South Texas towns helped by energy boom

Marketplace Contributor Jul 6, 2012

South Texas towns helped by energy boom

Marketplace Contributor Jul 6, 2012

Sarah Gardner: One economic indicator we’re pretty obsessed with these days is gas prices. And if you drive a car, you’re probably thrilled when gas and oil prices fall.

But the ebbing price of petroleum is causing anxiety in some parts of the country. Take South Texas, where several small towns enjoying an oil boom stand to gain from expensive crude.

Andrew Oxford reports.

Andrew Oxford: The outskirts of Pearsall, Texas, are scraggly, dry and flat. Blake Olson and John Pettit admit it’s an unlikely place to open a new restaurant.

Blake Olson: A year ago, I don’t think anybody would’ve said ‘Hey, let’s go to South Texas and open a business.’

That’s Olson. With about 10,000 people, Pearsall is a small town. Olson used to work in Austin, which is about two hours to the north of here. He was a tour manager in the music industry. Now he’s capitalizing on an oil and natural gas boom that has brought more than 50,000 workers to South Texas in just three years. The Pearsall General Store opened about two months ago. Pettit says they have been busy.

John Pettit: The semipermanent population has just exploded. As far as goods and services, there’s not the capacity locally — in any of these small communities — to service the people that are coming in. Whether it’s food or drink or gasoline.

Energy companies like Chesapeake and Anadarko come to drill on what’s known as the Eagle Ford shale. The oil and gas formation stretches from the Mexican border up past San Antonio. Companies have been able to start drilling quickly because of the technique known as fracking. In 2008, only 13 drilling permits were issued in the region. In 2011, more than 3,800 permits were granted.

Thomas Tunstall has been studying the Eagle Ford shale. He’s an economist at the University of Texas at San Antonio.

Thomas Tunstall: The best line I’ve heard about the activity in the Eagle Ford area is to look at it as kind of a bonus. Bank it and engage in medium and long-term planning and use the money to have suitable infrastructure in place that will attract either new visitors, new residents, or new businesses.

Across South Texas, some ranching families being offered more than a million dollars for mineral rights. Several people told me there was a job for anybody who could pass a drug test. Even fast food restaurants are paying $15 an hour. But what happens when the energy companies leave? How long can the Eagle Ford shale last?

I put that question to John Pettit, back at the Pearsall General Store.

Pettit: What’s the long-term? You hear the estimates. You get the pessimists saying three years, the eternal optimists are saying thirty years. I think it’s probably somewhere in between there.

Mike Wilson: You don’t want to let short-term greed lead you to long-term problems.

That’s Mike Wilson. He’s the president of Security State Bank in Pearsall. Its been in business for a while.

Wilson: From 1925.

The bank was around for the last energy boom — and the one before that. Even though deposits are up 82 percent since 2009, Wilson is cautious about loaning to businesses that are relying on the energy companies sticking around.

Wilson: If the price of oil drops and you’ve invested in a bunch of motels that, now, don’t get enough people to pay the light bill — much less, make your payment — it might be great for three years but it might hang you in years seven, eight, nine, and 10.

Or the residents here could wait for the next energy boom. They’re already talking about an even bigger gas deposit that’s located under the Eagle Ford shale.

In Pearsall, Texas, I’m Andrew Oxford for Marketplace.

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