Eastern Utah energy firms look for alternatives
As state legislators wrestle to balance Utah's budget, oil and gas companies operating in eastern Utah and the firms who provide them with services - are also finding ways to keep their businesses afloat as the industry draws down from the inflated growth of the past few years.
"Until the economy stabilizes and starts to turn around, we are going to see a decreased demand for natural gas," said Bill Ryan, owner of Rocky Mountain Consulting. "That's pretty much what the Basin is dependent on is natural gas sales."
What the region has experienced in the past few months, to a certain extent, is what normal oil and gas production activity should feel like, Ryan said. However since energy companies were so busy and shorthanded for so long, people got used to excessive overtime and high salaries in the Basin. Ryan said they didn't plan properly for the inevitable slow down.
"We were running incredibly long hours, and a lot of people make mistakes that you always do during those kinds of situations ... they spend their whole paycheck," he said. "They thought they would be working these long hours and stuff forever."
The slowdown led RNI Trucking and Chapman Construction last week to cut all of its employees' wages by 10 percent. The Roosevelt-based companies, which operate in Utah and Colorado, provide construction, water hauling, and wastewater treatment services to the oil and gas industry.
"We are taking some cost-cutting measures so as to avoid any large layoffs," said RNI Human Resources Manager Russ Cowan. "We're sharing in the pain across the board with everybody in hopes of trying to keep people working."
Cowan said nearly every oil and gas company is "taking steps to reduce operating expenses." "It's going to be, if it's not already, a universal thing," he said. "It's not the same environment we were in a year ago."
Cowan's forecast is accurate. Local and international exploration and production companies are doing what they can to keep workers employed in the Basin.
Richard Wheatley, a spokesman for El Paso Exploration and Production Co., said the company has kept its employees on the job by initiating an infill drilling program - a practice of drilling new wells between established ones to reduce spacing and increase production.
"We have been fortunate because of our cost control measures and we have not had to consider layoffs or salary reductions," Wheatley said.
Halliburton spokeswoman Diana Gabriel said the Houston-based company's strategy also seeks to "minimize personnel reductions."
"If one looks at costs associated with severance, rehiring and then retraining an employee base to handle (an upswing) in the industry, it almost always is more than or at least equal to the cost of carrying that employee base through a downturn in the industry," Gabriel said.
Many in the oil and gas industry are optimistic that drilling activity will resume, although not at the inflated levels seen in the recent past. And there is a consensus that natural gas - the resource driving the Basin's latest boom - is the key to meeting America's energy needs and reducing dependence on foreign oil.
"A lot of the things that you hear in the press about alternative fuels, they have technological problems with them," said Rocky Mountain's Ryan. "The reason we're not using them is that they haven't been able to overcome those technological problems. The most readily available and the proven fuel of choice for the next 20 years or longer to help decrease our dependence on foreign oil is going to be natural gas.
"I still think the Basin is a great place to live," Ryan added. "I think it still has a tremendous amount of opportunity as far as jobs and everything else is concerned. We're just going to go through a rough couple of years here."