The two states of Utah: A story of boom and bust
Numbers tell a troubling story for many families
Scott G Winterton, Deseret News
Editor's note: This is the first in a two-part series on the rise and fall of the oil industry and its impacts on Utah.
The prices at the gas pump are great, the lowest since 2004, but what is it costing families and communities in the oil and natural gas producing region of Utah? The Uinta Basin is in an oil skid, crashing headlong into tough economic times.
VERNAL — A Gallup poll released in late February revealed Utah residents are the most positive in the nation about their state's economic conditions.
The results must not have included those who live in Uintah and Duchesne counties, Utah's oil- and natural-gas rich country that is full of vacant storefronts, long unemployment lines and plunging sales tax revenues.
"With the oil and natural gas collapse, there have been losses, and they are hurting everywhere in the Uinta Basin with this setback," said Scott Smith, a regional economist in the basin for the state Department of Workforce Services.
"The rest of the state is actually booming, and they are out there dying and feeling really isolated. From our point of view, things are really rough. The rest of the state is, 'Happy Days are Here Again.'"
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The contrast between Wasatch Front-fueled successes and the Uinta Basin's struggles is stark:
While Utah logged a 5.2 percent growth in sales tax revenue in fiscal year 2015 overall and Salt Lake County enjoyed 5.1 percent growth, Duchesne County's dropped a significant 6.7 percent, and Uintah County's dropped by 3.2 percent.
"Every business is seeing a great decrease in their sales," said Barton Jones, who owns a Duchesne ammunition and gun store that also sells a variety of other items. "Even if they come in, they look around and leave, because they just don't have the money to spend."
Utah, overall, posted the highest growth rate in jobs in the nation for eight consecutive months in the fall of last year and was rated No. 1 in the country as the best state to do business.
In one year's time, Uintah County lost more than 1,400 "nonfarm" jobs that include the oil and gas sector, construction, and professional and business services. Duchesne County lost more than 1,600 jobs, with one sector down 41 percent.
Here then is the story of two states: Utah with a flourishing business climate driven by Wasatch Front success, a jobless rate lower than the national average and an economic climate ranked sixth in the nation by Forbes Magazine.
The other story, the one that does not generate state-issued press releases, is of government job placement offices that fill up weekly with the stricken-faced, newly unemployed, the one with local governments cutting services and businesses that are folding one by one.
"We are obviously feeling the effects. It's huge," said Chris Anderton, owner of the Frontier Motel and Grill in Roosevelt. "We went from 55 percent occupancy to less than 10 percent. Room rentals are pretty much nonexistent. It's not like Roosevelt is a destination location."
The drop in oil
The worldwide market is flooded with oil, and the economics of supply and demand are creating dramatic impacts.
Globally, the price for a barrel of crude oil has plunged 75 percent since June of 2014, according to the International Energy Agency, dipping to its lowest price since 2003.
Motorists are saving $80 million a year at the pump over the past year and spent $347 billion less in 2015 compared to 2014. Households are projected to shave between $700 and $1,000 off expenses due to the low price of gasoline this year.
It's also been a boon to the transportation industry, particularly trucking and the airlines.
But those low prices have driven the loss of more than a quarter million people in the oil and gas industry across the globe. With those jobs eventually go the workers in the supporting industries: the truckers hauling water, the geological surveyors, the excavators and pipeline pumpers.
Eventually, the service jobs in restaurants and stores and hotels start to dwindle as well without a customer base to support them.
While it is true the extreme highs of the "boom" years also create drastic declines, the effects in human terms are no less difficult to bear.
"Mondays, Tuesdays and Wednesdays, you cannot even breathe in here," said Kathy Deets, an employment counselor in the Vernal office of the state Department of Workforce Services.
"We'll have 20 to 30 people standing in the lobby."
One woman looking for a new job was self-employed as a massage therapist, averaging 40 clients a week, Deets said. She was down to about five people a week and urgently looking for another way to bring in household income.
"People are desperately worried," she said. "They have obligations they need to take care of."
Restaurants, auto shops, gas stations and motels have closed. The state, the counties and basin chambers of commerce don't have the exact numbers of how many businesses are shuttered, but the empty store fronts and unemployment lines tell of a collapsing economy.
Vernal City Manager Ken Bassett said sales tax revenue is down for his city at least 25 percent. That means cutting back.
"It's had a significant impact on how we go about providing services," he said. "The question is how you do more with less. That is what we are always trying to figure out."
Local pageant girls are holding canned food drives to help the food bank keep its shelves stocked. Facebook yard sale postings bring people together to barter and sell what they can to get by.
"Our area is hit extremely hard," said Duchesne County Commissioner Greg Todd. "There is nowhere else to go. Do you give up, do something different or hold on and hope you are the final one remaining when it turns?"
Todd spent 40 years in the industry, so he knows its volatile nature of boom and bust, the frenetic ascent of a community bursting with job openings, struggling to find people to put to work, hotels and rental homes filled to overflowing and the money pouring in, only to have it tumble over the cliff.
"There are for sale signs and for rent signs," he said. "Eighteen months ago, that would have been unheard of." Duchesne County's unemployment rate doubled in one year.
In times of bust, the basin experiences the steady exodus of workers seeking to find jobs elsewhere. If they're in the extraction industry, they might end up in Texas, Oklahoma or North Dakota, where the oil is less costly to pump and get to market.
They take their dollars and job skills with them.
"The talent will come back when the prices come back, but it is noticeable to us," said Bob Gilbert, a Utah workforce development specialist in the Uinta Basin. "There's been this severe downtown here. We tell them to look out in Salt Lake City and Provo. There's good jobs out there. "
The impact on families
The economic climate in the basin splits families and changes social dynamics in households.
Deets said the laid-off oil worker may stay at home and take up a "Mr. Mom" role while cruising job possibilities on the Internet. His wife takes whatever job she can get to help meet bills.
"I see mom flipping burgers, I see mom working as a cashier at Kmart," she said. Oil field workers take jobs out of state and come home to visit maybe a couple of weeks every few months, thrusting the woman into being a pseudo single mother.
"People are having to make tough choices," she said. "It's hard on these families."
The plunging oil prices in the Uinta Basin are having impacts elsewhere in Utah, such as a decrease of $30 million in school trust lands revenue in a year's time — money that goes to support public schools.
Money that the federal government returns to the states from oil and gas production — called mineral lease revenue — is distributed to local communities to build senior centers, hospitals, pay for fire trucks, sewer lines and a host of needs. Statewide, that revenue from oil and gas is down $13 million in a year's time and down overall $26 million.
State agencies with budgets that depend on severance taxes from oil and gas are also hurting. The Utah Geological Survey is short $2.2 million this fiscal year and reduced its staff by 20 percent. Similarly, the Utah Division of Oil, Gas and Mining is experiencing a $1.2 million shortfall and has not filled eight positions, even though the number of wells that need regulation has not diminished.
"The value of the price of a barrel produced in 2015 is not nearly the value of 2014 and as a result they've taken a hit in their budgets," said Jeffrey Barrett, deputy director of the Governor's Office of Energy Development.
Barrett said drilling activity in the basin dropped by 85 percent — companies are capping wells and exploration has ceased — with eyes looking to a future when prices come back.
There were 37 drilling rigs in Utah in 2012, reduced to 25 in 2014. Two weeks ago, the last rig standing was "layed down," the first time in three decades there's not been a single drill rig operating in Utah.
"Since 1987, we've never not had a rig operating," said John Rogers, associate director of the Utah Division of Oil, Gas and Mining.
The basin is trying to diversify its economy and bring in manufacturing jobs. It has high-speed fiber optic lines, gilsonite mining and its tourism economy by being in the heart of dinosaur country and a gateway to Flaming Gorge.
There is this realistic acknowledgement, however, that the basin lives and breathes and dies with oil and natural gas. It is the living and breathing part that is good. The dying hurts.
"This is an energy development town and the size of it is certainly not based on recreation, fishing, hunting or farming," said Bill Ryan, a retired Vernal-based independent oil and gas consultant with 40 years in the industry.
"There is no magic bullet out there. We are going to be dependent on oil and gas for a long time, because you can't replace it in all the places it is being used, at least not cost effectively."
The boom and busts have come before, so everyone is just holding on, waiting for this one to finish. But there are doubts about when, how much, or if it even comes back.
"I've been through three or four of these," Bassett, Vernal's city manager said. "This one is probably more concerning to me than any of the others simply because right now, we do not see any light at the end of the tunnel."
Adds Adam Long, a Vernal business owner, "Everyone wants it to be better than it is."
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