Workers cope with slow side of drilling field
By Timothy Puko
Published: Saturday, June 15, 2013, 9:00 p.m.
Ally Guyach is a type of worker that was virtually nonexistent three years ago in the oil and gas sector.
What type? Unemployed.
Guyach, 24, of Mt. Washington was a title worker until May, when her employer shut down a project researching gas and mineral rights ownership in Ohio. Since then, she's been applying for jobs, sending resumes to 15 companies a day, but with no success, she said.
“I thought it would be OK, and I'd find a job in a week. I wasn't stressed out about it before, but I'm starting to be now,” she said. “You kept hearing before how easy it was ... but it's not that way anymore.”
Data state officials released two weeks ago suggest that she's right. Oil and gas companies and contractors that once scrambled to keep up with a gas boom have turned instead to targeted spending and strategic discipline. A downturn in gas prices ended unfettered growth in favor of moderation, even in the Pittsburgh region, which has been much better off than the rest of the state.
Extraction industries — which include mining, logging and oil and gas — shed about 800 jobs heading into April, according to the state's quarterly Marcellus shale jobs update. Including the companies that help drill wells and do other support work, the sector totaled 36,400 jobs. That's down about 2 percent from the prior month and nearly 4 percent from the same time a year ago.
It was the second sputter in a year, after nearly nine years of steady and sometimes rapid growth to record highs, according to federal labor data tracked by the state Department of Labor and Industry and Moody's Analytics. The industry is still near an all-time high for employment in Pennsylvania, but it has mimicked gas prices, dipping once as prices dropped by half last spring, and then going back up and down once again in the year since.
“It's not that employment is shrinking, it's just not ramping up at the same rate that it was before,” said James T. Martini, an economist who tracks the data at the department's Center for Workforce Information & Analysis.
Region has safety net
That kind of moderation is a common trend as oil and gas fields mature, said Jim Ladlee, associate director of the Penn State Marcellus Center for Outreach & Research. In a boom-and-bust industry, there's a rush to get in on the bounty when commodity prices are high. The rush leads to a surplus and a price crash, then the strongest companies dig in for the long haul, he said.
Most of the cutbacks have happened in central and eastern Pennsylvania, where several field offices have closed, Ladlee said. Marcellus shale gas is dryer east of Pittsburgh, meaning those wells don't produce valuable hydrocarbons such as ethane, propane and butane along with their pure methane natural gas. So as natural gas prices dropped, drilling slowed faster there than in the Pittsburgh area.
The 10-county Pittsburgh region has nearly half the oil and gas rigs working statewide, up from less than a third two years ago, according to Baker Hughes Inc., a Texas-based drilling services company. Of the 95 rigs working in Pennsylvania last May, only 54 remain.
“If you're not drilling, you're not creating any jobs,” Ladlee said.
Pittsburgh is a bit insulated from all that, though, not only because of its more valuable gas, but because drillers have their regional headquarters here, he added. Ten rigs might have left Greater Pittsburgh in the past year, but the region sits at the top of the food chain, with corporate offices leading work all over Appalachia. Consol Energy, EQT, Range Resources, Chevron, Shell and several others have national or regional headquarters here, a corporate cluster that buffers the region from losses in the field, Ladlee said.
Insulated doesn't mean impervious, though. Notably, Exco Resources LLC sent 35 local workers back to its Dallas headquarters and laid off 35 this year. While it had office space in Marshall, its drilling land was in dry-gas regions of the state, forcing the cutbacks, the company had said.
“If they're not producing efficiently because of where their acreage is, if they're not in a profitable sweet spot ... we've seen companies reduce their operations out here,” said Allison Fountain, who's heading up the new Pittsburgh office for Swift Worldwide Resources, which recruits workers for oil and gas companies. “That's what's going to hit the bottom line.”
‘Still near an all-time high'
Federal and industry agencies have paid millions to develop educational programs for all levels of students who may enter the oil and gas industry. Long-term, there will be a need for that education, and even now, many fields including some science, legal and transport sectors still need as many qualified workers as they can find, experts said.
“It's true that natural resources and mining employment has declined since peaking in February 2012 ... but it is important to put that small decline in context. Natural resources and mining employment in Pennsylvania is still near an all-time high,” said Chris Lafakis, a senior economist at Moody's Analytics in Chester County. “Half the jobs that have been created in the entire state of Pennsylvania since 2000 have been in the energy industry. Remarkable.”
Well workers and land agents seem to have been among the most vulnerable to the cuts so far. Several workers like Guyach reported cutbacks and consolidation among land agencies, especially for title workers. The state does not show those types of legal workers in its data.
The numbers show that new hires for well drilling and support companies dropped statewide from 1,670 in early 2012 to 925 early this year. With rigs leaving for oil fields in other states and local work shifting to build pipelines instead of drilling more wells, those service companies that drill the wells and do other work at well sites have taken the biggest hit of the core shale gas workforce, state officials said.
The slowdown was stark from mid-October, said officials at McKees Rocks Industrial Enterprises, a hub for service companies that need to store and ship drilling sand across the state. It set an annual record for work in slightly more than nine months last year. Then, from mid-October until this spring, work slowed nearly to a halt. The company avoided layoffs because it staffs for the low levels, something you have to prepare for in a cyclical industry, said company President Jim Lind.
“I'd say we were at the brink,” said Brian Lind, company vice president. “We held off for a couple of months, as long as we could, hoping for the best. And fortunately, the best came.”
Turnaround in the works?
Several experts said there are signs of a turnaround.
Spot gas prices are hovering around $4 a unit, up from a dip to $3.20 in late February. Jobs data can lag behind current conditions — the most recent data available is from April — and some are reporting an uptick in business.
McKees Rocks Industrial Enterprises just set a monthly record for sand shipments in May, Jim Lind said. One company hired more than a dozen people to do title research on the outskirts of Western Pennsylvania, said Keslar, a veteran landman based out of Westmoreland County.
Prices would have to stay steadily above $4 for there to be any rush to hire again, Keslar and other experts have said.
Ally Guyach is hoping that occurs soon.
Because she was hired as an independent contractor — a common requirement in her field — she can't collect unemployment. Some of her coworkers were from the South, and they could take job offers for oil and gas projects there, but her fiancé and family are here, she said.
“Texas wasn't much of an option for me,” she said. The local gas boom has “been my saving grace because I didn't finish college and I didn't get a degree. I felt really blessed to be able to find a job like that. I don't want to make minimum wage again or have to start from the bottom.”
Timothy Puko is a staff writer for Trib Total Media. He can be reached at 412-320-7991 or firstname.lastname@example.org.
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