A Tale of Two Energy Economies

Several new reports suggest the energy future for the West could lie with renewable energy sources and efficiency and not fossil fuels, reports Tom Kenworthy.

Ashutosh Misra, senior vice president of Ascent Solar, checks on work to prepare the plant for production in Thornton, CO, March 17, 2009. By 2030 Colorado could have more than 600,000 jobs in renewable energy and energy efficiency and nearly $62 billion in revenue. (AP/David Zalubowski)
Ashutosh Misra, senior vice president of Ascent Solar, checks on work to prepare the plant for production in Thornton, CO, March 17, 2009. By 2030 Colorado could have more than 600,000 jobs in renewable energy and energy efficiency and nearly $62 billion in revenue. (AP/David Zalubowski)

New research shows that the real energy future for Colorado and much of the West rests not with fossil fuel development but with renewable energy sources and energy efficiency. Some, however, would have you believe otherwise.

Throughout a nearly two-year battle to overhaul the way Colorado regulates oil and gas development that concluded recently, the fossil fuel industry and its allies often argued that a comprehensive set of new rules requiring better protections for the environment, wildlife, and public health and safety would be devastating for a sector critical to the state’s economic well-being.

“Make no mistake; this is a jobs-killing bill,” said state Sen. Kevin Lundberg last month as the legislature neared final approval of the new rules established by the Colorado Oil and Gas Conservation Commission that some see as a model for other western states. “It is an energy-killing bill. It closes the door on the future of Colorado’s energy potential.”

There’s no question that some western states have been riding a huge oil and gas boom, though it has slowed during the current recession. Assisted by the previous administration’s pro-drilling policies, the boom created political support for states such as Colorado to pass stronger environmental protections.

In fact, a report by the House Committee on Natural Resources found that policies pushed by the Bush administration encouraged drilling on federal lands to the point that the number of drilling permits approved nearly doubled—from 3,802 to 7,561—between 2002 and 2007.

Those industry-friendly policies also accelerated drilling on private lands, since the federal government owns the rights to oil, gas, and other minerals underlying some 58 million acres of privately owned land—most of it in the West. In Colorado, for example, the total number of drilling permits approved for both federal and nonfederal lands jumped from 1,529 in 2000 to 8,027 in 2008, according to the Colorado Oil and Gas Conservation Commission.

But within the larger context of the increasingly diverse western state economies, is fossil fuel development as important to growth as legislators such as Lundberg claim? Probably not, according to a series of eight reports issued over the past six months by Headwaters Economics, an independent nonprofit research group in Bozeman, Montana.

Only 4 percent of counties in the West are seeing a “a surge of energy-related jobs,” the study found, and just 2.8 percent of total personal income in the five big energy-producing states (Colorado, Montana, New Mexico, Utah, and Wyoming) comes from the sector that includes oil, gas, and mining.

On the other hand, a separate study released in January by the American Solar Energy Society and Management Information Services underscores the increasing vitality and importance of the green jobs sector both nationally and in Colorado. The renewable energy and energy-efficiency fields “comprise some of the most rapidly growing industries in the world,” concluded the report, employing more than 9 million people in the United States as of 2007 and with the potential under a “crash effort” to employ 37 million by 2030.

In Colorado, according to the study, the renewable energy and energy-efficiency fields had generated some 91,000 jobs by 2007—more than 3 percent of state employment—and gross revenues of more than $10 billion. That’s about 20,000 more Colorado jobs than existed in the state’s oil and gas industry as of 2007, according to a Colorado School of Mines report, though less than half of the conventional energy industry’s overall economic output.

This job increase is due in part to the fact that Colorado has accelerated its renewable energy efforts in recent years, and the study may not even be telling the whole truth. It does not, for example, reflect several large developments by companies such as Vestas, a Danish manufacturer of wind turbines, that have created several thousand more jobs.

Even more clean-energy jobs for the state lie ahead. The green jobs report by the American Solar Energy Society—which was funded by the state, Xcel Energy, and other partners—concludes that by 2030 Colorado could have more than 600,000 jobs in renewable energy and energy efficiency, and the sector could have nearly $62 billion in revenue.

The series of reports by Headwaters Economics also found that economic progress in the West—the nation’s fastest growing and most urbanized region—during the last three decades of the 20th century was driven primarily by service and professional industries and by investment or nonlabor income. During that period 86 percent of net growth in personal income was in service-based jobs and nonlabor income. By contrast, energy development, mining, timber, and agriculture were responsible for less than 1 percent of income growth. This reflects the diversification of the West’s economy and the region’s strong shift away from jobs tied to resource extraction.

With a far larger and more diverse regional economy than existed during past energy booms, western counties that have focused on oil and gas development in recent years have actually underperformed counties that have not stressed energy development. Between 1990 to 2005, according to Headwaters Economics, so-called “energy-focusing” counties saw real personal income grow at 2.3 percent per year, compared to 2.9 percent in other counties.

In a case study of two energy-heavy counties in western Colorado, Headwaters Economics did find some positive effects: “new economic opportunities, reduced unemployment… rapid in-migrations, and raised wages for many workers.”

But the energy boom also comes with a price. “Fast growth has exacerbated inflation, housing, and commuting pressures; contributed to a growing wage and wealth gap; and made it more difficult for other industries to thrive.”

Some of those problems may be avoided as the renewable and energy-efficiency sectors grow because they will ramp up more gradually and the growth won’t be so geographically concentrated.

While conventional energy development will no doubt be a part of the western landscape for some time, it increasingly looks like the future belongs to wind, solar, and other renewables.

Tom Kenworthy is a Senior Fellow at the Center for American Progress.

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Tom Kenworthy

Senior Fellow