For an industry that runs on natural resources, it’s the human component that is becoming its newest challenge. The energy sector of the economy is more active than at any other time in the last 20 years. However, the industry has not only failed to attract new graduates, but it has lost seasoned professionals.
Despite periodic spectacular earnings over the last 20 years, the oil and gas attorney workforce has been declining steadily for almost 20 years. The industry slump of the 1980’s was unusually severe and left long-lasting scars. Moreover, the “dirty industry” image has not done much in the past to attract people to the profession. Many recall the oil-soaked birds and dead otters on the beach following the Exxon-Valdez spill. Others simply viewed the industry as a slow-growth, old economy behemoth.
Like other oil and gas professionals, lawyers left the industry for less cyclical sectors of the economy. However, unlike other industries affected by the economic downturn, the energy industry recovery did not bring these professionals back, nor were they replaced with new talent. And the high tech boom of the late 1990’s provided refuge for the best and brightest.
Adding to the problem, the average age in the oil and gas industry workforce is 49 – among the oldest of any sector in the U.S. economy. According to Martindale Hubbell, 85% of the lawyers who specialize in oil and gas law have more than 10 years of experience. In addition, a Labor Department study found that more than 65% of workers in the oil and gas industry are between the ages of 35 and 54, while only a “small” percentage are in their twenties.
With the retirement wave approaching and global demand at record levels, energy industry legal departments are headed for a human resource crisis.
Demand Exceeds Supply
Attorneys with certain areas of expertise, such as domestic and international exploration and production (upstream); gathering, processing, transportation and storage (midstream); refining and marketing (downstream); and energy commodities trading are in high demand and in short supply.
The short-term impact on the energy sector job market has been more competition for talent and increasing compensation packages. Sign-on bonuses are making a comeback. These efforts however, will only provide a temporary solution.
Leveraging Resources
Some creative ways to address the problem include:
- Contract Attorneys. There are many senior lawyers in the job market who may have taken a severance package as a result of a consolidation, but are not yet ready for retirement. Hire these lawyers on a contract basis to mentor existing or new lawyers in areas for which talent supply is low.
- Knowledge Management. Establish knowledge retention programs to leverage (as much as possible) the expertise of the specialists.
- Reverse Secondments. “Loan” junior lawyers to outside counsel firms for training. Most firms would welcome the opportunity to strengthen a relationship with a valued client by hosting a member of its legal department for a period of time.
