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Decline in gas drilling softens boom for Western Pa. businesses

John Bruno dresses the industry that revitalized his Waynesburg business district.

Mickey’s Men’s Store, which Bruno’s father opened in 1967 on High Street, sells the Carhartt attire, Carolina work boots and flame-retardant clothing that serve as standard wardrobe for the shale gas workers who changed the face of Greene and Washington counties during the past decade.

Those workers have kept Bruno in business as other local clothiers closed. But there are fewer of them today, and the last menswear store in a downtown that once housed five of them is feeling the pinch of a drilling slowdown that began nearly a year ago as natural gas prices started tumbling.

“It’s definitely starting to hurt our business,” Bruno said, noting sales are off by a third from a year ago. “There are still companies we do business with; they’re just not bringing as many folks in.”

Many businesses that support the shale industry or cater to its workers are starting to see the impacts of fewer rigs in the field, less spending by producers and layoffs by gas companies and contractors. Average occupancy rates have dropped at local hotels to below 70 percent from last year’s high of more than 80 percent in Washington County, according to data from tracker STR Inc. Companies that contract with drillers have absorbed cuts in payments reaching 20 percent.

“We’re seeing the same customers, just fewer of them,” said Paul Battista, founder and business manager of SunnySide Supply in Slovan, which sells equipment and gear to shale companies and workers. Sales are down about 35 percent from last year.

“Monday mornings, we used to be as busy as could be with new hires. We haven’t seen that in a year,” he said.

Fewer ‘Boots’

Statewide employment in the larger logging and mining industry that includes shale gas fell 7.7 percent from a year ago to 35,000 in October. Layoffs at Marcellus shale gas companies and related firms this year ranged from 10 employees at Reserved Environmental Services to several hundred at Consol Energy and Chevron to several thousand at contractors Schlumberger, Halliburton and Baker Hughes. Last week, Shell said it was closing its Appalachian regional office in Franklin Park.

A 40 percent decrease in the number of wells drilled this year compared to last means fewer out-of-town contractors — referred to by some business leaders as “Boots” — are booking hotel rooms or dining out.

“Some are suffering that lost business,” said Sean Sullivan, vice president and general manager at The Meadows Racetrack & Casino in North Strabane, noting fewer Texas and Oklahoma license plates in the parking lots of new hotels that added 1,000 rooms to Racetrack Road over the past few years.

Locals have fewer dollars to spend, too, especially if they became accustomed to larger royalty checks when prices that have dipped below a dollar per thousand cubic feet of gas were above $3.

Anthony Long started to see a dip in sales of all-terrain vehicles at Xtreme of Washington County in Donegal a year ago. Until then, the salesman said, “It was good, very, very good.

“A lot of it was gas well money, landowners who were getting royalties and stuff from the gas wells,” he said.

Gas companies bought ATVs for employees to use on remote well pads.

The store went from selling 80 to 100 ATVs monthly last summer to about 60 to 80 monthly this year, Long said.

Still ‘a lot of traffic’

Not everyone is feeling the pain.

“It’s a little bit down. But the restaurant has been stable,” said Marcus Piatt, president of the hospitality division of Millcraft Industries, owners of the Hilton Garden Inn at Southpointe and Jackson’s restaurant inside. At 15 years old, the Hilton and Jackson’s predate the drilling boom and subsequent growth of shale-related corporate offices in the surrounding business park.

“We have a lot of non-oil and gas business in the hotel,” Piatt said.

Businesses that can attract customers from outside the ranks of gas workers or similarly struggling coal miners are having better luck in the downturn.

“If you’re versatile and can do different things, that might help make it OK,” said Tammy Fischer, whose Fischer Antiques is one of numerous small shops to open on Waynesburg’s main drag since 2010. Gas workers buy cigars and vaping products from her store, but she sees a more traditional clientele shopping for antiques.

“We still have a lot of traffic through Waynesburg,” said Fischer, a leader of the Waynesburg Merchants Guild.

Up Interstate 79, Sullivan said fewer “Boots” are eating or gambling at The Meadows, but it hasn’t stopped the casino from posting higher revenue than in the previous year.

“We appreciate them, and we hope they’re back soon, but we weren’t dependent on them,” he said, noting that about 60 percent of customers travel from outside a 60-mile radius from the casino. Gas workers might have extra cash to spend there but don’t usually have the spare time, Sullivan said.

The slowdown has yet to cut into home sales that boomed in recent years in Washington and Greene counties.

“I don’t think it’s hit us just yet that it’s slowed down. We’re still doing well,” said Barry Crumrine, a real estate agent with Re/Max Community Real Estate in Washington, a retired coal miner and resident of the Washington-Greene Association of Realtors.

In the third quarter of this year, 853 homes sold for a combined $181 million in Washington County, well above the 682 homes that sold for $163 million in the year before, according to data from tracker RealSTATS.

Piatt said he saw more workers in the industry and related fields moving from temporary housing to homes even before the slowdown.

“Now we have a workforce, instead of out-of-towners,” he said, noting that trend might explain why some hotels are struggling.

Any impacts on housing would depend on how long the slowdown lasts, said Robert Dunn, who teaches economics and business at Washington & Jefferson College and its Center for Energy Policy & Management.

“I would imagine that with most of the businesses, what they’re really concerned with is how this lasts, the duration of things,” he said.

‘Not as wild and crazy’

Analysts expect low prices to continue until at least 2017. Until then, businesses say they will try to maintain workers and customers.

“There’s still activity in the gas sector. It’s just not as wild and crazy as it was,” Battista said. “We haven’t given up on it; we’re not going to run.”

Though business is down for him compared to last year, it’s still up 150 percent from five years ago, he said.

“If it wasn’t for the oil and gas business, we wouldn’t still be here,” Bruno said.

Hotel developers will need to slow their pace of building and look for other customers, Piatt and Sullivan said.

Long-term projections for the region remain good, with demand for natural gas forecast to increase by 45 percent over the next 10 years.

“The oil and gas business … is a cyclical business, so we here in Washington County have had 10 years of tremendous growth in terms of new job opportunities, new companies moving to the county,” said Jeff Kotula, president of the Washington County Chamber of Commerce.

In related news, Oil and gas companies lead an early decline in US stocks.

David Conti and Tory N. Parrish are staff writers for Trib Total Media. 

This article was written by David Conti and Tory N. Parrish from The Pittsburgh Tribune-Review and was legally licensed through the NewsCred publisher network.