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Editor’s Note: The following story is part of a periodic series exploring regional issues of interest or importance outside San Antonio.
The Eagle Ford, now the world’s most active shale play, has quickly grown to be an oil and gas boom beyond the region’s wildest expectations. Companies are investing billions of dollars annually, tens of thousands of good jobs are being created, and one of the nation’s poorest and most neglected regions is on the cusp of transformation.
The boom, one industry leader confidently declared, will continue for years.
Texas is once again the nation’s number one oil producer, producing more than the next three states – Alaska, California and North Dakota combined. That, coupled with the potential of expanding domestic use of cheap natural gas, offers the country an unprecedented opportunity to move closer to energy independence.
But challenges seem equally large: Badly stressed-cities and counties will need billions of dollars in investment to alleviate the strain on infrastructure: roads, acute housing shortages, and inadequate health care and medical facilities, and underfunded higher education.
The Texas Railroad Commission, which many see as too close to the oil and gas industry, is playing catch-up to issue new rules and guidelines that will assure adoption of best environmental practices as thousands of new horizontal fracking wells are drilled.
The Texas Legislature appears ready to respond to those needs by drawing up to $4 billion from the state’s Rainy Day Fund to underwrite investments in transportation and water management and conservation initiatives.
The panel featured Texas Comptroller Susan Combs; Lance Robertson, vice president of the Eagle Ford project for Houston-based Marathon Oil Corp.; Henry Cisneros, chairman of the San Antonio Economic Development Foundation; and Jim Marston, vice president of Energy program for the Environmental Defense Fund (EDF) and the founding director of the EDF’s Austin office. Robert Rivard of the Rivard Report served as moderator.
Attendees were greeted by more than a dozen exhibitors demonstrating various technological innovations, including new methods to purify chemically tainted water, a VIA bus fueled by natural gas, and a mobile solar generator that powered other exhibitors.
The program was opened by Bexar County Judge Nelson Wolff, who penned a narrative for the occasion that drew on the history of the region and its settlers and the oil boom and bust cycles that have shaped it over the last century. He described the Eagle Ford play as something bigger and better than anything that has come before it.
“Its’ not over,” Wolff told the audience.
Long-impoverished South Texas, a region where many once faced a choice of “drugs or food stamps,” has been “fundamentally changed” by the Eagle Ford boom and is now seeing the emergence of a growing middle-class, Cisneros said. Tens of thousands of additional jobs will be created over the next decade in the region and projected numbers for job creation during 2011 and 2012 have been greatly surpassed, he said.
“San Antonio’s job is to produce the technical talent for (oil and gas jobs/technology),” he said.
Study results from the Institute of Economic Development at UTSA were cited to underscore some of the dramatic growth numbers cited by the panelists, although panelists suggested some of those numbers already have been dwarfed by even more optimistic growth numbers.
A primary concern of stakeholders is that the region avoid what many see as the inevitable boom and bust cycle.
“This is very, very, very good – but it’s not going to last forever,” Cisneros said, speaking to the non-renewable nature of oil and gas resources. The region needs to plan for the future by strengthening education systems, investing in public infrastructure, and future economic development, he said.
Though the region is seeing a rising middle-class population, many towns are struggling to attract investors to develop permanent infrastructure to support the new arrivals. Developers and lending institutions, it was suggested, are loath to invest in new housing out of fear the market will be a fleeting one.
Robertson said Marathon employees are well-paid, as are workers in other companies active in the Eagle Ford, and they are in South Texas to stay if their families can find good homes.
“Eagle Ford is almost without peer in terms of return on investment,” Robertson said, adding that oil and gas companies plan to spend approximately “$13 billion on developing South Texas in 2013.”
Combs, however, rejected the moderator’s suggestion that Texas incentivize housing developers in the same manner it offers economic incentives to business. A more sensible course, Combs said, would be for communities to invest in themselves to become more attractive destinations not just for oil patch workers, but also their spouses.
“If (the wife of a worker) comes down for a visit and there’s nothing nice to look at or do, why would she want to stay?” Combs said. “All you need is three-to-five people who get together and have a shared vision” to organize events and make aesthetic improvements.
Combs drew a laugh when she offered South Texas communities a one word piece of advice for beautifying their landscapes: “Flowers,” she recommended.
Combs said the state likely will divide $4 billion from the Rainy Day Fund to create revolving credit lines for municipalities and other local entities, such as water districts, to support water development projects and fund road improvements and repairs.
“However, the constitutional spending limit is lower than the available amount (in the Rainy Day Fund),” Combs said, but that technicality will likely be amended during this legislative session.
Recent growth in the Rainy day Fund has been driven by the Eagle Ford, Permian Basin and other oil and gas production, she noted, which seems to be creating a growing consensus among the state’s political leadership to return some of that money for infrastructure improvements.
Gov. Rick Perry‘s State of the State address – which took place during the same time as the forum on Tuesday – seemed to echo this likelihood with similar initiatives. His approval would suggest that Republican leaders may be on board with this allocation of the Rainy Day Fund.
“They’re not living in the real world,” Marston said. “We actually think, if done right, natural gas can be a boom for the environment.”
Instead, Marston said, environmentalists should be working with regulators and the oil and gas industry to discover best practices and ways to solve problems. Individual companies or sites may be guilty of contaminating water supplies, “there are real problems, people are suffering from that,” he said, but it’s not the entire process of hydraulic fracturing that is to blame.
Other environmental groups, such as the Sierra Club, disagree.
Natural gas is generally seen as a “cleaner” fuel than coal, because the process releases comparatively little CO2 into the atmosphere. However, Marston noted, if a natural gas operation leaks 3.4% of its total, it would then be worse, or “dirtier,” than coal.
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According to the EPA, “Pound for pound, the comparative impact of (methane/natural gas) on climate change is over 20 times greater than CO2 over a 100-year period,” and oil and gas systems account for approximately 37% of total methane emissions in the U.S.
“What we’re leaking is product,” he said, so it’s in the industry’s best interest to solve leaks, that is, if the leak is big enough and fixing it is less expensive than recovering the loss.
“Natural gas should be viewed as a transitional fuel,” Marston said, rather than a replacement for coal or an alternative to long-term sustainable alternatives, such as solar and wind.
The potential economic benefits of the Eagle Ford Shale region is huge and, perhaps, still not fully comprehended or appreciated by the general public and even some business sectors – such as housing developers – that could benefit directly. But all booms come with potential consequences if ignored amid the excitement created by such unexpected prosperity. San Antonio is well-positioned to reap the benefits – but not without careful considerations for the potential consequences and strategic investments in education, technology and water management.
“Let’s do this right,” Cisneros said, “Let’s not make a mess.”
Robert Rivard contributed, greatly, to this article.
Related Stories on the Rivard Report:
The Texas Lege: Do the Right Thing, Please January 2013
Higher Water Rates for a Sustainable Future October 2012