How the Oil Boom is Impacting San Angelo

Texas is producing more oil than it has in 30 years, said Chamber Luncheon keynote speaker Dr. Thomas Tunstall Tuesday at the Museum of Fine Arts. Tunstall holds a Ph.D. in Economics and Public Policy and is the research director for the Institute for Economic Development at The University of Texas at San Antonio.

His latest research centers on our country’s current oil boom spurred by the shale plays in the Bakken of North Dakota, the Eagle Ford shale in south Texas, and the more traditional oil production in the Permian Basin, including the shale oil exploration in the Cline Shale that lies underneath western Tom Green County and counties west, north and northeast of San Angelo.

San Angelo in the Catbird Seat

Tunstall said that the Cline Shale, the hyped shale oil formation that covers several counties west and northwest of Tom Green and includes a small portion of our own county, has not yet played out because it is so much easier and less expensive to harvest the Permian Basin’s Spraberry formation that is currently the hottest-producing area near here. Developing the Cline will take time, he said.

That doesn’t mean San Angelo isn’t going to reap the benefits of the oil boom. Much to the contrary, San Angelo will be among the top beneficiaries, he said.

Tunstall referenced Bexar County and San Antonio as the primary source for skilled labor, housing inventory, and logistical support for the Eagle Ford. The inference wasn’t lost on the audience that San Angelo will continue to grow as oil exploration and production moves closer and closer to the edge of Tom Green County, and its county seat, San Angelo.

Tunstall headed the research for the December 2013 economic Impact study his department at UTSA conducted in partnership with the West Texas Energy Consortium. Phase I of the study is published and covers a 10-county producing region (Fisher, Glasscock, Howard, Irion, Martin, Mitchell, Nolan, Reagan, Scurry, and Sterling counties). The study also looked at the indirect economic impact of counties neighboring the core counties, including Brown, Coke, Coleman, Runnels, Taylor, and Tom Green counties. (Download the complete report for free here, 93 pages in *pdf)

Of the ancillary counties, Tunstall’s study shows Tom Green as reaping the most economic benefit from the oil boom as of the end of 2012:

• $111.5 million in output impact (revenues)
• 460 fulltime jobs supported (revenues)
• $59.3 million in gross county product impact (value added)
• $13.9 million in salaries and benefits paid to workers

Abilene’s Taylor County was a distant second, with $56.4 million in output impact.

By 2022, Tunstall’s study reveals that Tom Green County’s economic growth will increase to:

• $148.5 million in output impact (revenues)
• 665 fulltime jobs supported (revenues)
• $78.9 million in gross county product impact (value added)
• $19.1 million in salaries and benefits paid to workers

Abilene’s output impact increases to $63 million by 2022.

In the core counties, where all of the oil is, for 2012:

• $14.5 billion in economic output
• 21450 fulltime jobs supported
• $1 billion in salaries and benefits
• $6.2 billion in gross regional product impact (value added)

By 2022, this grows to:

• $20.5 billion in economic output
• 30,540 fulltime jobs supported
• $1.8 billion in salaries and benefits
• $9.4 billion in gross regional product impact (value added)

It is important to note that the 30,450-fulltime workers will not all be living in places like Barnhart. Some will live and commute from west Texas population centers like San Angelo, Big Spring, Abilene and Midland. Many will occupy back office and engineering jobs in high rises in Houston and the Dallas/Fort Worth Metroplex.

New Pipelines

Tunstall showed a map of new pipelines being built or enhanced to handle the volume of oil moving out of the center of the country. Three pipelines travel near San Angelo. A southern pipeline roughly follows Interstate 10 with a spur through Odessa, then through Austin terminating in Houston. Two new pipelines originate in Colorado City, with one terminating near refineries in Beaumont, and the other near Galveston Bay.

More significantly, Tunstall said, are the pipelines being constructed out of Cushing, Okla. to transport not only new Bakken crude, but oil from Canada to the Gulf Coast. “Once these pipelines are complete, they will actually overwhelm the refining capacity on the Gulf Coast, forcing ocean tankers and barges to transport crude from Texas oil terminals to refineries along the U.S. East Coast,” he said.

Record State Revenue

Oil and gas production in Texas has been generous to the state's government.

“One of the reasons the Rainy Day Fund, officially known as the Economic Stabilization Fund, is going to be over $14 billion next year is because of the severance taxes coming out of the oil and gas being produced out here [Eagle Ford and Permian],” Tunstall said. By 2022, Tunstall said, the 10 core counties will contribute $334 million per year in oil and gas severance taxes.

Our State Representative Drew Darby may hope some of that money will go towards budgets to fix our torn up Farm to Market roads and state highways. Tunstall cautioned, however, that population centers have shifted drastically to favor the urban centers of Houston, Dallas, and the I-35 corridor over the past 50-60 years. As rural areas like San Angelo have lost the number of state senators and representatives, urban centers have gained representation. “And the big cities have their own highway problems with more votes to get funding to fix them,” he said.

San Angelo’s best hope to overcome this disadvantage is to partner with other rural areas in the state and work in concert to fight for their fair share of money from the flush state trough, Tunstall said.

And it doesn’t hurt that Darby sits on the Texas House Appropriations Committee.

See also Tom Green County Judge Steve Floyd's economic development plan.