April 2016, Vol. 243, No. 4
Web Exclusive
Adjusting to Life – and Leaner Wallets – after Gas Boom
TOWANDA, Pa. (AP) — Jami Patel spends long hours behind the front desk of a nearly empty motel, desperate for someone, anyone, to check in. Hardly anyone ever does, not since the once-booming natural gas industry pulled up stakes amid a prolonged, severe slump in energy prices.
“I don’t know how much longer I can hold on,” lamented Patel, 43. “If it continues like this, the business is going to be dead.”
That’s the last outcome Patel would have envisioned after she and her husband spent more than $1 million on renovations a few years back. Times were good then; the 50-room Rodeway Inn was routinely filled with some of the legions of gas workers who helped turn Pennsylvania from a bit energy player into the nation’s No. 2 natural gas-producing state, after Texas.
But with the number of rigs drilling for oil and gas falling to all-time lows across the nation last week, Patel and other residents and business owners in Pennsylvania’s vast Marcellus Shale gas field are adjusting to life after the boom — while hoping for the eventual return of an industry that pumped billions of dollars into the economy.
When they were here, the drillers made a lot of people feel flush. Landowners with mineral rights commanded signing bonuses of thousands of dollars per acre. Landlords hiked rents. Restaurants were packed. Even the craft store had to add staff as the gas industry’s impact rippled throughout Towanda, a northeastern Pennsylvania town in the heart of the gas region.
The drilling frenzy came with its share of headaches, too. Drillers contaminated some residential water wells with methane, traffic was horrendous and some locals complained that most of the rig jobs went to out-of-state workers.
But there’s no dispute that shale gas was good for business.
“It got really crazy around here for quite a while, quite a few years. A good crazy,” said Angie Maynard-Cott, 61.
The self-described “cleaning lady” once got so many calls from drilling workers that she had to take her phone off the hook. The rig guys would give her $100 to clean a “little bitty trailer,” she said, and another $75 to do their laundry.
Those big-spending workers are mostly gone now, and it’s back to the way it was before.
“I could go shopping for clothes any time I wanted to, and now, all the sudden, I’m thinking ‘Eh, I better not go to Peebles today. I better be careful,'” Maynard-Cott said. “Because I’m just not having the hundred-dollar bills handed to me like they were, you know? It’s just my regular customers that I’ve had over the years.”
Towanda’s story is playing out everywhere the drillers are leaving or have left, places like Gillette, Wyoming, and Oklahoma City, where there have been massive job layoffs at energy company headquarters and the downturn has blown a billion-dollar hole in the state budget, leading to funding cuts to schools, prisons and other services. In Pennsylvania, state and local revenues from an “impact fee” assessed on drillers are projected to fall 17 percent.
While gas production remains high from thousands of already drilled wells, the industry has dramatically scaled back. Only 16 rigs are actively exploring in Pennsylvania, down from a high of 115 in 2011 and the fewest since December 2007, according to oilfield services company Baker Hughes.
Energy firms and the businesses that directly cater to them are laying off thousands of workers in Pennsylvania, with 1 in 5 jobs disappearing in a single year. Unemployment is rising in nearly all of Pennsylvania’s top drilling counties while generally falling in the rest of the state.
“I don’t think anybody saw it coming, to this deep of a decline that quickly,” said David Spigelmyer, president of the Marcellus Shale Coalition, a trade group.
Cratering commodity prices are the culprit. Gas extracted from the Marcellus Shale — the nation’s largest natural-gas field — is selling at a deep discount, the result of oversupply and inadequate pipeline capacity to take the gas to far-flung energy markets. The low prices are good for consumers and businesses and manufacturers that use gas, but they’re costing energy companies billions. Some have stopped drilling altogether.
The fallout is readily apparent in Towanda. For-rent and for-sale signs are plentiful along Main Street. The shoe store isn’t selling as many safety boots or flame-resistant shirts. About 20 miles north, near the New York state line, a “man camp” that once bustled with nearly 200 gas-field workers at Chesapeake Energy Corp. now sits mostly empty.
Jan Millard, a clerk at New Shoe Store Plus, got an inkling of what was to come when a rig worker told her, “We’ll be here one day, and then we’ll pick up like gypsies and we’ll be gone.”
“It was the truth. It was a sad thing,” recalled Millard, 55. “Hopefully it’ll come back.”
Spigelmyer predicted drilling will ramp up again as prices recover, but on a smaller scale.
In the meantime, local businesses that took advantage of the moneymaking opportunity presented by shale gas are now refocusing.
Bill Kelly and his father found success with a company that sells supplies and rents equipment to drillers. But with sales down 50 percent or more, they’ve expanded into party rentals to make up the lost revenue — from ball valves to bounce houses.
“Everybody’s kind of in the same boat,” said Kelly, 42. “We believe it’s coming back, but when?”
That’s the question facing Patel, who’s hoping to work with her bankers to keep her struggling motel afloat.
She calls it a depressing state of affairs but doesn’t blame the gas companies, saying they’re at the mercy of the market.
“What are they going to do? It’s not only us, or not only them — everybody is suffering from it.”
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