Bloomberg News

Eagle Ford Shale Boom Fuels ‘Madhouse’ in South Texas Counties

March 15, 2013

Eagle Ford Shale Boom Fuels ‘Madhouse’ in South Texas Counties

A floor hand signals to the driller to pull the pipe from the mouse hole on a drilling rig near Encinal in Webb County, Texas, on March 26, 2012. Photographer: Eddie Seal/Bloomberg

For the last 30 years, the quiet, dusty crossroads of Texas Routes 119 and 72 in Yorktown mostly consisted of a Dairy Queen on one corner, a gas station across the street and some traffic, usually heading somewhere else.

Ranchers joked that it was possible to make a small fortune in raising cattle on the mesquite and cactus range -- if you started with a very large fortune. Population in rural, south Texas grew slowly or not at all during the 2000s as suburbs boomed around Houston, Dallas and Austin.

The shale boom has changed all that here and throughout an oil-rich swath of counties extending to the Canadian border. Figures released yesterday by the U.S. Census Bureau show counties in south and west Texas are now among the fastest- growing places in the U.S. as oilfield workers rush to the Eagle Ford Shale. The underground formation holds an estimated 3 billion barrels of oil and 150 trillion cubic feet of natural gas reserves.

“It’s a madhouse,” J.E. Wolf III, a Yorktown real estate broker, said in a telephone interview. “I’ve been selling real estate here for 43 years, and I’ve never seen it like this.”

While half of the 10 fastest-growing U.S. counties between 2011 and 2012 were in North Dakota, where the Bakken shale formation draws people to the sparsely populated Great Plains, Texas is catching up.

Since the 2010 Census, Yorktown’s DeWitt County has grown 1.8 percent, more than four times faster than the entire previous decade’s 0.4 percent growth rate.

New Businesses

A new Southern Inn and Suites sits near the intersection in Yorktown, offering free wireless and challenging the aging White Top Motel on the east side of town for traveler dollars. A Mexican restaurant has been reopened, and a Valero gas station with a café competes with the Texan gas station across the street for convenience store supremacy.

An abandoned building has been turned into a shop offering donuts and kolaches, a south Texas breakfast snack consisting of a buttery roll wrapped around link sausage -- cheese and jalapeno peppers optional.

The Dairy Queen isn’t the only game in town any more, although it’s clearly the establishment of choice at lunch for a dozen oilfield workers conspicuous in their red jumpsuits and hardhats.

Eagle Ford

Those workers earn their wages at the Eagle Ford formation, which stretches from the far north Houston exurbs southwest to the Mexican border. While the shale was a known quantity for a generation of geologists, techniques for extracting oil and gas from it have only become practical in the last decade. The first Eagle Ford well was drilled in 2008.

The formation could provide as many as 900,000 barrels per day by 2016. The Permian Basin, deep in west Texas, may reach 1 million barrels daily, Texas Railroad Commission Chairman Barry Smitherman said in a March 6 interview in Houston.

By 2020, Texas’ crude output may exceed the 3.45 million barrels a day seen in 1972 if prices stay high enough to make drilling economical, he said.

Eagle Ford oil output rose to more than 352,000 barrels a day in 2012, compared with 358 barrels a day in 2008, according to the commission. The number of drilling permits surged to 4,143 in Eagle Ford last year, up from just 26 in 2008, the commission said.

In Yorktown, trucks filled with pipes or fluids rumble down Main Street, with smaller, late-model pickups following them like fish. Campers and recreational vehicles dot the roadsides in the shade of live oaks. A good parking spot in the area can command as much as $500 per month.

‘All Full’

While the shortage of housing stock doesn’t appear as critical as it did in North Dakota during the early days of the Bakken boom, at least a half-dozen trailers and mobile homes are parked in a pasture on the outskirts of town.

People aren’t buying homes. Wolf said a 2,000-square-foot, three-bedroom, stone house has been marked down from $225,000 to $165,000. He has rented 30 homes in the area, though, and the calls keep coming.

“They’re all full,” he said. “I’m keeping a waiting list.”

The city of Midland in the Permian basin was the fastest- growing metropolitan area in the country during the last year, posting a 4.6 percent gain to 151,662 people. Soaring demand for energy workers there has driven up wages, and not just for jobs in the oil and gas fields.

“You can make $15 an hour washing dishes at Wendy’s,” said Karl Gulick, vice president of Western National Bank in Midland, one of the largest independent banks in the state.

$75,000 Teens

Boomtown anecdotes among locals are as common as one-liners in a stand-up routine: The granddaughter who can’t get married in town because there aren’t available hotel rooms for guests; teenagers who earn $75,000 driving trucks the day they graduate from high school; the Cracker Barrel that couldn’t open until three months after the building was finished because of a lack of workers.

On a recent drive through town on Big Spring Street, there were few fast-food restaurants or local banks without a “Now Hiring” sign. A one-night stay at the Fairfield Inn cost $300.

“If you can pass a drug test and get a commercial driver’s license, you can get $80,000 in one phone call,” Gulick said.

The Eagle Ford is responsible for one of every 50 jobs created in Texas, according to a study last spring by the Federal Reserve Bank of Dallas. Landowners are benefiting as well. The Fed study conservatively estimated that mineral rights are being assigned for $1,500 per acre over a 5-million-acre territory, yielding $7.5 billion in compensation since 2007.

Sunbelt Rising

Large Texas cities that feed equipment and workers to the fields are prospering, recording the biggest numerical population increases in the nation.

The Dallas metropolitan area added 131,879 people during the last year, more than any other in the nation, raising its total to 6.7 million. The Houston metro area increased its population by 125,185 to 6.2 million. The two Texas cities gained more people than the Seattle, San Francisco, Miami and Phoenix metro areas combined.

William Frey, senior fellow at the Washington-based Brookings Institution’s Metropolitan Policy Program, said the latest Census estimates could be an early sign of a resurgence of migration to the Sunbelt.

“We may be turning a corner here,” he said.

To contact the reporter on this story: Frank Bass in New York at Fbass1@bloomberg.net

To contact the editor responsible for this story: Flynn McRoberts in Chicago at fmcroberts1@bloomberg.net; Mark McQuillan in Washington at mmcquillan@bloomberg.net


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