Clash of cultures: Energy boom and rural lives

updated 1:38 p.m. ET March 5, 2006

GREELEY, Colo. - On a blustery winter day on the rolling plains north of Denver, a herd of cattle stood grazing a few yards from an idled natural gas pump in a dormant field as traffic rumbled by along a black-topped, two-lane highway.

Just down the road are shopping centers and subdivisions packed with new homes, gobbling up land around this once-sleepy agricultural town that just happens to sit atop the Wattenberg gas field, one of the nation’s most productive.

Ed Orr knows this land well. A rancher and developer whose family roots in Colorado date back more than a century, Orr says the real estate business is growing increasingly difficult because gas producers want access no matter what the plans are for the property.

“The conflict of the cultures is certainly more prevalent. You have two industries that are both growing,” Orr said. “They think that we have no valid rights to get any accommodation for development use of the surface.”

Twin engines of growth — in population and within the oil and natural gas industry — are colliding in Greeley, the fastest-growing metropolitan area in the nation. Developers looking to cash in on rising land values are running into companies eager to sink more wells and drawing up plans for multibillion-dollar pipelines to carry gas to the East Coast.

Similar conflicts are playing out from Montana to New Mexico because the Rockies’ energy boom is in full bloom, prompting worries about the environment, property rights and the changing character of small towns swelling with new workers. Many fear another Western rush to fortune will be followed by hard times — again.

Long-term boom?
The gas boom, however, seems to be setting up for an extended run, according to industry experts. That poses a new set of issues for communities that have diversified their economies by attracting tourism, manufacturing, construction and technology companies after the last bust in the 1980s. Cities such as Grand Junction and Montrose in western Colorado have become havens for retirees, while mountain communities that are home to celebrity-magnet ski resorts are filled with wealthy property owners who buy up ranches and build second homes.

Even as the West’s population grew by nearly 20 percent in the 1990s, the oil and gas industry has returned its focus to the Rockies thanks to skyrocketing prices and technology that make the resources easier to retrieve. Drilling has slowed in other gas fields, and Hurricane Katrina forced Gulf Coast-oriented companies to consider other options.

Producers — including EnCana Corp., Kerr-McGee Corp., Noble Energy Inc. and Bill Barrett Corp. — are sinking traditional oil and gas wells across the West, tapping coal-bed methane reserves and are even experimenting with hard-to-get resources such as oil shale.

According to federal statistics, U.S. gas production has been relatively flat for years (18.1 trillion cubic feet in 1993 compared with 18.6 tcf in 2004). But exploration is red-hot: In New Mexico, Colorado, Utah, Wyoming and Montana, gas reserves in 2004 totaled 60.7 billion cubic feet, up from 58.8 billion cubic feet in 2003. And the number of producing wells rose from 73,796 in 2000 to 84,164 in 2004.

The quick pace of production has filled pipelines to capacity, prompting at least three new pipeline proposals, including a $20 billion project to bring gas from Alaska’s North Slope to the Midwest. The other projects are in the West.

‘Infancy’ stage
“The Rockies is sort of in its infancy,” said Ron Gist, senior principal of Purvin and Gertz Inc., an industry consulting company in Houston. “One of the reasons the Rockies has not been developed as quickly is the local demand isn’t that big so then you need an infrastructure to get it to market.”

Kinder Morgan Energy Partners LP and Sempra Energy are building a $4 billion, 1,323-mile pipeline to carry up to 2 billion cubic feet of natural gas from Colorado’s Weld County — home to Greeley — to Monroe County, Ohio, for delivery to Midwestern and Eastern markets by June 2009. Kinder Morgan is also expected to buy another pipeline from EnCana that will run from Rio Blanco County in western Colorado through Wyoming to the Weld County hub.

Separately, El Paso Corp. has proposed a 1,000-mile pipeline called the Continental Connector to move up to 2 billion cubic feet of natural gas from Weld County to Kansas and then into existing pipelines that serve markets in the Midwest, Southeast and Northeast. The costs have not been disclosed but El Paso said it could be in operation by November 2008.

Don Santa, president of the Interstate Natural Gas Association of America, said the companies will need adequate pledges from producers for gas before they can get federal approval for the sprawling projects. He said rising levels of production and the need for gas in the East suggests a need for the Kinder Morgan-Sempra and El Paso projects.

“Those two are of a magnitude that we haven’t seen in a while,” he said.

Most analysts believe the gas boom will remain strong, noting there is an insatiable demand not only in the United States but overseas.

“We’re looking for continued production increases for 10, 15 years at least and perhaps longer than that,” Gist said. “Our view of things out to 2020 has gas production in the region continuing to increase. This is indeed a long-term trend.”

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