U.S. Oil, Imported Workers

Oil staffing and service companies are accused of illegally employing non-U.S. workers on rigs in the Gulf of Mexico—and displacing American workers

By Moira Herbst

To Daryl Johnson of Orange, Tex., work as a rigger on pipe-laying barges seemed like a pretty sure bet. The pay was good—$18.50 an hour—and with oil exploration booming, Johnson felt secure with Houston-based Horizon Offshore Contractors, which had hired him in 1999. But Johnson, speaking through his attorney, says he got concerned when managers told him there were no openings for friends whom he referred for jobs, even while Horizon continued to hire Mexican and Malaysian nationals. Then, in 2007, Johnson lost his job. "They gave me no explanation," says Johnson.

However, in Johnson's mind and in those of other oil workers in the Gulf, the connection to the cheaper foreign workers is clear. His allegations are part of a lawsuit moving forward in federal court in Texas, which claims that a group of U.S. energy services companies operating in U.S. waters on the Outer Continental Shelf in the Gulf of Mexico are using workers recruited from Malaysia, Mexico, the Philippines, and other countries to displace U.S. workers, at less than half of the pay. According to the lawsuit, the staffing is illegal because non-U.S. workers are working without proper visas aboard foreign-flagged vessels that are in fact controlled by American companies.

"Paid Pennies on the Dollar"

For years, immigration has been a tense topic, mostly centered around the estimated 12 million low-wage, undocumented workers and the ability of Silicon Valley companies to secure extra visas (BusinessWeek, 3/6/08) to import thousands of skilled technology workers. But now, as a recession looms and the Presidential election heats up (BusinessWeek.com, 7/28/08), attention is turning to another booming industry: oil services. It's not widely known, but both onshore and offshore in the Gulf of Mexico, non-U.S. workers can be found doing shipbuilding, pipe-fitting, welding, rigging, and related jobs. Some of them are here on temporary visas and some may be undocumented.

Johnson's suit, Cunningham, et al v. Offshore Specialty Fabricators, Inc. et al, was filed in U.S. District Court in the Eastern District of Texas, Texarkana Div. in December 2004. On July 21 the judge issued a scheduling order that calls for both sides to begin discovery and depositions on Aug. 10.

The case is about working conditions for both U.S. and non-U.S. workers, says plaintiff's attorney Tony Buzbee of Buzbee Law Firm in Galveston, Tex. The foreign workers "were paid pennies on the dollar, worked grueling hours for days on end, and were essentially captives on the rigs because they were paid when repatriated," says Buzbee. "This suit seeks remedy for the American workers who were paid less due to wage market suppression or who lost their jobs due to being replaced."

The oil services and staffing companies named as defendants in the suit declined to comment.

Incentive to Cut Labor Costs

It might seem like there is plenty of money to go around for the companies that explore for and produce oil. Crude-oil futures prices, after all, have jumped by 64% over the past year, to $125 a barrel. The largest untapped fields are to be found on the ocean floor, which is in part why spending on offshore drilling worldwide rose from $29.4 billion in 2000 to $61.8 billion in 2007 and will reach at least $77 billion by 2010, according to Spears & Associates, a Tulsa energy consulting firm.

However, with high demand has come a growing shortage of specialized drilling rigs. That has driven the drilling costs for some of the newest deepwater rigs in the Gulf of Mexico—the U.S.'s top source of domestic oil and natural gas supplies—to about $600,000 a day, compared with $150,000 a day in 2002. Experts say rising costs for vessels create a big incentive for companies to cut their labor costs.