Trouble in the Energy Industry


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Working for an energy company based in Colorado and Wyoming, I pay very close attention to all the employment events that happen in the energy industry.

Sadly, we are currently experiencing a serious downturn in the industry.  Just recently, on 3.31.2016, two separate coal mines in Wyoming laid off a total of 465 people.  Peabody Energy cut 235 employees at their flagship North Antelope Rochelle mine, the largest coal mine in the US, and Arch Coal cut 230 employees at their Black Thunder Mine.

The reason behind the layoffs is due to three things.  First, as in most mining operations, when the price of the commodity is high, operations ramp up and production is increased.  This almost always leads to an over supply in the commodity which brings the price of the commodity down.  Right now, there is an over supply of coal in the US.  The nation’s coal fired power plants currently have approx 95 “days of burn” stockpiled which is the highest level since 2010.  The power plants are saving their coal which is reducing demand and bringing down the price.  Second, cheap natural gas is taking away from the demand for coal.  The coal in Wyoming is competitive with natural gas when gas prices are $2.25 per million BTUs.  Right now gas prices are below $2.oo and are expected to remain there through 2016.  And finally, the unseasonably warm winter has made it difficult, dropping weekly shipments from western US mines to below 7 million tons compared to 10 million tons per week last year at the same time.  Year to date, US coal production is down 30 percent compared to last year.  It all has to do with basic supply and demand economics.

These recent announcements along with a series of other layoffs in Wyoming have impacted the local economy and will continue to do so in the foreseeable future.

Colorado has also experienced a series of energy industry layoffs but they will be able to better absorb the impact since the Denver area economy is much more diverse that Wyoming’s.  Wyoming, I fear will continue to suffer.

During the summer of 2015, most of the counties in Wyoming had ridiculously low unemployment rates but now, only a few months later, the rates are significantly higher.  Wyoming is the nation’s smallest population and a sizable percentage of that population is in the energy or energy related industry. There isn’t a lot of economic diversity in the state so when the boom is on, everything is wonderful.  But when the bust is on, things get tough.  Unfortunately, I am seeing the beginnings of another bust.

Despite this dire economic news, I have to give strong kudos to Wyoming Governor, Matt Mead who quickly responded to the layoffs by deploying the Wyoming Business Council, the Wyoming Department of Insurance, the Wyoming Department of Workforce Services, and the Wyoming Community College Commission to help the people in the communities impacted by the layoffs.

These state agencies immediately partnered together and set up temporary community resource centers for the people who were laid off.  They quickly set up centers in Casper, Douglas, and Gillette and were opened from 10-7 on 4/1 through 4/4.  These resource centers were staffed with experts who assisted people with unemployment insurance, job training opportunities, health insurance, and community health services.

In addition, the Department of Workforce Services offices in the same three cities extended their hours to 8-7 on 4/1 through 4/4 where they were available to provide information on unemployment insurance enrollment, job training counseling, job search assistance, and resume preparation.

I love the fact that Governor Mead quickly responded to the situation and did what he could to provide help to all the people who lost their jobs.  I have found that Wyoming has an excellent organization in the Wyoming Workforce Services.  I have worked with these people often and have found them to be very professional and helpful in all of their services.  They are good people who have the best interests of the Wyoming workforce at the top of their priorities.

It’s good to see a state government marshal it’s workforce services so quickly when there is a crisis.  I applaud Governor Mead and all the good folks who work at the agencies for quickly stepping up and trying to help these people out.  I fear many will move out of the state in search of other work but I hope many will be able to find work in Wyoming.  It’s such a small state without the economic diversity of most other states.

We’ll see how this all shakes out and I’ll keep you updated as things continue to develop.

Know your Business Part 9: In-Situ Recovery (ISR) vs. Hydaulic Fracturing (Fracking)

I talk to a lot of people in the course of my job as Director of HR and IR/PR at my company.  I love to explain the method of mining – in-situ recovery (ISR) – that my company does because it is technologically fascinating, environmentally friendly, and economical.  Often when I’m explaining ISR, people wrinkle their noses – and sometimes sneer – at me and say that it sounds just like fracking.  I have to explain to them its not but, as a big supporter of fracking (aka hydraulic fracturing), I consider it important to explain what fracking is when I get this reaction.

I’ve already written about ISR uranium mining here. I have also shared how an excellent guide to economy 7 will be helpful in carrying out fracking the right way. Today, I’m going to explore fracking.

Fracking has actually been around since 1949 and estimates are that over one million wells have been hydraulically fractured since.  The method is used primarily to extract natural gas and shale oil from shale formations that used to be economically impossible to develop.  With the recent technology advances in horizontal drilling, fracking has made these formations economical and as started an oil and gas boom in the United States.

Today, fracking is being used in the Bakken Shale deposit in North Dakota and Montana, the Barnett Shale deposit in Texas, and the Marcellus Shale deposit in the northeast.

Here is how fracking works.  A well is drilled straight down until a “kickoff” point is reached where the drillers start to arc off horizontally to reach the shale layer.  The well is typically about 7,000 to 8,000 ft deep from the surface to the shale layer and is cased with cement to protect the water table which is at about 800 to 1,000 ft deep.   Once the shale layer is reached, the horizontal drilling continues for about 3,000 to 4,000 ft.  Production casing is inserted into the horizontal borehole and then surrounded by cement.  Charges are then detonated inside a perforating gun that blasts small holes into the shale.  At this point, a pressurized mixture of water, sand (proppant), and chemicals are pumped into the well at about 4000 gallons per minute.  This action generates many small fissures in the shale which frees the trapped gas and oil allowing it to flow out of the well and to the surface where it piped to the market.

According to an independent Kinetico review, Its important to note that the water table is no more than 1,000 feet down and the fracking is occurring 7,000 to 8,000 feet down.  I doubt the fissures are reaching the water table 6,000 to 7,000 feet away.  I mention this because those who oppose fracking claim that the method contaminates drinking water by leaching the chemicals and methane into the water table.