Monthly oil production in Colorado rebounded to over 80% of pre-pandemic levels in 2022, putting it on track to produce more oil than all but four other states.
But with employment and wages in the industry still down from 2019 highs, a new report seeks to challenge what has long been an article of faith among Colorado policymakers – arguing that rather than being a major engine of growth for the state, the oil and gas sector has only a “modest” impact on its economy overall.
The analysis from the left-leaning Colorado Fiscal Institute “shows Colorado’s oil and gas industry is in fact merely a fraction of Colorado’s diverse economy,” CFI senior economist Chris Stiffler, a co-author of the report, said in a statement. “As of March of last year, the industry represented less than 1% of total employment and less than 2% of total wages.”
The release of the report comes as Colorado lawmakers convene in Denver to begin another four-month session of the General Assembly, and debate a new slate of legislation that could impact the state’s energy industry and its ambitious goals for combating climate change.
“One the biggest barriers to these goals is the perception that Colorado is so economically reliant on the oil and gas industry that our state’s economy will prohibitively suffer if production declines,” CFI’s report said.
Past analyses published by the Colorado Oil and Gas Association have claimed that the industry accounts for as many as 89,000 local jobs. A 2021 report commissioned by the American Petroleum Institute put the figure even higher, at 340,000 jobs in Colorado alone – 1 out of every 8 jobs in the state.
CFI’s report, however, faults those figures for their reliance on imprecise estimates of “indirect” and “induced” economic effects, which, the authors argue, lead to exaggerated perceptions of the potential impacts of a “gradual, managed transition” to clean energy.
Federal data show that direct employment in Colorado’s oil and gas sector declined from roughly 32,700 workers in March 2019 to about 20,500 in March 2022, or seven-tenths of one percent of total state employment.
“If the oil and gas industry in Colorado gradually declines due to market forces, regulation, or a combination of these, we can expect the economy to evolve and develop to accommodate these changes,” wrote Stiffler and report co-author Pegah Jalali. (Jalali has contributed commentaries to Newsline.)
Among the largest benefits attributable to the industry are the local property taxes paid by the owners of oil and gas assets in the handful of Colorado counties where significant production occurs. In 2021, over 43% of the property taxes collected by Weld County, home to the vast majority of Colorado’s oil production, came from oil and gas. Other counties on the gas-rich Western Slope boast similar figures – though the value of the assets can fluctuate wildly from year to year, depending on global commodity prices.
“Some counties would be disproportionately affected by (the energy transition), and Colorado will need to come together to find a solution that will support these communities,” the authors said.
Advocates with 350 Colorado, a progressive climate-action group, said Friday that CFI’s report shows that “a gradual phaseout of new oil and gas permits is feasible.”
For years, environmental activists have urged Gov. Jared Polis and other Colorado policymakers to begin phasing out oil and gas production in the name of climate change – and for years Polis and other top Democrats have rejected those calls. A 2019 law increased health and safety protections for drilling but has done little to hinder production, which state officials have projected will continue to increase until at least 2030.
A biannual report released last week by the Polis administration touted progress on its “road map” for reducing emissions in line with targets set by a 2019 state law. Through a wide variety of voluntary measures and incentive-based regulations, the state aims to achieve a 26% overall emissions cut by 2025, and a 50% cut by 2030, though administration officials have acknowledged it’s falling behind on the 2025 goal, especially in the transportation sector.
“With momentum and progress on the initial Greenhouse Gas Pollution Reduction Roadmap, we look forward to updating our plans and working closely with our local, in-state, and federal partners to make progress towards our climate goals and continue to lead the nation,” Polis said in a statement.
Proposals expected to be taken up by the Legislature this session include Polis’ request for an additional $120 million in state incentives for electric vehicles, e-bikes and electric lawn and garden equipment, as well as additional measures aimed at tackling Colorado’s ozone pollution problem. State Sen. Chris Hansen, a Democrat from Denver, told journalist Allen Best this week that he will introduce a bill to set an interim emissions-cutting target of 65% by 2035.
The potential of long-term declines in oil and gas property taxes could also loom over discussions about updating Colorado’s school funding formula. Advocates continue to press for a “just transition” that protects workers and residents in fossil-fuel-dependent communities as the energy transition accelerates.
“Unfortunately, we’re already seeing the incredible cost of delaying a transition away from pollution-causing fuels to clean energy,” Jalali said in a statement. “This report will give lawmakers a clearer picture of which communities – especially which school districts – will need the most attention in the years to come.”