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Agents say energy boom might not bust

Thursday, August 17, 2006     By BOB KRETSCHMAN          The Daily Sentinel

The biggest worry about the Western Slope’s oil and gas energy boom isn’t that it will abruptly end with a bust, an economist for the Federal Reserve Bank of Kansas City told a Grand Junction audience Wednesday.

The big worry, economist William Keeton said, is that the oil and gas industry will grow to employ such a large share of the local labor market that other industries will be seriously short of workers.

But a survivor of the 1980s oil shale bust, commercial real estate broker Dale Beede, told the same audience not to bet on a new oil shale boom or on the continued red-hot growth of natural gas production.

Keeton and Beede were two speakers in a lineup of authorities who spoke during the 2006 Western Slope Real Estate Update, sponsored by the Franklin Burns School of Real Estate and Construction Managment at the University of Denver. At Wednesday’s gathering at the DoubleTree Hotel, Beede was named the school’s honorary dean for 2006.

Keeton said most economists believe the national economy’s growth will slow through the end of 2007, largely because of the nationwide slowdown in housing construction and sales. But that trend might not extend to the Centennial State.

“Colorado and the Western Slope are likely to experience stronger growth than the nation,” he said, citing the migration of people to Colorado because of the state’s scenic beauty, recreation and quality of life.

He said western Colorado’s “abundance of mineral resources” has subjected the region to economic boom-and-bust cycles in the past. But such a cycle might not be the case this time.

“The recent increase in oil and gas prices will prove less transitory than past increases in energy prices,” Keeton said. The current boom in gas production is driven by increasing global demand for energy, while past booms have been the result of changes in energy supplies. There’s no sign that global demand for energy will ease anytime soon, thus keeping prices stable, he said.

Rather than experiencing a bust, Western Slope businesses could find themselves facing a significant labor shortage as workers gravitate to high-paying jobs in the energy sector, he said.

“The concern is that the energy sector will consume too great a share of the labor force and housing stock, making it difficult for other sectors to grow,” Keeton said.

In a later presentation, Beede, a broker associate for Coldwell Banker Commercial Realty, said growth-related statistics in the two-year period preceding Exxon’s abrupt closure of the Colony oil shale project in May 1982 strongly resemble today’s numbers.

“Most say the boom is different this time,” he said, asking for a show of hands among the 200-person audience of those who lived in Grand Junction during the bust years of the 1980s. About 20 percent of audience members raised their hands.

“We went through hell here in Grand Junction” during the bust, he said.

“We have to be careful we’re not betting our entire future on one commodity, and right now that’s natural gas,” Beede said.

Natural gas is a commodity, and commodity prices fluctuate over time, he said. Western Colorado residents need to be ready for a downward trend in natural gas prices.

“Economic diversity is the key,” he said. “We have to diversify now more than ever, because we can’t put all our eggs in the energy basket again.”

Beede discounted future prospects for oil shale development, saying he believes it is simply too expensive to develop into a viable commercial industry.

“Oil shale development will fizzle,” he said.

But Beede had a different view of coal, which he said will remain a reliable, cost-effective source of energy.

“Coal will become our greatest energy resource,” he said, “Coal’s going to be our next boom.”

Bob Kretschman can be reached via e-mail at bkretschman@gjds.com.