Diversifying an oil and gas economy in Carlsbad

CARLSBAD, N.M. (AP) - In 2015, T. Boone Pickens predicted the price of crude oil would rocket to $70 per barrel by the end of the year.

It was a message of hope, delivered at the annual Energy Summit in Carlsbad, for the southeastern New Mexico community that was feeling the pinch of a worldwide oil glut and a downslope market.

More than two years later the price of crude hovers around $50 per barrel, never having reached Pickens’ predicted high.

When the price of crude oil took a downturn in 2014, the city - just establishing a name for itself in the oil and gas industry - was left holding the bag.

Now touted as an area of growing economic growth thanks to the boost in popularity of the Permian Basin - an area where some of the world’s largest producers of crude oil and natural gas have established extraction operations - Carlsbad is working to build a diversified economy.

Entrepreneurs in the community are turning to business models that will keep them high in boom times but not stumble in busts.

Reaching back to its roots, city officials and leaders of Eddy County are noting the importance of the tourism and hospitality industry, and marketing themselves to retirees across the country.

BREWING SUCCESS

In 2015, the City of Carlsbad, New Mexico adjusted its Code of Ordinances to include “microbrewery” in its definition of a bar.

That simple change to the ordinance helped establish zoning requirements for the first craft microbrewery to open in the city

Milton’s Brewing, a brewery and taproom located in what used to be an auto garage, has found success in the year since it opened its doors and served its first pint.

And while approval from a municipality is among the final steps in the licensing process required by the state of New Mexico by those intending to sell alcohol to consumers, the city’s zoning office was the first stop for Milton’s owner Lucas Middleton.

“We went and talked to the city even before we started filing and asked, ’What do you guys think of this?’” Middleton said. “They had to change the zoning, the permitting. We were the first brewery here and they (City of Carlsbad) just didn’t have anything on the books for this.”

Middleton said the opportunity to own a business in his hometown and his passion for crafting beer made the months of paperwork leading to Milton’s opening worth the effort.

But a large part of the decision was based on the obvious opening in the business atmosphere of the southeast New Mexico city known for its oil and gas economy.

“It was my passion. I wanted to do a brewery and so it was like: I live in Carlsbad, there isn’t a brewery there. It was perfect,” Middleton said.

TOURISM AND ENTERNTAINMENT

More than 800,000 visitors pass through Carlsbad, generating more than $20 million in revenue.

But those who fill the barstools and tables at Milton’s aren’t who you’d imagine.

Unlike breweries in college towns, Middleton said young business professionals and retirees are their most loyal customers.

Tourist traffic is a smaller portion of sales, Lucas said, but visitors to the area still manage to find their way to the taproom located off the beaten path.

“I know we get a lot of out-of-towners, because that’s the new thing, is breweries,” Lucas said. “They were probably still coming to town, they were probably still going to restaurants, but this gave them something else to do.”

Things to do might become more prolific as Carlsbad once again courts its tourism and travel industries. In a city surrounded by two national parks, two state parks and home to the Pecos River - a recreational wonder for outdoor sportsman and water enthusiasts - the potential is endless.

Chris Woodland, director the Carlsbad Small Business Development Center, said most the clients he councils are seeking to open service-related businesses.

“There’s been bakeries, and food trucks, and clothing boutiques,” Woodland said. “In addition to retail . that have come in, I’ve also had more people come interested in industries which includes electricians, welders and different people like that.”

These are entrepreneurs who have spotted a niche, to Woodland’s surprise, which is dramatically underserved.

“Because the money is so good in the oilfield its drawn away from those types of services, just every day services,” Woodland said. “Think about getting your car fixed. You can’t because they’re just overrun with oilfield jobs.”

In the past year, the Small Business Center, has counseled 69 clients, most of which are Caucasian males.

Only a handful of women, and a handful of minorities, have sought advice from the center.

“What is successful for your 70-year-old retired couple who always wanted to have a bakery and worked for 50-60 years and they’ve saved up money and now they’re going to open up a baker yon a corner. They break even they’re happy, that’s successful for them. On the other hand, an oil field guy wants to start up a trucking company he’s not happy unless he’s making $5 million a year,” Woodland said.

“Success is defined by the business owner and the industry in which they choose to enter.”

A COMPETITIVE CULTURE

Most nights, those who are enjoying a brew at Milton’s can be entertained as well. From comedians to musicians, the taproom serves as a venue for local and not-so-local artists and performers.

Jameson Lucas, Milton’s taproom manager, said they tried to not promise too much when they announced their plans to open a brewery.

The Carlsbad community, starved for late-night venues and fresh entertainment fare, welcomed to the brewery.

“When we were open the first six months, every person was like I was glad you did this,” Middleton said.

A year into their business, the taproom faces a challenge in the form of a competitor.

In August, the Carlsbad City Council unanimously approved a liquor license for Guadalupe Mountain Brewery.

The new brewery will inhabit a 6,000-square foot building formerly a Chinese buffet restaurant in south Carlsbad along busy U.S. Highway 62/180.

“They’re going to be on the same size system we started on, which is a five-barrel system so they’re brewing about 130 gallons of beer at a time,” Lucas said.

Instead of fearing the competition, Middleton and Lucas said they hope collaboration will help both businesses survive.

Both men hoped to have another year to establish Milton’s as the community’s preferred hang-out spot, but both Lucas and Middleton said the additional brewery and taproom is a good sign for the city.

“The community definitely needs a lot of these different spaces with different vibes and different atmospheres to cater to different demographics and different people,” Lucas said.

Milton’s however, is growing, keeping a step ahead of the competition.

After a year in business Milton’s is expanding the footprint of the current location, leasing a former warehouse next door.

With limited hours and space, per state and city regulations, expansion is a necessary component of success. That includes putting their product in local restaurants, also an option they hope to pursue in the new year.

It also means identifying other communities in southern New Mexico that can support their particular take on what a small business is and how it fits into a community.

In 2018, Milton’s will have a sister taproom: Milton’s on Main will open in Roswell, a two-hour drive north of Carlsbad.

It remains a mystery to both men why Roswell, one of the largest southern New Mexico communities, had such a dry spell when it came to recruiting microbreweries to its business community.

The City of Roswell said they were searching for business owners interested in opening a brewery in the city, but businesses in operation in Albuquerque, where taprooms and breweries have become a mainstay of small business, passed up the opportunity to make Roswell home.

The presence of three microbreweries in nearby Artesia, a significantly smaller municipality of 12,000 people, might have influenced business owner’s decision.

In Artesia, a craft beer enthusiast can find plenty to satisfy the palette. Cottonwood Wine and Brewing, Wellhead Restaurant and Brewpub, and the newly announced Deep Well Brewing offer a variety of craft and specialty brews, in addition to food and entertainment.

“When I think about competition in the craft beer community I don’t think of it as competition,” said Travis Carlo.

Carlo, the 26-year-old native Artesian and owner of Deep Well, said the city’s atmosphere called for a place where residents could enjoy craft beer and live entertainment. And the continuing prosperity of the oil and gas industry made the endeavor that much more attractive.

“The bigger picture of it all is putting southeast New Mexico on the map for craft beer and New Mexico is becoming a state that is producing great quality craft beer,” Carlo said.

When he’s not working to get Deep Well opened - the taproom will be housed in downtown Artesia near a burgeoning theater and small shopping area - Carlo is helping brew craft beer at Dry Lands Brewing Company in Lovington.

Hobbs, New Mexico, a community of 38,000 has no taproom or brewery, but nearby Lovington, a community of only 11,000 people, is home to Drylands.

Carlo said the growing number of taproom and brewery proprietors often consider themselves more of a family than competitors in an industry. He’s hoping this camaraderie will help reinvent the economies of the small towns that dot the rural southeast of the state.

“When people think about opening a business they think about a business that is oil and gas related, because this is southeast New Mexico, and that’s what we’re all about.”

A HARD SELL

For a while it seemed the enthusiasm for craft beers that overtook Albuquerque would bypass the rural communities of southeast New Mexico, if not for the passion and enthusiasm of the small business owners who said they’ve found success by believing in the potential of their communities.

That potential is a hard sell to most other industries, however.

On paper, Carlsbad’s true potential fails to come through, said John Waters, director of the Carlsbad Department of Development.

Potential investors fail to find the city attractive, because of several factors, Waters said. But the most influential is the number of potential customers the city holds.

With the latest U.S. Census Bureau numbers a pale representation of the true population found in the area, Waters said those looking to invest will often bypass the region.

A 2016 population estimate from the bureau makes Carlsbad home to only 29,000 people.

Waters said that it was obvious something was wrong with the population data from the Census Bureau; all it took was driving on Eddy County roads and Carlsbad Streets to bring the point home.

A water usage study by the City of Carlsbad is a truer representation of Carlsbad’s population. Waters believes. That study estimates Carlsbad’s population at just over 77,000 people.

“We keep track of the gallons per capita per day of water that is being used in the entire area which includes - we call it our service area - Carlsbad and about 25 minutes outside of Carlsbad. That whole area, we know that the population of the area, without question, is at minimum 62,000 people today using the water records.”

A leakage study conducted by the CDOD revealed that these consumers are eager to spend money on goods and services, when those goods and services are readily available.

“We know that people have money, and they’re spending it, but they weren’t spending it in Carlsbad,” said Jeff Campbell, director of marketing and business development at the CDOD.

Highlighting the need for businesses - such as microbreweries - that improve the quality of life in the region, the CDOD has been recruiting retail and service companies to the area.

Unemployment rates have remained low in Eddy County, where the CDOD is embracing industries such as manufacturing and aeronautics.

“If you’re talking about commercial retail and restaurants and so forth keeping the option open and getting more into the market helps our economy grow because people are not leaving town, they’re keeping the money here and then plus it’s a good quality of life thing because people come here and tourists come here. They see all the different things that we have, and it makes them feel like wow we can get things here..” Campbell said.

“The ones that innovate the best . the best of those rise to the top,” Waters said.

Even failure, whether from competition or other factors, can have a positive impact on a community, releasing trained employees into the workforce and forcing business innovation.

An oversaturated market will balance itself out, Campbell said; undersaturation does the same thing, providing an economy where two microbreweries can find equal success.

The CDOD said they haven’t shied away from trying to compete with neighboring Texas for industries that will stabilize and diversify the economy in Eddy County.

“That’s our big key difference between our neighbors and Carlsbad. Carlsbad has always since long before Jeff and I got on board, recognized the virtue of diversifying,” Waters said.

With a history of feeling the impact of boom and bust times following commodity driven industries - agriculture, oil and gas and potash - the region has learned the hard way that hard times can strike at any moment.

For now, Milton’s is relying on the loyalty of customers and the potential they see in the community of Carlsbad to support both themselves and their competitors.

“They’ll stay, they’ll drink, they’ll come back. That’s what breweries have been doing over the last ten years is trying to change (culture),” Middleton said.

Waters said competition does breed success.

___

Information from: Carlsbad Current-Argus, http://www.currentargus.com/