For Oil & Gas, Will Colorado Become the Next California?

You know how the saying goes – if it’s not broken don’t fix it. But the state of Colorado is walking a thin line as it considers several pieces of legislation that stand to severely curtail its booming oil and natural gas industry and workforce. As legislators deliberate on the direction of the state’s energy future, they need to be cognizant of the myriad advantages linked to this sector.

How Colorado benefits from mining

Mining, especially oil and gas extraction, is one of the key pillars of the Colorado economy. Currently, the state ranks 5th in the nation in oil production and 8^th in natural gas, with production in the state more than doubling since 2020.

Aside from its impact on the nation, there is a plethora of benefits that Colorado reaps impacting both the economy and the community. About one in 10 jobs in the state depend on Colorado’s oil and gas industry. More specifically, a recent PwC study found that the industry supports more than 303,000 jobs statewide, provides over $34 billion in wages, and pumps more than $48 billion into the state’s economy every year. In some rural communities, oil and gas companies pay the lion’s share of local school taxes.

To kill the goose?

Despite the importance of oil and gas development to Colorado’s economy, the state legislature is currently considering bills that would essentially kill the golden goose. Although they smartly rejected Senate Bill 159, which would’ve put an end to the issuance of new permits for both new wells and modifications to existing wells by January 2030, there is further concern to be raised about the other bills still on the table. Senate Bill 165 would impose unfeasible emissions standards and ban internal combustion engines after 2035. On top of that, House Bill 1330 would set unreasonable standards on air quality that would seriously strain the finances of the state’s oil and gas companies. In short, it’s quite obvious that some members of the Colorado legislature want to mimic California’s radical energy policies.

The fact that a thriving state like Colorado, with an unemployment rate of 3.5%, would want to emulate California, with a 5.3% rate, defies logic. While Colorado’s population has grown by 1.8% over the past three years, California’s has declined by 1.4%. As evidence of Colorado’s healthy labor market, it took the state only 18 months to get back to pre-pandemic employment levels. It took California almost three years. And in contrast to a $38 billion budget deficit projected for the state of California this fiscal year, Colorado’s general fund revenues are nearly in balance with projected expenditures.

As goes California…

California’s sub-par economic performance in recent years can be attributed to many factors, including high taxes, overregulation, and rapidly rising housing and energy costs. But the demise of California’s oil and gas development has also contributed to the state’s decline. Due in large part to legislative and regulatory restrictions on fossil fuel development, as well as a de facto ban on hydraulic fracturing, crude oil production in California has dropped from a peak of 1.1 million barrels per day in 1985 to less than 300,000 barrels per day in early 2024.

Colorado’s legislators should keep in mind the need for different courses of action to meet and sustain economic goals. Whereas in California the oil and gas industry directly accounts for only 2.3% of gross state product, in Colorado direct spending by oil and gas companies generates 10.7% of gross state product. This means, of course, that shutting down the companies that produce oil and gas would have major negative impacts on jobs, income, and tax revenues in Colorado.

… so might go Colorado

Advocates for killing Colorado’s oil and gas sector could also benefit from a dose of economic and energy realism. Despite all the hype, incentives, and investment in renewable energy, fossil fuels aren’t going away any time soon. Crude oil and natural gas output in the U.S. and around the world hit an all-time high last year. America is not only the world’s number one producer of oil and natural gas; we have also become the world’s number one exporter of natural gas and last year ranked number three in oil exports. This year, the U.S. will likely surpass Russia to become second only to Saudi Arabia as an oil exporting country. Even our own Energy Information Administration projects the demand for oil and gas to continue growing both domestically and globally at least through 2050.

So, Coloradans have a choice. They can stay in the game and reap the economic and fiscal benefits that attend oil and gas extraction. Or they can quit, which will have ripple effects not only in Colorado but across the nation.

This article was originally published by RealClearEnergy and made available via RealClearWire.