Bill Grant Column January 13, 2009

Republican lawmakers need to think realistically about gas drilling

“Cargo cults” emerged in the South Seas after World War II when islanders, missing the useful items like canned food, steel tools and medicine that came with the soldiers in airplanes, set up elaborate replicas of airfields, including wooden planes along runways hacked from the jungle, in hope of bringing the “cargo” back.

The rituals attracted no planes, the cargo never returned, and eventually the cults faded away, a nearly forgotten monument to the failure of magical thinking.

But the cargo-cult mentality is still alive, and lately its magical thinking has pervaded the GOP side of the Colorado Legislature. Led by Senate Minority Leader Josh Penry, these Guardians of Gas advocate lower taxes and minimal regulation as a solution to the problems facing the energy industry in western Colorado.

Lower taxes and less regulation are the GOP’s magical solution to all economic problems — local, state and national.

As part of an anti-tax coalition, many of these legislators opposed Gov. Bill Ritter’s attempt to repeal the ad valorem tax credit for energy companies. Failure of that effort cost the state up to $300 million in revenue that might now be used to alleviate the economic downturn. Instead, the state will be hoping for federal bailout dollars to repair infrastructure damaged by the industry.

There is no evidence that defeating Ritter’s gas tax proposal has prevented any drillers from reducing their rig counts or curtailing expansion plans.

Now the anti-regulation Guardians have targeted the rules formulated by the Colorado Oil and Gas Conservation Commission to protect public health and wildlife as the next solution to keeping the gas boom from declining. Unless the rules are either scuttled entirely or radically weakened, they say, the boom will go away and Colorado’s good economic times will sink into the malaise that infects the rest of the country.

Up to this point, little evidence has been presented to demonstrate that the proposed state rules have caused the decline in drilling. Though some industry representatives routinely add the new rules to their list of reasons for shutting down rigs or curtailing expansion plans, they place primary emphasis on low gas prices and lack of available pipeline capacity for western Colorado gas.

In fact, thirteen companies are already complying with the new rules, while others are working with COGCC to develop compliance plans. As a Chevron official says, “It would be false” to blame the drilling slowdown on the new regulations. Actually, more complaints about the rules seem to be coming from the paid public relations and lobbying staff at the Colorado Oil and Gas Association, and their allies in the Legislature, than from the energy companies. It was an
Oil and Gas Association vice president who called the passage of the rules, “a sad day for Colorado’s economic well-being,” not a company official.

Reductions in gas drilling in western Colorado are the result of forces beyond the power of the Legislature to influence. Industry analysts predict that from 700 to 1,000 rigs nationally will shut down next year. It is inevitable that some of these rigs will come from western Colorado.

Market conditions, including pipeline availability, will be the major factors determining how many will go, and when they might return.

While simple adjustments like that proposed by Rep. Kathleen Curry might be necessary before the rules are adopted, wholesale rewriting or rejection of the rules is not called for.

GOP leaders should forgo the magical thinking that lower taxes and decreased regulation will preserve the energy boom. The rigs didn’t just mysteriously disappear, and they will not magically return.

Oil and gas is only one sector of Colorado’s diverse economy, every part of which is required to lift the state out of recession. Since the new state rules protect other important economic drivers, including amenities-based communities and businesses, tourism and recreation, hunting and fishing and public health, allowing these activities to be weakened to protect the energy industry would be a serious mistake.

Penry and his followers should join the effort to establish a balanced economy in Colorado, of which energy extraction is only a significant part. Then if the drilling downturn is prolonged, or the jobs don’t come back at all, Colorado will still be economically strong as well as environmentally healthy.

Bill Grant can be reached at .(JavaScript must be enabled to view this email address).


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