The oil and natural gas industry accounts for less than 2% of the jobs and incomes in the Rocky Mountain states, and natural amenities are more important to the area's economy, according to a report by the Wilderness Society.

The 32-page report, "Natural Dividends: Wildland Protection and the Changing Economy of the Rocky Mountain West," provides a snapshot of the economic trends that have shaped the Rockies region, and it details the economies of Colorado, Idaho, Montana, New Mexico, Utah and Wyoming. The report relied on state and federal economic data.

"While some places are simply too wild to drill and should be protected, in areas where drilling is appropriate we recommend phased development of oil and gas resources," said the authors. "Phased development involves incrementally opening an area for development, limiting the total area developed and/or limiting the percent of the area disturbed at any one time."

According to the report, phased development could involve: 1) limiting the number of drilling permits that will be granted; 2) limiting the number of rigs permitted to operate in an area at one time; and 3) developing one area at a time, only moving to a new area once the first area is fully restored to baseline conditions.

The Wilderness Society's report follows one issued in June by the Colorado Energy Research Institute that characterized the oil and gas industry as a major economic force in the state, contributing $23 billion to the Colorado's economy (see NGI, June 25).

The Wilderness Society's report noted that many communities in the Rockies receive "a great deal of income from oil and gas royalties and other taxes." However, "these revenues should be considered in their proper context -- compared with the many costs that oil and gas drilling imposes on communities. When these costs are considered, revenue from oil and gas drilling will be less important to the overall economy even in these communities."

The authors noted that the region's natural attributes and quality of life have boosted the economy over the past few decades by drawing unrelated energy businesses and retirees to the area.

"In fact, the contribution of oil and gas extraction is roughly where it was 30 years ago -- about 1.3% of total personal income in 2005, a remarkably small percentage given the current drilling boom," the report noted.

Left unchecked, the authors argued that energy development could threaten the amenities that could sustain the economy once oil and gas production diminishes.

Oil and gas development "is notorious for resulting in 'boom and bust' cycles that can have devastating impacts on nearby communities," the report said. "Research has indicated that an emphasis on resource extraction results in inherently unstable community economies...often due to forces such as fluctuations in prices and changes in extraction technology, which are completely outside local control. The current drilling boom is a case in point. Rural communities have had little control over the pace or location of drilling -- as the Bureau of Land Management (BLM) continues to ignore widespread local opposition to this development."

The upsurge in drilling already is having "negative impacts" on communities in the West, noted the report. "Recent news accounts document residents leaving areas where drilling has become such a nuisance that their quality of life and property values have declined...Other impacts include damage to rural roads, poaching in and around the gas fields and other crime -- especially drug use...The 'hidden costs' from the current drilling boom also include air and water pollution, loss and fragmentation of critical wildlife habitat, decline in the quality of hunting and outdoor recreation in general and the potential damage to the region's natural amenities."

Merely counting jobs in the energy industry "is not sufficient to predict the economic impact of proposals to increase this development," the report stated. "Communities and planners must also consider the increasing importance of industries and economic sectors that rely on protected wildlands, which could be harmed by the extraction of natural resources."

Among other things, the report said the socioeconomic analysis of oil and gas drilling proposals be based on the resources that are economically recoverable, "not the resources that are only technically recoverable." And the economic analysis of recoverable resources "should fully account for the hidden costs to communities and the environment associated with drilling."

The Wilderness Society stated in a recent report that Rockies oil and gas drilling could increase by more than 160% over the next 20 years, in part because of pro-industry regulations enacted during President Bush's administration (see NGI, Sept. 24). To read the latest report, visit http://www.wilderness.org/ and click on "Natural Dividends."

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