Before World War II, it was aviation. Planes heading from one coast to another needed a stopover, and Cheyenne was on the safest route across the Continental Divide. Boeing and American Airlines had offices there, and the first of the well-mannered, manicured and uniformed airline stewardesses were trained in Wyoming’s state capital.
Then the war came, bringing with it new technologies and better planes. The stopover in Cheyenne was left behind like an old railroad hub miles from a new interstate highway.
In the ‘70s, some said Wyoming could be home to the next big manufacturer of Barbie dolls. From alfalfa to cattle, tourism to plastic princesses, the desire to diversify has a long history in Wyoming, but the winning market has long been energy.
For all the effort — or at least, stated effort — to diversify Wyoming’s economy over the years, some say it just can’t be done.
Can it be done?
Colorado School of Mines professor Graham Davis said that if the Cowboy State was going to become a hub for non-extractive industries, that already would have happened.
“I can tell you there have been many, many regions and nations that have tried to diversify away from natural resources through planning exercises,” Davis said. “None have succeeded.”
He said Colorado, a state that moved from mining oil, coal and precious metals to boasting a variety of major industries including high-tech, did not take concerted steps to diversify its economy.
“It’s just market forces,” Davis said.
Denver, San Francisco and many other metropolitan centers in the United States were creations of gold rushes or other mining booms — essentially random events that can lead to a thriving region.
Wyoming’s borders were effectively drawn in the 1860s as an act of corporate welfare meant to subsidize the railroad.
Union Pacific was building the transcontinental railroad through southern Wyoming due to its relatively flat grade and easy access to coal deposits. But the region was part of the Dakota Territory at the time, with a Legislature based hundreds of miles away in Yankton, adjacent to Iowa.
“We set up a government here because the Union Pacific railroad needed a government that was closer than Yankton,” said University of Wyoming economics professor Anne Alexander.
“This was the first place that they made a state for a corporation,” Alexander said.
Even then, businessmen in Wyoming were facing the same problem that the state faces today: how to draw people and businesses to the state and how to sell what Wyoming had, said Gov. Matt Mead.
Unlike Colorado and other states that were created around clear economic hubs, Wyoming had to find its own way toward financial viability.
The coal deposits were seen primarily as fuel for the railroads and would not find a major national market until the 1980s. Oil grew in importance as automobiles became popular in the early 20th century. Agriculture and tourism, meanwhile, had always been around.
The main sources of lucrative, blue-collar jobs in Wyoming have long been natural resources. No other industry has come close.
“Market forces say productive activities go where it’s most profitable to do so,” Davis said.
And, Davis added, those forces have not brought much to Wyoming other than extractive industries — and it is unlikely the government can do anything about that.
Mead differs on that point.
“It’s always a combination of ‘We have wonderful assets — how do we maximize those?’” he said. “We can no longer sit and wait and hope for the world market to give us that place. We have to grab what we have and make our own better days.”
More, better energy
In the current bust, the call to diversify has a hint of panic. The challenge is one of awareness in some cases.
“How do we make the world know that we are open for business?” Mead said.
Wyoming could again look to fossil fuels as a way to grow the economy, but with an eye to the future, he said.
Though oil, gas and coal face enormous pressure because of worldwide concern about carbon dioxide and methane emissions, those sources are still valuable.
Wyoming’s School of Energy Resources at UW was created to look at some of these new possibilities.
Mead and the state Legislature invested millions in a cost-share with the industry for the Wyoming Integrated Testing Center, which broke ground last year. Using the Dry Fork Station coal-fired power plant as a guinea pig, the center will host competitions and research into carbon capture technology, or how to grab carbon dioxide emissions from burning coal.
Others see carbon capture as a small part of what research can do for Wyoming’s existing energy sources — research that could move oil, gas and coal away from the turbulent supply and demand of the electricity and fuel markets, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.
“If we really want to see value in our coal resource, Dry Fork is a step,” Godby said. “But I think a lot of people are coming around to the opinion that really we should be thinking about coal as an alternative hydrocarbon source.”
Coal can be used in carbon fiber structure — considered the future of construction materials as fewer builders use steel.
Much of industry supports this idea of added value.
“Gas is such a cool molecule, it shouldn’t be wasted on electrical power,” said Cary Brus, senior vice president for Nerd Gas. “You can do so much stuff with gas … You can use it for all kinds of other raw materials, plastics, all these things that we take for granted every day.”
Better use of commodities is the way of the future, Godby said. However, though that’s more accessible than a booming tech industry in Cody or Casper, it still doesn’t solve Wyoming’s economic diversification dilemma.
Wyoming can’t just supply coal and gas to other states where they are refined and used. Those refineries, those industries and that new workforce need to be located here, he said.
Some smaller firms offer a model for how businesses outside the energy industry could thrive in Wyoming. McGinley Orthopaedic Innovations, a medical device manufacturer in Glenrock, has hired roughly two dozen workers. Their ranks include machinists, welders and others who once made their living in the energy sector.
But the scale of those efforts, which provide stable employment, still pale in comparison to the economic engine that is Wyoming’s extractive industry. And in that sense, Wyoming remains where it started, a geographically remote market with a small workforce that is dependent on energy production, Godby said.
A universal challenge
Alaska, another state where jobs and tax revenue depend primarily on energy, has likewise struggled to diversify.
Clive Thomas, a longtime economist of the state who now teaches at Washington State University, said Wyoming and Alaska have much in common and will both likely continue to flounder in efforts to attract other high-paying industries.
“Alaskan politicians, especially those who have never taken a politics class, think that somehow if they have the right policies — and get rid of this government or that government — that Alaska can diversify its economy,” Thomas said. “It can never do that.”
Thomas addressed the attempts to draw technology startups to the state, an effort that has also been pushed by business development groups in Cheyenne.
“Who’s going to move from San Francisco to Anchorage, which is a pit hole?” Thomas said. “Who would want to do that?”
Like Davis, the Colorado School of Mines professor, Thomas said that it was unlikely that government alone would be able to convince businesses that special opportunities existed in their states.
“Investors would have found them,” Thomas said.
He said that states across the Mountain West had been unsuccessfully seeking to develop economies to compete with places like California and New York for decades.
“If there was a way to do it, people would have figured it out,” he said.
Thomas and Davis both take a more skeptical approach toward the need for economic diversification, saying that Wyoming’s population is free to move in and out of the state depending on conditions in the energy industry.
It might hurt Wyoming if a worker relocates from Casper to Denver or, say, Philadelphia for a higher-paying job, but Davis noted that from an economic perspective, that would be seen as a positive move for the country.
“It’s good if someone can find a good-paying job on the East Coast; they should go for it,” Davis said. “We don’t see that as misery.”
Wyoming, however, does.
Even economists who believe in the need for diversification emphasize the importance of figuring out the end goal of changing the economy.
“You have to be reasonably clear on why you want economic diversification, because that, to some degree, answers the question,” said Center for Global Development fellow Alan Gelb, who works with overseas countries looking to move away from dependence on natural resources.
Some countries are worried about job creation; others are concerned that too much of their budgets are tied up in commodities with wildly fluctuating prices.
He said that Botswana, a diamond-exporting country near the southern tip of Africa, has many similarities to Wyoming: It has a small population spread across a large territory, it’s home to relatively few people with advanced college degrees, its semi-arid climate makes agriculture difficult and it is forced to compete against neighboring countries with better infrastructure and more established economies.
Despite the government’s best efforts, diamond mining continues to dominate the economy in Botswana.
“In a case like that, there is a real question as to what else the economy can do,” Gelb said.
His answer — and the one adopted by some countries that have realized they will never be able to offer a variety of good-paying jobs — is to invest in human capital.
“Make sure your people can earn their livings anywhere in the world,” Gelb said.
Wyoming already invests heavily in its education system and it is easy for a University of Wyoming graduate to move elsewhere in the United States for work.
The state’s challenge is keeping young people in the state after school. About 60 percent move elsewhere, Mead said.
Alexander, the University of Wyoming economist, said the state also needs a more stable economy if it hopes to keep the social contract that governments enter into with citizens.
“The government is supposed to not just dictate our lives but provide us with services,” she said. “People like the cops to come when they’re called. They like the fire department to come. They probably want a reasonable transportation system.”
That all costs money. And even if residents can settle in and leave Wyoming depending on the number of energy jobs, it costs roughly the same amount of money to provide a police force for a city of 50,000 people as it does for 40,000 people. The roads between Cheyenne and Casper need to be maintained at basically the same level even if 25 percent of Wyoming’s population leaves during an energy downturn.
“These are all things that are really difficult to provide if you don’t have predictable revenue flow,” Alexander said.
Alexander said that not only is steady revenue necessary to provide stability during periods of industry downturns, but a diverse economy is also needed to ensure Wyoming’s economy can grow outside of the wild booms that tax the state’s infrastructure and social services.
That’s important because if Wyoming hopes to retain its young people, it needs to offer them compelling careers, something that is only possible if it branches beyond extractive industries.
Gov. Mead said that many Wyomingites see it differently. Rather that a state without a solid economic base that struggles to retain its young population, they see one of rich natural resources, wide vistas and a high quality of life. People from Wyoming, and people who migrate to Wyoming, do so because of the quality of life.
“We could just sit back — fine — and the only people who will remain here will be the people who really want to be here,” Alexander said.
But if Wyoming simply accepts that its population will fluctuate with the whims of the energy industry, Alexander said the holdouts who remain in the state will be required to either bear a higher tax burden or make due with government services far below what their peers receive elsewhere in the United States.
“There’s only so long you can ask people to do that,” she said.
“The best and the brightest and most talented who might have grown up in your backyard in Hanna or Worland or Meeteetse (will) have no incentive to stay here and that puts you in a death spiral.”
Alexander did not dispute that Wyoming’s small population, lack of a large metropolitan center and relative isolation made it difficult to diversify the economy. But she said that doing so was still possible.
“We have to look really carefully at what we have,” Alexander said. She cited Wyoming’s small-scale manufacturing and agriculture products industry as source of skilled labor.
Alexander also praised Gov. Matt Mead’s proposed ENDOW program, which would offer job training and other incentives to create a more skilled workforce.
The governor has asked the Legislature to fund $2.5 million for the initiative. More than half will go to community colleges.
If lawmakers were to refuse the funding, the 20-year project would go on, but be severely crippled, said Jerimiah Rieman, the governor’s director of economic diversification strategy and initiatives.
“There are challenges, big ones, massive ones,” Alexander acknowledged. “But you eat the elephant one bit at a time.”