LINKEDINCOMMENTMORE

FARMINGTON — February numbers from the Bureau of Labor Statistics show that, in 2015, Farmington ranked first in the nation in the rate of unemployment growth.

Local economic development and oil and gas industry officials all agree on the cause: The collapse of crude oil prices over the last year on the commodities market hit the local economy — which relies heavily on the oil and gas industry — particularly hard.

The federal study looked at 387 metropolitan statistical areas, or MSAs, across the United States. Farmington had a 5.2 percent unemployment rate in December 2014. It rose by 2.1 percent to 7.3 percent in December 2015. according to the bureau's preliminary numbers, the largest increase over that time period in the nation.

The bureau, an agency of the U.S. Department of Labor, monitors labor market activity, working conditions, and price changes in the economy. The "Economy at a Glance" report emphasized that the December 2015 numbers are preliminary and not seasonally adjusted.

Unemployment rates, however, were lower in December 2015 than they were a year earlier in 296 of the 387 U.S. metropolitan statistical areas, according to the bureau. They were higher in 79 areas, and unchanged in 12. New Mexico has four MSAs  — Farmington, Las Cruces, Albuquerque and Santa Fe.

Jason Sandel — executive vice president of Aztec Well, an independent oilfield service company established in 1963 that has grown to include a group of subsidiaries — said the increase in unemployment is in direct relation to the pain caused by the price of a barrel of oil hovering around $30, down from prices well over $100 in 2014.

"We see time and again that our area is hit very hard with the cycles of boom and bust," Sandel said. "(We're) hopeful that, moving forward, we can accomplish some of the diversification goals that have been put into place."

Like many oil and gas company operations in the area — from large international corporations to smaller local independents — Aztec Well has had to lay off employees. The company now employs about 550 workers — a loss of about two-thirds of the Sandel family's total workforce, which was at about 850 in fall 2014.

Sandel said there are other problems that likely contributed to the increased unemployment rate.

"We've got power plants, coal mining, natural gas and oil drilling rigs in the extractive industry. All of it combined play into a really difficult economic picture," he said. "Why we're worse than other MSAs across the U.S., I really don't know. I do know that when there's a downturn in the industry, it's really hard on our community. We've got two drilling rigs working here and we're grateful for every hour and every dollar."

Ray Hagerman, Four Corners Economic Development CEO, said the ranking, while only a snapshot in time, was attributable in large part to the downturn in the oil and gas industry.

"I'm not surprised. (the lost jobs) were largely all concentrated in the oil and gas industry," Hagerman said. "We've seen a 300 percent decrease in the price of oil."

Hagerman said that efforts to diversify the local economy have been incremental but hampered by a lack of infrastructure like a rail line or an international airport that would make industries like heavy manufacturing feasible here.

The area lost 5,000 jobs by the end of 2010, Hagerman said, when the region was hit by a similar fall in the price of natural gas, which is plentiful in the San Juan Basin. Oil exploration in the basin brought roughly 1,500 of those jobs back by the middle of 2014, which proved to be temporary relief.

Hagerman said the employment numbers should improve by the end of 2016 when hundreds of direct and indirect jobs open up to retrofit two area coal-fired power plants — Four Corners Power Plant and San Juan Generating Station — with pollution controls. Both projects combined exceed $1 billion.

He said that, overall, the unemployment numbers will improve.

"At the end of 2016 we will see the unemployment rate improve with the retrofitting and construction work at the power plants," he said. "We should have hit the low water mark now and by the middle of this year we should see it improve. The good news locally — if there is any — is that I think this is a temporary situation."

Hagerman said Farmington is vulnerable because of the area's economic makeup.

"We're a smaller basin and any loss of 1,500 jobs — our labor shed is about 50,000 people — we're always going to feel anything like that more strongly," he said.

He cited slow permitting for oil and gas drilling by the U.S. Bureau of Land Management. Complicating matters is what is called the "checkerboard," a regulatory jigsaw puzzle that includes federal, state, Navajo Nation, private and other land parcels closely packed together.

"Other basins have fee-simple, privately owned land," he said. "We had less drilling in this basin because of BLM drilling permit nightmares."

Glen Biart, explosives manager for Basin Well Logging Wireline Services, Inc., walked the company's Farmington oilfield service yard on Wednesday, pointing out logging trucks, cranes and hundreds of thousands of dollars worth of wellhead pressure control equipment sitting idle.

The company hasn't laid off any of its roughly 30 workers but the impact of the low commodities prices was clear as Biart listed all the vehicles and equipment that before last year would normally be at a job site in the field being put to use.

"I've been in this business for 35 years, since 1981," Biart said. "This isn't the worst I've ever seen, but it's in the top three."

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.

LINKEDINCOMMENTMORE
Read or Share this story: https://www.daily-times.com/story/money/industries/oil-gas/2016/02/10/farmington-tops-us-unemployment-rate-jump/80184422/