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Drilling, dollars and debt


Rockies Today

November 12 · Issue #33 · View online
The big stories up and down the Rocky Mountains, curated by Mountain West News

Drilling, dollars and debt
Colorado’s oil and gas industry is still doing a robust business, but to keep up they’ve had to borrow. With fewer willing investors and declining prices, that business model is being put to the test, The Denver Post’s Aldo Svaldi reports.
Colorado's oil and gas industry is leveraged to the hilt. What does that mean for the future? Colorado's oil and gas industry is leveraged to the hilt. What does that mean for the future?
The state’s petroleum industry employs about 90,000 people, directly and indirectly, generates $13.5 billion in economic activity, and provides $1 billion in taxes to state and local governments, according to an analysis from the University of Colorado Boulder.
The industry’s ability to achieve free cash flow is vital to the state economy, not to mention winning back the investors burned by years of underperformance.
And yet, the eight largest public producers active in Colorado have spent $27 billion more than they have made the past five years, according to financial numbers.
To fund the gap, they have borrowed or turned to equity markets. But capital is in short supply and oil prices are lower than where producers need them to be to keep growing production. Drilling activity will likely slow in the months ahead.
“The industry raised a ton of capital to expand U.S. production this decade with little to show for it,” said Blaine Rollins, lead portfolio manager of the 361 Macro Opportunity Fund in Denver.
For eight of the past 10 years, energy stocks as a group have underperformed compared to the S&P 500, with a discouragingly wide gap this year. An exchange-traded fund, ticker XOP, that tracks oil and gas producers in the U.S. is down 14% this year, while the larger S&P 500 is up 23%.
“Why would any equity investor be excited to invest in the space given the past results?” Rollins asked.
And lenders, while they haven’t slammed the door entirely shut, have become much stingier and more questioning.
“Banks and debt investors no longer want to throw good money after bad money until they see some light at the end of the tunnel. And with $50 oil and $2 gas, there is only darkness,” Rollins said.
National context from The Wall Street Journal:
Frackers prepare to pull back, exacerbating a slowdown in U.S. oil growth
More oil and gas news from around the region:
Occidental seeks up to $700 million for Anadarko assets in Wyoming, Colorado
Wyoming faces a glut of drilling permits. But a solution might be coming.
Wyoming eyes downgrade of oilfield creeks’ protection
Report: Drilling boom adds stress to U.S. western water supplies
Opinion: It’s time for a moratorium on new fossil fuel extraction
'Go back to California'
Wave of newcomers fuels backlash in Boise Wave of newcomers fuels backlash in Boise
BOISE, Idaho —  This city sure knows how to roll up the welcome mat — that is, if you happen to move here from California.
Just consider last week’s mayoral election. It was the most competitive race in recent memory, a referendum on growth in the rapidly expanding capital of Idaho. And candidate Wayne Richey ran on a very simple platform: Stop the California invasion.
His basic plan to fulfill that campaign promise? “Trash the place.”
Richey figured that would be the best way to keep deep-pocketed Golden Staters from moving to his leafy hometown. He blames them for pushing home prices and rents up so high that Boiseans can’t afford to live here on the meager wages most Idaho jobs pay.
At a candidate forum in late October, he had a terse answer for the question: “If you were king or queen for the day, what one thing would you do to improve Boise?”
“A $26-billion wall,” he said, laughing, drawing out each word for maximum emphasis. As in build one. Around Idaho. 
California bashing is a cyclical sport with a long history in the heart of Idaho’s Treasure Valley. Growth spurts have more than doubled Boise’s population since the 1980 census. Four months before federal counters hit the streets here that year, a Washington Post headline crowed, “To Most Idahoans, A Plague of Locusts Is Californians.”
In this current wave, California concerns have made their way into a heated mayor’s race. They have taken up residence on Nextdoor social networks.
And they erupted into a recent tweet storm that swirled around two beloved institutions, Boise State University and football. The electronic uproar caused residents all the way up to Mayor David Bieter to defend their city’s welcoming nature and insist that they like Californians, really they do, despite evidence to the contrary.
This from the Idaho Statesman editorial board, inspired by the above story:
When it comes to Boise’s growth, quit blaming the Californians
Meanwhile, Idaho’s smaller cities want more people to come:
Idaho towns have to be creative to increase tourism, experts say
Time for Smokey Bear to retire?
Smokey Bear is 75. Is it time for him to retire? Smokey Bear is 75. Is it time for him to retire?
In mid-July 1974, a bolt of lightning struck a tree in a remote area of Wyoming’s Grand Teton National Park, igniting a blaze that burned for three months and marked a major shift in federal wildfire policy.
Rather than racing to stamp out the flames, park officials decided to monitor the fire. Decades of suppressing fires, natural and human-caused alike, had left America’s forests overgrown and prone to extreme conflagrations. Emerging research showed that allowing nature to run its course would benefit forest health.
The National Park Service had revised its wildfire management policy a few years earlier, and the Forest Service followed suit that year. The Waterfall Canyon Fire in Grand Teton was one of the first large fires officials let run its course inside a national park, and it torched some 3,700 acres before rain and snow finally extinguished it that fall. 
An October New York Times article, “Rangers Refute Smokey Bear and Let Forest Fire Spread,” captured locals’ frustrations with the controversial new policy, as the sight of smoke-filled skies and smoldering old-growth trees prompted accusations that the park was taking a “scorched earth” approach to fire management. Hundreds signed a petition urging the federal agency to conduct its “experiments” in more isolated areas. 
Officials said critics threatened to derail a science-based policy. “We’ve had nearly 200 years in this country of saying fire is bad,” Tony Bevinetto, the park’s information officer, reportedly told visitors at the time. “It’s neither bad nor good — it’s natural.”
Nearly half a century later, wildfire experts are fighting the same fight. And the person perhaps most responsible for Americans’ reflexive anti-fire sentiment isn’t a person at all, but a cartoon bear: Smokey, the Forest Service’s lovable icon of fire prevention. 
The fire-prevention campaign has a past rooted in wartime propaganda, as Wendy Melillo, a professor of journalism and public communication at American University, spotlighted in this article published in July:
Smokey (the) Bear is still keeping his watchful eye on America's forests after 75 years on the job
Smokey Bear - Bomb in the Forest (1969)
Watch: 'The Art Of Home: A Wind River Story'
Film featuring Wind River artists airs on PBS
Stream the 55-minute documentary here. The trailer:
The Art of Home: A Wind River Story (Trailer 2019) on Vimeo
Backcountry goats, wild horses, skinny grizzlies
A roundup of wildlife news:
As backcountry travelers shift load to goats, national forests eye risks As backcountry travelers shift load to goats, national forests eye risks
Fewer Yellowstone wolves equals no wolf-on-wolf deaths
20 years later, Colorado lynx reintroduction heralded a success—but threats loom
Northwest Wyoming deer test positive for chronic wasting disease
Sage grouse court order trims energy lease auction in Nevada
BLM gathered nearly 300 wild horses from Central Idaho in effort to trim population
Up north, there's concern about skinny grizzlies and declining salmon
The West is more than heroes and villains
In ‘This Land,’ Christopher Ketcham roams the West in search of heroes and villains, and misses a lot in between In ‘This Land,’ Christopher Ketcham roams the West in search of heroes and villains, and misses a lot in between
Cast a stone anywhere in the open spaces of the West, and there’s a decent chance it’ll hit something that offends your conscience. Love wildflowers? Bemoan the destruction cattle wreak on the range. Cherish wildlife? Weep at wolves gunned down on ranchers’ behalf. Find fulfillment in lush forests? Suffer the stumps of industrial logging. Respect ancestral ties to land? Deplore the rigs and recreators despoiling it.
As Christopher Ketcham tromps around the region in his new book, This Land: How Cowboys, Capitalism, and Corruption are Ruining the American West, he throws predictable stones at environmental degradation. Through litanies of wrongdoing, Ketcham makes a pugnacious argument against despoilers of public lands, chronicles the many failures of federal oversight on the commons, and harangues the corporate softening of the environmental movement.
These screeds aren’t without merit. For the most part, they are based on facts and include apt descriptions of environmental destruction and corruption. But the arguments and examples Ketcham provides are often reductive. Complex resource issues are reduced to destruction versus preservation. Federal employees are either the few brave whistleblowers Ketcham talks to or a legion of enablers paving the way for the industrialization of wilderness. Ketcham’s West becomes a landscape for the preservation and enjoyment of those with the physical capacity and leisure time to seek it out, not a place to live on or make a living in.
More from High Country News’s annual Books and Authors special issue:
Storied Landscapes — High Country News
What else we're reading today
Tribe members: Ancient bison kill site desecrated by mining
Bureau of Land Management staff face relocation or resignation as agency moves West
Powder River Basin coal production hits 20-year low
⚡Taylor Kuykendall
Navajo Nation President says he will terminate indemnity provisions supporting NTEC's purchase of Cloud Peak's mining operations in the Powder River Basin:

NTEC previously warned such a move threatens capital structure/mining ops:
In search for cheaper, longer energy storage, mountain gravity could eventually top lithium-ion
Do e-bikes belong on public lands? Depends on who you ask
E.P.A. to limit science used to write public health rules
Rockies Today is edited by Matthew Frank, Fellow in Regional Journalism at the O’Connor Center for the Rocky Mountain West at the University of Montana.
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O'Connor Center for the Rocky Mountain West, University of Montana, Missoula, Montana, 59812