Gas drilling feeling the economic pinch

PICEANCE BASIN, Colorado — A good deal of work has disappeared with 40 to 60 percent fewer natural gas drilling rigs working in the Piceance Basin this year compared to last.

Rigs working in the Piceance Basin dropped from a high of 102 in the third quarter of 2008 down to about 38 in February, which has led to a “sharp decline” in oilfield services, according to a presentation last month by Carter Mathies of Arista Midstream Services. He expects the count to fall further.

The Colorado Oil and Gas Conservation Commission counts 54 fewer rigs operating in Colorado between late September and March 2. COGCC staff said at an oil and gas forum Thursday the number of rigs in the basin dropped from a high of 111 in late 2008 to around 70 recently.

Energy companies said the cutbacks are based on the price of natural gas, an oversupply of gas without enough pipeline capacity, and concern over new rules approved by the COGCC. Others question how much of a deterrent the rules really are.

An EnCana spokesman has said the company estimates one rig produces 18 jobs directly and supports over 100 to 200 jobs indirectly, which could be anything from someone driving a water truck to someone getting hired in a restaurant.

The estimate suggests at least some 4,800 jobs related to the Piceance Basin could have been affected. But some say the estimate could be a bit much. A report for the Associated Governments of Northwest Colorado last year estimated that each energy and natural resource job indirectly supports about 2.6 other types of jobs — a far smaller multiplier. That estimate suggests at least 2,600 jobs could have been affected. But that doesn’t necessarily mean that many people have been laid off.

How many jobs lost?

EnCana spokesman Doug Hock said it’s difficult to know how many jobs have been lost as a result of cutbacks in the number of rigs operating. He said it’s probably clear that at least several hundred direct jobs have been lost as a result of fewer rigs operating in the Piceance Basin this year.

“Regardless, it’s a loss of jobs and that’s not a good thing,” he said.

Williams Production RMT spokeswoman Donna Gray said Williams estimates one rig produces the man-hour equivalent of over 100 full time jobs in one year. But she said laying down one rig would not cause that many people to get laid off.

“These are equivalents, and because many individuals work more than a 40-hour week — and a contractor may provide multiple workers to equal a week in man-hours — you can’t imply that more than 100 actual people are laid off when a rig is laid down,” she said.

Williams cut its investment in the Piceance Basin from about $1.7 billion last year to over $500 million this year. But it’s currently building a $350 million natural gas processing plant on Piceance Creek in Rio Blanco County southwest of Meeker. It’s expected to open this summer and employ about 20 people for day-to-day operations.

Garfield County Commissioner John Martin said EnCana’s estimate of the effects of fewer rigs on jobs sounds reasonable. He said in Garfield County alone, there’s probably 10,000 jobs directly or indirectly related to the energy industry and up to 60 percent of them may be going unfilled.

“(Energy companies) have cut back anywhere from 30 to 60 percent. With that the revenues also drop off that much, as well as spin-off for other jobs. It’s devastating to everybody.”

He said county tax revenues could take a hit in 2010 once property value assessments catch up with what’s happening this year, but the county is much better off than other places because it has built up large cash reserves it can tap into.

“We’ll find a way to survive,” he said. “I don’t think that the bust has happened yet. I think that’s down the road a little bit.”

Less work in the basin

Contractors are seeing a lot less work in the Piceance Basin.

Cyclone Drilling contracts manager Patrick Hladky said, “There’s a lot less work. About 60 percent less.”

He said Cyclone employs 23 people per drilling rig. He hasn’t heard of any contractors going out of business or leaving the area entirely. But Cyclone, as well as pretty much everyone he’s heard of, has had to cut back and lay people off.

“You have to make cuts. That’s the unfortunate part of a slow down, is losing people,” he said.

Halliburton and Delta Petroleum made headlines for reportedly laying people off last week.

Ryan Olds, who works on a finishing crew for Halliburton, said he used to work at least 100 hours a week, and he now can get only around 40 hours of work a week. He has to sit at home for two or three days at a time hoping something will come through. Many people are getting less hours, he said, but “there’s quite a few companies where they’ve laid everyone off and that was it, because there’s no more rigs to work on.”

He said he has “dozens” of friends in various companies who’ve been laid off completely. On Thursday, he felt lucky to have a job and was hoping to be able to ride out the slow down.

Fewer workers in town?

Parachute Town Councilor Judith Hayward said she’s heard Parachute’s two hotels actually have some rooms open now, rather than having them all booked all the time to energy industry workers. She said the town has seen a slight decline in sales tax revenues so far, but the figures lag two months behind.

“The town is getting prepared to maybe not be as grandiose as we thought it would be,” she said.

Hayward feels the slow down is probably OK because it will provide a time for the town to “take a deep breath and start planning” since there wasn’t time for that with the rapid boom in energy activity over the past several years.

Carrie Belstra, general manager of the La Quinta Inn and Suites in Rifle, said a lot of people are worried about the slow down in natural gas activity, but, “I’ve got to tell you, I’m not seeing it too bad. I’m still in the 90 percent occupancy.”

Still, things are a bit slower. Last year the hotel was fully booked virtually all the time and it took a conscious effort to hold back rooms for walk-in guests.

Contact Pete Fowler: 384-9121

pfowler@postindependent.com