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oil and gas pumpjack operates in the Niobrara formation in Wyoming
A pumpjack operates in the Niobrara formation in Wyoming.

Report: Wyoming hit hard by oil and gas slowdown

CHEYENNE — Wyoming’s energy extraction sector took a beating in the third quarter of 2015, thanks to the continued drop in global oil and natural gas prices.

That’s among the conclusions drawn in a report released recently by the state’s Economic Analysis Division.

Principal economist Wenlin Liu said that, compared to the third quarter of 2014, mining sector jobs — which include oil and natural gas extraction — had fallen precipitously, shedding more than 4,000 employees year-over-year.

“This is the second consecutive quarter with an overall year-over-year job decline for the state,” Liu said Thursday.

“We saw a little bit of that back in 2012 — late 2012 and early 2013. Employment was a little bit down then, but otherwise you’d have to go back to the recession (to find similar drops).”

In fact, the mining sector shed nearly 15 percent of its workforce from the third quarter of 2014 to the third quarter of 2015. Aside from construction and miscellaneous services, mining was the only sector to post a net job loss, and it easily dwarfed the losses in any other sector.

Construction, Liu said, was down only modestly year-over-year, dropping by 0.9 percent, or about 240 jobs. Miscellaneous services was down by 1.4 percent, or about 140 jobs.

All other job sectors posted gains over the previous year, albeit modest ones. Leisure and hospitality saw the biggest gains, growing 3.4 percent, or 1,370 jobs. Education/health services rose by 600 jobs, or 2.3 percent, while professional and business services added 400 new jobs, growing by 2.1 percent.

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Overall, Liu said the state’s unemployment rate remains in good shape, despite a net loss of 860 jobs from the third quarter of 2014. The state’s unemployment rate stood at 4 percent, below the national average of 5.2 percent.

That said, Liu noted that while the loss of energy sector jobs may be made up in other sectors, those sectors are unlikely to match the high wages of energy sector employees. That could mean a drop in sales tax revenues if the oil and gas bust continues, since less disposable income means less spending.

Additionally, Liu said the energy sector itself is often a major contributor to taxable sales, since new oil or gas operations usually translate to the purchase of specialized equipment or trucks for transportation. There, he said, the energy sector slowdown has already made its presence felt, with year-over-year taxable sales dropping in all but four of Wyoming’s 23 counties.

“Overall sales tax receipts declined 18 percent statewide, and the main drag was directly from reduced activities in drilling,” Liu said. “That’s one thing, the oil companies, they don’t pay sales tax based on production, but they do pay on lots of supplies and equipment, and even some services.”

While there were 40 active oil rigs across the state in the third quarter of 2014, Liu said that number dropped to 10 by the third quarter of 2015. Actual oil production remains robust, he said, but with prices so low, there is little incentive for oil and gas companies to drill for more.

That said, the decline in taxable sales varied by county, depending on the local reliance on energy extraction. In Laramie County, the decline was modest — 13 percent. Converse County, meanwhile, saw taxable sales fall nearly 51 percent over the same period.

Teton County was one of the few to actually see an increase in taxable sales, thanks in part to huge tourist turnout at Yellowstone and Grand Teton national parks. In fact, Liu said tourism has been one of the past year’s biggest bright spots for the state; after all, when gas is cheap, tourists are more likely to travel.

But while employment overall may appear stable, Liu said there’s still plenty of cause for concern if the oil and gas sector remains sluggish.

“The industry is pretty quick about turning around, it’s just that nobody knows how long this downturn will last,” Liu said. “Our unemployment rate may be around 4 percent, but on the revenue side, things are just as bad as during the recession. Almost three-fourths of state government revenue is from the mineral extraction industry, from mineral severance tax, sales tax, property tax, and as far as state and local governments go, (the downturn has) a huge impact.”

While Cheyenne and Laramie County aren’t as reliant on oil and gas as many other counties, Cheyenne Mayor Rick Kaysen agreed that the downturn in that sector has had an impact on the city’s coffers. Kaysen said sales tax receipts from July through November totaled $7.2 million, about $800,000 less than the city anticipated.

To offset that shortfall, Kaysen said expenditures have also been kept below what the city originally budgeted for. So far this fiscal year, he said, the city has spent $20.8 million, compared to an initial forecast of $22.5 million through Nov. 30.

Kaysen said the city has accomplished that by freezing vacant staff positions and deferring equipment and capital purchases unless they can be thoroughly justified.

“If it’s tied to health, safety or welfare, an absolute need, then that would be taken into consideration,” Kaysen said. “But for replacement of employees, again, justification must be made with the replacement (and we have to consider) is there another way to get the job responsibilities done by a reorganization or reassignment of responsibilities?”

The city also has scaled back its staff training to only those employees who require it to maintain certain professional certifications inherent to their jobs.

Going forward, Kaysen said it’s difficult to tell when the energy sector may bounce back from its current doldrums. But even if the slump is prolonged, Kaysen expects the city to be able to continue maintaining its current level of service.

What’s most likely to be affected instead, Kaysen said, are future construction or other capital projects. Already, he said, the governor’s budget is calling for direct revenue distribution to cities and towns to be halved from the $180 million they received in the previous biennium. But most of that is coming from funds used for construction projects.

“For Laramie County, Albin, Burns, Pine Bluffs and Cheyenne, that means we won’t see a lot of new construction projects,” Kaysen said.

“But if the $90 million can hold, that will help maintain where we’ve been for the last couple of years. We’ll be able to stay where we stand today.”

Kaysen added that the loss of capital construction funds won’t necessarily mean no more capital projects at all. Rather, he said, those projects would have to be proposed for the sixth-penny ballot, and voters would have to voluntarily agree to fund them.

This article was written by James Chilton from Wyoming Tribune-Eagle, Cheyenne and was legally licensed through the NewsCred publisher network.