Oil

As oil prices drop, equipment theft climbs

Some experts point to laid-off workers, who know how much the items are worth.

 

Reports of what gets stolen from oil and gas fields read like an exhaustive hardware supply list: Drill bits, valves, metal piping, copper wiring, vehicles, trailers, hand tools, pumping unit engines, and of course, oil – perhaps millions of barrels’ worth. Such theft has long been a problem from Wyoming to Texas, but has spiked in recent months.

The surge in crime has exacerbated financial woes in an industry already suffering from cratering prices. National employment in oil and gas extraction is at its lowest level since February 2012, down nearly 9 percent from the peak levels enjoyed in 2014, according to the Bureau of Labor Statistics. The slowdown has coincided with a rise in theft, as idle well sites are raided for equipment of value, often by laid-off workers with knowledge of the rigs.

Low oil prices have contributed to unemployment and a subsequent rise in oilfield theft.

“The people that are doing the theft know the value of these things,” says John Chamberlain, executive director of the Energy Security Council. He and other industry insiders say that, in general, incidents of theft correspond with job layoffs.

Over the last twelve months, oil and gas prices have slipped lower and lower. As a result, Russell Winn, an account executive with IMA, Inc., a brokerage firm closely involved with the oil and gas industry, says there’s been a dramatic spike in oilfield heists. “We probably are seeing a 30 to 35 percent increase in our theft of equipment over what we saw the last two years,” Winn says.

Values of stolen items vary, but one truckload of drill pipe can be worth $100,000, while pilfered scrap metal from a single worksite can fetch more than $10,000. Last April, seven drill bits worth $267,000 were reported stolen from a site in Weld County, Colorado. All that theft adds up to tens of millions of dollars lost annually. Some sources indicate that value can even soar into the billions. In Texas alone, the Energy Security Council estimated that 1 to 3 percent of the state’s 700 million barrels of oil production was stolen in 2013.

The problem is simple: Unattended and out-of-service oil wells are easy targets for thieves.

“You have a million dollars worth of assets in the middle of nowhere, just sitting there,” says Brad Roberts, an oil well servicer and owner of Tool Branding, a company that stencils marks on machinery to help with recovery. “During depressed times, you have people that are unemployed and they’re looking for ways to turn anything into cash.… It’s a horrible situation.”

Experts like Chamberlain see the crimes mostly as an “individual, opportunistic thing.” But organized, interstate crime networks can be involved, with stolen assets being moved across state lines and even international borders.

“Equipment could be stolen from Colorado and end up in Mexico in 24 hours,” says Kenny Jordan, executive director for the Association of Energy Service Companies, which runs the website stopoilfieldtheft.com.

While oilfield theft is an area of growing concern for industry officials and law enforcement alike, underreported cases and jumbled jurisdiction make it hard to quantify the issue’s magnitude.

With stolen equipment crisscrossing counties and states, coordination among investigators can be complicated, Jordan says. Industry organizations acknowledge that exact figures aren’t available, but agree that the price tag is substantial. Even a Texas-based FBI oilfield theft task force does not have an estimate about the cost incurred locally or on a broader scale. “We’re going to try to track this better in the coming year,” says task force coordinator Andrea Simmons.

But law enforcement is devoting special attention to the issue in some areas. Besides the FBI task force in west Texas, a similar unit is now operating in Oklahoma. On the local level, enforcement also falls to certain sheriff departments, such as in San Juan County, New Mexico.

Meanwhile, others are taking do-it-yourself approaches to cracking down. Jordan's organization built an online serial number database to help recovery efforts, though he says the response has been underwhelming. Stamping, like that done by Roberts, provides some opportunity to recover stolen equipment, but experts say that an item is typically gone for good once it’s nabbed from the oilfield.

There may be some indications that oilfield crime is starting to taper off after reaching its recent fever pitch.

“The last few months of the year, we actually saw it tailing downward,” says Winn at IMA, Inc. “I think the reason is that the decline in oil prices made it so that the equipment was not as valuable as it had once been.”

Even with the lull, authorities are keeping busy with associated acts of fraud and embezzlement, which can take longer to come to light.

But some experts shrug at the decline, saying theft is as an unavoidable cost of doing business. “Trust me, it’s been going on for years and years and years,” says Jordan. “It’s nothing new to the industry.”

Bryce Gray is an editorial intern with High Country News.