Local economy could take long-term hit as reserves
|A well continues on with its
perpetual pumping along Highway 160 east of Durango. A recent
study commissioned by La Plata County found that the county
revenues from natural gas well property taxes dropped by 11
percent last year and will continue to drop over the next
few decades to 7.5 percent of current levels./Photo by Todd
There is a fixed amount of natural gas beneath the ground and
local drilling will not go on forever. La Plata County recently
received the results of a study on area drilling that shows steadily
diminishing revenues from natural gas, a factor that offers little
environmental benefit but threatens to hit local economies hard.
Last year, La Plata County commissioners retained a Texas firm
to conduct a $30,000 study to determine how much natural gas remains
locally. The study was kicked off with the understanding that
the fuel is a finite resource and that several local governments
have grown dependant on property tax revenues from the industry.
The study was released to the county in September of last year.
However, it didn’t see daylight until last week after the
Friends of the Animas Valley filed a Freedom of Information Act
The findings point to an 11 percent drop for the county in oil
and gas revenues from property tax in the last year. That trend
is also expected to continue according to the report, and would
render revenues a mere 7.5 percent of their current levels by
the year 2025.
Commissioner Josh Joswick said that the county has expected the
drop-off but did not know when it would begin. “We knew
that at some point in time, it would start dropping and we know
we’ve benefited from the industry in the past, but there’s
been a false security,” he said.
Joswick commented that the end of this false sense of security
has caused him concern. “Personally, I think it’s
something we’ve got to start paying attention to,”
The county has considered the additional tax somewhat of a bonus
and spent the money wisely, according to Joswick. However, he
added that the loss of dollars will still be a hit.
“We’ve been really good about where we’ve put
bonus revenues,” Joswick said. “We haven’t put
ourselves too far out on a limb. But roads still wear out and
buildings need repairing.”
Curiously, the amount and price of natural gas being produced
by local gas wells are not going down, according to retired petroleum
engineer Bob Aitken. “I see no signs of a decline up through
2003,” he said.
|The shaft rises, drops and repeats on a
gas well near Elmore's Corner. Three-hundred new wells are
being proposed for national forest land in the HD Mountains,
near Bayfield./Photo by Todd Newcomer.
With steady value and production, Aitken said that the only way
to lose value would be if wells are being taken off of the tax
rolls, as would happen if they were purchased by the Southern
Ute Indian Tribe. With strong pricing and production in mind,
Aitken commented, “I’d say (the La Plata County study)
is very pessimistic.”
If the forecasted loss in revenue plays out, the county can either
cut expenses or ask the public to raise revenues. “The only
real options we have are to redirect the finances we have or ask
people to raise taxes,” Joswick said.
This potential new burden is what pushed the Friends of the Animas
Valley to make the FOIA request in the first place. Renee Parsons,
Friends of the Animas Valley president, said that the group first
became concerned during the county’s April 28 approval of
the La Plata Archuleta Water District. As proposed, the system
would provide drinking water to residents in a 400-square-mile
area in southeast La Plata County and be funded largely by property
tax from the natural gas industry.
“Our first concern is that the water district was approved
and is going to be built on speculative financing,” Parsons
said. “Now we’re wondering if the county has done
any contingency planning for when the bottom falls out.”
Alan Cathcart, also of Friends of the Animas Valley, characterized
his view of the county’s planning for the contingency, saying,
“There seems to be a ‘We’ll cross that bridge
when we come to it’ mentality.”
Dan Randolph, oil and gas organizer for San Juan Citizens’
Alliance, said that his group has always viewed natural gas extraction
as a boom-bust cycle for La Plata County.
“The end of the reserve doesn’t necessarily mean
that there will be fewer surface impacts,” he said. “It
does mean that there will be fewer benefits to the 4 community
in terms of royalties and taxes to the various government entities.”
Randolph added, “This has been a short term benefit and
is really a temporary situation. We’ve been saying for years
that this is a boom-bust cycle.”
One government entity that could be hardest hit is the 9-R School
District. The district is largely dependent on property tax revenues
and has seen them drop over the last two years. Diane Doney, director
of business services for 9-R, remarked, “If oil and gas
revenues go down, another piece of the puzzle has to go up. In
the past couple years, we have seen a significant increase in
the amount of revenue we’re getting from the state for operating
|Citizens’ oil & gas forums
The San Juan Citizens’
Alliance is hosting three forums to assist landowners in
dealing with proposed or existing gas and oil wells.
The forums will be held for the next
three Thursdays a various locations throughout the county.
Forum times and locations are: Thursday, May 6, 7 p.m.,
Bayfield Middle School Cafeteria, 615 E. Oak; Thursday,
May 13, 7 p.m., Ignacio Schools Administration, Building,
315 Ignacio St.; and Thursday, May 20, 7 p.m., Friends Meeting
House, located in Grandview just east of AC Houston Lumber.
Discussion topics will include:
-What are the rights of the landowners?
-What are the obligations of the gas
-What should a landowner ask for?
-Once the well is in, what is the company
required to do?
-How can La Plata County and state regulators
For more information, call 259-3583.
An $84.5 million bond issue was approved by voters in 2002 to
upgrade all of the district’s schools and facilities and
would also be impacted by a drop in revenues. Doney said that
the bond will be paid back over 20 years and it is hoped that
the oil and gas industry will contribute revenues during that
“When the industry goes away, it’s hoped that the
bond will be gone,” she said.
Environmentally, the end of the oil and gas industry may appear
to be beneficial. However, Randolph said that it’s not necessarily
the case. Because the San Juan Basin was the first place in the
nation to have commercially viable, natural gas drilling, it will
also be the first to lose the resource, he said. In the case of
the oil industry, efforts to get the last of the reserve have
been especially damaging.
“What we’ve seen with oil extraction is in order
to get the last bits of the reserve, companies can use some of
the most damaging practices,” Randolph said. “Trying
to wring the last drops out of the towel can take the most work.”
Much of the damage also has largely been done, according to Randolph.
“Humpty Dumpty never goes back fully together,” he
This month, the Forest Service plans to release a draft Environmental
Impact Study for 300 proposed wells in the HD Mountains west of
Bayfield. However, Randolph said that he is not concerned about
diminishing revenues encouraging drilling in the pristine area.
In fact, he said that the coming bust is an argument for not drilling
in and damaging the HDs. “We’d counter that it’s
an argument for why not to drill in the HDs,” he said.
Instead he suggested that the people of La Plata County should
be asking themselves a hard question about the natural gas industry.
“The benefits are really short term,” he said. “Some
of the consequences are really long term. Is this a trade-off
that really makes sense?”