The hustle and bustle of activity in Douglas starts before the sun rises. The twinkle of headlights in the pre-dawn illuminates a path to convenience stores before lighting a snaking path to the oil fields. The cough of nondescript, white truck engines may wake you up before you look at the clock and roll over.
While many Mountain West cities are still fast asleep, Douglas comes alive at 4 a.m. Lately, business owners have noticed more activity in those early morning hours.
Lodging tax figures show that hotels have been selling more rooms; sales tax revenues in the last several months have spiked. Energy workers line up out the door at Grasslands Market or Maverik Country Store, many buying sandwiches for lunch and most filling mugs with caffeine-rich coffee or grabbing a Mountain Dew.
The telltale signs of a new boom are unmistakable. For most, new wells and new workers are more than welcome after several years of economic struggles.
“In booms, you can pay the bills,” Charlie Hegglund, plain-spoken owner of The Plains Motel, explained. “The bust that we were hit with (in 2015) was lower than it ever was before. We had nothin’ . . . there was hardly any way to survive it.”
This could be just the beginning of the next boom. If the U.S. Bureau of Land Management selects its preferred alternative, B – the operator group’s 5,000 oil and gas well proposal for development – in its final environmental impact statement, Converse County’s current uptick could seem comparatively small.
Based on early indicators, the boom -– if it isn’t here already – could begin in earnest next summer. In 2019, industry could invest billions and send hordes of workers flocking to Converse County.
“Next summer is going to be busy,” Converse County Commissioner Rick Grant said in a commissioners meeting.
While the new development would bring scores of challenges, the prospect of financial prosperity has county business owners and officials eager and hopeful.
“A rising tide raises all ships,” commissioner Jim Willox said.
Like local businesses, the county, city and towns are eyeing the massive financial windfall potentially headed their way, even beyond recent spikes in sales taxes income.
Converse County Treasurer Joel Schell expects the county and its residents to benefit from the project, but he cautiously points out that, as with any anticipated boom, uncertainties abound.
“It depends on the timing and the impact,” Schell said. “It’s just like what we did last time, where we took in a lot of revenue, but then we spent a lot of revenue trying to keep roads updated and trying to keep up with impacts of the development.”
The factors determining the price of a barrel of oil are so variable that it’s impossible to predict the precise net gains and losses; in the end, the EIS doesn’t determine the pace of development, the world oil and gas market does.
“As long as we’re dependent on that industry, you’re a slave to the market,” Schell explained. “Anybody who tells you, ‘This one’s going to be a while,’ or ‘This is how long we project,’ is fooling themselves. You don’t know. You have to hang on to it.”
For example, during past booms, the county and municipalities chose to hire additional law enforcement to handle a growing number of calls, and added to road and bridge staffs – changes that increased costs. The EIS estimates Converse County would need additional road and bridge employees and an additional nine officers – between Douglas Police Department, the sheriff’s office and the Glenrock Police Department – if the 5,000 well project is approved.
If the BLM selects its preferred alternative, B, for the final EIS, Converse County could receive billions of dollars in tax and royalty revenue over the next four decades. Industry estimates predict that a 5,000-well project would produce about 1.4 billion barrels of oil and 5.8 trillion cubic feet of gas through the 40-year life of the field.
At $65 a barrel and $4 per thousand cubic feet of gas (mcf), alternative B would bring in about $19 billion in total tax and royalty revenue split between the federal, state and local governments. At $100 a barrel and $6 mcf, the project would bring in $29 billion.
However, the estimates don’t account for indirect economic benefits. Douglas businesses would likely see their profits grow as the city’s population spikes. Construction companies, electricians and truckers, among many other subcontractors, would almost certainly experience skyrocketing demand for their services.
Schools across the state would directly benefit from the taxes on the development. Converse County schools would especially benefit from the increase in ad valorem tax collections and from the rising enrollments which would boost state funding for county schools.
Substantial development will occur regardless of the BLM’s decision: Tax and royalty revenues generated under alternative A, which rejects the operator group’s 5,000-well request but honors existing leases, would amount to between $7 billion and $10 billion over 40 years. All of the estimates presented in the EIS are in 2015 dollars, and do not account for inflation or indirect economic benefits and costs.
If alternative B is selected and all 5,000 wells are drilled, taxes and royalties would add $19-$29 billion more over the next 40 years, in addition to the totals in alternative A.
Three types of royalties and taxes account for 95 percent of government revenues from the Converse County oil and gas project: federal mineral royalties, severance taxes and ad valorem taxes. (Please see the graphic with this story for a detailed explanation of tax and royalty revenue distribution.)
Federal mineral royalties
The federal government comes out on top in the EIS sweepstakes. Because the federal government owns nearly two-thirds of the mineral estate, federal mineral royalties would account for almost half of all tax and royalty revenue from Converse County development. The federal government levies a 12.5 percent tax on the value of production on federal lands. It retains 51 percent of the revenues and disburses 49 percent back to the state of Wyoming.
The state divides its share nine different ways, but the Budget Reserve Account and public school system are the two leading recipients.
Severance taxes would account for about a quarter of government revenues from the new development. Wyoming taxes the production of oil and gas at 6 percent at the end of the production, before processing.
According to the EIS, severance tax funds are typically distributed accordingly: 42 percent to the Permanent Wyoming Mineral Trust Fund, 19 percent to the state’s General Fund and 39 percent to the state’s Budget Reserve Account, frequently referred to as the state’s Rainy Day Account.
Ad valorem taxes
In Wyoming, ad valorem taxes are effectively property taxes, but apply to anything with assessed value. Based on the value of last year’s mineral production, these revenues would primarily benefit the county and county school systems in addition to the Wyoming School Foundation.
POPULATION AND JOBS
Douglas’ population would be expected to grow by about 4,400 during the first 10 years of the project, and then decline rapidly thereafter – it takes more people to build a gas plant than it does to operate it.
Glenrock’s population would grow by about 1,200, which, combined with Rolling Hills, would increase the Converse County population by about 6,000 by year 10. The Casper area would see greater population increases, by about 15,000 over the first 10 years of the project.
The project would create 6,650 regional jobs – in Converse, Natrona and Campbell counties – in the first year alone. Slightly more than half of those jobs would be directly related to industry. In year 10, the year of peak development, the number of total created jobs would rise to 8,500. A bit more than half of those jobs would come directly as a result of development of the wells.
After year 10, when development is expected to peak, the EIS states that 6,000 of those jobs would leave within two years.
The Douglas School District could be expected to grow by between 160 and 190 students per year for the first seven years of the project. The number of new students would peak in year 10 of the project but decline thereafter.
The Converse County commissioners favor alternative B (full development) but also expressed some concerns in their comments on the draft EIS. Willox and other commissioners have stressed that they would like the final EIS to offer a better analysis of the socioeconomic impacts.
“Converse County needs a much better indication of costs to them from development impacts as well as the revenues that would come to them,” the comments read. “The big revenue numbers are meaningless to local government unless we know who gets what, when.”
TRAFFIC & SURFACE DISTURBANCE
Many of the benefits and costs of development don’t show up in a resident’s daily life. Those who live in town rarely worry about the tap running dry. Low air quality probably doesn’t affect them often as long as they have healthy lungs and are not very young or elderly. They probably don’t see sage grouse on the drive to work every day, and outside of the new justice center (which was paid for by revenues during the last boom), improvements paid for by oil and gas tax revenues are not obvious to the average resident.
But more traffic and new structures cropping up on the horizon tend to be more noticeable in your daily life.
The operator group’s best guess on vehicle trip increases says that traffic within Converse County will rise by between 5 and 679 percent as a result of the project. On WY 93 (Ross Road), at the junction of Route 504 and WY 95, traffic will increase by 1,863 percent. If the BLM selects alternative C, traffic increases would be smaller because C requires more wells be drilled on each pad.
New wells require new roads. Alternative B would require the construction of 1,970 miles (covering more than 50,000 acres) of new roads, 700 miles more than alternative C. Roads would account for 39 percent of the new surface disturbance under B. Alternative A would require about 400 miles of new roads.
Nearly two-thirds of the Converse County Project Area – the area identified as likely for development by the EIS – is used for grazing. If the BLM selects alternative B, industrial development will reduce agricultural capacity by over 62,000 animal unit months (AUMs). One AUM is the amount of forage required to sustain a 1,000 pound cow for a month.
“Agriculture is a dominant land use in Converse County,” said Converse County Conservation District Manager Michelle Huntington. “Any loss of that rangeland that has been historically used by livestock and other agricultural use for production, you’re not going to get that back once the site turned into an oil field.”
In other words, new development will likely put a dent in Converse County beef production.
“Our main concern revolves around the possibility of the BLM reducing AUMs on the federal portions of these allotments when it may not be necessary,” said Derek Grant, Wyoming Department of Agriculture’s public information officer.
Ranchers could be on their own if the BLM leases its public pastures to industry, lands traditionally leased for grazing. There are no mitigation requirements on federal or state lands.
“It is important the BLM include a statement that the National Environmental Policy Act does not require mitigation, rather only evaluation of environment impacts, and therefore these recommended mitigation measures may be considered and utilized but are not intended to be imposed as binding requirements in all circumstances,” Anadarko said in its comments on the EIS.
Anadarko sent written responses to the Budget, stating that “the use of longer laterals means lower well-pad density in the project area.”
Public support for alternative B is strong, as evidenced by comments on the draft EIS. Outside of a few agencies and environmental groups, only a handful of individuals – primarily those who live in the areas expected to see new development – expressed a preference for alternative C or any concern over the project in their comments.
In written comments, a handful of hotel managers and owners expressed their vehement support for alternative B. Most comments advocating for alternative B cited the project revenues and financial benefits to the region.
Others who expressed concerns feared that this EIS will fail to protect Converse County and nearby residents.
“I think the biggest difference is this (EIS) seems like a much shoddier piece of work than we have seen in the past,” said Jill Morrison, executive director of the Powder River Basin Resource Council. “It’s all about handing industry what they want without abiding by the mission of the BLM.”
The PRBRC is one of several groups and agencies to identify errors and insufficiencies in the EIS.
But at the same time, the BLM’s preferred alternative has the support of government officials including Wyoming’s congressional delegation.
A joint letter from Sens. Mike Enzi and John Barrasso, both R-WY, and Rep. Liz Cheney, R-WY, urged the BLM to prepare the final EIS as quickly as possible and asked the BLM to ensure its final EIS reflects recent executive orders signed by President Trump and Secretary of the Interior Ryan Zinke. The orders cited in the letter reduce mitigation requirements and call for the rescission of regulations that “burden” industry.
Critics also have voiced concerns that this EIS limits public participation and input, and that agencies will have little ability to enforce the guidelines in the EIS.
For instance, before this EIS, each new development on U.S. Forest Service land in the Thunder Basin National Grassland would have required its own public comment period. This EIS would change that.
“There’s one public comment portion now (the public comment period was from January to March of 2018) which then takes the place of all the individual ones,” said Aaron Voos, Medicine Bow-Routt National Forests and Thunder Basin National Grasslands public affairs specialist. “This project should allow for expedited processing . . . we no longer have to do those full-blown environmental analyses.”
Voos emphasized the Forest Service will still review each project and the sites where the agency allows drilling “won’t necessarily change.”
There exists significant uncertainty as to where the BLM will allow drilling. The locations of new development are not described in the EIS, which makes it difficult for cooperating agencies to prepare for them in advance.
Some say that the BLM is forging ahead while valuing industry desires over public interests.
“I frequently hear from agency staff, ‘Well, this is what the operators want, and we’re just doing this for them basically. We can’t get them to change their proposal very much,’” PRBRC lawyer Shannon Anderson said.
But many see the efforts of pro-energy politicians like Wyoming’s congressional delegation and Zinke as positive, because it cuts through restrictive red tape.
State Sen. Brian Boner, R-Converse, is excited about the proposed project. He sees the opportunity to ensure fiscal security for years to come, and, as a rancher, he touted the advantages of horizontal drilling. He thinks the county is well-positioned to develop the land responsibly, but added that it’s crucial to build pragmatically.
“It’s important that we maintain it and manage it in a way that it’ll be here not just for the next five to 10 years, but for the next two or three generations,” he said. “That doesn’t mean you treat it like some sort of museum, where you don’t touch it. It doesn’t mean that you never allow change to happen.”
For Frankie Addington and Stirling Moore, mother and daughter ranchers of the W.I. Moore ranch, the fear isn’t just that the development will cause some challenges. They believe the balance of power is skewed.
“As a rancher, how do you stack up to a multi-billion dollar corporation?” Stirling said. “How do you stand up to them?”
Addington and Moore repeatedly emphasized their support for responsible development. They aren’t militant environmentalists, they say. They just don’t want to be wiped off the map.
“Our family has ranged in this area for over 130 years,” Addington said in her comments on the EIS. “The ranch is not only our business but also our home. We are in the process of passing this ranch onto our children so they can continue on this land for the fifth generation. This project has the potential to devastate our water, the land, livestock/wildlife and alter our home and business forever, certainly not for the better.”
The following individuals and organizations either did not respond to numerous requests for comment or declined to comment for the stories in this series: Rob Boner of Boner Bros, Troy and Blake Scott of Scott Ranches, Frank Moore of The Spearhead Ranch, Frank Eathorne of the U Diamond Ranch, Macey Moore of Remax Realty, Bobbie Larson of My Realty, Dr. Ginger Paige, associate professor of water resources at the University of Wyoming.
The Bureau of Land Management would not let the Budget talk with their experts on water quality, air quality, or wildlife, and twice reneged on a promise to answer written questions submitted to a media contact. The Budget first spoke with the BLM in early July, submitted written questions, and subsequently reminded the BLM of the written questions five separate times.