combined with the prolific gas reserves in the area, point toward a sustainable economic upswing.

"I have very conservative bankers who feel pretty confident that this is a long-term development," said economic developer Robbins.

Other southwest Wyoming residents share the hopefulness but retain a streak of bust-bred skepticism.

"Everybody thinks this one will last," said Rock Springs real estate developer Dan Scheer. "But once you've been burned, you don't forget."


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