Shrug it Off: The Push for Recovery from Economic Shock in Gillette
(Dr. Erik Pages, Entreworks Consulting president, speaks during the Strengthening Wyoming Economies forum Monday)
Across the board, the coal industry remains but a shadow of its former self, thus highlighting the need for economic diversification here in Gillette now more than ever before.
At one time, the national coal industry boasted a workforce of nearly 100,000 employees. A decade ago, coal shipments reached record-setting levels over 1 billion short tons. Seven years ago, coal prices averaged around $54 per short ton.
During the height of the coal industry, coal-dependent communities prospered. Until 2016 when the coal industry took a turn for the worse.
The average price of coal slumped to just over $30 per short ton. Coal shipments dropped significantly, barely clearing 600 million short tons. And the Bureau of Labor Statistics reported coal industry employment levels were cut nearly in half.
The decline was attributed to political, geological, and economic barriers such an increasing abundance of cheaper and cleaner natural gas, according to a report published in 2016 at the Yale School of Forestry & Environmental Studies.
Effects of the decline impacted coal-dependent communities across the nation, including Gillette.
In March 2016, Arch Coal and Peabody Energy announced layoffs for over 400 workers from two of the largest coal mines in the country—North Antelope Rochelle and Black Thunder.
The layoffs triggered a chain reaction. In 2017, unemployment levels in Gillette jumped to nearly seven percent, almost double what they had been before the decline, according to an article published by the Sierra Club.
The population took a hit as well, with many Gillette residents putting the city in their rear view mirrors to seek employment elsewhere.
In short, Gillette experienced what is known as an economic shock, according to Dr. Erik Pages, president of Entreworks Consulting, who spoke Monday during the Strengthening Wyoming Economies forum.
When a community experiences an economic shock, they typically move in three directions.
An estimated 47 percent of these communities move to become “shrugger-offers,” which means they experience an economic shock and are able to resume functionality within one year and 36 percent are able to recover from the shock within three years, Pages said.
But there are 17 percent of these communities that fail to diversify or change their ways. These economies become stagnant and ultimately fail.
Essentially, Gillette needs to become a “shrugger-offer,” but the way to become one is not as simple as it sounds.
Pages said there is little to be done in the short-term to help an economy recover without undertaking a massive project like building a dam to create a plethora of jobs.
In the mid-term, local governments should turn their attention to helping their community’s businesses recover as best they can.
But the most crucial period following economic shock is to look to the long-term, said Pages.
Some of the most successful communities he has seen have been supported mainly by numerous, small, local businesses. But how to gain more small businesses?
It all begins with finding talent.
In the long-term, communities can focus on developing, attracting, and retaining people with the right kind of talent, whether it be engineering, woodworking, art, mathematics, or anything else.
Once talent is identified, the next step is to teach talent-holders to act on it by becoming entrepreneurial.
Oftentimes, people with talent are reluctant to use their forte in the workforce, which could be because they have never been taught how, said Pages.
“Teach them how to be entrepreneurs, and the rest will follow,” said Pages.
He says the key is to instill self-confidence in talented individuals at a young age and to try recruiting from the ranks of students.
Once they are recruited, talent should be provided space to grow and mature, much like the newly opened Gillette College Center for Innovation and Fabrication, perhaps better known as Area 59.
Most importantly, when it comes to economic diversification, local governments need to remain transparent and open with their residents.
The coal industry has recovered slightly since 2016. Employment numbers hover around 52,000 these days and the average price of coal has risen to just over $45 per short ton.
It would be relatively easy for Gillette to turn away from progress and resume dependency on the coal industry. However, it is important to note that while employment numbers are rising slightly, and the price for coal is beginning to climb, coal shipments continue to decline, according to the U.S. Energy and Information Administration.
The path forward is not to use an “either/or” approach, Pages said, but to embrace a both/and proposition.
Essentially, Gillette should not abandon coal, but should look for ways to support it while at the same time diversifying its economy.
Already, steps are being taken to move coal into new, innovative industry with the Advanced Carbon Products Innovation Center (ACPIC) which continues to step closer to reality every day thanks to Energy Capital Economic Development (ECED).
When all is said and done, the ACPIC will be a place where lab research on refining coal into products can be taken from the lab and proven to be commercially viable, according to an ECED press release.
“Times are changing, and there are opportunities to take existing research and commercialize it for new and profitable products,” Phil Christopherson, CEO of ECED, said in a statement.