Steamboat Springs Local government in small communities on the cusp of a potentially significant oil and gas play should plan ahead to set aside any revenue they receive for long-term projects, George Blankenship told an audience of Steamboat business leaders last week.
And there certainly are signs that oil and gas activity will pick up in Routt County, he added.
In the case of a major play, “A lot of taxes begin to flow, and you also get production revenues,” Blankenship said. “But there are issues with that.”
The problem, he said, is that the greatest demands on governments to provide services and the associated costs come up front in the development phase of an oil field, when revenues have yet to begin to flow. The greatest impacts related to growth come in the early stages of energy exploration as employees of oil field subcontractors place demands on housing, law enforcement and other community institutions, Blankenship said.
His consulting firm specializes in the area of socioeconomic impacts on local communities.
“Local governments provide services in advance of the time when they begin to receive substantial revenues,” Blankenship said. “Production revenues can take a year or more to flow, and they don’t always flow to the local government agency that provides the services. The big bonanza is fairly short lived — assume a five to six-year period, then it continues for a long time at a much lower level,” he said.
During the production phase, oil and gas revenues to local government are likely to exceed the cost of providing services to the energy companies, Blankenship said and added that is the time to put aside reserves for other purposes that are unrelated to the impacts of energy production.
“Investments made by oil and gas companies can be used to leverage your sustainability,” Blankenship said. “Make sure your infrastructure doesn’t rely on revenue from oil and gas.”
Northwest Colorado, with four communities that are roughly equidistant from one another, provides many employee-housing options for the energy companies, Blankenship said.
However, Steamboat has a significant stock of temporary housing.
“How that figures into your tourism economy is something you’ll be grappling with, he said.
Most of all, Blankenship said, it’s important for community leaders to reach out to oil companies early and build a collaborative relationship.
“If you have a regional oil and gas play, you’ll have multiple operators and contractors coming from different places,” Blankenship said. “It’s possible they’ll have different approaches for dealing with communities. It’s important to form a working group of community leaders, businesses and industry representatives to share information on an informal level.”
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com