Cities in South Texas have been through a lot in the recent past. Around seven years ago, seemingly from out of nowhere and almost overnight, the Eagle Ford area was inundated with oilfield workers, housing shortages, crowded restaurants and busy roadways. Starting with just a handful of oil and gas rigs in 2010, the shale field eventually peaked at over 250 rigs in 2014. And yet even with the drop in energy prices since then, the Eagle Ford continues to produce over a million barrels of crude oil and condensate each day. Cumulative production stands at around 2 billion barrels, with total estimated recoverable oil and condensate at 10–12 billion barrels.
To date, The University of Texas at San Antonio Institute for Economic Development has assembled four economic impact reports on the Eagle Ford chronicling its development since 2010. The most recent report was released in 2014 and covered activity through calendar year 2013. A fifth study is now in the works — to be released in early summer — will provide Eagle Ford estimates for 2014 to 2016.
One of the initial concerns about the boom and bust cycle of the oil and gas industry was the way in which communities in South Texas would deal with those ups and downs. In order to learn more about how this process has played out, researchers from the Institute for Economic Development recently ventured into South Texas. Not surprisingly, rig counts had dropped below 40, following the price of oil as it went as low as $26 per barrel in February 2016. However, more recently, rig counts rebounded above 60, and West Texas Intermediate crude prices have held steady above $50 per barrel until March 9.
In our travels to the Eagle Ford, the research team has spoken with Larry Dovalina, the City Administrator of Cotulla, Texas; Don Tymrak, the former City Manager of Karnes City, Texas; and Genora C. Young, the President and CEO of the Gonzales Economic Development Corporation (EDC). Despite obvious challenges, the news is encouraging.
In Cotulla, Dovalina told us that the city’s free trade zone approval is expected soon, which will include Gardendale, Texas, as well as land south of Cotulla. With additional tax revenue as a result of Eagle Ford activity, the city has extended its airport runway to 5,000 feet, which gives Cotulla the ability to land small jets, providing the city with an edge over nearby general aviation airports that have shorter runways.
Buoyed by increased sales and property tax revenues from Eagle Ford-related activity, the city has constructed ballfields and a natatorium. The Cotulla ISD built a new elementary school and football stadium, and purchased additional land.
In Karnes City, Tymrak told us that community leaders have designated new parks and a stadium scoreboard with its additional tax revenue from Eagle Ford activity. Street infrastructure has been upgraded with an all-weather surface. Funding for a drainage project resulted in a new cross-country park. Tymrak indicated that many of the young people who had left are starting to return to Karnes City, capitalizing on newly available economic opportunities.
Young told us that several new businesses are opening up downtown. Gonzales, Texas’ Come and Take It festival occurs annually in October, a three-day event that sells out all of the hotels in the area. Estimated attendance is between 15,000 and 20,000 people.
Here again, younger residents who had moved away are returning, in part because they can find housing close enough to walk to downtown. The city offers a variety of economic incentives for business startups, and the EDC focuses as much on assisting existing businesses as it does on attracting new ones to the city. Current priorities for the EDC are to revitalize the downtown area and increase the stock of single and multifamily housing.
Other cities and counties in the Eagle Ford have also proactively worked through the ups and downs of oil and gas industry activity. Details of those and other developments, along with the most recent economic impacts will be included in the upcoming Eagle Ford Shale Economic Impact Report.
About the author: Thomas Tunstall, Ph.D., is the senior research director at the Institute for Economic Development at The University of Texas at San Antonio. He was the principal investigator for numerous economic and community development studies. He has published peer-reviewed articles on shale oil and gas, and has written op-ed articles on the topic for The Wall Street Journal. Dr. Tunstall holds a Ph.D. in economics and public policy, and an M.B.A. from The University of Texas at Dallas, as well as a B.B.A. from The University of Texas at Austin.
Photos courtesy of Thomas Tunstall