How a typical employer in mining, oil and gas, and energy services operates
A typical employer in this industry sells labor, equipment, hydrocarbons or minerals into a demand that is set by the movement of people and goods, and it does so with a workforce that lives on the road, sleeps in hotels and camps, flies to rotations, crosses State and national borders, holds licenses and certificates that must be renewed at physical offices and clinics, and works under permits issued and inspected by regulators whose own offices, deadlines and rules the pandemic changed. Every one of those features is a function an order can reach, and the layers section below shows that orders reached each of them in every quarter.
Definition and scale
The industry comprises NAICS 211 (oil and gas extraction: operators and working-interest owners), 212 (coal mining; metal ore mining, including the copper mines of Arizona, the gold and silver mines of Nevada and the iron ranges of Minnesota and Michigan; nonmetallic mineral mining and quarrying, including aggregate, frac sand and industrial minerals), 213 (support activities for mining: contract drilling of oil and gas wells; pressure pumping and hydraulic fracturing, wireline and coiled tubing, cementing, well servicing and workover rigs, water hauling and disposal, roustabout and lease-operating crews, rental tools and inspection services; and the support services for coal, metal and nonmetal mines) and 2371 (oil and gas pipeline and related structures construction; power and communication line construction).1 The Bureau of Labor Statistics counts about 30,273 private establishments and 572,600 employees in NAICS 21 today, an order of magnitude the 2020 industry shared.2 The employment series measure the six quarters: mining and logging employment fell from 684,000 in February 2020 to 619,000 in April, 579,000 in June, 557,000 in December 2020 and 539,000 in February 2021, and stood at 566,000 in September 2021; support activities for mining fell from 313,400 in February 2020 to 267,700 in April, 233,200 in June, 208,000 in December 2020 and 204,800 in February 2021, and stood at 231,400 in September 2021, 26 percent below February 2020; oil and gas extraction fell from 136,500 to 111,400 over the same period; mining except oil and gas fell by 13,000 in April 2020 alone.3 The oilfield-services segment, which is one third of the industry's employment and the most cyclical part of it, lost a third of its jobs in ten months.
The functions
EX, extraction and production sites
The operator's field comprises the wellheads, tank batteries, gathering systems and processing plants on leases in the Permian, the Eagle Ford, the Bakken, the DJ Basin, the San Juan, the Uinta, the Powder River, the Anadarko, the Haynesville, the Marcellus and Utica and the North Slope; the underground and surface coal mines of Wyoming, West Virginia, Pennsylvania, Kentucky, Illinois and the Navajo Nation; the copper, gold, silver, iron and aggregate mines and quarries of Arizona, Nevada, Minnesota, Michigan, Utah and every State with a construction market. Production runs continuously with pumpers, lease operators, plant operators and contract crews on site; it is regulated at the wellhead by the State conservation commission (permits, spacing, flaring notifications, inactive-well plugging, production reporting), on federal leases by the Bureau of Land Management, on State trust lands by the State land office, and in mines by the Mine Safety and Health Administration under mandatory inspection statutes.4 What an order can reach: whether the site may operate at all (Pennsylvania closed coal, metal and nonmetal mines and mining support by name on March 19, 2020); the conditions on which it operates (the workplace infection-prevention and exposure-control requirements: distancing, screening, written plans, face coverings, exclusion of exposed workers); whether wells must be produced or may be shut in without losing the lease (the New Mexico State Land Office rule; the North Dakota waivers); whether the regulator's deadlines run (the Railroad Commission's extensions); and whether the site's product has a buyer at a price (the demand chain through the customer base, CB).
SV, oilfield and well services
The service company's revenue is the job: pressure pumping and stimulation priced by stage, wireline and coiled-tubing runs, cementing, well servicing and workover by the hour or day, water hauling and disposal by the barrel, rental tools by the day, roustabout and lease-operating labor by the hour. Crews mobilize from district yards to the well site with equipment fleets, work twelve-hour tours on a fourteen-day or twenty-eight-day hitch, and demobilize; a fleet moves between basins and States as the work moves. The service company's only customer is the operator, and the number of wells to complete, service and work over is fixed by the operators' drilling and completion plans and by the regulators' rules on when drilled wells must be completed.5 What an order can reach: the crew's movement across State lines (twenty-State quarantines); the crew's lodging (caps, closures, quarantine-notice duties); the job site's conditions (State-plan workplace standards; gathering caps on pre-job safety meetings); the shop and yard (face-covering, exposure-control and telework orders); the count of wells to work (waivers, shut-ins, deadline extensions); and, through the operator, the price of the product the well produces.
DR, drilling and completion crews
Contract drillers earn dayrates per rig under term or well-to-well contracts, with mobilization and standby fees; completion crews earn by the stage. A rig crew is five to six persons per tour on a rotation; a frac spread is a convoy of pumps, blenders, sand and chemical trucks and a crew of thirty or more that arrives, works round the clock for days and leaves. Rig counts and completion-crew counts are the industry's own measure of activity, and the regulators recorded them: North Dakota's Director's Cut reported 55 rigs on April 14, 2020, 54 on May 15, 52 on June 12 and 35 on July 17, "the number of active completion crews decreasing from 25 to 1," "Lower crude oil price has put extreme downward pressure on rig and completion crew counts," and 193 wells waiting on completion by July 2020; the Energy Information Administration recorded "the fewest active drilling wells in the United States in their records which go back to 1987" in May 2020.6 What an order can reach: the regulator's rule on whether a drilled well must be completed (the North Dakota Not Completed Well waiver), the deadline to commence plugging inactive wells (16 Tex. Admin. Code § 3.14(b)(2), extended), the crew's travel and lodging, the pre-spud meeting and safety stand-down (gathering caps of ten in Texas, Colorado, Oklahoma, Wyoming (to May 14, 2020), New Mexico and North Dakota), the rig floor's conditions under State-plan standards, and the operators' capital plans under the demand collapse the orders on travel produced.
PL, pipeline and utility construction
Contractors build and maintain gathering lines, transmission lines, compressor and pump stations, LNG facilities and electric and communication lines under lump-sum and unit-price contracts with midstream companies and utilities, with change orders and integrity work orders; the work is seasonal, concentrated in the second and third quarters, and it runs on permits, rights of way recorded at county recorders, and the owner's certificate schedule at FERC or the State commission.7 What an order can reach: whether construction may proceed (Pennsylvania marked Utility Subsystem Construction "No" on March 19, 2020; New Jersey ceased non-essential construction April 10 to May 18, 2020 while naming utilities essential; New York and Washington limited construction to essential projects); the job-site conditions (State OSHA construction rules; Pennsylvania's mandatory construction guidance); the owner's schedule (FERC's extension-of-time notices reciting COVID-19 construction delays); the owner's revenue and capital program (utility disconnection moratoria in twenty-eight States and the District; FERC's construction-accounting waiver); and the recording and permitting offices.
CM, crew lodging, camps and travel
The industry's workforce is rotational and itinerant. North Slope crews fly to Deadhorse; Gulf crews fly by helicopter from Louisiana heliports; Bakken crews drive from Montana, Minnesota and Idaho or fly to Williston and Bismarck; Permian crews drive from Oklahoma, Louisiana and Texas cities to Midland, Odessa, Hobbs and Carlsbad; Rockies crews drive from Utah, Colorado and Idaho to Wyoming. They sleep in crew hotels, man camps and RV parks; they eat in restaurants; they cross State lines on every hitch and, in the case of Canadian and Mexican technicians and Alaskan and Gulf offshore crews, national borders and ports. What an order can reach: every arrival quarantine (Texas, North Dakota, Montana, Wyoming, New Mexico, Oklahoma, Kentucky, Utah, Pennsylvania, Kansas, Alaska, West Virginia, Hawaii and the New England and tri-State regimes); every lodging cap or closure (New Mexico's fifteen months of caps; the bans and essential-worker-only rules of Connecticut, Maine, New Hampshire, Delaware, South Carolina and Vermont; Southeast Utah's Grand County lodging order; Routt County; Alaska's critical-infrastructure lodging plans; the Navajo Nation's closures); every quarantine-notice duty on hotels (Montana, Wyoming); the federal conveyance face-covering order, the airborne-transmission control the CDC and TSA layer imposed on every flight and airport from February 1, 2021; every land-border notice (March 21, 2020 to November 8, 2021); and every entry proclamation.
PM, permits, inspections and regulator filings
Every well runs on a drilling permit, a spacing or pooling order, a completion report, a production report and a plugging deadline; every mine on a permit, a plan and an inspection schedule; every pipeline on a certificate, a right-of-way and a tariff. The filings are made to, and the hearings held before, the Railroad Commission of Texas, the North Dakota Industrial Commission, the Oklahoma Corporation Commission, the Colorado Oil and Gas Conservation Commission, the New Mexico Oil Conservation Division and State Land Office, the Wyoming Oil and Gas Conservation Commission, the Bureau of Land Management, the Federal Energy Regulatory Commission and the county recorders and district courts.8 What an order can reach: the regulator's own operation (the Railroad Commission and "a large number of operators are now working remotely" on March 19, 2020; the Oklahoma Corporation Commission's remote hearings through the third quarter of 2021; BLM field offices on maximum telework and closed to the public); the deadlines (the Railroad Commission's extension of every permit, license, registration and rule exception expiring March 1 through September 30, 2020, then to December 31, 2020); the courts and recorders (State supreme court emergency orders; courthouse closures); the federal courts and the Tax Court; and the regulator's substantive rules (waivers, shut-in rules, temporary exceptions).
SC, equipment and supply
The inputs are tubulars and OCTG, drill bits, pumps, frac-fleet engines and transmissions, wellheads and valves, proppant, chemicals, cement, diesel and CNG, guar, mining machinery and parts, and N95 respirators for hydrogen-sulfide environments, sourced from plants in Pennsylvania, Ohio, Michigan, Texas and Oklahoma and from China, Mexico and Canada.9 What an order can reach: the plants (non-essential manufacturing closures in Pennsylvania, Michigan, New York, New Jersey, Kentucky and Washington; Texas non-CISA manufacturing at twenty-five percent in May 2020 (Ex. TX-014; Ex. TX-016)); the borders (the land-border notices; the entry proclamations; Title 42); the respirators (the FEMA allocation and export rule from April 7, 2020 to June 30, 2021); and the ports (the Coast Guard's regime at the marine terminals).
HR, hiring, screening, training and credentialing
Every hire is conditioned on a pre-employment physical, an H2S respirator fit test, a drug test, well-control certification and, in mines, MSHA Part 46 or Part 48 training; every commercial driver holds a CDL renewed at a motor-vehicle office; engineers and technicians hold H-1B and L-1 visas; Canadian and Mexican specialists enter across the land borders.10 What an order can reach: the occupational-health clinics closed by the elective-procedure suspensions of March through May 2020; the motor-vehicle offices closed in 2020; the consulates closed from March 20, 2020; the entry suspensions of April 23 and June 24, 2020; the quarantine and isolation directives that removed exposed workers from crews for ten to fourteen days; and, from August and September 2021, the vaccination or testing conditions on State-agency and federal contractors.
OP, office, administration and telework
The office function comprises the district offices, engineering and land departments, accounting, dispatch, procurement and sales staffs in Houston, Midland, Denver, Oklahoma City, Pittsburgh, Anchorage and every basin town. What an order can reach: the telework mandates and office caps (New York's 100 percent reduction; Pennsylvania's "Unless not possible" and "Unless impossible" mandates; New Mexico's 100 percent reductions; Colorado's fifty percent reduction; Minnesota's "All workers who can work from home must do so"; Texas non-CISA offices at twenty-five percent in May 2020 (Ex. TX-014; Ex. TX-016); Kentucky offices at fifty and then thirty-three percent); the face-covering orders of Louisiana, New Mexico, Illinois, Oregon, Nevada, Washington, Hawaii and the District, the airborne-transmission controls those jurisdictions imposed on every office in the third quarter of 2021; and the metro orders on the industry's headquarters cities.
WF, workforce availability
The workforce's children attend schools that were closed by order in every State in the spring of 2020, ran remote or hybrid in the fall of 2020 under mandatory plans, and ran the 2021-22 year under face-covering and quarantine orders; exposed workers were confined by State and county quarantine orders; commuting workers rode every bus and train under the federal conveyance face-covering order from February 1, 2021; the Families First Coronavirus Response Act compelled every employer under 500 employees to grant paid leave for a quarantine order or a closed school from April 1 to December 31, 2020.11 What an order can reach: the number of workers who can report to the site, the yard or the office on any given day.
CB, the customer base: producers, utilities, refiners
The service company's customer is the producer; the producer's customer is the refiner, the marketer or the gas utility; the miner's customer is the electric utility, the steel mill or the construction market; the pipeline contractor's customer is the midstream company or the utility. Each of those customers operated under orders. The refiner's demand was the travel the orders forbade: the Energy Information Administration's own account is that "Lower demand is the result of COVID-19-related shutdowns" and that consumption would rise "As stay-at-home orders are eased."12 The utility's revenue and capital programs ran under disconnection moratoria written into orders and statutes in twenty-eight States and the District and under FERC's liquidity and construction-accounting waivers.13 The producer shut in wells under the State Land Office rule and the Industrial Commission's waivers, and the Railroad Commission adopted temporary exceptions "in recognition of the unprecedented national and global economic conditions."14 The demand chain from the orders on travel and commerce to the service company's job count is the mechanism the Suspension Clause reaches (see the interconnected economy section below).
Revenue lines
Operators earn wellhead sales of crude oil, natural gas and natural gas liquids, netted for royalties and severance taxes, with hedge settlements; contract drillers earn dayrates and mobilization and standby fees; service companies bill by stage, run, hour, day and barrel; miners sell under term supply contracts with utilities and steel mills, on the spot market and into the construction market; and pipeline and utility contractors earn lump-sum and unit-price construction contracts, change orders and maintenance and integrity work orders.
The counterparty map
Each counterparty class was reached by orders, and the layers section catalogs them: producers (the State conservation commissions' and land offices' instruments; the demand collapse; the sector regulators); midstream companies and interstate pipelines (FERC's policy statements, delegation order, comment-period notice, extension-of-time notices and construction-accounting waiver; the sector regulators); refiners and marketers (the stay-at-home, travel and gathering orders on the traveling public and the federal transport and entry orders; the ecosystem); electric utilities (disconnection moratoria and mandatory payment plans; the counterparties); lessors and permitting authorities (BLM office closures and telework; State land office tele-hearings; court and recorder closures; the sector regulators and counterparties); equipment manufacturers and importers (State manufacturing closures; land-border notices; the FEMA allocation rule; the ecosystem); hotels, camps and RV parks (lodging caps, closures and quarantine-notice duties; the fifty States); occupational-health clinics (elective-procedure suspensions; the OSHA Healthcare ETS from June 21, 2021; the counterparties); schools and child care (closures, remote orders, face-covering and quarantine orders; the counterparties); carriers and airports (the CDC conveyance order and TSA directives; the federal layer); and tribal governments as lessors (the Navajo Nation's lockdowns, curfews, road closures and status orders; the sector regulators).
Workforce, geography and seasonality
The industry is concentrated in Texas, North Dakota, New Mexico, Oklahoma, Colorado, Wyoming, Louisiana, Alaska, Pennsylvania, West Virginia, Kentucky, Utah, Montana, Nevada, Arizona, Minnesota, California, Kansas, Ohio and Illinois, and its pipeline and utility contractors work in every State. Its crews commute across State lines as a matter of ordinary operation: Louisiana to Texas, Oklahoma and Texas to New Mexico and North Dakota, Utah, Colorado and Idaho to Wyoming, the Lower 48 to the North Slope by air, and Canada and Mexico to every basin for specialized services and equipment; the travel-quarantine orders of the spring of 2020 are the public record of the crossings the States regulated.15 Its seasonality is the Bakken and Rockies winter slowdown and spring road restrictions, the North Slope winter exploration season, the Gulf hurricane season of June through November, the second- and third-quarter concentration of pipeline and utility construction, and the summer and winter peaks of utility coal burn. The second quarter of 2020, the industry's normal ramp, coincided with the stay-at-home orders, the demand collapse and the first negative settlement of a United States crude benchmark, on April 20, 2020.16