KIRTLAND, N.M. — The fruits of Greg Hill’s labor at the San Juan Mine have been many.
He has helped put his kids through school. There is a Skeeter boat to zip around nearby Navajo Lake on weekends and a timeshare for vacations. His parents have a home on his property. Sundays are reserved for family and steaks on his Traeger grill.
“This mine has blessed me with things I enjoy and my family enjoys,” says Hill, 47, a married father of three who began working underground at the San Juan Mine a decade ago. The coal mine’s only customer is the adjacent San Juan Generating Station.
But Hill’s job and hundreds of other good-paying jobs at the mine and power plant are on death row.
Public Service Company of New Mexico, which operates the plant, plans to shutter it in four years.
It will be yet another blow to Farmington and the remainder of San Juan County, which already is reeling from a downturn in the natural gas industry, partial shutdowns at the San Juan Generating Station and the Four Corners Power Plant, and cutbacks at the coal mines that supply the plants.
“The hits kind of keep on coming,” says Warren Unsicker, CEO of Four Corners Economic Development, a nonprofit group supporting business growth.
San Juan County is used to booms and busts, but this is a different kind of down, a much deeper decline.
The county’s economy is built on the energy industry. One pillar of that foundation is shaky and another is crumbling. The natural gas industry isn’t forecast to bounce back any time soon, and the area’s coal-fired power plants are headed the way of the horse and buggy.
Workers and their families have been pulling up stakes. Tax revenues are down and are going to drop further, challenging local governments to maintain public services.
It’s a marked downturn for a county that has been a key to the state’s overall fiscal health and has had some of New Mexico’s highest average wages.
Hitting the road
San Juan County isn’t the first to face such troubles because of its heavy reliance on one industry. Think Flint., Mich., and automaking. Or Youngstown, Ohio, and steelmaking. Or just about any place in West Virginia and coal mining. Some of those communities have been able to remake their economies; others haven’t.
Unsicker and community leaders are working to attract new business and grow jobs in San Juan County, but no one believes there is a quick fix.
The county, Unsicker says, may never quite look the same.
Hill, who says he earned more than $100,000 last year at the San Juan Mine, doesn’t know what he is going to do when it shuts down. He says he could go back to his previous job as a trucker, but that would mean a 50 percent pay cut and nights on the road.
“It would be a sacrifice of family time, grandkid time,” he says.
Joe Lee, another San Juan Mine worker, says he isn’t going to wait until the mine’s bitter end to look in Colorado or elsewhere for another job in coal or gas.
“I got to beat the other guys to the jobs out there,” says Lee, a married father of five. “I would love to stay here; I don’t think it’s possible.”
The unemployment rate in San Juan County was 4.8 percent in April, but that relatively low rate masks deep problems.
Since October 2008, the labor force in San Juan County has shrunk by more than 5,000 workers, as has the number of people employed. The county population declined by an estimated 6,000 people, to 122,537, between 2012 and 2016, the most recent year for which there is an estimate from the U.S. Census Bureau.
If San Juan County had the same size labor force today that it did in a decade ago, the county’s jobless rate would be in double digits.
The San Juan Basin has one of the largest proved natural gas reserves in the United States, but a decline in gas prices has led to a sharp drop in the number of new wells in recent years. Longtime holders of gas reserves in the area have sold out.
There was just one drilling rig operating in San Juan County last week, and it was mining for oil.
Over the decade that ended in December, the county lost nearly 900, or 15 percent, of its jobs in mining, including gas extraction.
That decline has rippled throughout the economy. The number of jobs are down in construction, manufacturing, retail trade, and professional and technical services.
There have been a couple of bright spots. Farmington is a regional retail center, and jobs were up in food services and drinking establishments. So were jobs in health care, part of a statewide trend due to expansion of Medicaid, the government health care program for low-income people.
But the blow to the energy industry in San Juan County hasn’t been limited to the natural gas sector.
PNM, which operates the San Juan Generating Station, shut down two of the facility’s four generating units in December to comply with federal haze regulations.
In 2014, Arizona Public Service turned off three of the five generating units at the Four Corners Power Plant to comply with air-quality rules, resulting in a reported loss of 150 jobs at the plant and another 210 at the coal mine that supplies it.
Job numbers from 2017 show some improvement in the San Juan County economy. Still, the picture was mixed. More people were working in mining and construction at year’s end, but there were fewer employees in health care.
The 800-pound gorilla bearing down on the county is the closure of the San Juan Generating Station, a behemoth in both physical size and the shadow it casts over the area’s economy.
In 2013, the plant and its coal mine employed about 900 people, with worker pay and benefits totaling about $120 million, according to a study by Highland Economics, a Portland, Ore., consulting firm.
Today, the plant and mine employ about 450 people, and complete closure of the facilities is set for June 2022. The plant has been in operation since 1973, and PNM has said there are more cost-effective ways to produce electricity for its customers.
The average annual pay at the plant last year was $88,000, according to PNM.
The job losses won’t be limited to the generating station and coal mine. Employees at the plant and mine buy things. So do the workers for the contractors that supply goods and services to the facilities. [PNM says it spent more than $40.9 million on plant contractors in 2016.] Indirect job losses from the closure of the San Juan Generating Station are estimated in the hundreds.
The closure of the power plant and job losses also will mean less tax revenue for local and state governments. In 2016, the power plant alone paid $5.1 million in property taxes, according to PNM. The tax money goes to the state, county, town of Kirtland and local schools.
With that kind of trouble looming, the challenge for local governments is to maintain public services while making the investments needed to diversify the county’s economy. How they will do that is unclear.
“That’s the million-dollar question of the day,” says Jeff Kiely, executive director of the Northwest New Mexico Council of Governments.
The future of the Four Corners Power Plant and its coal mine, with a total of about 670 workers, also is uncertain.
Arizona Public Service has a permit to operate the plant until about 2040, but the market forces that led PNM to put San Juan on track for closure could point to an earlier demise for the Four Corners plant as well. PNM, a minority owner of the Four Corners Power Plant, is considering an end to its use of the plant’s electricity in 2031.
A rebound in natural gas prices and a resulting surge in jobs could help offset the loss of the San Juan Generating Station, but the forecast is for prices to remain flat or decline and for production to gradually drop in the state over the next several years, according to Jeff Mitchell, director of the University of New Mexico Bureau of Business and Economic Research.
“There’s little reason for optimism” in San Juan County, says Jim Peach, an economist an New Mexico State University. “Gas has to be booming to make that place go.”
A new economy
San Juan County, like other places in the state, may be suffering from a phenomenon known as the “resource curse,” according to a study by Highland Economics for the Northwest New Mexico Council of Governments.
Numerous studies have found that areas with higher levels of natural resource extraction tend to have lower levels of long-term economic growth, the study says. Possible explanations include lack of investment in public works that can benefit other industries, workforce training and education.
But the study says there are many opportunities to expand and diversify the economy of San Juan County and the rest of northwest New Mexico.
The greatest opportunities are in petrochemical manufacturing due in large part to availability of natural gas and in tourism, the study says. Large-scale agriculture and food processing are also well-suited to the region, although wages in those industries are relatively low and employment is seasonal.
“While reductions in coal mining and power generation in Northwest New Mexico clearly have a negative short-term impact and hardship on many area families and businesses, with the proper planning, in the long-term a reduced reliance on the energy sector may provide an opportunity for the area to enhance long-term economic resiliency through investments in diversification and workforce training and education,” the study says.
Community leaders have formed what is called the Outdoor Recreation Industry Initiative. The major goals are to enhance outdoor recreation experiences and offerings and attract more guides, outfitters and manufacturers of outdoor gear to the area.
In May, Sen. Martin Heinrich, D-N.M., toured part of the Glade Run Recreation Area, a 19,000-acre expanse near Farmington run by the U.S. Bureau of Land Management. Its sandy arroyos and slick rock are popular with mountain bikers and off-road vehicle users.
The area also features the San Juan and Animas rivers.
“There’s no reason Farmington can’t compete with the Durangos and Moabs of the world in terms of outdoor recreation,” Heinrich told the Daily Times newspaper.
Mattie and Mandy Snow are hoping to catch a wave of increased interest in outdoor San Juan County. They recently opened Alien bicycle shop in historic downtown Aztec. The Animas flows through town.
Mandy Snow grew up in Aztec and says it has always had the potential to develop as an outdoor town. “We have the river,” she says. “There are great trails.”
But jobs in the tourism business, on average, pay a lot less than those at the power plants and coal mines.
“If that is the basket you are putting your eggs in, that is tough going,” says Mitchell, of UNM’s Bureau of Business and Economic Research.
Long road ahead
San Juan County faces other significant headwinds as it tries to diversify its economy. Among the challenges: no railroad or interstate.
“That’s a big deal,” says NMSU’s Peach. “They are not going to be a transportation hub. That’s for sure.” Also, he says, “They are not close to major markets for anything.”
Mitchell says the area doesn’t have the skilled human capital needed to drive a growth in professional services. Development of service economies has driven the job growth in Colorado, other neighboring states and elsewhere across the country in recent years.
No one is forecasting any short-term fixes to the economy of San Juan County. Diversification will take time.
“It’s a long and very difficult track,” says Unsicker, of Four Corners Economic Development.
Michael O’Donnell, a senior research scientist at UNM’s Bureau of Business and Economic Research, says San Juan County faces the same challenges as the state as a whole when it comes to diversifying an economy largely dependent on oil and gas.
“I’m not sure how they get there, how the state gets there,” O’Donnell says.