5:29am

Thu October 25, 2012
Business Report

Louisville Still Optimistic Even After Phillips 66 Pulls Out

Oil company Phillips 66 announced last week it has canceled plans for a major facility in Louisville. The project was expected to generate 7,000 jobs and tens of millions of dollars in economic activity.

KUNC’s Erin O’Toole spoke with Boulder County Business Report staff writer Michael Davidson to learn more about the company’s decision.

Erin O’Toole: First of all, what was planned for Louisville?

Michael Davidson: Well, the story starts in 2008, back when Phillips 66 was part of ConocoPhillips, which was one of the largest oil and gas companies in the world. ConocoPhillips spent $55.6 million to buy 432 acres in Louisville, and it planned to build a research center on the land. ConocoPhillips said its scientists would be working on new types of fuels, and the company also planned to move its training center there.

The facility would have been huge, with plans for up to 2.5 million square feet of office and research space. That suggests ConocoPhillips intended to base a lot of employees there, and of course they would have spent money in the area’s shops and restaurants.

O’Toole: That sounds like it would have been a pretty big deal for Louisville and its neighbors.

Davidson: While projections always seem to be on the high side with these things, it still would have been a very big deal. And that’s why when ConocoPhillips announced its plans in 2008, the reaction of state and local leaders was ecstatic. Not only was this going to generate a lot of jobs on its own, it was expected to make the area a hub for energy research, both for clean energy and fossil fuels.

O’Toole: Yes, it all sounded very promising…  so, what happened?

Davidson: Phillips 66 and ConocoPhillips before it haven’t gone into a lot of detail about how it made its decision, but you can make some pretty educated guesses.

The most important thing was the Great Recession. Just like it hurt everyone, it hurt ConocoPhillips and oil companies too. The company’s revenue and stock price dropped, and that led it to re-examine its priorities. During that time it told Louisville, which had already approved preliminary site plans, it was delaying the project.

Then last year ConocoPhillips announced it was going to split into two companies. That led to the creation of Phillips 66, which, in the split, got the Louisville project. When that happened, local leaders began to really worry this wasn’t going to happen.

O’Toole: Why is that?

Davidson: The short answer is Phillips 66 doesn’t really need it, especially because the company is building a new headquarters in Houston. It just makes sense to put all that stuff at the new campus. 

O’Toole: So how are people responding to the news here?

Davidson: Better than I expected actually. Louisville’s elected officials are trying to look on the bright side. They say the impact will not be a major blow to the city. Meanwhile, economic development specialists have pointed out that these jobs would have been nice to have, but they never really were here, so it’s not going to be that big of a hit.

Also in the past year or so, there’s been a subtle shift in attitudes around the project. Up until last year, it seemed like every developer with a new apartment project or hotel project was talking about how it was going to benefit from ConocoPhillips. It was almost a cliché. Then last year, people stopped talking about it, but most of those projects seem to be going forward anyway.

O’Toole: A lot of people have been wondering - Does Phillips 66’s decision have a broader impact on the energy industry or the clean energy industry in Colorado?

Davidson: This project kind of got lumped in with work clean energy companies were doing, whether it fit together or not. If there’s a common thread, though, it’s that four or five years ago those industries looked really promising, and Colorado looked poised to be a leader in what then-Governor Bill Ritter called the "New Energy Economy." Several major companies announced they would build factories or R&D centers in Colorado.

Since then, those companies have faced tough times. Vestas, which makes wind turbines, has had substantial layoffs in its Colorado plants, and solar panel maker Abound Solar went bankrupt. But both those industries really are facing their own issues, I’d say, like competition from Chinese companies, the looming expiration of tax credits for wind energy, or just the cheap price of natural gas.

O’Toole: So Michael, does this mean we should close the book on the New Energy Economy?

Davidson: I would say that’s premature. All major industries see promising companies struggle and fold in their early days. But maybe it is a lesson that many of the things that will shape the clean energy industries can’t be controlled by people in Colorado.

O’Toole: Right. So what happens next in Louisville?

Davidson: Well, Phillips 66 is putting the land on the market, and the city hopes another major corporation buys it and turns it into a corporate campus. I guess then Louisville can go through this all over again… but hopefully with a happier result.

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