What real estate slump? Town on roll with oil on rise
PARACHUTE, Colo. — They cheer when you cry. They buy when you sell. This is a town out of sync with the rest of the country.
The desert here is so dry it’s difficult to maintain a decent lawn. Yet local real estate prices are through the roof while the rest of the nation’s housing market is in a slump.
Is there another town in this country where city employees have been receiving 10 percent raises every six months?
Welcome to Parachute, where up is down and down is up, where unbridled capitalism has made Karl Marx’s dream of full em- ployment a reality, and nobody is asking for help from Venezuelan President Hugo Chavez.
“The real estate slump? It’s not here,” laughs Flo Rinker, a retiree
from Massachusetts, who moved to the Rocky Mountains’ western slope with her husband 14 years ago. “Here, we have money in the bank.”
And she goes on to boast how a modest two-bedroom house she bought five years ago for $125,000 now is worth $270,000, at the very least, and probably will reach $300,000 sometime next year.
All of this, locals say, because there’s oil in them there hills.
Trapper and rancher Mike Callahan, who was among the area’s first settlers in the 1890s, learned it the hard way, according to local lore. Mr. Callahan built a stone cabin with a fireplace. On the first cold night, he made himself comfortable in front of the crackling fire.
He could not believe his eyes when first the stone fireplace and then the rest of the cabin caught fire and burned to the ground.
Thus came a discovery that would affect this region for decades to come, offer ing a promise of tremendous riches and a major shake-up in the world energy market.
“All this beige color you see in the mountains around is shale that has a lot of oil inside it,” explains Judith Hayward, a member of the Parachute Board of Trustees, which is how the local City Council is called. “It won’t burn if you throw a match at it. But if you heat it up in the fire long enough, it will.”
These oil shale deposits stretch from western Colorado into neighboring Utah and Wyoming, creating a mammoth non-liquid oil field that analysts estimate contains as much as 800 million barrels of recoverable crude, or three times more than is known to exist in Saudi Arabia.
If a cost-efficient way is found to extract oil from the rocks, this deposit alone, economists say, can satisfy U.S. energy needs for four decades and ensure what politicians in Washington longingly talk about — the country’s energy independence.
So far, they have not, but out there, in the desolate canyons of Rio Blanco County, Shell Oil is quietly running an experimental plant, testing new cutting-edge technology designed to extract oil from shale.
The method, company officials say, consists of using powerful underground heaters to convert kerogen, an oil precursor contained in shale, into pure marketable oil.
Shell said its plant already had been able to extract 1,700 barrels of high-quality light oil, plus associated gas, and the technology “has shown great promise.” But the project’s commercial viability is highly dependent on the oil market.
The last time an oil company, Exxon, tried to do something similar in the late 1970s, oil prices were pushing toward $38 a barrel. But when in the early 1980s they started plummeting toward $14, Exxon pulled up stakes and went, plunging the local economy into a deep recession.
Now, oil prices have shot up over the $90-a-barrel mark, and folks here hope the price stays high.
“Here it’s like in Houston 100 years ago,” conceded L eslie Robinson, an advertising executive from the neighboring town of Rifle. “We are in business if the prices stay up.”
Oil shale so far is just a promise, a vision that will require years of additional research, the success of which cannot be guaranteed.
For now, the region’s real mother lode is natural gas, which officials say comes from about 3,000 producing wells around the area.
A decade ago, the drilling rigs were not here either. But rising natural gas prices — from $1.55 per thousand cubic feet in May 1995 to $6.98 last May — plus new dr illing technologies, have changed the equation and made local gas fields profitable.
“Gas has transformed our town dramatically,” Mrs. Hayward said. “But oil shale could be even bigger than the gas industry. Seven years ago we did not even know what a traffic jam is, and now look at this.”
The parking lot in front of the local Super 8 Motel was crammed with tractor-trailers.
Once a sleepy bedroom community of 600 retirees and low-income service workers from posh ski resorts like Vail or Aspen, the town now has a population of more than 1,300 and growing fast.
Jack Pretti, a local real estate broker, predicts the combined population of Parachute and nearby Battlement Mesa likely will reach 50,000 in the next 20 to 25 years.
The booming energy sector has affected every facet of local life, sending real estate and other prices skywards, but also creating thousands of new jobs and boosting tax revenue.
In the late 1990s, one could rent a decent place to live for about $400 a month. Now it costs that much just to park an RV at a local trailer site. A modest mobile home now rents for $1,200.
“And we have a waiting list to get here,” smiles Karen Bowers, the trailer park manager.
An area that just 10 years ago had no home worth more than $350,000 now features milliondollar mansions.
“These belong to energy company executives,” Mr. Pretti explains. “And the fact that they’ve built them is a good sign. It’s an indication the companies are here to stay.”
The number of businesses in Parachute’s Chamber of Commerce has increased tenfold to roughly 250, Mrs. Hayward said, and those that existed in the 1990s have ballooned in size.
“See this guy?” she says, gesturing toward Toby’s Vacuum Truck Company. “Seven years ago, he had just two trucks. He now has 80 trucks and at least as many employees. He delivers water to drilling sites.”
Unemployment has become a notion from history books. In fact, while home builders elsewhere lay off their crews, here there is a dire shortage of qualified construction workers.
“I’ve heard of gas companies just snatching workers off private home construction sites,” Mrs. Hayward says. “They stop by and offer each of them something like $50,000 a year. And the next day, the crew is gone.”
Six years ago, Parachute had just three employees and a budget of $800,000. Now it boasts a 22-member city work force and a budget approaching $9 million — the result of a dramatically broader tax base.
“We have been giving them 10 percent raises every six months for the past three years,” Mrs. Hayward said of the city employees. “Otherwise, they won’t be able to keep up with cost-ofliving increases.”