2013 agenda: Oil regulations, sequestration, health care

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Every New Year brings its own issues, and for Colorado Springs the areas of emphasis for 2013 were not hard to define — even in advance.

Oil and gas drilling, upcoming changes to the health care industry, and the local effects of possible cuts to national defense industry stand out as the year’s starting points for the Pikes Peak region’s business community.

So those will be the three topics discussed at the debut of a new CSBJ-sponsored quarterly series, “Breakfast with the Journal.” The first event, featuring local and state-level authorities as speakers, is scheduled for 7 a.m. Tuesday, Jan. 15, at the Antlers Hilton. (Tickets are $26 for subscribers and $36 for non-subscribers. Make reservations at http://csbj.ticketleap.com/january-breakfast-with-the-journal/.)

The breakfast gatherings are designed to connect experts with the business community — and to provide insight into what local business leaders will face in 2013.

Oil and gas

Neither Colorado Springs nor El Paso County has seen an oil boom — but that could change soon.

Ultra Petroleum is drilling exploratory wells in El Paso County and is set to start on the former Banning Lewis Ranch land. Those properties are on the edge of the oil-rich Niobrara Formation, which stretches from Wyoming into Colorado.

The county passed local regulations early, and the city is expected to pass them in January — following in the footsteps of other local municipalities worried about protecting air and water quality.

But Weld County and Greeley are no strangers to oil and gas development — and the wealth it brings. Noble Energy is investing millions to drill for the minerals, and creating jobs at the same time. Weld County Commission Chairman Sean Conway will be at the breakfast to discuss oil and gas exploration there. Noble paid Weld County school districts $5 million each to convert buses to run on compressed natural gas and opened a new operations facility to explore the Niobrara formation.

“Currently they’re going to have about 300 to 350 jobs in this building, but eventually it could be as high as 500,” Conway said in an interview last year. “I expect it could get to 500 in short order based on the Niobrara play. It is a huge boom in terms of our local economy, especially to the surrounding communities. … But it really benefits the whole county.”

Conway doesn’t believe hydraulic fracturing is unsafe.

“Weld County has more active wells than anywhere else in the United States. Over 18,000 wells,” he said in the interview. “We’ve never had a case of ground-water contamination — never had a single incident.”

Health care changes

No matter what happens with the Patient Protection and Affordable Care Act in 2013, health care agencies will change to meet growing demand with fewer federal dollars. That means many businesses will take another look at benefits.

That’s the message from Mike Scialdone, CEO of Memorial Hospital, who will speak about the changing health care environment and what it means for businesses.

“How do you take care of more people because there’s more insurance coverage with fewer dollars? You focus on health and wellness, on keeping them out of the hospital, and you focus on quality,” Scialdone said.

The change in focus from merely caring for the sick to keeping people healthy will require changes from both hospitals and businesses, he said. Businesses will have to revamp health plans to make sure that they keep up with the changing times.

“Health plans will have to start offering wellness incentives,” Scialdone said. “And that in itself will provide a great business opportunity — a business that provides health prevention and wellness and gives businesses incentives, that’s a new opportunity that’s out there.”

Hospitals also will have to change their business models, he said.

“While we know that there will always be a need for inpatient services, we can’t rely on a revenue model that focuses solely on patient volume,” he said. “We’ll have to become a true health system, not just a hospital.”

Sequestration

In a last-minute holiday deal, Congress passed an agreement preserving tax cuts for all but the wealthiest Americans — and delaying sequestration for two months.

Couples making more than $450,000 and individuals making more than $400,000 will see higher income taxes. And everyone’s paychecks will be 2 percent less as the payroll tax holiday wasn’t extended.

So regional businesses are still bracing for weeks of arguments, secret discussions and uncertainty over sequestration — across-the-board cuts on most government programs now set to begin March 1.

Colorado Springs leaders hope Pentagon cuts will be revised, because the cuts hit defense harder than any other federal program. Of $1 trillion in planned cuts during the next 10 years, half would come from defense at 10 percent on every military program, every military contract, as they come due.

The concept spells trouble for Colorado Springs, with its four military bases and reliance on the defense industry that adds up to 40 percent of the local economy. The city still is recovering from the recession, with an unemployment rate among the highest in the state.

Scott Bryan, owner of Bryan Construction and an integral member of the Pikes Peak Regional Coalition for Strategic Federal Action — a nonprofit group of business and community leaders that hired the region’s first federal lobbyist — will talk about the progress to end sequestration — and what happens if no deal is reached by the new deadline.

With a new Congress already convening, Republicans are focused on spending cuts, saying the government must cut spending to reduce the deficit. But no one is really sure what the extent of cuts will be, making it tough for businesses to plan for a potentially rocky future.

The White House’s Office of Budget Management issued a report saying there was no way to plan for the cuts and tax hikes.

“The sequestration itself was never intended to be implemented,” the report said.

But delaying it could have disastrous consequences for defense contractors, said Dan Stohr, spokesperson for the Aerospace Industries Association. That’s because the full year’s worth of cuts, $53 billion, would now be squeezed into seven months instead of nine.

“Every day government contracts come up for renewal,” Stohr said. “Every day. Thousands of them a year. So that means contractors will cut 10 percent from their bottom line, and then pass that cut along to their suppliers. Suppliers will cut jobs and that means that businesses on Main Street — the businesses that rely on people to have jobs and spend money — will also feel the brunt of the cuts.”