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While low oil prices are good news for most Americans, the trend has raised concern in oil-rich boom towns in North Dakota that have seen exponential growth in recent years.
So far, North Dakota hasn’t experienced the mass oil industry layoffs seen in other areas of the U.S. and the world. But companies involved in oil and drilling are tightening their belts and preparing for the worst.
Many companies are cutting expenses, reducing overtime and looking for ways to be more efficient, said North Dakota Petroleum Council President Ron Ness.
“Most of the companies are trying to use this opportunity to retain their best crews and provide additional training and those things as long as they can,” Ness said. “They want to do what they can to retain their employees because we’ve worked hard to attract them all and we want to keep them here.”
The number of drilling rigs operating in North Dakota has declined by 50 in recent months, from 186 in mid-December 2014 to 136 in mid-February 2015. With each rig estimated to support about 150 jobs, the rig reduction could’ve affected up to 7,500 jobs. About 80,000 people work in the oil industry in the state, Ness said.
While some predict the number of rigs will drop to as low as 50 this summer, the North Dakota Department of Mineral Resources projects a low of 120 rigs, department spokeswoman Alison Ritter said.
Without an increase in oil prices, Ness said he expects more jobs will be lost, particularly those with the oil service contractors that are heavily involved in the drilling stage.
“I don’t think there’s any question we’re going to continue to see rigs being laid down because of the economics,” he said.
Of the 53,041 job cuts by U.S.-based companies announced in January 2015, 21,322 were directly attributed to the sharp decline in oil prices, according to a report by Challenger, Gray & Christmas. Falling oil prices also contributed to one-third of the 4,859 job cuts in January among manufacturers of industrial goods sold to oil drillers, the report said.
As of December, North Dakota’s jobless rate was 2.8 percent, still the lowest of any state in the U.S. Job openings were up 16.7 percent in January compared to January 2013.
“There was and still is competition for qualified workers,” said Michael Ziesch, labor market information manager for Job Service North Dakota.
In the North Dakota oil industry, “there have been a substantial number of staff reductions, but you also have other areas where people can find work,” Ness said. “We’ve been 25,000 workers short in North Dakota for a number of years, so there’s going to be opportunities in some other areas for people.”
In 2014, North Dakota maintained its position as top-ranked state for worker reports of job creation, according to Gallup.
On Monday, three carloads of job seekers from California, Florida and New York arrived at the Job Service North Dakota office in Williston, N.D. They were invited out by friends in North Dakota who told them jobs were available, said Cindy Sanford, customer service office manager at the job service facility.
Three oil service companies held job fairs this week, seeking to hire more than 100 workers including heavy equipment operators, drivers, pipefitters and project engineers.
“It’s not like there aren’t any jobs,” Sanford said. “It’s just a choice. Three years ago, you could pretty much jump to another job for another $1 per hour. We’re not seeing that any longer.”
The oil industry slowdown is a reprieve for many local employers whose workers were constantly leaving for higher-paying oil jobs.
“This is like letting the air out of an overinflated balloon,” said Dan Bjerknes, director of HR and support services at Mercy Medical Center.
Turnover on the medical center’s staff dropped from 40 percent in 2012 to 14 percent in the last half of 2014. (The medical center’s 2015 fiscal year started July 2014.)
“Now, our stability is seen as a good thing,” Bjerknes said. “Our wage scale is now attractive again.”
In the past three years, the Williams County government payroll has grown from 182 to 263 full-time employees.
“I think that our main HR challenge is to grow our HR policies and systems and practices to meet this larger number of staff, to address turnover and housing issues that we never had time to do before,” said Helen Askim, the county’s HR director. “That’s hard to do when you’re just trying to tackle the day-to-day work.”
But the HR department still has a turnover problem. Last year, one-third of the 90 employees who left county employment moved back to their home states, where the local economy is improving.
The housing shortage in North Dakota is still a major obstacle to attracting and retaining workers. Both the county and the medical center provide apartments to some employees.
Shawn Wenko, economic development director for the city of Williston, said the current “market correction” in the oil industry isn’t surprising. “We were on a trajectory that wasn’t sustainable,” he said. “It’s time to play a little bit of catch-up.”
The city is five years behind on infrastructure improvements, he said. It’s asking the state for $80 million this year to help. It’s also launched an initiative to help the oil and gas companies be more cost-efficient by using regional manufacturers instead of paying to transport supplies from out-of-state, he said. Meanwhile, several new restaurants are opening up in town.
“Regardless of oil prices, there’s still 60,000 to 70,000 wells that need to be drilled,” Wenko said. If you don’t drill them this year, you’re going to drill some the following year … or the year after that. The industry wasn’t kidding when it said this was a long-term play. I think people are seeing that.”
What HR Can Do
In the fast-changing oil and gas industry, HR professionals should balance short-term cost-cutting measures with long-term goals of retaining qualified workers who will be needed when economic conditions change, advised a Mercer report released Feb. 2, 2015.
The report suggests seven steps to help:
Dori Meinert is a senior writer for HR Magazine.
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