2/25/02

KUFM / KGPR

T. M. Power

Using Energy Development to Boost Incomes

Per capita income in Montana is among the lowest in the nation. This is usually blamed on the loss of the high-paid jobs that were associated with the natural resource industries that once dominated the Montana economy. The implicit message of this claim is that if we could restore some of those high-paid natural resource jobs, we could boost average incomes in the state. Governor Martz has been one advocate of this “solution.” Energy developers, who are among the Governor’s closest advisor and supporters, also push this path to Montana’s future prosperity. More coal development, oil and gas development in Montana’s wildlands, and widespread coal bed methane development are offered as ways to move down this particular path to higher average incomes in Montana.

Since Montana has already been through fairly dramatic energy developments in Eastern Montana over the last quarter century, it is worth looking at whether this particular way of boosting average incomes actually works.

Rosebud County provides a good case study. It would be hard to find a Montana county that saw more intense natural resource development in recent decades. Strip mines were developed to provide coal for export. The four Colstrip coal-fired electric generators were built primarily to provide electricity for export over high-voltage electric transmission lines that also had to be built. At the same time significant oil development took place, too.

In the decade between 1969 and 1979, nine hundred jobs in mineral development, construction, transportation, and public utilities were created in Rosebud County. These jobs alone represented a 35 percent increase in employment. In today’s dollars they were very well paid jobs, averaging $40,000 per year. Given that per capita income in Rosebud County was ten percent below the state average, which, in turn, was below the national average, these jobs, of course, were welcomed as a way of gaining economic ground and moving towards national income levels. But despite this tremendous boost to local employment and payroll, per capita incomes in Rosebud County actually fell relative to the state level, from 90 percent to 83 percent of the state level.

Over the 30-year period 1969 to 1999, the gain in high-paid energy-related jobs was even greater. Over 1,200 jobs in coal mining, running of electric generators, operating coal trains, etc. were added. Those jobs represented almost a 50 percent increase in employment levels in Rosebud County compared to 1969. Those jobs in 1999 paid a whopping $60,000 plus per year. One could hardly imagine a bigger boost to the local economy. But in 1999 per capita income in Rosebud County was 15 percent below the state average and 34 percent below the national average.

Rather than all of this energy development and all of these high paid jobs transporting Rosebud County to economic paradise, at the end of this 30-year period, the center of energy development in Montana had slid downward relative to the nation faster than the slide experienced by state as a whole. Clearly something in this popular economic prescription for boosting incomes does not work reliably.

For some groups in Rosebud County, things were even worse than these depressing economic statistics suggest. The creation of high-paid natural resource jobs is often offered as a solution to the poverty that is found in many rural areas. Most of the Northern Cheyenne Reservation is located in Rosebud County. The Northern Cheyenne have always been skeptical of what regional energy development had to offer them and others. They fought to make sure the best pollution control devices were installed on the Colstrip power plants and to block give-away sales of coal on their reservation to international coal companies. All the time, they were assured that rapid energy development offered tribal members a way to escape the low incomes and high unemployment rates that typify most Reservations.

As that energy development boomed around them between 1970 and 1990, the Northern Cheyenne Reservation saw real median family income decline, poverty rates rise, unemployment rates increase, and the percentage of the working age population employed decline. Per capita income also declined relative to Rosebud County as a whole. Whatever the benefits of massive energy development were the Northern Cheyenne did not participate in them.

These economic facts are not offered as proof that well planned natural resource development cannot benefit workers, families, and communities. Rather, the point is that the economic gauges that we regularly use to judge how well we are doing, per capita income and average pay per job evaluated relative to the rest of the nation, are not very reliable gauges of economic well-being. Just as real per capita income fell in relative terms amidst a boom in high paid jobs in Rosebud County, per capita income actually rose relative to the state as a whole in the Butte-Anaconda area as copper mining and smelting was being shut down in the late 70s and early 80s. The very numbers we are told we should build and evaluate public economic policy around regularly mislead us about local economic conditions. That suggests that we should stop taking a bumper-sticker approach to Montana economic development and look a little deeper. We might be surprised at what we see.