EDITORIAL: Oil price drop shows the need to diversify Wyoming economy

Posted 3/17/15

That is happening again, as the price of oil has been cut in half, with it selling for around $50 a barrel now. All signs point to it staying in that area for several months and perhaps even a few years.

While people filling up at the gas tank …

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EDITORIAL: Oil price drop shows the need to diversify Wyoming economy

Posted

We’ve seen this before in Wyoming. One day, we’re riding high on $100-a-barrel oil, then, the bottom drops out of that barrel.

That is happening again, as the price of oil has been cut in half, with it selling for around $50 a barrel now. All signs point to it staying in that area for several months and perhaps even a few years.

While people filling up at the gas tank are smiling, private oil field contractors and their employees are not. The price drop means fewer jobs and more oil field workers looking for a way to pay their bills.

The number of oil rigs drilling in the state declined from an average of 55-57 to 32, according to Bruce Hinchey, president of Petroleum Association of Wyoming in Casper.

Jerry Herweyer, manager of J&R Well Service in Powell, said he was forced to lay off half his workers.

That has also meant less tax revenue for the state. The projected mineral severance tax revenue was more than $322 million in FY 2014. It will drop to $248 million, according to estimates.

Wyoming has ridden this wave before, most recently in 2008, when the sharp economic downturn dropped the price of oil from $146 in the summer to $40 by the end of the year.

In recent years, oil companies responded by drilling more and more and flooding the market with oil. This correction was easy to see coming.

There is no need to panic. Wells still need to be staffed and maintained. Pipelines and plants are keeping the lights on and employees are earning paychecks. Tax revenue will flow into state coffers and overall, Wyoming is in strong financial shape.

But this is a clear reminder for the state to continue to diversify its economy. There are welcome signs that companies not involved in mineral extraction are interested in Wyoming.

Microsoft is expanding its data center west of Cheyenne. The $200 million investment will create 200 to 600 temporary jobs during the two-year project and then double the workforce at the center from 25 to 50.

“If you were to ask four or five years ago if a company is going to invest three-quarters of a billion dollars in Wyoming, and it’s not directly related to minerals or tourism and ag, I think it would have raised some eyebrows,” Gov. Matt Mead said. “But that is exactly what’s happened, for the betterment of the state.”

The Governor’s Data Center Recruitment Fund provided a $5 million incentive for the tech giant to expand its Cheyenne operation. It will be used to pay for extending water and sewer lines to the location and erecting water towers.

Mead is on the right track here, following the leads of Govs. Dave Freudenthal and Jim Geringer. Mead knows the strengths and weaknesses of the state and is well aware of the need to diversify our economy.

He promised to do so during his campaign for a second term last year.

“To me the biggest challenge for Wyoming in the coming future is diversifying our economy,” Mead said during a debate with Democratic challenger Pete Gosar.

It will protect the economy from boom-and-bust cycles, he said, and it will create jobs and reasons for young people to remain in Wyoming. The state has the lowest population in the nation but with a steady economy, along with all the other glorious advantages of this large, beautiful state, there is room for more to stay or move here.

The men and women who built this state were “not hoarders, they were builders,” Mead has said, urging his state to rebuild its infrastructure and invest in the future. That’s sound advice.

There are other hurdles to clear, however.

One is the Cowboy State’s traditional social conservatism. A bill that would have strengthened the state’s nondiscrimination law passed the state Senate but was defeated in the state House.

“Attracting the best and brightest workers is essential to growing and diversifying Wyoming’s economy,” Wyoming State Chamber of Commerce Executive Director Heidi Peterson said in a statement supporting the proposed law.

“To reach beyond the industries that have traditionally driven our economy — particularly in technology, software development, finance and other professional sectors — we need to show our business climate is in line with current business practices, which have long prohibited discrimination in the workplace,” Peterson said.

Yes, seeing some of the air leak out of the oil balloon is cause for concern. But we are heartened by Mead’s leadership on this issue and signs that Wyoming is moving toward a more rounded economy.

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