Zarsky Lumber of Victoria, Texas, has sold drilling mud, a cooling and flushing lubricant, for more than half a century. Its on-staff engineers work in the locations they serve, and may be on-site at oil fields for a week or more at a time.
But as oil prices rose last year, Zarsky started losing engineers to higher-paying drilling-mud competitors. It was down to six engineers in November from 12 the same time a year earlier, and finding replacements hasn't been easy.
"It's just about money," says the dealer's executive vice president, Cally Fromme. As a result, her company has been forced to turn down business.
Dealers operating in oil- and gas-producing states must always consider the possibility of employees jumping ship for better-paying jobs. "Most of our  yards in Wyoming have been affected a great deal by the oil and gas industries, not just this year but for the past several years," says Greg George, president and CEO of Bloedorn Lumber of Torrington, Wyo. Energy companies have been stepping up their hiring for a while, and that competitive threat was palpable when oil prices spiked to $145 per barrel last summer.
"Young people coming out of high school, who we'd pay $10 to $12 an hour, could go to work for the oil and gas companies and get $20 an hour," says George.
Even though this threat subsided once oil prices came back to Earth, most pro dealers aren't in any position to bid for workers, especially with the housing market in recession. Whatever chance they have of hiring and retaining employees rests on the value those employees place on the companies' work environments and benefits.
Drivers Are Scarce Dealers' fears about losing workers are more evident in some regions than others. Carolyn Atkinson, a spokesperson for Denver-based ProBuild Holdings, tells ProSales that its yards in Oklahoma and Texas haven't experienced many employee defections to oil and gas companies. But during the week of Nov. 9 alone, ProBuild's yard in Williston, N.D., lost two people.
"The oil companies pay $26 an hour to start, and lumber dealers don't have those kinds of margins to compete with that," says Milton Theige, yard manager at Williston. That branch is close to oil fields in a state that's sitting on the largest contiguous oil deposit in the lower 48 states. Theige says oil and gas companies there talk about hiring between 2,000 and 3,000 people per year for the next decade if energy prices stay reasonably high.
This ProBuild yard is having a particularly difficult time holding onto drivers with commercial licenses. It's a serious problem that it shares with other dealers in energy markets. Even Stine Lumber in Louisiana, whose yards haven't lost many workers to oil and gas producers, can't find drivers. "We've posted and posted, and advertised and advertised," laments president Dennis Stine.
Pat Marback, president of Front Street Millwork and Lumber in Bismarck, N.D., says there's a "desperate need" for drivers in his state because "a lot of what's being pumped from those fields is being trucked out because the pipeline is full." Front Street, whose yards are at least 100 miles from the nearest oil field, pays between $15 and $16 per hour to drivers with loading and unloading responsibilities.
Marback acknowledges there's something attractive about a job with an oil company that pays a driver $10 per hour more than a lumberyard, "and his hands never leave the steering wheel."
Still, a booming energy sector can be a double-edged sword for dealers that must vie for employees at the same time their businesses reap the economic benefits that more drilling and production deliver, like boosting new-home construction and renovation.
Theige estimates his yard, which generated $3.5 million in 2008, had the best year in the dozen he's worked there. Harrison's Lumber Yard in Stanton, Texas, about 20 miles northeast of oil-rich Midland, did about $450,000 in revenue in 2008 vs. $375,000 in 2007.
"The oil fields, until recently, were buying a lot from us," says Courtney Poitevint, who owns and runs the yard with her husband Harrison.
Such reverberations aren't always positive. Rich Bass, chief operating officer of Mill Creek Lumber in Tulsa, Okla., notes that his workers' expect wages to be higher– even though there's no drilling going on in his markets– because companies that supply equipment, such as pipes, to those oil fields operate in Tulsa.
Bass also notes that machinery became scarcer and pricier during the recent oil boom. "Two years ago, we could buy a used day-cab tractor with 200,000 miles on it for $40,000," he says. "Now you're looking at one with 300,000 miles for $50,000 because the oil fields have sucked all of them up."
Touting Benefits Front Street's Marback speaks for other dealers when he says it's impractical to pay drivers or other workers more to keep them. The best his company can do right now is "sell ourselves" and remind employees that they have a stable and safe work environment, with good benefits that include a 401(k) plan and heath care.
"We're also an [employee stock ownership plan-owned company], and some people will look at all of that and say that's a good place to be," he says.
Bloedorn is employee-owned, too, and has been promoting its benefits package "more aggressively," says George, including its 80/20 health care plan and $25,000 life insurance policy for all employees.
Both executives, though, concede that the employment picture could become more problematic if energy exploration and drilling become more critical to the country's economic health.
Bloedorn, which also operates yards in Colorado, Nebraska, and Montana, already has gone outside of its trading region to find drivers and other workers. It recruits in Kentucky and Indiana, and recently hired a driver from Washington state. Front Street has bought more booms and forklifts to make its operations less labor intensive.
"But when you add that kind of equipment," says Marback, "you need quality operators." And that commodity is in short supply and costs more to hire.
A booming energy sector can be a double-edged sword for dealers. They must vie for employees at the same time their businesses reap the economic benefits that more drilling and production deliver, like boosting new-home construction.