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07/14/2011

Onshore Drilling, Other Markets Balance Oil Spill Impact for Members

For many business owners with ties to the oil and gas industry, the Gulf of Mexico oil spill last year was expected to create waves in the economy and cripple business.

In addition to the immediate impacts, the oil spill and resulting deepwater drilling moratorium decreased consumer spending and sales tax for the Gulf States. The food and tourism industry hit an all-time low and many lost their jobs. Recovery has been feeble as new environmental regulations have slowed the approval process of new deepwater wells, according to Greater New Orleans, Inc., a regional economic development agency.

Despite these impacts, several NAHAD members reported very little impact on their businesses. In fact, for NAHAD members like Ohio-based Goodyear Engineered Products-Veyance Technologies, sales have taken off due to increases in other parts of the market.

"Our sales have been increasing in the industrial and hydraulic hose industry and in the oil and drilling market," said Sam Petillo, the company's North American marketing manager. "The markets are up because the cost of the barrel is up, and that's what really drives the drilling."

Onshore drilling, which requires hose products, has increased in demand and made up for lost sales in offshore drilling for some NAHAD members.

Dan Ahuero, president of Houston-based GHX Industrial, LLC, said offshore drilling business is down about 50 percent compared to last year. However, sales in the oil and gas segment overall have increased 20 percent this year.

"Our company does have a big piece of the oil and gas industry, but the biggest part of it is land drilling exploration and production," Ahuero said. "I think there is optimism out there. Our Louisiana locations and customers have been affected by the moratorium and more especially the lack of issuing new permits once the ban was lifted, (but) the south Louisiana economy seems to be feeling it more severely than the rest."

Many of NAHAD members' customers felt the impacts of the Gulf spill and deepwater drilling moratorium, but demands for products used in other types of drilling have helped assuage the impact.

NAHAD members said they've seen an increase in demand for a type of land drilling called hydraulic fracturing, also known as fracking, which is the process of drilling and cracking a rock layer to extract oil and natural gas from sources such as coal beds and shale gas formations, according to the United States Environmental Protection Agency.

"This system in place for collecting natural gas is starting to grow in popularity," Petillo said. "Both the drilling and hydraulic fracturing use a lot of hose products."

The largest shale gas formation is reportedly in Pennsylvania, where Tom Paff is president of Campbell Fittings. He likewise has not felt an impact from the oil spill, minus a few extra product orders to assist with clean-up around the Gulf.

"I'm not seeing any effect from what was happening down there," Paff said.

However, he said he agrees with other NAHAD members that fracking has helped business, although it is "coming under fire from a lot of people."

The EPA reported that several economic and energy policy developments spurred an increase in hydraulic fracturing to extract gas over more geographic regions. It is expected that shale gas, extracted by fracking, will comprise more than 20 percent of the total U.S. gas supply by 2020. However, increasing concerns over its impacts on drinking water and the environment has prompted government debate and possible regulation changes, according to the EPA.

Business has been consistent yet slow for Jim Janakes, president of U.S. Rubber Tech, Inc. in California. But he said the key to recovery from the oil spill and improved business for NAHAD members "would be the attainment of a national energy policy that would eliminate our dependence on foreign oil ... to explore all avenues of potential domestic sources of energy," Janakes said.


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