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This is Chaco 2408 32P #114H, one of dozens of oil wells drilled in the last few years in northern New Mexico's Gallup Sandstone, one of the nation's newest "tight oil" plays. Chaco #114H and thousands like it in North Dakota, northern Colorado and Texas exist because of high oil prices, driven by demand from China and the developing world. But now, thanks in part to slower growth in China and the flood of U.S. oil, crude prices are falling. Though the resulting drop in gasoline prices benefits most sectors of the economy (average gas prices in New Mexico dropped below $3 this fall), it may dampen or even crush the shale oil revolution.
Chaco #114H can help explain why. The San Juan Basin, home to some 40,000 oil and natural gas wells, was already one of the most prolific natural gas fields in the nation when, in the early 2000s, high prices made it economically feasible to combine horizontal drilling and hydraulic fracturing to drill in tight shale formations. The drilling frenzy that followed glutted the domestic market with gas, causing prices to crash. Rigs abandoned San Juan County for fields also rich with profitable oil. San Juan County's economy faltered; tax revenues from oil and gas are today just one-third of what they were in 2009, when prices were high.
But there remained hope — oil, that is — in the Gallup Sandstone. Spurred by high oil prices, energy companies recently resurrected this old play, sparking a still small but growing boom.
Chaco #114 is one of the boom's pioneers. In early 2013, WPX Energy drilled down about 5,400 feet, turned the bit 90 degrees, and ran it another 5,000 feet horizontally through the oil-bearing sandstone. At 10,000 feet "deep," as drillers say, it's still shallower than North Dakota's wells, which average 20,000 feet. But it's far deeper than its predecessors, which averaged about 4,000 feet deep.
And that helps make shale wells far more expensive, and therefore more sensitive to price drops. In reports to its investors, WPX Energy says its wells in the San Juan Basin cost $5.2 million on average to drill and frack; its Bakken wells run to a staggering $10 million. Old-school oil wells typically cost $500,000 or less to drill.
As much as a quarter of the cost stems from hydraulic fracturing. Chaco #114 was pumped full of nearly 1 million gallons of water and chemicals — everything from walnut hulls to Bactron K-87 Microbiocide — along with 3 million pounds of sand to hold the fractures open.
Chaco #114 responded in March of 2013, initially gushing as much as 272 barrels of oil per day. With oil selling for $108 per barrel on the global market, the well should have turned a tidy profit within its first year.
According to state records, however, each barrel of oil from Chaco #114 has yielded as much as $26 less than the global benchmark for crude, the "European Brent price." Subtract royalties paid to operate on state land (12.5 percent in this case), other county and state production taxes (about 8 percent), and the costs of extracting hydrocarbons, transporting them to market, maintaining the well and disposing of the tens of thousands of gallons of wastewater, and the well becomes a lot less lucrative.
And there's a bigger catch. Oil and gas wells produce heartily during their first months, and then wane. It's called a decline curve, and it's especially steep for most shale wells. Chaco #114's production had dropped by half by the time it was six months old. A year after drilling was complete, it was producing just 50 barrels per day — a decline of over 80 percent. This phenomenon is repeated across the West's shale oil and gas fields to varying degrees.
That means that, just to keep overall production levels stable, energy companies must drill new wells relentlessly. "It's known as the Red Queen syndrome," says Mark Haggerty, a policy analyst with Headwaters Economics, a nonprofit based in Bozeman, Montana. "They've got to drill faster and faster, just to stay still." Collectively, the nation's producers have stayed ahead of the curve, but only by operating 1,700 to 1,800 rigs at any one time, each drilling multimillion-dollar wells.
When prices are high, that might make sense. But when they crash by 20 percent, as they have since this summer, it puts companies in a tough spot. If they stop drilling, production and revenues will fall. If they finish drilling when prices are low, the well uses up that initial production bonus with less of a return, reducing the chances of ever recouping that multimillion-dollar investment. Had Chaco #114 been drilled this October, the company would have made about $82,000 less during the critical first month of production. That math may not stop drilling in the best spots if prices remain in the $80 per barrel range, says Haggerty, but it could result in a total shutdown in smaller, peripheral plays.
For the brand-new boomtowns of North Dakota, and for the reworked ones in the San Juan Basin, a long-term drop in oil prices is a mixed bag. The social and environmental impacts that accompany the drill rigs will dissipate if drilling slows, but so will the taxes paid by the companies to help mitigate some of those impacts. A 10 percent price drop from year to year could reduce North Dakota's mean annual revenues by as much as $300 million, and the San Juan Basin could forget about recovering from the natural gas slump, at least for now.
This dynamic can be influenced by tighter regulations, which can raise drilling costs, or by technological advances, which can lower them. But whether Chaco #114 will ever pay for itself — or whether the regional boom will keep going or lose its steam — hinges primarily on the price of oil and the unpredictable global forces that determine it.]]>
If you doubt the power of bikes to transform a place, consider the saga of the Brickyard, a sunken, vacant lot spanning nearly three blocks east of downtown in a mostly residential district of this small New Mexico city. Up until about 1960, it was home to the kilns that cooked the bricks for Gallup's historic homes and businesses. After it shut down, time and neglect claimed the few remaining structures, and weeds and scraggly trees moved in, followed by drinkers and vagrants. Local legend held that some of them barbecued stray cats in a camp on the edge of the lot, next to the Junker Bridge, which was named after a former mayor.
Chuck Van Drunen hated the Brickyard. He lives just a few doors down from the lot with his wife, Jenny, and their two young kids, and he grew tired of the Brickyard's tenants wandering through the alley behind his house. So, Van Drunen, who co-owns Gallup Journey, a monthly alternative magazine, made a video blog in which he sports an Abe Lincoln-style beard and expresses his frustration. After his house was broken into, he complained to the Brickyard's owner. And when that went nowhere, he phoned his spandex-clad biking buddies, flagged some of the older trails that had been worn through the overgrown shrubbery, and started leading afternoon group rides through the lot in hopes of driving out the riff-raff. Call it Occupy The Brickyard, with bikes.
To Van Drunen's surprise, the city soon got involved. Behind the scenes, Mayor Jackie McKinney convinced two of the Brickyard's three property owners to donate their share of the five-acre lot, and then got another local to buy out the third owner, and donate that piece. Other community members, with the city's backing, solicited donations to commission nationally known park designer Nat Lopes to draw up plans. The local Youth Conservation Corps then went to work, clearing out brush and garbage and building trails.
Last September, the Gallup Brickyard Bike Park celebrated its grand opening, with Levi Leipheimer, a former pro-cyclist, officiating. The park now sports a pumptrack, jumps, whoop-de-doos and walking trails with interpretive signs – not to mention swarms of kids having a blast on their bikes.
Van Drunen, an avid cyclist with a laconic manner and wry wit, is delighted with the change. As he wrote in the Gallup Journey: "The Junker Bridge Bed and Breakfast club has officially closed its cat-cooking kitchen to overnight guests."
The park is just the latest step in a long-running effort to re-create Gallup as a mountain-biking hub. Over the last 15 years, local bike-advocates have built and designated dozens of miles of trails in the nearby desert and forests and spiffed up the old downtown. Gallup now hosts several mountain bike races each year, including the 24-hour national championships. In 2011, the state Legislature even formally designated the city as the Adventure Capital of New Mexico.
To Westerners who haven't visited recently, the moniker sounds more ironic than anything else. The Gallup in most peoples' mind – with its lingering reputation for public drunkenness, economic inequality, exploitation of Native Americans and just general all-round roughness – bears little resemblance to, say, Moab, Utah. And it's still not clear how far the two-wheeled revolution can go in turning things around.----
Gallup, population 20,000, sits along Interstate 40, Route 66, the major cross-country rail line and at the terminus of Highway 491, née 666. The railroad came in 1881, coal mining shortly thereafter, and an often boisterous little city sprouted on the sandstone slopes above the dusty trickle of the Rio Puerco. Over time, Gallup became a supply center for the region, known for brickmaking and uranium and coal mining.
But Gallup is probably better known for Native Americans and its complicated relationship with them. The town itself is not on a reservation, but it sits in the heart of Indian Country. Zuni's just down the road to the south, Laguna and Acoma Pueblos aren't far to the east, Hopi's a few hours west, and the massive Navajo Nation wraps around the city – the Navajo capital of Window Rock is just a half hour's drive. By 1900, Gallup was a major trading center for Indian jewelry. It's long been the place where Native Americans come to visit Wal-Mart and get a bit of an urban experience; the regional office of the Bureau of Indian Affairs is here, as well as a major Indian hospital. One of Gallup's nicknames is "The Indian Capital of the World."
Gallup's cultural quilt also includes a strong Hispanic community and the descendants of Italian and Croatian immigrants who came to mine coal. There's even a Palestinian community – a mosque sits along old Route 66 – that is mostly involved in the Indian jewelry trade. Squeezed into that demographic stew are doctors, teachers, bureaucrats, missionaries and AmeriCorps/VISTA volunteers, many of whom come from elsewhere and end up staying; they're the major force behind the recent cycling push. The town's historic character hasn't been diluted by postwar sprawl; the kitschy/cool Route 66 storefronts mostly endure and the old brick homes are still stacked closely along steep streets. It all gives Gallup a gritty, diverse, even cosmopolitan feel, very different from the placeless suburbia that has gobbled up so many Western cities.
Yet Gallup is also notorious for its dark side: It's not only the unofficial Indian capital, but also the epicenter of Indian exploitation, a place whose very identity and economy were built on taking advantage of the local Native Americans. The jewelry business, for example, has occasionally been tainted by fraud, with machine-made and imported goods pawned off as handmade by Indians. Nor is it uncommon for the traders to offer the jewelry makers – often unskilled in business dealings – a pittance for their product. One of Gallup's biggest tourist draws since the 1920s has been the annual Indian Ceremonial. In the early 1970s, Native American activists regularly protested the event, saying it appropriated their culture, then commodified it for the profit of white businessmen. "Colonialism has a lot to do with it," says John Redhouse, a Navajo and one of those early activists, who has spent much of his life fighting for Native rights. "Gallup is a border town, and the tribes around it constitute economic colonies."
And then there's alcohol. In 1953, the federal government lifted the ban on selling alcohol to Native Americans. Tribes, however, continued to prohibit its sale on the reservations. That created a vast, new, thirsty market for Gallup's liquor peddlers: During the following decades, as many as five dozen different drinking establishments flourished at one time in town, far more than allowed under state law. Garden De Luxe, a sweet, fortified Tokay wine, was shipped in from California in rail tanker cars and bottled in Gallup to be sold for a buck or less per bottle. An entire economic sector grew up to feed the epidemic, including dozens of pawnshops, a blood-for-cash place and bustling bottle- and can-recycling centers.
During the 1970s and '80s, police hauled more than 30,000 people each year to the drunk tank, which was little more than a cage where people could sleep it off before being released to get drunk again. Cirrhosis killed many, but hundreds of others each year died more quickly – killed when they passed out and froze to death on long winter nights, or staggered out in front of traffic or the freight trains that rumble through town. Inebriated people were beaten up for sport, or raped. It got so bad that, in 1973, Larry Casuse, a Navajo college student and activist, kidnapped the Gallup mayor and part-owner of the Navajo Inn – the most profitable liquor store in the state – which was perched cynically right on the edge of the reservation. The mayor escaped, and Casuse was killed in an ensuing firefight.----
Then, in 1986, Ed Muñoz ran for mayor, promising to tackle the alcohol problem. He wanted to put up billboards declaring Gallup "the drunk-driving capital of the world," a suggestion that enraged local businesses anxious about tourism. The billboards weren't necessary, though: The town had caught the attention of the media. In 1988, the Albuquerque Tribune published a six-part series entitled "Gallup: The Town Drunk." ABC News' 20/20 followed with a feature called "Drunk Town, USA," a name that stuck for years. Mother Teresa even put Gallup on her list of "forsaken places," along with Calcutta.
Finally, in early 1989, a drunk driver slammed into a car on the highway to Zuni and killed four of its five occupants, including an infant. That inspired dozens of community activists to march from Gallup to Santa Fe to force the Legislature to wake up to the problem. By the time it reached the State Capitol, the procession was 2,000 strong.
State lawmakers finally listened. They helped fund a rehabilitation center in Gallup (since taken over by the Navajo Nation) that included traditional Native American healing methods; banned open containers in the front seat of vehicles; and passed a law to shut down drive-up liquor windows. The Robert Wood Johnson Foundation gave nearly $5 million in grants to fund various efforts combating alcohol abuse. Eventually, Gallup banned package liquor sales in the downtown commercial area. Some of the worst bars have shut down.
By the late 1990s, the situation had improved markedly. It was about then that some locals figured it was time for Gallup to get a reputation for something new.
Bob Rosebrough's handshake is startlingly gentle. Perhaps it's from spending a lifetime among Navajos, who are known for diffident handshakes, or maybe it's because he's 6-and-a-half-feet tall with the paws of a basketball player and enough strength for a bone-breaking grip. He grew up in Farmington, went to college and law school in Albuquerque and has practiced law in Gallup since 1979.
In the 1990s, Rosebrough started mountain biking. He and his friend, Peter Tempest, a Gallup native and now a local surgeon, would seek out established trails in Colorado or Utah to ride. While on one such outing in Telluride, they picked up a guidebook that described local trails and rides. It occurred to them then that the Gallup area, with its high mesas, towering red rock fins and ponderosa-covered plateaus, was just as rich in recreational opportunity. Someone just needed to publicize the trails. It would be worth it, even if it just encouraged locals to ride closer to home.
Rosebrough, who wrote the definitive climbing guide to the San Juan Mountains in southwestern Colorado, was up to the task. In 1999, he and Tempest published The Gallup Guide: Outdoor Routes in Red Rock Country, which featured not only climbing routes, but also road biking, hiking and a few mountain biking trails.
The book was hardly the first of its kind for the Southwest. Moab, Utah, had transformed itself from busted-down uranium-mining burg to industrial-grade recreational tourism desert mini-metropolis, thanks largely to two brothers who opened a bike shop there in the early 1980s. Telluride and Durango had long banked on trails and mountain-biking terrain to supplement their tourism industries. And in 1995, Troy Rarick opened a bike shop in the farming and oil and gas town of Fruita, Colo. Simply by building trails and marketing them, Rarick changed his town into a hip recreation destination. Rosebrough and Tempest's little book opened up many Gallupians' eyes to new possibilities.----
Gallup had long been famous as a gateway to Indian Country. But by the 1990s, the tourist industry and the lodging taxes it generated were stagnant, the coal mines were dying and the uranium boom had busted. In 1999 Patty Lundstrom, then executive director of the Northwest New Mexico Council of Governments, held a forum to figure out how to "use existing assets as an economic driver for the region." Adventure tourism "floated to the top," she says. Moab was the obvious role model and Lundstrom visited there often, hoping to learn how to draw the same number of visitors without provoking tension between old-timers and pedaling newcomers. Unlike Moab, though, Gallup had no bike shop or other private enterprise to encourage the effort. Adventure Gallup & Beyond, the campaign's umbrella organization, would have to rely on volunteers and the public sector to get started.
The first step was legitimizing the spider web of "social trails" that wandered around the sagebrush and sandstone, mostly on land owned by Gamerco, a coal company. The task turned out to be tougher than anticipated. Rosebrough got so frustrated with the lack of progress that he successfully ran for mayor in 2003. He then helped get an easement across Gamerco's land northwest of town to provide public access to the 26-mile-long High Desert Trail, the flagship of the local trail system.
Meanwhile, Lundstrom was elected to the state House of Representatives in 2001. From there, she was able to help secure funding to buy a nearby rock-climbing crag, to upgrade Red Rock State Park and its associated trails and to design, build and market trails to the outside world. Another longtime local, Karl Lohmann, formed a local chapter of the Youth Conservation Corps to turn the rutted paths into a world-class trail system.
This loose-knit group of trail builders and cyclists eventually coalesced into Trails 2010, a nonprofit based on Durango's wildly successful Trails 2000. The organization worked with the U.S. Forest Service to designate existing single-track trails in the Zuni Mountains, some 15 miles from town, as mountain-bike-friendly. Now, the group is working with the agency to vastly expand – by as much as 250 miles – the mountain biking trail network. Today, when you cross the state line from Colorado, you see a huge state tourism billboard sporting a photo of a mountain biker on Gallup's trails.
The immediate Gallup area now has two major networks of buffed-out, fast single-track trails that rival those in Fruita or Durango. Several races are held on them each year – more than in any other community in the state. In 2012, the Department of Interior designated the High Desert system as a national recreation trail, and the community is urging the International Mountain Biking Association to designate it as a "Ride Center," one of just a dozen or so worldwide. Supporters say that would help Gallup capture a decent piece of the billion-dollar bike tourism industry.
When Lindsay Mapes walks into Gallup's downtown coffee joint and introduces herself, I'm momentarily taken aback. In her form-fitting black-and-white dress and high heels, she looks more like someone who strolled off the streets of Manhattan than a resident of Gallup. Before even sitting down, Mapes announces: "I'm the success story."
What she means is that, in her role as owner of Zia Rides, Mapes is the only private enterprise making a direct, quantifiable profit from Gallup's newfound status as an adventure hub. Mapes came to Gallup in 2003 as a volunteer with AmeriCorps/VISTA, which had sent a crew to work on promoting "entrepreneurship through adventure tourism." She got a job with the Chamber of Commerce to manage mountain biking and running races and other events, then broke off on her own to start Zia Rides. She now runs and promotes two endurance races in Gallup, including Nationals, as well as rides in El Paso, Texas, and Ruidoso, N.M. As if that doesn't keep her busy enough, Mapes is also the executive director of the Business Improvement District and just received her master's degree in public administration in December.
Cycling is already giving an economic boost to Gallup, Mapes says. Last year's Nationals attracted 500 racers from all over the nation, along with support crews and spectators, and the biking and trail-running events of the Squash Blossom Classic draw around 300 participants. Adventure Gallup figures that the racers and their families and friends spend around $30,000 locally on food, lodging, gas and merchandise over the course of each event. ----
That's less important, say Mapes and others, than the event's power as a marketing tool. The races introduce the trails to the kind of people most likely to plan a hiking-and-biking vacation in Gallup, bringing still more money to town. A 2011 University of Wyoming study, for example, found that the Teton County trail system around Jackson Hole generated $18 million for the local economy in just one year. In Oregon, bicycle tourists spent $400 million in 2012, according to a study done last year by a marketing research firm. And an extensive Arizona Department of Transportation study found that out-of-state bike-related travelers there spend an average of $263 per person per day on lodging, food, gas and bike parts.
That can mean a lot in an economically challenged place. When Moab's uranium industry, which employed some 25 percent of the area's workers, busted in the 1980s, it left a shell of an economy and community. But as the masses started flocking to the Slickrock Trail, as well as the area's rock-climbing, rafting and jeeping opportunities, the place experienced an abrupt turnaround. Between 1990 and 2000, employment grew by 65 percent, according to a Headwaters Economics study. There are now more than 3,000 service and retail jobs in the county, quadruple the total number of mining jobs when that industry was at its peak.
In Gallup, lodging tax revenues have increased by almost 70 percent since 1999, when the adventure tourism push began, and two new hotels, one along I-40 and another downtown, are currently under construction, adding to a handful of other lodging establishments built in the last several years. It's impossible to say exactly how much of this is attributable to adventure tourism, but the estimated 15,000 people who ride, run or hike the High Desert Trail each year are certainly having an impact.
But a lot of cycling money bypasses the city. Trail riders who do no more than fill up their gas tank, grab a fast-food bite, even stay a night in a hotel, contribute little more to the economy than random interstate travelers. But when they slow down and spend time downtown, they tend to drop more cash. The problem is that Gallup largely lacks the sorts of establishments that would draw bikers, such as a brewpub – one of the prerequisites for being a "real" bike town and for getting IMBA Ride Center designation – or even a downtown bike shop. And would-be entrepreneurs are not likely to risk opening a business until they're convinced the bikers will venture into town. It's a bit of a chicken-and-egg thing.
Van Drunen puts it bluntly: "To really have a tourist economy, we'll have to overcome the shitty aesthetics. We need a legit downtown."
Progress is slowly being made. During Rosebrough's time as mayor, the city refurbished infrastructure, spruced up parks, gave land and money to affordable housing initiatives, and generally spiffed up the historic downtown by planting trees, fixing up the old El Morro theatre and having local artists paint murals on graffiti-covered walls. It also passed a quality-of-life bond measure to fund such improvements, along with trails and the like. The local Business Improvement District is trying to attract businesses to downtown by touting the cheap rent, round-the-clock security guards and various other incentives.
Gallup now boasts a popular weekend farmer's market and a couple downtown art galleries with a broader range of wares than the usual Southwestern kitsch. There's even a monthly, well-attended Arts Crawl, "where people are drinking cappuccinos," says Lundstrom, "and they actually know what that is. It's just really cool. Who would've ever thought Gallup would attract that kind of attention?" And yet, for all that, the problem remains: To most outsiders, Gallup is, well, still Gallup.
"It's a real remarkable community," says Rosebrough. "It's disproportionately wonderful and disproportionately terrible at the same time."----
Driving into Gallup on Highway 491 from the north can be an overwhelming experience, and not in an aesthetically inspiring way. After a couple of hours of wide-open road, where smog-tinged vistas stretch out for miles, you crest a hill only to be bludgeoned by traffic, far too thick for a city of 20,000. And every block or so, nestled in the strip malls, next to window-tinting places and garishly-colored fast food joints, are dozens of small loan companies, the kind that promise quick cash via payday loans, tax refund anticipation loans or car title loans.
These places congregate where cash is in short supply and regular banking services are either unavailable or out of reach. They offer customers short-term loans in exchange for exorbitantly high interest rates, averaging more than 300 percent. Of New Mexico's 618 active "small loan company" licenses, 46 are in Gallup –– twice as many as in Santa Fe, which has more than triple the population. Cash Cow, one of the major local lenders, calls itself "The Home of the Loan Ranger" and boasts: "We speak Navajo." In one strip mall on the east side of town, next to a Dominos Pizza and a dentist, three loan outlets are lined up in a row. Gallup is like the Wall Street of high-interest short-term loans.
The proliferation of payday lenders is a reminder of the desperate poverty that persists here. More than a quarter of all families in McKinley County live below the poverty line, and the unemployment rate is among the highest in the economically challenged state. The loan companies indicate that the old exploitation economy still grinds on. "If there is some kind of abusive lending practice happening," says Nick Mattison, an attorney at Feferman & Warren, a consumer rights law firm in Albuquerque, "it's happening in Gallup."
"It's still a racist border town," says Redhouse, the longtime activist. At best, he says, Gallup has gone "from terrible to bad." The Inter-Tribal Indian Ceremonial, which draws some 50,000 people, is similarly still problematic from his perspective: "Aspects of our culture continue to be commercially exploited."
And though it has done a great deal to shed the old "Drunk Town" label, Gallup still has a drinking problem. McKinley County is consistently second in the state, and among the top in the nation, in alcohol-related deaths and injuries. Though involuntary protective custody admissions have been slashed dramatically since the '80s, the police continue to haul 19,000 or more annually to the detox center, which in recent years has struggled to get adequate funding to stay open. In an effort to allow police time to focus on other problems, the city last year asked 50 liquor merchants to shut their doors from 7 a.m. to 11 a.m. All but eight ignored the request. Earl Tulley, one of the leaders of the 1989 march on Santa Fe, says the problems of the past simply have been adopted by a younger generation – a young friend of his recently froze to death while on a drinking binge. "Maybe we need another march," he says.
McKinley County's diabetes death rate is the state's highest, nearly three times that of the U.S. The city's crime statistics look like they came out of Natural Born Killers, the 1994 ultra-violent flick that was partly filmed in Gallup. There were seven murders and 36 rapes in 2012, and the violent crime rate was about five times the nationwide rate, on par with Oakland, Calif., and not too far below Detroit's.
There are those among the Gallup adventure movement who see the development of trails and the cycling scene in an admittedly selfish light, merely wanting to improve their own quality of life. Still others believe it can be a tool to improve a troubled town. "We want to create a physically healthier, financially healthier and fair community," says Mapes, "and outdoor adventure is the way to go." Adventure tourism doesn't rely on exploiting or commodifying Native Americans or their culture in any way. Though it does impact the landscape, it's nothing compared to the older energy economy: In 1979, a dam at a uranium mine not far from Gallup collapsed, sending millions of gallons of acidic and radioactive water into a tributary of the Rio Puerco.
Though tribes were brought into the Adventure Gallup planning process, the trail-boosters' community is notably void of Native Americans. "Cycling is still seen as an outside, transplant, Anglo activity," says Dirk Holenbeek, a cyclist who moved to Gallup from Michigan in 1998 to work as a teacher at the Christian High School just outside of town.
And critics see a racist tinge in some efforts to improve the town's "aesthetics" for tourism's sake. This spring, a local group launched a campaign to rid the city of panhandlers by convincing residents to donate money to charities rather than to the solicitors. Local veterans will also be posted to provide a "safe" atmosphere for shoppers, and police presence stepped up to enforce the anti-panhandling ordinances. But Jennifer Rose Denetdale, a Navajo Human Rights Commissioner and associate professor of American studies at University of New Mexico, calls this organized harassment of mostly Native transients. "I am incensed at this targeting of the most vulnerable population who cannot protect themselves," she says. The eviction of the Brickyard's previous occupants in order to make way for a bike park might be seen in a similar light.
At the same time, the bike park may be the very thing that connects the adventure movement with the Native American community. "I wish the bike park would have been there when I was there," says Ryan Tsosie, a Navajo and competitive cyclist who moved from Virginia to the Gallup area as a teen in the '90s. He was part of the budding Gallup cycling scene, and even opened a bike shop that eventually failed. Now he lives and helps run a bike shop in Albuquerque. He's tried to pull other Native Americans – including his family – into cycling, without much success. But the bike park might help. On most school-day afternoons, the place teems with a mix of local Hispanic, Native American and Anglo kids.
The majority of the YCC trail builders are Native Americans. And the local affordable housing nonprofit, Care 66, which is building a colorful, modern mixed-income housing project downtown, even held a bike ride fundraiser last year.
A decade ago, when Mapes told people where she lived, she'd get what she calls the "Gallup Look" – an expression of exaggerated pity or disgust. "Now it's like: 'Oh, yeah, I love it there. The trails are great!' " she says. "I love it when I see locals interacting with someone in the outdoor community, boasting about the assets we have. There's a lot of community pride.
"Sometimes," says Mapes, "I see it as a revolution. This group is really using the bike as an agent of change." ----
Van Drunen describes Gallup's changes from the seat of his bike. On an unusually warm but typically windy March afternoon, we do a couple of laps of the Brickyard's berms and jumps. Then Van Drunen motions me to follow, and we tear across a street, down a trail through a vacant lot, across a gas station parking lot and into Route 66 traffic before leaving a frontage road to climb up a narrow path onto the "Northside" trail.
We stop on a high island of slickrock with an expansive view, and Van Drunen points out and praises all the trails – some for hiking, some for biking – that surround the town. It occurs to me then how odd this whole concept of trail-as-economic-development really is: You take a piece of long-abused land, you establish some paths through it, and you invite people to ride or run or hike. It sounds crazy, yet it seems to work.
A quarter of a century ago, I spent summers living and biking in Cortez, Colo., another reservation border town that resembles a smaller version of Gallup. Back then, the place was downright hostile to bicyclists. Rednecks in pickups thought it was hilarious to lay on their horns at the sight of a skinny lycra-clad guy, and roadside mutts thought I was a tantalizing piece of steak on wheels. But a few years after I left, a little bike shop opened on the main drag, a few renegades started mountain biking on desert hiking trails, and others carved trails on a stretch of public land that had previously been used for dumping and then shooting old appliances.
Today, the local Chamber of Commerce touts the county's trail network as one of its primary draws, along with Mesa Verde and Canyon of the Ancients National Monument. The little bike shop has grown into one of the biggest and best in the region, and a few road and mountain biking pros have even based themselves in Cortez and nearby Dolores. Meanwhile, Cortez's main drag, once a cultural and culinary wasteland, has gained a brewpub, a sushi joint, a farm-to-table restaurant and a few coffee shops. I think my 17-year-old self would have been a lot less lonely there today.
Gallup will never be another Moab, and some say that's just as well: These days, Moab too often resembles a spring-break beach town set amid red rock. Gallup has too much culture and character to become totally sterilized and steamrolled by the industrial recreation machine, and despite its poverty, it has an existing economy. But it may still experience a trail-driven, cultural and economic shift similar to Cortez, only on a larger scale.
"We're on the cusp. It's just a matter of time," says Van Drunen, who makes road and mountain bike excursions with the local team – Rez Dog Racing – deep into the reservation, where he says there are rides on vast slickrock formations that put Moab to shame. "The assets are there. ... The gold is there. ... Someone just needs to dig it up and polish it and market it."
HCN senior editor Jonathan Thompson writes from Durango, Colorado.]]>
I didn't know how to respond. I was taken aback at first. I'd never thought of myself that way, but I guess I know what he means. What he means is that I don't live under looming debt.
Some years back I was able to pay off my house. Goodbye mortgage. I own an older vehicle that I finished loan payments on long ago. I am allergic to credit card debt. I hate to use plastic in the first place. There's something vaguely suspicious about the whole scheme that makes me wary. Every time I swipe a card, I can't help feeling I've been bamboozled. As a result, I don't think I've ever even made a late payment, and so what if my airline miles rack up at a glacial creep.
I don't know where this aversion to financial risk came from, but I've always hated owing money. I don't have any family history of debtor's prison, bankruptcy court, or fiscal mismanagement that I'm aware of, but even as a youngster, when I went into a financial hole, it really bothered me. I felt it as an oppressive, hovering weight that would bear down on me until I could make enough money mowing lawns or delivering papers or caddying on the local golf course to finally pay off that new bike or pair of skis. The liberation of that last payment has always been, for me, like breathing deep again after a long, chronic state of partial suffocation.
So what my friend was saying is that I'm invulnerable to the collapse of leveraged material wealth that this culture is so tragically addicted to -- expensive homes, new cars, entertainment centers, glitzy vacations. The stuff a lot of us want but can't actually afford. Lucky me. Of course, another way he could have put it is that when it comes to the tumble of recession, I don't have far to fall because I live close to the bone.
I admit to feeling a little pulse of pride when he said that. Yeah, recession-proof; I like the sound of that. But it didn't last long because while I may not be in immediate danger of being buried alive under mountains of debt, I can't say that I feel particularly secure, either. Because I'm not.
I live on a modest, mostly freelance, income. When magazine ad sales dry up in a recession, my assignments tend to dry up, too. I'm one of those 50 million Americans without health insurance. In terms of a savings safety net, mine is pretty frail.
I keep putting off buying the new garage door my house needs. I've been thinking about a new roof for several years now, and am about to gamble on another season in exchange for taking a summer canoe trip. If my car, or computer, or furnace goes out, I'll have to scramble. To say nothing of something really big, like heart surgery. A little slip of fate could tap me out tomorrow.
It's a conscious choice. I've decided that there are other things besides money that matter to me, and that make a certain level of vulnerability worth it. I value my flexibility, my independence, my time with the kids, my ability to go off on adventures, more than deep financial pockets and the brand of slavery that those deep pockets would require.
There is no way I would want to trade places with folks who have accumulated the trappings of wealth on the back of debt. It would feel desolate to live in a house of cards and feel the walls start to collapse around me. No thanks.
But I can't say I feel smug. Not in the least. It never occurs to me that I have it made in the shade. I can't remember a single time in my life when it did. But now that I come to think of it, that awareness might be the most recession-proof thing I have going.
Alan Kesselheim is a contributor to Writers on the Range, a service of High Country News (hcn.org). He is a writer in Bozeman, Montana.]]>
Because wind and solar fluctuate, utilities build expensive power plants, usually fueled by natural gas, to smooth energy spikes and dips. The cost increases the price of solar and wind. Renewable energy advocates argue that, instead of the West's 38 grid operating entities each having its own fleet of backup plants, it makes more sense to pool resources, buying and selling backup power on the open market ("The power grid may determine whether we can kick our carbon habit," HCN, 6/3/13).
As of Oct. 1, the California Independent System Operator and PacifiCorps, which together power 32 million customers, joined such a scheme, called an energy imbalance market — the first one ever created in the West. It will help them smooth out variations in burgeoning renewable power sources and make those sources more cost-effective and appealing to utilities and their customers. Should the market succeed, proponents expect other Western grid operators to join in as well.]]>
At first listen, it sounds like a bunch of hot air. Hoover Dam is hard to match as a component of the grid, $8 billion is a lot of cash to scrounge up, and the permitting alone could take years, even decades. Besides, a similarly ambitious project by Power Company of Wyoming — two huge wind farms paired with the direct current TransWest Express line to California — is already much farther along than Pathfinder. In fact, the Pathfinder plan isn't even new: It's been on the table, stagnating for years.
Still, there are some twists in that new/old proposal that are buzzworthy: A massive energy storage component that utilizes underground salt caverns in Utah; and the proposal to use an existing transmission line that stretches from Utah to California. Though the whole endeavor may be pie-in-the-sky, it gives a glimpse into a post-coal — and possibly post-hydropower — West, and reminds us how inextricably entwined the Interior West's energy ambitions are with California's energy hunger.
The Pathfinder project would work like this: Wind turbines near the southeastern Wyoming towns of Wheatland and Chugwater, with a collective generating capacity of 2,100 megawatts, would send 6 to 9 terawatt-hours* of electricity each year through the 525-mile direct current Zephyr transmission line (to be built as part of the project), across Colorado, to Delta, Utah. There, the line would connect into the Intermountain high voltage direct current line that now carries coal-generated electricity from the Intermountain Power Plant, also in Delta, to Los Angeles.
Building the Zephyr DC line enables Pathfinder to send its wind power straight into the California grid, without the possibility of getting diluted by fossil-fuel-generated electricity along the way, thus making it more compatible with California's renewable portfolio standard requirements (the proposed TransWest Express is also DC). Meanwhile, since Intermountain's biggest customers, Los Angeles and other California utilities, must kick coal by 2027, the Intermountain line into L.A. should have plenty of available space on it in a few years. Rather than building a brand new transmission line across California, an increasingly difficult and expensive task, the project can utilize that existing line.
Then there's the storage part. When southern California's load, or electricity demand, is low, but the wind is cranking in Wyoming, excess energy will be used to compress air, which will be pumped into underground salt caverns near Delta. When the wind's not blowing, or when the California load increases, then the compressed air can be released, combined with natural gas, and used to turn turbines to generate electricity that can go back into the grid. It's cool stuff, for sure. But is it as good as a massive dam, like Hoover?
*Proponents claim the Pathfinder wind farm would generate 9.2 terawatt-hours, or 9.2 million megawatt-hours, per year, which would amount to a capacity factor of about 50 percent. But the capacity factor of existing Wyoming wind farms tends to be closer to 35 percent, which would result in about 6 terawatt-hours per year.
Jonathan Thompson is a senior editor at High Country News.
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While cities and their greater areas appear to have climbed back towards pre-recession employment levels, rural America largely remains stuck. Before getting too far into the nuances of the recovery, let's first define the terms. The USDA's analysis is based on county-level recovery, which the report divides into two categories: Metropolitan counties have one or more urbanized areas with at least 50,000 people. Non-metropolitan counties have less population and are defined by small towns and sparsely populated rural areas. Of course, rural areas can exist within metropolitan counties: Coconino County in Arizona houses Grand Canyon National Park and two remote Indian reservations, but also Flagstaff, a city of almost 70,000.
The USDA's study indicates that employment rates have plateaued in non-metro counties, unlike their metro counterparts. The graph below shows quarterly employment in both types of counties nationally from 2007 through June of 2014.
So why is this happening? First, as of this year, overall population growth in nonmetro counties has slowed to just below zero for the first time ever. Small towns and rural areas have seen periods of exodus in the past, but never before has rural America experienced population loss. "The loss is not huge," says economist Tom Hertz, the lead author of the study, "but it is unprecedented." Furthermore, the low rate of population growth is partly due to the loss of jobs during the recession, which only makes more people leave. According to the report, slower population growth in nonmetro areas accounts for about half of its job growth deficit.
Movement to nonmetro counties has also slowed. For several decades, a good share of development in many nonmetro counties was determined by baby boomers moving to highly desirable places close to recreation opportunities and natural beauty, like the mountainous Interior West. This movement brought with it sizeable populations to work in the building and service industries accompanying that growth. But as construction and manufacturing took enormous hits with the housing market crash that began in 2007, and as people pinched pennies to pay off housing debt, this growth plummeted and employment rates followed suit.
The report also mentions that the population in nonmetro counties is aging — there are less and less young to replace the old. A lower overall rate of college graduates in nonmetro counties, when compared to metro ones, also contributes to the slower employment growth post-recession.
Not all nonmetro counties are the same, of course. While more densely populated rural areas that rely heavily on manufacturing took the largest hits, the least densely populated rural counties (with an average of 5.8 people per square mile) experienced smaller job loss. These very rural counties typically have higher shares of farm and government employment, both of which performed relatively well during the recession. Average employment there fell by 1.3 percent, compared to 5 to 6 percent for more populous nonmetro areas. These very rural counties have rebounded more quickly than the more densely populated non-metro counties.
The narrative of economic stagnation may appear to contradict the news of large natural resource booms in sparsely populated pockets throughout the country. With the rise in fracking and natural gas production since 2007, nonmetro counties around the country have indeed seen unemployment shrink and population increase. The population of Richland County in eastern Montana across the state border from the Bakken oil field, for example, grew by 15.2 percent between 2010 and 2013. Between 2010 and 2012, the employment rate grew by 19.9 percent. But even these isolated spurts of exponential growth don't alter the fact that nonmetro counties, on the whole, are struggling to bounce back economically in the wake of the recession.
This is not to suggest that there have been no improvements at all. Unemployment rates in non-metro areas have indeed come down, if only incrementally (down by 1.79 and 3.14 percent in low and higher density nonmetro counties, respectively). And economists like Hertz say that real recovery will eventually kick in. "There's no reason to think that rural America is in some great death spiral" Hertz says, "but there is a long climb ahead."
Wyatt Orme is an editorial intern at High Country News. He tweets @wyatt_orme. Homepage photograph by Flickr user Just Having Some Fun in Cohagen, Montana.]]>
Overspending on Tesla – or any other company – could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company's cost structure, but lost tax revenue comes 100 percent out of public budgets.
While the Tesla incentives are sizable, they aren't the biggest Western state and local governments have offered a corporation by any means, according to an incentive database compiled by Good Jobs First. In 1993, New Mexico gave Intel some $645 million in incentives to locate its facilities in Rio Rancho, a suburb of Albuquerque; 11 years later it added another $2 billion (Intel has also gotten big incentives from Oregon and Arizona). Oregon has given Nike over $2 billion in incentives over the years, and Washington has kept Boeing around by giving over $8 billion.
Utah hasn't given any billion-dollar-plus incentives, but has nevertheless been a big and able player in the incentive game, handing out millions to companies that clearly don't need any help, like Goldman Sachs. Meanwhile, Utah spends less per student on education than any other state in the nation. Colorado doesn't give huge incentives, but does give a lot, primarily to energy companies, including: Northern Colorado Wind, BP, WPX Energy, Encana, Bill Barrett Corp., and Exxon-Mobil.
Nevada has been relatively stingy with its incentives, rarely handing out more than $10 million to any single corporation. The exception was Apple, which in 2012 received $89 million in incentives from state and local governments to lure a server/data center to the Reno area. Renewable energy companies have also received similar, albeit far smaller packages from Nevada.
It's not easy to quantify the long-term payoff of these gambles. The Apple server center in Nevada provided a lot of construction jobs, but just a few dozen permanent ones -- school districts and mega-resort casinos on the Las Vegas Strip are by far Nevada's biggest employers, bigger even than Tesla will be (but with lower salaries). And over in financially-strapped New Mexico, the $2.6 billion in subsidies to Intel have resulted in 3,500 jobs, making it just the state's 13th biggest employer, outranked by universities, national labs, school districts and health care providers.
Of course, the economic impact of a $5 billion, 5 million-square-foot factory goes beyond just the jobs at the plant. If Tesla really employs 6,500 people, and pays them at least $25 per hour, as it promises, that will ripple through the economy as those people buy new homes, shop at local businesses and the like -- the Governor's office expects the factory to increase the state's employment by 2 percent. Under the incentive agreement, Tesla will also contribute $37.5 million in direct payments to public education. And the Gigafactory also is likely to increase Nevada's draw as a headquarters for renewable energy companies, perhaps creating other jobs, and perhaps more customers for the aforementioned lithium mine. So maybe the billions in subsidies make sense.
But then, who knows, maybe Tesla would have moved to Nevada for far less money. And Nevada could have used all those incentives to build another school or two. Or hire some teachers: That $1.25 billion could pay the salaries of more than 22,000 Nevada public school teachers.
Note: Since this article was first published, the Good Jobs First subsidy tracker has continued to add subsidies to its database. We have updated our chart accordingly as of 9/10. The chart's total for Nevada does not yet include the Tesla incentives because they have yet to be approved by state lawmakers.
Jonathan Thompson is a senior editor at High Country News. He is based in Durango, Colorado.
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Yet across the nation it's getting harder to climb the income ladder. And in the Gallup commuting area, which stretches into Arizona and spans much of the Navajo Nation, the American Dream is all but dead. Jonny and other poor kids here have about a 6 percent chance of ever making it into a household in the top income bracket (earning more than $90,000 per year), according to data recently released by the Equality of Opportunity Project. The Project, headed by four prominent Harvard and Berkeley economists, ties geography to income mobility. And the picture it paints of Western places like Gallup, Albuquerque, Tucson and Phoenix isn't pretty: For the most part, kids who are born poor in these areas stay poor.
There's some hope for Jonny, however. If his family can afford to move to Vernal, Utah, or Williston, N.D., or Gillette, Wyo., his chances of reaching the top of the ladder by the time he's in his 30s increases fivefold. These are among the areas that are not only the most upwardly mobile in the West, but in the nation. And the common thread connecting them is energy extraction: They are all hotspots for coal, oil or natural gas production.
In such geologically fortunate places, jobs on the oil and gas rigs or in the coal mines have taken the place, if imperfectly, of the factory jobs that once buoyed the middle class. Since 2007, private-sector employment in the U.S. has grown by a mere 1 percent, while in the oil and gas sector, jobs have jumped by 40 percent. The annual mean wage for oil and gas jobs is $92,000, twice that of other occupations. Petroleum engineers -- 270 in western North Dakota alone, according to the Bureau of Labor Statistics -- need only a bachelor's degree to make $161,000 on average. Meanwhile, derrick or rig operators make nearly $60,000. "I can't think of another industry where someone with just a high school degree can come in and make that kind of money," says Jeremy Weber, an economist with the U.S. Department of Agriculture Economic Research Service.
Before the early 1980s, even if you grew up in a poor household, you had a chance of getting a union factory job right out of high school and steadily working your way into the middle class. Relatively high, progressive federal income taxes kept the wealth from accumulating in the hands of Mad Men-era executives. But over the last three decades, manufacturing jobs have dwindled, thanks to outsourcing and technology, and working-class wages have generally declined. At the same time, executive pay has skyrocketed and the taxes on the top incomes have dropped by more than 40 percent. More and more of the wealth has gone to the top 1 percent, and the abyss between rich and poor is growing ever wider.
In the energy patch, however, high-paying jobs on the rigs are bridging the abyss. And Weber's research in the oil and gas fields shows that in energy-boom counties, wages and employment across the board -- not just in the industry -- increase. Poverty and income inequality tend to be far lower in those counties than national and even associated states' averages. That suggests that the so-called resource curse, or Dutch Disease, in which the positive impacts of a boom are limited to the extractive industry, and may even suffocate other industries, is being held at bay.
Local government coffers also get in on the action. The Equality of Opportunity Project found a mild correlation between areas with high upward mobility and those with the most progressive tax structure. That is, when lower income folks get more tax credits and the wealthy are taxed more, the chances of climbing the income ladder go up. This phenomenon extends to the energy fields as well, but with a twist: Rather than taxing the rich, the states tax energy production. Wyoming has long had a robust mineral severance tax, netting the state some $1 billion per year, or about $2,000 for every resident, and North Dakota is closing in on the $2 billion per year mark. And these figures don't include impact fees and property taxes on the energy industry, which can amount to millions for local government. In theory, at least, these funds can go toward safety nets that catch people before they fall into poverty. They can also encourage upward mobility: Wyoming spends more per pupil on public education than almost any state in the nation, and its teachers are paid well, too. Add to that the grants and scholarships energy companies often give to classrooms and students -- along with big funding to energy wings of colleges and universities -- and the educational system in the gas patch tends to be pretty strong.
There are trade-offs, to be sure. Any energy boom ravages the landscape to some degree. Energy-rich counties also tend to have higher rates of domestic violence, teenage births, juvenile arrest and youth death than other counties. Women in the oil patch make less than their male counterparts. And even a battalion of drill rigs or some gargantuan coal mines can't completely counter the drag that racial factors have on income mobility: It might be high in the energy fields, but it's still low where they intersect Indian Country.
But as the 1 percent continues to hoard more of the wealth, and the middle class dissolves, the energy fields may be the last bastion, however imperfect, of the American Dream.]]>
These days you can ride the light rail into lower downtown, an area that was half rail yard, half urban blight back when Dynasty was wrapping up, and look up at the bright blue sky reflected in the facades of brand new, steel and glass residential/office/retail buildings. A gleaming white arc-like structure stretches over the stop for the Amtrak trains, and beyond that, the century-old, but beautifully refurbished Union Station rises up, it's neon telling you to "Travel by Train." The vibe is futuristic hip, a far cry from that old quasi-Houston feel.
Or maybe not. See that new energy-efficient building adjacent to Union Station? It is the headquarters for Antero Resources, one of the top oil and gas companies drilling in the Marcellus and Utica shale plays in the East. Apollo Exploration employees look out at all the new buildings from a couple blocks away. Noble Energy and Encana Oil and Gas have offices on the other side of downtown; in between are Anadarko, Halcon Resources, EOG Resources, QEP Resources and plenty more. One estimate has 30 percent of Denver's downtown office space occupied by oil and gas industry workers.
Over the last couple of decades, Denver has transformed itself into a greener, transit-oriented city, and a trendy magnet for millennials. Fossil fuels have helped drive the metamorphosis. According to statistics recently released by the Bureau of Economic Analysis, Denver now has one of the healthiest gross domestic products in the nation. The metro area's GDP grew by 4 percent in 2013, about half of which is attributed to extractive industries. Close to 30,000 people are directly employed by the fossil fuel industry in northern Colorado, either in Denver offices or the oil fields of Weld County, which yielded some $4.5 billion worth of crude last year. Greeley, a cow-town north of Denver with a massive meatpacking plant, saw its GDP jump by a whopping 10 percent, and it has nothing to do with cattle.
The story's similar across the West: The shale oil boom has pulled old energy towns — thrown into a slump by the sudden and massive deflation of natural gas prices a few years ago — back into the black, as well as creating some new ones. Among the top performing metros are Casper, Wyoming, Fargo, North Dakota, and Bakersfield, California. Jimmy Carter's dream is finally coming to fruition: Domestic oil production has reached levels not seen since Blake Carrington and Alexis Colby were duking it out on Dynasty, and oil companies are raking in record profits — $1.8 billion for Anadarko last year, $2.6 billion for EOG Resources. Now if someone would just make another Western soap opera that includes wistful, moonlit dialogue scenes on drilling rigs.
Since all the big energy states tax the oil and gas that comes from the ground, those state governments should be flush, too. And in some cases they are. Alaska regularly pulls in around $4 billion per year from energy production taxes, and North Dakota's severance tax revenues totaled more than $2.5 billion in 2013, or more than $3,500 per resident. Colorado, meanwhile, only got about one-sixteenth what North Dakota did (and just $28 per resident). That's despite the fact that Colorado produces about one-fifth as much oil as North Dakota, and nearly ten times the natural gas.
Colorado, it turns out, has one of the lowest effective severance tax rates in energy country. A Headwaters Economics analysis found that Colorado would collect about $1.2 million in taxes from the same well from which Wyoming or North Dakota would collect $2.2 million. And a Colorado Legislative Council study earlier this year painted an even more disparate picture. When exemptions and tax credits are figured in, Colorado has an effective severance tax rate of just 1.5 percent, compared to North Dakota's 10.7 percent.
In theory, that would lure drillers to set up their rigs on the Colorado rather than the Wyoming side of the state line, thus giving Colorado the jobs, as well as state and local taxes and impact fees, those rigs bring. But a look at drilling activity in oil and gas fields that cross state lines show no such preference — geology and land ownership, and perhaps regulations, appear to be more influential. Similarly, despite the fact that Colorado has a 4.63 percent corporate income tax, and Wyoming has none, oil companies tend to set up shop in Denver, not Cheyenne. Regardless, another study, this one out of the University of Michigan, found that many states have actually been lowering their tax rates as production has increased.
Severance tax allocation varies from state to state — some goes to general funds, Wyoming sends kids to college, Alaska sends checks to everyone. Ideally some of the money's put away into a trust fund, or used in a way that makes the affected communities more able to weather the next bust. A repeat of the 80s crash is unlikely — the preceding boom was driven less by scarcity than by geopolitics, first, and then federal energy policy, including massive subsidies, which were discontinued by the Reagan administration. This boom is driven by drilling technology and the rising price of oil, which is fueled by burgeoning demand from China, India and developing countries. That's not likely to go away entirely, but every boom busts someday, and when it does, Colorado may regret throwing away all those would-be severance tax revenues.
But when that day comes, Denver will be far better prepared to deal with it. Despite energy's outsized role, the economy is far more diversified than in the early '80s — finance, high tech and so-called cleantech, which includes wind and solar companies, are also big sectors. Plus, public funds have been invested wisely in infrastructure, transportation and in making the city a desirable place for companies — including oil companies — to relocate, with or without high taxes.
And as long as the oil and money are flowing, those script writers may as well start working on a Dynasty for the millennial set.
Jonathan Thompson is a senior editor at High Country News.
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All of which has left coal companies searching for "some story," says University of Wyoming energy economist Rob Godby, "to say, 'we're sitting on an asset that's still worth something.' " The story they've seized upon is the insatiable hunger of developing Asian countries for coal, and the incredible moneymaking potential markets in China, India, South Korea and Vietnam offer – if only U.S. mining companies could get their product across the Pacific.Logistically, the easiest way to do that is to build new railroads from Montana and Wyoming to ports in Oregon and Washington, perhaps the worst states politically to try to build new projects having anything to do with coal. As recently as last year, six coal export terminals were being proposed in the Pacific Northwest. The projects met with unprecedented public opposition, and now only three are still on the table. Soon, the number may be down to two.
Last month, Oregon denied an application from Ambre Energy – an Australian company that also mines in the Powder River Basin – for a permit to build a dock at the Port of Morrow on the Columbia River, effectively nixing the project. The company, the port and the state of Wyoming are now suing over the decision, arguing that the state improperly rejected the permit application not because of the impacts the dock would have but because of its distaste for the product to be shipped from it.
How much does the ultimate outcome matter for Montana and Wyoming, home of the Powder River Basin, the largest coal producing region in the U.S.? The Port of Morrow project was the smallest of the three remaining export terminal proposals. It would shepherd about 9 million tons of coal a year overseas, while the two others, both in Washington, could ship a combined 90 million tons. When you consider that the Powder River Basin produces some 400 million tons of coal annually, export via the Port of Morrow represented a fairly small opportunity.
The Washington ports, however, would be much more meaningful, conveniently allowing Powder River Basin producers to export about the same amount of coal they're expected to lose demand for domestically when carbon regulations take effect, says Godby.
"It's a tremendous growth opportunity for U.S. coal producers, particularly in the Powder River Basin," adds Andrew Moore, managing editor of Platts' Coal Trader, a daily newsletter covering domestic coal markets. Even though China is beginning to grapple with the extremity of its coal-driven pollution problems, and is preparing to launch the world's largest carbon market, Moore says coal demand in Asia is still likely to rise in coming years: "The hope of increasing and improving quality of life in those developing countries is likely to trump environmental considerations."
Still, there are no guarantees that Asian markets could absorb a large influx of Powder River Basin coal says Godby. U.S. producers would have to compete there with coal coming from Australia and Indonesia, two of the world's powerhouse producers who enjoy much closer proximity to the coal-hungry countries and existing infrastructure to deliver it. "And the big port projects have a lot of uncertainty," he adds. Building out the infrastructure to get the coal over big, rugged mountains to the coast is no simple task. It will require a huge investment from the railroad companies, and will confront opposition, no doubt, from communities that might have to endure multiple trains an hour. (Godby estimates that, owing to the mountainous geography, each train could only carry about 6,000 to 6,500 tons at a time.)
And then there's the competitive market U.S. coal would face in Asia, he says. "Which will make the rate of return on those projects relatively low. If you're an investor, do you want to take on a project that long term with so many risks?"
Maybe not. So why go to all the effort, in the face of such challenges? "(Coal companies) don't want to see the door closed now," explains Godby. "And they want to keep positive news in play, so that, longer term, they have a second option" – beyond the declining domestic market.
Cally Carswell is a High Country News contributing editor. Follow @callycarswell]]>
Robert Glennon, author of Unquenchable: America's Water Crisis and What to Do About It, estimates about 50 billion gallons of Western water – enough to supply 500,000 families annually – were sent to China via alfalfa in 2012. China isn't the world's biggest hay buyer – land-poor Japan leads, followed by the United Arab Emirates – but its hunger is rapidly growing.
Water also leaves in the form of food exports such as rice, wheat or almonds, but alfalfa stands out as a low-value forage crop, Glennon says. China's consumption of milk and meat is skyrocketing, and it can't feed 42 million cattle on its own.
Half of all Chinese shipping containers bringing goods into Western ports return empty, and it's cheaper for farmers (and more lucrative for shippers) to fill them with alfalfa for China than it is for Imperial Valley farmers to truck alfalfa around the West. But Glennon suggests a more direct transaction: Perhaps the farmers should abandon alfalfa and have the option to sell the water to Las Vegas, which is looking to spend billions to supplement its paltry Colorado River allocation.
"They would pay anything for that water," Glennon says.]]>
"It seemed to me that many companies outgrew what they stood for," says Smith, 34. "(The industry) had become very much about turning the crank and running products on the Asian superhighway."
So in 2012, a disillusioned Smith quit his job at Gore-Tex and moved from urban Maryland to Pagosa Springs, Colorado, a town of 1,700 on the southern flanks of the San Juan Mountains. He took a marketing job with an idealistic startup called Voormi, which pledges to manufacture its outerwear in the U.S. and buy only Rocky Mountain wool. And though it has just seven employees so far, co-founder Dan English hopes that by headquartering in a small town, Voormi can help stem the tide of talent flowing from the rural to the urban West. "We wanted to be super authentic," English says, of his move from Boulder to Pagosa. "There's no major interstates here, no major airports. Part of being an authentic brand is living the lifestyle that we preach."
Voormi and other niche gear companies – like Duckworth, a Bozeman-based clothing brand that buys only Montana wool, or Meier Skis, a Colorado ski manufacturer that uses locally harvested aspen and beetle-kill pine – hope to leverage that "authenticity" to compete with far bigger rivals. They're banking on the rise of microbreweries and farmers' markets as evidence that some Americans are willing to pay more for quality local goods, and they're already having an impact on small towns, sheep ranchers – even machine salesmen. "If you look at consumer trends, you're seeing a return to people caring about the stories behind things and where the things they buy come from," Smith says. "What happened with craft beer is an interesting model."
There's just one caveat: Outdoor gear ain't beer, and the very isolation and rugged terrain that allow Voormi's testers to head straight out the door and into the mountains has caused other companies to go under entirely – or outgrow and abandon their rural birthplaces. "Made in (small-town) Colorado" is a great marketing strategy for breaking into the $120 billion-a-year outdoor industry. But can it sustain a business for the long haul?
On a cloudy June morning in Glenwood Springs, Colorado, Matt Cudmore's 7-year-old twin boys are playing videogames while waiting for summer camp to start. A room away, 23-year-old Chris Dean shapes ski patterns from aspen boards and blasts Damien Marley tunes. Dean is one of four employees at Meier Skis, the company Cudmore started in his garage five years ago with $1,000 inherited from his grandmother. His first pair of alpine skis took six months to create; now, with the help of some new tools and an investor, he's making 500 pairs a year in a small factory outside town. He says he'll relax when he hits 2,000.
"The guys at Lowe's are like, 'Matt, dude, I want to live the dream like you're doing.' " He laughs. "What, you want to work till 10 o'clock every night and get allergies from epoxy?"
What he's saying is: Making skis isn't as romantic as it sounds. Cudmore hits the slopes less often now than before starting Meier Skis, and though sales have doubled annually, he lives in fear that the business into which he's poured everything could go belly-up. "Don't get me wrong," he says. "I love what I do. But it's not like slapping sandwiches together. That's why we're pushing our story."
Cudmore hopes his story will distinguish Meier from the dozens of other outdoor companies that have come and gone from Western towns like Glenwood. The allure of living where you play has long drawn outdoor businesses to the rural West, and an anti-establishment, entrepreneurial spirit – combined with a lack of jobs – may be why so many gear companies begin here. There are other benefits, too: Sometimes small towns come equipped with an eager, low-cost workforce, like the skilled Navajo workers who once sewed Osprey Packs in Cortez, Colorado, or the tight-knit group that made sandals "with love" at the Chaco factory a few hours north in Paonia (HCN's hometown).
One of those employees was Dave Shishim, who in 2001 moved from Kansas to western Colorado to take a job at a small airport. One day, Chaco founder Mark Paigen was waiting for a flight and the two got to talking. Shishim was hooked. Before long, he'd invested in the sandal company and upended his life (again) to become its customer service manager in Paonia. "I was enamored," he says. "We had an extremely dedicated local workforce, you could ride your bike to work, the product was made in the U.S. … It was utopian."
But as his business grew, Paigen – a river guide who began making sandals in his garage – found utopia lacking. "I loved living there, but it was not an easy place to run a business," he says. "There were huge challenges in recruitment and logistics."
For one thing, manufacturing in Paonia meant adding an extra $10 to $15 per pair to sandals that were already more expensive than their foreign-made competition. And there were other problems. So in 2008, Chaco joined the 99 percent of American-brand shoes now made overseas and began outsourcing to China. A year later, Paigen sold the company to Wolverine Worldwide, which also owns Merrell and Keds, and its Paonia headquarters were shuttered permanently. A hundred workers lost their jobs. Many more in the town of 1,600 felt betrayed.
Shishim is now back to working at the airport, and Paonia gets by on agriculture and a shrinking coal-mining economy. Yet making it work in a small town isn't impossible. Some Colorado companies, like Scott Fly Rods in Montrose, have succeeded by making a product so specialized it can't (yet) be outsourced. Others, like Melanzana – which has been making super-soft fleece sweatshirts in Leadville for 20 years – simply reject the "grow-at-all-costs" philosophy. As if to flaunt its stubborn independence, Melanzana is named for the Italian word for eggplant, because according to the company's website, the vegetable represents "the exact opposite of every ultra-cool outdoor clothing company named for an exotic mountain locale, imposing rock face, or ancient Tibetan rite."
Founder Fritz Howard isn't making a killing by sourcing, sewing and distributing under one roof in a high-altitude old mining town, but that's OK with him – and with Melanzana's loyal following, who see it as one of the few brands that haven't sold out. "We're authentic without having to say we are," Howard says. "I just wanted to live in a mountain town and do my own thing, really."
Five hours southwest in the town of Cortez, Osprey Packs has managed to compete globally while remaining locally rooted. Mike Pfotenhauer moved the company from California to Colorado in the early '90s, but by 2003 it had outgrown those digs, and Pfotenhauer began outsourcing manufacturing to Vietnam. The company's design hub is now in Marin County, California – which offers a larger creative pool – and it'll soon move distribution to Salt Lake City to be on the national railroad network and reduce Osprey's carbon footprint.
But Pfotenhauer remains committed to Cortez. The company employs about 75 people in the town of 8,500, and he and his wife just moved back there. And though he's had plenty of offers to sell, Pfotenhauer has turned each one down. "I think we remain strong by remaining independent of the typical corporate system," he says. "You have to be wary of opportunities from the outside."
Paigen, however, has a different take. Today he lives outside Boston, where he has launched a proudly Made-in-America menswear line called Osmium. But he cautions that while the gear industry – and market – may be ripe for a made-locally movement, finding the sweet spot between idealism and success is easier said than done. "When growth is knocking at your door," he reflects, "it's not as simple as just saying no."]]>
Schultz is one of just two large-scale bobcat farmers in North America. For 32 years, he and his wife, Carol, have raised the animals for fur in Arengard, North Dakota — population 115 — a dot on the state's western border, just south of Williston. Schultz is an erstwhile trapper who hated to see skinned beavers go to waste and figured he could raise cats on the recycled meat. He sells his skins to Canadian auction houses, which ship the furs to Russia, China, Japan and Italy. A good fur, speckled with constellations of black spots against a snow-white belly, fetches him up to $1,100.
"I grew up on a farm, and we raised hogs and cattle and sheep and chickens," Schultz, who currently keeps around 130 cats, told me earlier this week. "It's always rewarding when you watch something go from little to big. It's just a different kind of farming, is all it is."
The last thing Schultz ever expected was international infamy. Yet infamy is what's been thrust upon him, brought on by the confluence of an oil boom, an environmental review and a coalition of animal rights activists.
Arnegard sits at the heart of the Bakken region, the sprawling oil patch now yielding a million barrels of crude per day. When production in the Bakken spiked, so did truck traffic past the Schultz Fur Farm. Soon, as many as 25 semis were roaring by his property every hour, raising a racket and kicking up dust. The stressed-out bobcats responded by killing their offspring. (Although Schultz started his farm with wild-caught stock, today all his cats are born in captivity.) Forty percent of his kittens were slain by their mothers.
Schultz decided it was time to flee the Bakken and move to central Montana's Fergus County, far from the tumult of the oil patch. On June 18 of this year, Montana Fish, Wildlife & Parks (MFWP) completed a pro forma environmental assessment and recommended that Schultz receive a license to operate his relocated farm. The state then opened the assessment to a public comment period — and the fur hit the fan.
The comment period quickly turned into a referendum not on the environmental impacts of Larry Schultz's bobcat farm, but on the ethics of farming animals for fur at all. Thousands of comments poured in, some from places as far away as New Zealand. A petition demanding the rejection of Schultz's application garnered 12,000 signatures. The internet howled its disgust. One typical comment, on the website of the Missoula Independent: "This asshole wants to move because the mothers kill their young, basically it hurts his profits, f--- him."
When activists from California called his house to castigate him, he tried to point out that the loss of animal life was inherent to any farming operation. They didn't listen. "They can be an animal rights person, that's their opinion, that's fine," Schultz told me. "Just like I can have an opinion about them being a vegetarian."
Schulz's predicament isn't surprising: Fur farms have long been a favorite target of animal rights activists, and for good reason. Animals at many farms are confined to tiny, wire-floored cages; suffer from self-mutilation; and are sometimes killed via a shudder-inducing process called anal electrocution. (According to the environmental assessment, Schultz's bobcats would be kept in 4x6 wire cages with attached 2x4 nesting boxes. He told me he kills his animals by lethal injection.)
Several countries, including the United Kingdom, have responded to pressure from animal rights campaigners by passing complete or partial bans on fur farming. The U.S., however, has no such law — to the outrage of many activists. This spring, ski mask-wearing vandals destroyed breeding records at a bobcat farm in Ronan, Montana, though their attempts to free the cats were deterred. "Our motives were borne of a fierce love for wildlife," the activists wrote in an email. (Whether bobcats that have been raised in captivity for generations qualify as wildlife is a question the email did not address.)
Schultz hasn't yet experienced that kind of harassment, but his attempts to depart the Bakken have brought his once-anonymous business an unwelcome notoriety. (When I asked him if he would speak with me, his first question was, "Well, that depends — do you eat a hamburger once in a while?") Attacking bobcat farms, however, isn't likely to put a dent in international demand for furs. As long as there's a market, fur farming — and trapping, currently experiencing a boom of its own — will persist.
Meanwhile, Montana Fish, Wildlife & Parks has been sifting through the snowdrift of letters and emails (the comment period closed August 29), though according to game warden Shawn Briggs, there's no timetable for issuing a decision on Schultz's application. For now, then, Larry and Carol are stuck in the Bakken. "We're in the heart of it," Schultz said. "We could stay and bitch about it. Or we could leave."
Ben Goldfarb is a correspondent at High Country News. Follow @ben_a_goldfarb]]>
When Governor Hickenlooper issued his executive order last year to create a state Water Plan, he charged the Colorado Water Conservation Board with the task and they, in turn, looked to the Basin Roundtables for their ideas about what the overall plan should include. The goal said, James Eklund, the Board's Director, was to tackle Colorado's water problems "as one unit."
That's the theory at least. But with the Roundtables dominated by municipal and agricultural interests, other groups are struggling to make their voices heard.
On September 10, a group of Colorado business leaders made their case for the "river-based economy" at the Colorado Water Conservation Board meeting in Glenwood Springs, where members of the public could comment on draft sections of the plan.
The setting was fitting: nearby, the rugged Glenwood Canyon runs alongside the busy I-70 corridor. A good portion of the town's economy revolves around people coming to fish and raft on the Colorado River which carves through the canyon walls, but that river, like so many on the West Slope – where the majority of Colorado's water lies – is shrinking. Every year, 180 billion gallons of water are sucked from rivers flowing west of the Continental Divide through a vast system of tunnels and pipes to thirsty farms and cities along the dry Front Range.
Now, faced with a growing gap between water supply and demand, they need more. In their draft plans, released in July, East Slope Basins like the South Platte emphasize the need "to consider new Colorado River supply options to meet future water demands" - which means keeping open the possibility of pulling more water from west to east through new transmountain diversions. But those plans, say members of Colorado's outdoor recreation, real estate, and tourism industries, jeopardize a $9 billion dollar economy that hinges on healthy rivers – and supports more than 80,000 jobs in the state.
A report commissioned by Protect The Flows found that if the Colorado River was a company, it would rank 155th on the 2011 Fortune 500 list (those numbers are based just off of the revenue and jobs provided by the outdoor recreation industry), ahead of General Mills and US airways. It would also be the 19th biggest employer on the list.
"It's really pure economics for us," says Dennis Saffell, a realtor from Grand County. Factoring in all the indirect beneficiaries of Colorado's rivers means the true economic value is likely much greater, he added, citing a recent report that found declining river flows across the Southwest could significantly hurt home prices.
Decades of overuse, plus a 15 year drought, have taken their toll on Colorado's waterways. Reservoir levels have dropped 35 percent in the last 12 years and average flows on the Colorado River are half what they were two centuries ago.
"For 150 years we've done a good job of taking water out of the river," says Craig Mackey, the co-director of Protect The Flows, a coalition of business owners that rely on rivers.
Protect Our Flows wants the statewide plan to place more emphasis on smart water management and remove the option of building new transmountain diversions. The group is pressing the Colorado Water Conservation Board to set concrete statewide conservation goals in the Water Plan, especially for towns and cities – something most other Western states have, but Colorado is lacking.
Both Mackey and Saffell noted that although most of the Basin Roundtables recognize the economic value of healthy rivers, far fewer have actually quantified those benefits - or included specific language to protect stream flows. Since each Basin's recommendations lay the foundation for the statewide plan, it's essential that all of them include concrete standards.
But the river advocates are up against some strong, well-entrenched political forces. They pointed to the big agriculture and municipal interests that drive a large chunk of Colorado's economy – and hold much of the power at the Basin Roundtables.
In comparison, the recreation economy is "the new kid on the block,", says Mackey, who grew up skiing on wood skis and cable bindings. "I'm a sixty year old man and Patagonia, The North Face, the Vail Ski Resort – these companies grew up in my lifetime," he added. "So we really need to push our way into the conversation."
And there's another challenge: Colorado's water laws. Most were written in the late 1800's and though a few modifications have occurred over the years, the laws still reinforce a "use it or lose it" mentality, which makes it difficult to implement conservation strategies. Thanks to those laws, says Saffell, farmers and cities have a legal right to keep using more water.
Think of it this way, he added: if we had the same traffic laws as we did 150 years ago when the water laws were written, it would be utter chaos. Most laws change to accommodate new realities, says Saffell, "but for some reason our water laws are untouchable."
Instead, "we need to get away from this concept that any water left in the river is wasted water because it's not being put to beneficial use," he said.
Sarah Tory is an editorial intern at High Country News. Follow @tory_sarah]]>
Instead, hobbled by a longstanding federal ban on shipping hemp seed across state lines, most Colorado hemp farmers are squirreling away their seed supply, using this year's harvest as a source of next year's supply in an attempt to vastly increase planted acreage in 2015 with Colorado-grown seed stock.
"In an ideal world we'd grow between 1,500 and 2,000 acres of hemp next year, said J.R. Knaub, a 37-year-old farmer in the northeastern Colorado town of Sterling who has been growing corn, sugar beets and alfalfa for the last 20 years and this year planted around 2 acres of hemp. "But getting seed will be the biggest task we have to conquer."
The federally-induced seed shortage has already stunted the growth of Colorado's hemp industry: Last spring, farmers registered with the Colorado Department of Agriculture to plant nearly 1,600 acres of hemp. Yet seed shortages, poor germination rates and inexperience with the crop will limit their harvest this fall to about 200 acres, according to Zev Paiss of the Rocky Mountain Hemp Association.
"This year, because it was so hard to get seed, people were buying whatever they could get a hold of, and it wasn't always the best seed," said Paiss. "Because of that, I've heard that the amount of germination farmers achieved varied widely."
In light of the shortage, Colorado hemp farmers appear to be prioritizing seed saving this fall over other potential uses for their hemp crops. The state Department of Agriculture requires hemp farmers to submit a form at least 30 days before harvest detailing what they plan to do with their plants, and as of late September, 27 farmers had written that they plan to use their crop primarily for seed saving purposes. Just 14 farmers had plans to experiment with making construction materials, textiles, medicines and other hemp-based products, and only one farmer planned to sell seed to other growers this fall. (As this story was published, "harvest notification" forms continued to roll in from farmers around the state).
"We are at the very beginning of rebuilding a complicated industry," said Paiss. "All the farmers are going to be holding on to their seed this year and building seed stock. There will be almost no seed available for sale to new businesses [next] year."
The federal ban on hemp has its roots in the Controlled Substances Act of 1970. The act made it illegal to transport the plant or its seeds across state lines without a permit from the Drug Enforcement Administration, which can be hard to get. Since Colorado voters legalized industrial hemp in 2012, farmers have found ways to import seed from other countries, but many are reluctant to discuss the details of those legally nebulous arrangements. Plus, there's no guarantee that seeds they import from hemp producing nations like Canada and China will successfully clear U.S. Customs.
There are cracks forming in the façade of federal hemp prohibition: The 2014 farm bill contained a provision allowing colleges and universities to cultivate industrial hemp for research purposes without fear of federal interference, and 19 states have laws on the books permitting such pilot projects, according to the National Conference of State Legislatures. Eight of those states, including Colorado, California, Maine, Montana, North Dakota, Oregon, Vermont and West Virginia have passed laws removing barriers to more widespread hemp production.
If Colorado farmers can save hemp seed successfully this fall, the acreage planted there next spring should grow substantially from this year's levels. Paiss says that the seed saved from two acres of industrial hemp should be enough to plant at least 20 acres next year, which he says is a conservative estimate. Bill Billings, the president of an eastern Colorado company called the Colorado Hemp Project, says depending on the hemp variety and production methods, an acre worth of seed could be enough for 100 acres next year. Even if the ban on seed transport persists, farmers will likely continue smuggling seed from abroad next year to supplement what they can grow themselves.
And despite the seed shortage, there are some plans afoot to use part of this year's hemp harvest for research and development — it is possible, after all, to save some seed while putting the rest of the plant to immediate use. Over the next few years, Colorado entrepreneurs are hoping to build processing plants to make hemp-based pharmaceuticals, textiles, energy drinks and myriad other products.
Billings says he's working with a Boulder, Colorado-based company to develop hemp-based carbon electrodes for batteries and other applications that could make expensive materials like graphene unnecessary. Ryan Laughlin, the farmer who harvested a much-publicized hemp crop on his Springfield, Colorado farm in 2013 before state hemp regulations were finalized, is selling this year's harvest to Cannabis Therapy Corp. of Boulder, which makes hemp and cannabis-based pharmaceuticals. And a firm called American Hemp Ventures recently won approval to build an experimental hemp processing plant in Logan County in the eastern part of the state.
Over time, the hope is to replace many imported hemp products with domestically produced alternatives. "Right now we import $580 million per year in hemp products into the U.S.," said Paiss. "We are talking about tapping into a half-billion dollar industry over the next few years.
Nelson Harvey is a freelance reporter and contributor to
High Country News. Correction: An earlier version of this story stated that Bill Billings estimated one acre of hemp seed could be used to plant 400 acres, when in fact he meant 100 acres could be planted. We regret the error.


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From glittering gowns to micro-minis, the singer rocked multiple amazing looks
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Updated: Wednesday Nov 09, 2011 | 11:00 PM EST
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More jokes (this time about Nicole Kidman and Keith Urban)? Bling 'em on! The star cranks up the sequin wattage in a pailette-embellished Roberto de Villacis chocolate-and-gold minidress, Jimmy Choo shoes and glimmering Sutra earrings.
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Published: August 2013
This study is an overall assessment of the worldwide surfactants business. It provides an up-to-date view of the surfactants industry, products, markets, market participants and relevant issues.
The surfactants industry is generally considered complex because of factors such as a broad-ranging definition of the term surfactants; a large number of suppliers (more than 500 worldwide); numerous product chemistries (more than 3,500), intermediates and blends; a combination of specialty and commodity products and business; a wide range of applications and customer base; variable captive production and merchant markets; and interproducer business relationships and sales.
The most important surfactant-consuming area is Europe (31% of total consumption), followed by North America (United States and Canada, 28%), and China (17%). The highest consumption growth rates are expected for China and Africa. Growth rates in other regions vary from low (in the case of Japan) to above-average (in the case of Latin America and the Middle East). Poor growth in Japan and Western Europe is a reflection of stagnant economies, low population growth (–0.2% and 0.3% per year, respectively, during the forecast period), and to some extent the reduced surfactant concentration in formulations (softeners, detergents, and other washing and cleaning products) either for cost reasons or as a result of the increased efficiency of the washing/cleaning systems. Overall growth on a volume basis in the major world areas is expected to average only 2.6% annually during 2012–2017.
The following pie chart shows consumption of surfactants on a volume basis by major region:
Worldwide, there are substantial differences in detergents from region to region. Western European detergents often have more surfactants, polymers and enzymes than those in Latin America and Asia. North America, Western Europe and Japan remain the traditional net exporters of surfactants. However, new production capacity being built in import-oriented and emerging regions such as the Middle East and China are changing the world's surfactant supply/demand patterns. India went from being a net importer to being a net exporter in mid-2000 and China's switch happened in 2012. Major surfactant producers continue to expand their operations to Southeast Asia, China, Latin America, and Central and Eastern Europe, further increasing their financial stake in the surfactant business. The Middle East is becoming more and more important as a raw material supplier (LAB, etc.) for surfactants.
The household detergents market is mature in North America, Western Europe and Japan, and rapid growth is limited to developing countries including China, India and Latin American countries. The growing popularity of liquid laundry detergents, as opposed to powders, has affected the consumption of surfactants, as the former generally use much higher surfactant levels per wash load. In China, the total production of liquid detergent increased by about 11% from 2009 to 2012, while production of powders increased by less than 3% and that of soaps declined during the same period. In Brazil, powdered detergent accounted for nearly all of the laundry detergent market through 2010. By 2012, liquid detergent accounted for at least 15% of the market. Although a much smaller market than Brazil, liquid detergents in Argentina now make up approximately 35% of the total.
"Green surfactants" are not expected to make a major change in the overall pattern of consumption, as products emphasizing consumer value seem to be more appealing than the benefits of product sustainability. The question remains as to how far green product features could affect customer behavior. In some segments of the market, the "green" label is promoting sales.
More investment and increased supply of oleochemicals are expected, especially in Asia. Most of the new investment in surfactants is taking place in the ASEAN region, China and South America. Asia is seen as the strategic growth area for most global surfactant manufacturers. Overall, surfactant manufacturers, even those in Asia, continue to see their margins eroded by increasing feedstock and energy costs as well as hurdles in building business competitiveness.
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