Northern Tier gas drillers still an under-served market

Joe Barone wants NEPA business to know the drill about serving gas workers in the northern tier. He believes these well-paid professionals from the natural gas industry, who are relocating to the region in growing numbers, as well as their families and an expanding supply chain, represent tremendous opportunities for many local companies to capture new customers.

Toward this end, Barone is operating an online directory called PAGasDirectory.com with more than 116,000 Pennsylvania businesses organized on a county-by-county basis. The goal is to connect gas companies, drillers and their families with eager vendors.

Barone, who is a veteran of the advertising industry, explains that the gas drillers are generally from remote parts of United States. Most have been active in the gas recovery industry for years, and, as drilling increases into the Marcellus Shale growing numbers of these families will be relocating here.

According to Barone, drilling jobs are strenuous. The workers typically endure 12-hour shifts for many weeks while drilling continues. Inclement weather and exhaustion can be the norm.

Overall, Barone has been impressed with the fiber of this group.

“Current predictions call for 160,000 to 175,000 more people to be employed here by 2020, and we’re already meeting such interesting people,” he says. “The drillers are usually very direct and have no hidden agendas. As a group, they stand by their word.”

Healthy wages

Barone conducted a survey of gas drilling personnel and found that the annual salaries for these workers are impressive. According to his research, 48 percent of the gas workers earn upwards of $50,000, with 35 percent earning $100,000 to $150,000, and 14 percent $150,000 to $200,000. The remainder earn above $200,000.

The categories of business that can now be exploited within the gas supply chain include truck drivers to haul water and sand needed in the drilling process, as well as suppliers of various types of hoses. Opportunities also exist for maintenance specialists who can free stuck drill bits. “For these drillers, time is money,” says Barone.
Commercial real estate sales are also healthy, encompassing all classes of land, office and warehouse space. On the residential front, typical housing demand is for homes of new or recent construction with four bedrooms and two baths.

Barone says that numerous homes like this are not plentiful in the Northern Tier, and he has witnessed old homes being purchased, demolished and new homes erected in their places. Other gas workers have found homes in more populated areas such as Danville, Lewisburg, and State College, and commute from there.

“These people have relocated from the western United States and they have always accepted driving several hours each way to a destination,” says Barone.

Barone also reports that many consumer products and services are in demand by the gas workers, creating strong business opportunities. These include family health care, financial services, home décor and furniture, fashionable women’s wear, and western attire such as cowboy boots.

An area of specialized demand, according to Barone, is air transport to the shale areas.
“It’s common to hear these gas workers say how terrible air transport is in their areas,” says Barone.

Barone comments that the biggest consumer item in demand by the gas workers is authentic Mexican food. He points out that virtually none of this kind of cuisine is available in the counties of Bradford, Tioga, or Susquehanna.

“Whoever opens a great Mexican restaurant here will practically be able to print money because the demand is that great,” adds Barone. “Supermarket expansion of the items needed to prepare these foods at home is also needed.”

Manufacturing demand

Kathryn Klaber, president and executive director of the Marcellus Shale Coalition, calls attention to the manufacturing demand now being created in the shale fields. She points out that companies such as U.S. Steel are now making large pipes used for well casings, and that huge demands for gas pipeline sections will soon follow.

The Norfolk Southern Railroad is hauling large amounts of sand, aggregate and steel, and heavy equipment needs at the drilling sites are growing. Job opportunities include rising demand for permit engineers, consultants, and attorneys, plus landscaping, environmental and compliance professionals.

“We need to think of each gas well as a $4 million to $5 million construction site,” says Klaber.

Dave Danneker, president of A.M. Metal Specialties, operates fabrication and installation shops in Williamsport and South Williamsport. The company specializes in products such as industrial ventilation components, tanks and chambers.

According to Danneker, his company has been able to capture some business within the gas supply chain. He says these drillers regularly need metal fabrications, storage tank pipes and tap installations, and in response to this demand he has added an employee with appropriate American Petroleum Institute welding certification.

He has found the gas workers to be up-front in their professional expectations.
“To do business with the drillers, you need to display persistence and really hound them,” says Danneker. “You also have to accept that new business will be slow in unfolding, and when the door opens you must prove that you are genuinely reliable.”

Booming real estate

Brent M. Fish, agent and general appraiser with Fish Real Estate in Williamsport, has been exploiting gas-related opportunities in both commercial and residential real estate.

He says the regional commercial market has grown very busy, and his company has now leased the majority of their industrial inventory. Only pockets of space now exist with demand still strong for shop-type metal buildings that also include office space.

“At last count, more than 50 new companies are operating in Lycoming County or its immediate boundaries,” says Fish.

On the residential front, Fish has found that the majority of gas personnel are renters, and many of these people are trial workers. Others may own another home in a remote part of the country, but have been unable to sell it due to the slump in the housing market there.

“These families must wait to buy here, and this scenario demonstrates the regional effects of the national housing slump even though the market here is healthy,” explains Fish. “I believe we will eventually see a gradual increase in the number of home buyers.”
Fish emphasizes that the establishment of relationships is important in doing business with the gas workers. He urges regional business managers to take the time to understand how the business models of the drillers operate and then fill the available niches.

“As an example, it’s a fact that drilling work is good paying with strong benefits, but the work itself has long and difficult hours,” says Fish. “For a salesperson, evening calls are vital. We cannot have an 8 a.m. to 4 p.m. mind set.”

Ed Barone, investment advisor representative with Barone Trusted Services, confirms that the families of the gas workers with who he has dealt have a desire to establish relationships with local businesses. These include hair stylists, physicians, and financial services ranging from life insurance to investment and IRA accounts.

He agrees that as a group the gas workers are very open and straightforward, and that sellers to this group need flexibility in their business model. Additionally, it is important to understand that many of these people are aware that they are outsiders to the northern tier and its culture, and they therefore appreciate when a vendor openly greets them and gives them a business card.

“These people are aware of the bad press their industry has received and therefore can be reticent,” say Ed Barone. “We must almost go out of our way talk to them. They also will not stand for any price gouging.”

Rising deposits

Charles H. Updegraff, Jr., president and CEO of Citizens and Northern Bank, says his organization is enjoying increases in direct deposit checking as increasing numbers of the gas workers utilize local financial services. Overall bank deposits are on the rise, and business at motels, restaurants, convenience stores, and rental companies is booming.

Warehouse space in Bradford County has become tight and many gas companies are willing to pay rents above normal regional levels. One-year leases for this space are common.

Updegraff also notes that the Mansfield area is experiencing a “push and pull” in the residential housing market as both gas workers and college students vie for the same space.

“Many area motels are at 100 percent occupancy,” says Updegraff. “I know of one motel that’s booked solid for one full year.”

Updegraff also has witnessed the predictable cultural clash that is taking place between the gas workers from Texas and Oklahoma and the traditional residents of the northern tier. Despite this conflict, Troy and Towanda are being transformed into commercial centers.
“The gas businesses is so big it will undoubtedly trump outdoor tourism and transform this area,” says Updegraff.

He also warns that an ongoing economic boom for the Marcellus Shale region is not a “done deal” and that many people are taking the huge financial predictions surrounding the gas industry with a grain of salt.

“The industry could find better gas fields and leave, or gas prices could drop . . . this would really hurt development of the shale.”

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