Global enough for you? 

How foreign investment is fueling resource extraction in the West

Page 4 of 4

Besides, say many economists, it's good to have China in particular as a big investor and customer, because it takes a bite—however small—out of the gargantuan trade deficit the U.S. has with them. Even Matthews, for all his alarming statistics, seems resigned to it: "If they keep making stuff for us and keep lending us money so we can buy it, I guess it will be OK."



The schizoid West

Yet, even if we put aside xenophobia and leftover Cold War nightmares about the Red Army infiltrating Idaho potato patches, the West still has reason to be concerned about the Asian "invasion." The Asian stimulus package may have lifted up the mining and gas drilling sectors, but it's left the rest of the economy in the dust. And that could throw our regional economy back to its old lopsided ways.

In its fourth-quarter report for last year, Wyoming's economic analysis division noted: "After a short, but severe recession, Wyoming's economy has turned around...thanks to the robust rebound of the energy industries." Attributing the boost to Chinese demand, the report noted that unemployment dropped to 6 percent, compared to 9.6 percent nationwide, and the mining industry in Wyoming added 2,130 jobs. But the picture isn't as rosy as it seems. "You look at wages and employment in Wyoming: Wages are higher, income per capita is higher than average U.S., and employment is higher," says Ed Barbier, a University of Wyoming economist and author of the book Scarcity and Frontiers, a history of the world through a natural resource economics lens. "But it's distorted," he says, because just about every non-extractive sector of the economy—even in the oil and gas boomtowns—remains sluggish, at best. As a result, a deep schism has opened between the state's fossil-fuel-centric economies and everything else. Teton County, for example, home of Jackson and archetype of the high-end amenity economy of the New West, has a 12.8-percent unemployment rate. That's three to four points higher than the national rate, and three to four times higher than the gas and coal counties of Sublette, Converse and Campbell.

click to enlarge Thirty loaded coal trains per day could pass through Missoula if export capacities on the West Coast are fully realized. - PHOTO BY CHAD HARDER
  • Photo by Chad Harder
  • Thirty loaded coal trains per day could pass through Missoula if export capacities on the West Coast are fully realized.

This divergence appears across the region. In Arizona, mines are ramping up again. Freeport-McMoRan, the Phoenix-based company that owns copper mines in Arizona and molybdenum mines in Colorado, posted a $1.5 billion profit during its first quarter of 2011. Meanwhile, the construction industry has lost more than 100,000 jobs in the last five years in Phoenix, where hundreds of thousands of homes sit vacant. Nevada's mines more than doubled their shipments to China over the course of just one year, while housing values have dropped by 60-percent in the last five. North American timber and lumber exports to China increased fivefold between 2008 and 2010, yet the unemployment rate in the Pacific Northwest remains higher than 9 percent. The scrap-metal barons are back, scraping the Navajo Nation of its junked cars and sending them to China. But those fast-food signing bonuses of yore? They're history: Nearly 1 million people showed up in April for 62,000 jobs offered at McDonalds' first-ever national hiring day—no signing bonus offered.



The distant prospect of a Hummer

Out on the western edge of the Powder River Basin, about 60 miles as the magpie flies from Douglas, the little town of Midwest sits mostly forgotten by the rest of the world. Its small houses are crammed together along bumpy streets. Some of the yards have been cared for but others are cluttered with the detritus common in the rural West: an old stove here, a car up on blocks there, a torn-up sofa perched on a weathered plywood porch. On a windy day in April, when the sky is gray and the light flat, the town seems empty, despite all the cars parked haphazardly before the homes. The distinct aroma of burnt oil lingers in the air.

Midwest exists for only one reason: the Salt Creek Oilfield. A Dutch company drilled its first gusher in 1907. Then the place went crazy. The Midwest Refining Company took over the field and ran the company town. Midwest got its own hospital, held one of the first lighted nighttime football games in the U.S.—Casper beat Midwest, 20-0—and had a tennis court, a clubhouse, a theater and a hotel. Back then, money gushed out of the field like water, and the company gave a little bit of it back.

Then, beginning in the 1930s, it shriveled up. Standard Oil, based in Indiana, bought the field and took over its operation. The hospital closed, the theater was torn down, the company offices were moved to Casper. Today, the Salt Creek Field's owner is based in Houston, where decisions are swayed by the need to please shareholders and driven by oil prices determined by forces emanating from far away.

The wealth never really stopped flowing out of the Salt Creek field. With the help of CO2 injections and high oil prices, its wells still produce hundreds of thousands of dollars worth of oil each day. Anadarko, the field's operator, reported $363 million in post-tax profits for the first quarter of this year. But it hasn't added up to what one might consider a prosperous community.

There was a time when the mine and oilfield managers and bosses, if not the owners themselves, lived alongside the workers in the local community. The bosses witnessed the needs of their communities firsthand and they had the power to influence the company to do something about them. If they didn't, the workers and the unions had the clout and access to make some demands and have them met.

In today's world, we're not even sure who the bosses are or where they live. How can we expect a firm that's based in another state, or another country, to build a new library or school, or to pay for economic diversification efforts and new roads? How can we demand that it set up a safety net to catch the roughneck who gets his arm ripped off on the rig, or the single mom who's fallen on hard times, or the entire community when the oilfield finally does dry up?

Not that we even try that hard. We've long surrendered these sorts of demands in return for a few high-paying jobs, for the distant prospect of a Hummer in the gravel yard of the factory-built home and a Walmart close by. We have blindly handed over our sovereignty to the corporate giants in the name of energy independence. We have watched our bounty slide along the rails and the interstates to the East without complaint, comforting ourselves with the illusion that it would make our nation stronger and our nation would return the favor by lifting us up with it. Today, the centers of control are drifting even farther away, and, in our desperation for jobs, we hardly even notice.

A couple days after driving around the Powder River Basin, looking unsuccessfully for Russian uranium smugglers, I sit in the Denver office of Jeremy Nichols, climate and energy program director for WildEarth Guardians, an environmental group that is fighting plans to expand mining in the Powder River Basin of Wyoming. Nichols sees the latest invasion as nothing more than another iteration of the story the region seems doomed to repeat: "This is the constant struggle of the West," he says. "We try to have this independent face, but our future is always tied up with someone far, far away. We're always sending our value somewhere else."

This story originally appeared in High Country News (hcn.org).

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