Oil and gas creating boomtowns in Texas

By Frank Bass

Bloomberg News

For 30 years, the quiet, dusty crossroads of Texas 119 and Texas 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 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 throughout an oil-rich swath of counties extending to the Canadian border. Figures released last week by the U.S. Census Bureau show that counties in South and West Texas are among the fastest-growing places in the U.S. as oil workers rush to work in the Eagle Ford Shale, an underground formation that holds an estimated 3 billion barrels of oil and 150 trillion cubic feet of natural gas reserves.

"It's a madhouse," said J.E. Wolf III, a Yorktown real estate broker. "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 from 2011 to 2012 were in North Dakota, where the Bakken Shale has drawn 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.

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 reopened, and a Valero gas station with a cafe competes with the Texan gas station across the street for convenience store supremacy.

An abandoned building has been turned into a shop offering doughnuts and cheese and jalapeño kolaches. The Dairy Queen isn't the only game in town anymore, although it's clearly the establishment of choice at lunch for a dozen oil workers conspicuous in their red jumpsuits and their hard hats.

Those workers earn their wages at drilling sites in the Eagle Ford, 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 developed in the Barnett Shale in North Texas for extracting natural gas from the rock have been transferred to plays with oil, which commands a far higher price.

The first Eagle Ford well was drilled in 2008, and the formation now could provide as much as 900,000 barrels of oil per day by 2016. The Permian Basin, in West Texas, may reach 1 million barrels daily, said Texas Railroad Commission Chairman Barry Smitherman.

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

Eagle Ford boom

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

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."

In the Permian Basin, Midland was the fastest-growing metropolitan area in the country for the 12 months ending July 1, 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 for 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 it couldn't find enough 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 1 in 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.

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

Even as gas drilling has receded in the Barnett Shale, Dallas-Fort Worth added 131,879 people during the last year, more than any other metro area 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.

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