Is Colorado a Regenerative Economy?

Legacy industries often claim they’re essential for the prosperity of the economy in which they are located. Therefore, they say, they must be sustained, regardless the cost to people or the planet. Colorado is no exception. The state’s oil and gas industry asserts that it is vital to local prosperity.¹

It’s not true.

The industry spent more than $40 million dollars opposing a citizen’s initiative that would have limited hydraulic fracturing (fracking) near homes and schools. The measure, Proposition 112, would have ensured that regulators took human health and safety more seriously than industry profits.

Despite receiving more votes than the Republican candidate for Governor in 2018, the measure was narrowly defeated because, said the industry, oil and gas extraction is the job creation engine for the state.² Without it, the claims went, Colorado’s economy would collapse.

At Natural Capitalism Solutions (NCS),³ we asked: is this true? What is the real basis of the Colorado economy? Are industries like oil and gas and industrial agriculture as critical to our wellbeing as their proponents claim? Or could the state transition away from industries that are dangerous and polluting⁴ to business practices that are more regenerative?

Jock Gilchrist, an NCS Research Fellow,⁵ synthesized information from over 120 sources and summarized key trends, employment numbers, contributions to state GDP, and other metrics. The result is a groundbreaking report, A Snapshot of the Colorado Economy.⁶

NCS’ research painted a very different picture of Colorado’s economy than that offered by the fossil fuel industry. Far from being a resource colony, Colorado enjoys an economy that is diverse and growing. The true foundation of the state’s economy are industries like education and outdoor recreation. These receive less acclaim but make far bigger contributions to the Colorado’s strong economic performance (in 2018 the fifth fastest growing state in the nation.) In contrast, the state’s legacy industries oil and gas, mining, timber and industrial agriculture represent a small and falling part of the state’s economy. They are not sustainable, much less regenerative and are at risk of further erosion. Oil and gas and industrial agriculture are dwarfed by clean technology, craft brewing, even arts and culture.⁷ Here are the numbers:

The labor force of the fossil fuel industry shrank over the last few years, posting negative employment growth in Metro Denver between 2015 and 2017.^{8, 9} Statewide, the industry shrank by 8.4% between 2012 and 2017.⁹ While the fossil fuel industry is important in two counties in the state (Weld and Garfield), it contributes relatively little to the Metro Denver area (which comprises 90 percent of the Colorado economy) or the state’s overall economy.

The IT-software industry cluster employs 58,190 in nine-country Metro Denver.⁹ Arts and culture directly employs 100,631 statewide.¹⁰ While estimates vary for total fossil fuel jobs statewide, a report commissioned by the Colorado Oil and Gas Association itself put direct employment at 30,000.¹¹ Additionally, trouble lies ahead for oil and gas in Colorado. The US fracking industry has never had a profitable quarter, and survives only on fresh infusions of investor money. One report says, “investors would be wise to view fracking companies as speculative investments.”¹²

The real economic powerhouse in Colorado is the Outdoor Recreation Industry. It directly creates four times as many jobs as oil, gas, and mining combined (229,000 to 58,000),¹³ and supports 511,000 total jobs in Colorado, or 18.7% of the state’s labor force. Outdoor Recreation was responsible for over 10% of Colorado’s GDP in 2017.¹⁴

Compare this to the 89,000 total jobs supported by oil and gas (3% of the labor force), and its 4% contribution to GDP. ¹⁵ Outdoor Recreation thus supports almost six times as many Colorado jobs and contributes over two and a half times as much revenue to state GDP. Any industry hires employees and contributes to local economies, thereby inflating its economic impact, but in the oil and gas industry, spending could dry up the moment investors reconsider.

Even the emerging industry of craft brewing is almost as dominant a force as extraction in Colorado. The Beverage Production industry in Metro Denver, which includes things like craft brewing, spirits, and tea, grew 28.1% between 2011 and 2016, the highest job growth of any Colorado sector in that time period. By the end of 2017 it had grown to employ 9,790 individuals in Metro Denver,¹⁶ as opposed to the 9,370 employed by the combined Mining, Mining Support, and Oil and Gas Extraction sectors. Statewide, craft brewing alone directly employs 22,411.¹⁷

Similarly, industrial agriculture is a declining part of Colorado’s economy. Colorado’s agriculture sector faces persistently low crop prices, falling net farm income and challenges from the federal tariff war to climate change.¹⁸

Between 1997 and 2015, Colorado’s organic farmland grew from 3,716 acres to over 151,000 acres—a total of a 4000% increase, and an over 220% average increase every year.¹⁹ This growth reflects an increasing demand from Coloradans, Americans, and others around the globe for food grown chemical-free and with farming methods that are friendlier to surrounding ecosystems and wildlife.

Beyond providing increased jobs and revenue, the growth in organic land in Colorado is also good news for the economy in another way. According to research by the Organic Trade Association,²⁰ a high level of organic agriculture activity boosts a county’s median household income by over $2,000 and decreases the poverty rate by 1.35%.

Conclusion

Few Colorado residents are aware that a transition is underway or that it provides an opportunity to shift from dirty, dangerous industries to businesses that have a stake in the wellbeing of local residents. The NCS report shows that the legacy industries are fading, dying of an incurable attack of market forces, while industries that are more regenerative of human and natural capital are rising. This begs the question whether similar results might be found in other economies that have settled for a role as a resource colony, but which might already be in a transition to a more attractive economy.

We suspect that this is true almost everywhere.

Change is hard. Margaret Mead observed that the only person who likes change is a wet baby. And most babies fuss through the process. Similarly, legacy industries claim that they are responsible for the prosperity of their society and must be sustained. Colorado is no different.

The report showcases the opportunity to facilitate an economic, social, and ecological shift away from industries that are drive climate change and endanger our citizens to business practices that are cleaner, promote healthier lifestyles and can give Colorado a finer future. Colorado can deliver shared prosperity for all while protecting the environment for generations to come.

References

1. Vital for Colorado, https://www.vitalforcolorado.com/videos_and_podcasts
2. Prop 112 fails as voters say no to larger setbacks for oil and gas, Denver Post, 6 November 2018, https://www.denverpost.com/2018/11/06/colorado-proposition-112-results/Natural Capitalism Solutions, https://natcapsolutions.org/
3. Physicians for Social Responsibility, “Compendium of Scientific, Medical, and Media Findings Demonstrating Risks and Harms of Fracking (Unconventional Gas and Oil Extraction)” Sixth Edition, June 2019, https://www.psr.org/wp-content/uploads/2019/06/compendium-6.pdf
4. Natural Capitalism Solutions Team, https://natcapsolutions.org/team/
5. Gilchrist, Jock, and Hunter Lovins, A Snapshot of the Colorado Economy, 2019 https://natcapsolutions.org/wp-content/uploads/2019/09/FINAL_A-Snapshot-of-the-Colorado-Economy_8.13.19.pdf https://natcapsolutions.org/beverage-production-metro-denver/
6. “Metro Denver and Northern Colorado Key Industry Clusters 2017,” Metro Denver Economic Development Corporation, 2018,
7. http://www.metrodenver.org/media/230157/2017-industry-cluster-study-full-report-.pdf
8. “Metro Denver Region Industry Clusters 2018,” Metro Denver Economic Development Corporation, 2018, http://www.metrodenver.org/media/855845/metro-denver-edc-full-report-36.pdf
9. NEA. (2018, March). State-Level Estimates of the Arts’ Economic Value and Employment (2001-2015). Retrieved from National Endowment for the Arts: https://www.arts.gov/artisticfields/research-analysis/arts-data-profiles/arts-data-profile-17
10. COGA. (2019). Colorado Oil & Gas Industry Economic and Fiscal Contributions. University of Colorado, Denver, Business School, Global Energy Management Program. Denver, CO: Colorado Oil & Gas Association. Retrieved from https://www.coga.org/uploads/1/2/2/4/122414962/coga_economic_fiscal_impacts_- _final.pdf
11. Clark Williams-Derry, Sightline Director of Energy Finance; Kathy Hipple, IEEFA Financial Analyst and Tom Sanzillo, IEEFA Director of Finance, “Red Flags on U.S. Fracking, IEEFA and Sightline, October 2018 http://ieefa.org/wp-content/uploads/2018/10/Red-Flags-on-U.S.-Fracking_October-2018.pdf
12. The Outdoor Recreation Economy, Outdoor Industry Association, 2017, https://outdoorindustry.org/wp-content/uploads/2017/04/OIA_RecEconomy_FINAL_Single.pdf
13. The 2017 Economic Contributions of Outdoor Recreation in Colorado, Southwick Associates, 23 July 2018, https://cpw.state.co.us/Documents/Trails/SCORP/2017EconomicContributions_SCORP.pdf
14. “Colorado Oil & Gas Industry Economic and Fiscal Contributions,” Global Energy Management Program University of Colorado Denver, Business School, 2017, https://www.coga.org/uploads/1/2/2/4/122414962/coga_economic_fiscal_impacts_-_final.pdf
15. “Metro-Denver Region Industry Cluster,” Metro-Denver Economic Developments Corporation, 2018, http://www.metrodenver.org/media/855845/metro-denver-edc-full-report-36.pdf
16. Brewers Association. (2018). Total Economic Impact. Brewers Association, Boulder, CO. Retrieved from https://s3-us-west-2.amazonaws.com/brewersassoc/wp-content/uploads/2018/08/State-byState-Breakdown-2017.pdf
17. Economic & Revenue Forecast,” Colorado Legislative Council Staff, p. 57 – 59,
18. June 2019 https://leg.colorado.gov/sites/default/files/images/juneforecast.pdf
19. Fox, S. (2017, January 29). More conventional farmers in Weld County are adding organic crops to the mix because demand is hot. The Tribune. Retrieved from https://www.greeleytribune.com/news/more-conventional-farmers-in-weld-county-are-addingorganic-crops-to-the-mix-because-demand-is-hot/
20. “Harvesting Opportunity: The Power of Regional

    Food System Investments to Transform Communities,” The Federal Reserve Bank of St Louis, 2017, https://www.stlouisfed.org/~/media/files/pdfs/community-development/harvesting-opportunity/harvesting_opportunity.pdf?la=en