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When I was preparing for my first trip to the Marcellus Shale, I was approached by someone who lived in Upstate New York to discuss the issues that was going on in DISH as well as the Barnett Shale in general. As we began discussing the lessons learned here about leasing, and the amount of money given at lease signing, he interrupted me to state that in several small towns in the Upstate New York area, they were ready for drilling to begin…for the jobs. He further stated that everyone was waiting to get “their new white pickups and Halliburton hard hats”. That they were not even concerned about the leases and that most had already leased for one or two dollars per acre. He continued to state that when I mentioned the $ 30,000.00 per acre that was once offered in the Barnett Shale, some would collapse in tears, knowing that they had been taken advantage of by this industry.
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Throughout my several tours around the country, the question about jobs and the vast influx of money into the local economy came up constantly. I quickly found that my new friend was right, there were a large number of people who really thought they would soon have a new white pickup and Halliburton hard hat. I always asked the crowd, “how many certified pipeline welders do I have in the room?” They seemed to quickly get the point that most of the folks in rural New York would not have the skill set required to work in this industry. Although, I do know of folks here in Texas that started working on a drilling rig with no experience, and worked their way into a nice paying job, it is unlikely with the slowdown, that the industry would need to hire people with no experience. So any jobs would be entry level and low paying. There are plenty of folks out of work with experience in the industry.
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In areas of Pennsylvania where gas exploration had begun, there was a noticeable amount of vehicles with Texas plates that highlighted this point. I was almost offended when the local population complained about the amount of Texans that followed the natural gas boom to this area. It was apparent that the population increase was not something that they were yet comfortable with.
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While growing up in the Oklahoma oil fields, we went through the boom and bust cycle several times. It seemed as though most of the males would go to work in the oilfields after graduating high school and made a decent living for themselves. However, with the economy based upon this one industry, the downturns were pretty severe on the local economies. When the bust came, it left everyone scrambling to find another job. However, with the economy based on this one industry, most of the jobs were either in the industry or supporting the industry. Therefore, in the bust, there were not many jobs to be found. This resulted in many of the small rural towns to simply dry up, with people moving away to find work.
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On a recent trip to New Mexico, I met with Gilbert Armenta, the New Mexico rancher depicted in the documentary Split Estate. Mr. Armenta has spent his entire life living with the boom/bust cycle in Northwestern New Mexico. In this part of the country, the oil and gas industry is the predominant industry. As the industry has cooled over the last year or two, he stated that there was 12 % unemployment in that area. I might add that the Farmington, New Mexico mayor was nice enough to write a letter with some negative comments about yours truly, as well as talking about how great the industry was to him.
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One thing that I had heard on several occasions is that when the eventual bust comes, the crime rate goes up almost immediately. Mr. Armenta confirmed this fact during his presentation, that crime levels increase particularly during the bust cycles. He further stated that the crime that increased the most was robbery.
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What has happened in Mr. Armenta’s area is that it is solely an oil and gas economy. All other industries have moved on and therefore everything directly or indirectly is dependent on this industry. So even if you do not work directly for the industry, when the bust comes, you are affected. In our local area I have noticed over the past several years, that we have been going through a transformation to an oil and gas economy. In some areas of the Barnett Shale, the transformation has already taken place. We managed to avoid an economic catastrophe only because the industry has continued to drill when it wasn’t profitable, knowing that regulation was coming. Otherwise, many of the towns in the western part of the shale would have simply went away.
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It has become very tempting for cities to embrace the explorations for the quick shot of tax revenue with the budget shortfalls over the last couple of years. Falling to this temptation has led to more and more of the area transforming to this new economy. Unfortunately, when the bust comes, and we know it will, the entire area will be devastated. This may very well lead to this area being destroyed economically at some point, because we know that this is only temporary. It is key for cities to develop strategies for sustainable funding that is not primarily put on the backs of the taxpayer, and does not destroy future growth.
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Unfortunately, one city that comes to mind is the City of Fort Worth. This city has the largest number of gas exploration activities of any city in the world, yet financially is by far the worst in this area, having a 73 million dollar shortfall this year. Part of this expenditure is a $600,000.00 air study to determine if the exploration activities is harmful to public health. Fort Worth is also home to several of the exploration company’s headquarters. The downturn has affected everyone, but the city most dependent on the natural gas revenue, is the one doing the worst financially. As Tim Ruggiero would say “it does not take a PhD in economics to see there is a problem here”.
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Another thing that this does, is give the industry extreme leverage to demand things like tax breaks and loose regulations. They simply threaten to pack up and move somewhere else, and take the jobs with them. When it is an oil and gas economy, them leaving makes a ghost town. Although this is only a threat, local officials are held hostage by this threat. So they give in, and keep cutting the setback requirements like the City of Fort Worth continues to do, or they allow this industry continuously cut corners putting their citizens at risk.
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For some here it is too late to build a diverse economy, there will be booms and busts, it will be feast or famine. However, for some of you out there this does not have to be the case. Look ahead and do not let this industry take over your economy and hold you hostage like it is doing in many other parts of the country. Be very careful of what you wish for.
Calvin Tillman
Mayor, DISH, TX
(940) 453-3640
“Those who say it can not be done, should get out of the way of those that are doing it”
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