Boom or Bust? Slowing the pace of oil and gas drilling is best for local economies

Pinedale Anticline Field, Wyoming. Photo by Wendy Shattil and Bob Rozinski.

Recently the Department of the Interior announced that it will launch reforms that will end the fast-track leasing of public lands to oil and gas companies that had been rampant under the Bush administration.

These reforms are welcome not only because they will protect sensitive lands from being wrongly leased without proper environmental analysis, but because they may help prevent boom and bust cycles that so many western communities have suffered in recent years.

Economists like myself have always known that energy development can be a positive economic activity for rural communities, but it can often be a mixed blessing, too Communities often experience myriad problems associated with rapid energy development. Analysis conducted by myself and Dr. Pete Morton, soon to be published in the peer-reviewed Western Economics Forum, suggests that communities can best take advantage of future energy development by slowing the pace of oil and gas drilling.

Many people are familiar with the effects of the boom-town phenomenon:

  • Workers are lured by the promise of easy money.
  • The new wealth often leads to a rise in crime.
  • Oil and gas jobs are sometimes dangerous and this may lead to an increase in emergency service calls.
  • Out-of-town workers need housing, which increases the cost for everyone.
  • The heavy equipment needed for drilling increases wear and tear on local roads.
  • Eventually, booms are nearly always followed by busts, leaving communities to struggle.

Towns throughout the west saw these exciting but trying times in the 1970’s and early 1980’s and have recently been reliving them.

During much of the first decade of the 21st Century the price of natural gas climbed steadily — leading to a drilling boom throughout the West. By 2009, natural gas prices had dropped dramatically, the drilling boom had subsided, and the bust began.

Our analysis compares the impacts of rapid energy development with those that would occur with slower, phased development.

Two things that lead to energy booms are the rapid pace and large scale of development. Often a large number of wells are drilled in a very short time — leading to a rapid pace of development. Since about 2000, the recent drilling boom has spread across a large geographic area — resulting in a large scale of development. Pace and scale are often interrelated - slowing the pace of development will usually reduce the scale.

Many of the problems associated drilling booms are the result of this large scale, rapidly paced development. Our analysis shows that slowing the pace and reducing the scale of development by reducing the number of wells drilled at one time can reduce boom related problems. For our analysis we looked at several scenarios that distribute the drilling over short and long time periods. Shorter time periods mean that many wells will be drilled all at once. This will mean a lot of jobs in the area for a short time and when the drilling is done a large area will become a natural gas field.

Longer time periods mean fewer new drilling jobs at one time, and fewer wells at one time, but more land is left open for other uses and fewer workers stream into town.

Certainly, communities can benefit from oil and gas development, but this development often comes with high costs. For example, long-time residents often miss their quiet lifestyle. Slower development will bring some new jobs to communities but may reduce the negative impacts on locals.

Rapid paced, large scale energy development often results in added costs to local governments to meet the needs of an influx of workers. Slowing the pace and reducing the scale of development may reduce or even eliminate the need for public investment to meet the needs of the influx of workers

Another reason to slow the pace and scale of development is to help protect a region’s natural amenities (such as open space, scenic vistas, recreation opportunities, clean air and water) that play an important role in furthering economic diversity. An oil and gas drilling boom may suppress amenity-driven growth, but slower energy development can maintain economic diversity. Finally, slower development over a smaller area will help to protect our scenic wildlands, wildlife habitat, recreation opportunities and clean air and water.

Oil and gas development, done right can be a vital component of a healthy economy in the Rocky Mountain West. Done right means slowing down the pace to protect other parts of the economy, ensuring that drilling and production don’t harm the environment and not drilling at all in areas that are more valuable for other resources like wildlife habitat, watersheds, recreation and scenery — things that make our region such a great place to live and work.

photo: Pinedale Anticline Field, Wyoming. Photo by Wendy Shattil and Bob Rozinski.