DeWitt County Judge Daryl Fowler has had a front-row seat to the economic windfall that is the Eagle Ford Shale. He’s seen the unprecedented benefits the recent oil and gas drilling has brought his mostly rural county, such as the creation of jobs with starting wages that more than double the area’s $26,000 per capita income and help to create opportunities for the area’s young adults that have never existed before.
“We want our kids to be able to come back here and enjoy the lifestyle of living in a rural community,” said Fowler, who has a 20-year-old son. “The income that comes back here and circulates creates an even more vibrant community for us.”
But driving down the roads on the way to work isn’t a pleasant experience. Roadside trash has become a problem; litter from trucks and the increased traffic is everywhere. That’s small potatoes though. The bigger problem is that county roads have been shredded to pieces.
Most overweight trucks associated with oil drilling weigh up to 84,000 pounds, though some weigh almost twice that. Unfortunately, most county roads are built to withstand only 58,000 pounds. This is problematic because each well built requires about 1,184 loaded trucks — the equivalent of 8 million cars or a cumulative total of 3 to 6 million pounds — just to bring that well into production; another 353 trucks are needed each year to maintain the well, with another 997 trucks needed for refracturing every five years, according to the Eagle Ford Task Force Report.
Dozens of overweight trucks coming and going from well sites at a time have resulted in roads being chipped away. Potholes grow inches deep and feet wide. Dust clouds in some areas have become so thick that residents have complained that they can’t let their children play in their yards.
When oil and gas production first started booming in 2010, the county tried to keep up with its negative effects. It tried repairing and rebuilding the broken roads, but the roads would just deteriorate again because the overweight traffic never stopped.
“Our county road system is our largest asset and our largest liability right now. We are constitutionally tasked to keep those roads maintained for the public safety, but the limitation has been having the financial resources to do it,” Fowler said, adding that though the county has benefitted economically from the oil and gas drilling, the two-year lag time between when drilling first began and when the county saw the financial gains on its tax roll took its toll.
“Now we have to go in and actually rebuild sections of a road at a time, and that is taking our road crews away from their other responsibilities and costing an inordinate amount of money,” he said. “Where we can, we are going in and adding gravel to the edges of our existing roads and armoring them up to accommodate the wide trucks coming in and out, so they are not running in the ditches.”
But many of the roads are just too narrow to survive the traffic and can’t be widened without obtaining additional right-of-way space from landowners.
Fowler said the county has about 342 miles of county roads currently facing daily oil and gas traffic.
“Of the 342, there are 99 miles that need to be widened to a high-capacity farm-to-market class, which could cost up to $1.9 million per mile for ROW acquisition, moving of fences and utilities, engineering and construction,” he said. “Another 187 miles of the 342 need widening to a lesser degree, but could still cost as much as $920,000 per mile. The cost estimates come from TXDOT or the Texas Transportation Association. The remaining miles are short roads with only a few potential wells to be drilled on the land leased nearby. They would require only annual maintenance. Annual maintenance — adding up to 8 inches of gravel base to an existing road — can run $80,000 per mile.”
Fatalities Pile Up
In nearby Karnes County, County Judge Barbara Shaw said that money shouldn’t be driving the road infrastructure funding issue. There, roads are so bad that the issue is about public safety and loss of life.
On Feb. 15, seven children were injured in a school bus accident along Highway 80 involving a pickup truck and an 18-wheeler. Two oil field workers in the pickup truck were flown to a nearby hospital, according to news reports.
That’s just one of many accidents that have happened on Karnes County and neighboring county highways and roadways since drilling in the shale began, Shaw said, estimating that the number of roadway fatalities in her county has increased from about two in 2010 to 25 in 2012. Many of the victims are people she knows personally from being so active in the tight-knit community.
“No parent should have to put their children on a school bus in the morning hoping that the school bus is going to be okay,” she said. “I know this is a big fight over money, but with our road conditions, I’m not burying dollars. I’m burying people.”
And the problem isn’t just road conditions, but the type of road traffic prevalent in the county: 18-wheelers that are hard to see around and cause anxiety for residents driving along roadways that badly need to be widened.
“Our traffic is a different traffic. In your traffic, you can see where you’re going. In our traffic you’re meeting 18-wheeler after 18-wheeler after 18-wheeler or something carrying large amounts of weight. You’re not meeting normal sized vehicles. You cannot take one of these vehicles head on and be okay,” she said.
Residents have come up to her at funerals and other functions pleading for improved roads, she said, adding that senior citizens say they are afraid to leave their homes because they don’t want to drive alongside the heavy truck traffic.
“If you have young people pulling flat bed trailers down them, the ruts in the roads are going to throw those trailers off if the weight is not distributed properly and these people are trying to overcorrect and get back on the road, so we’ve had a lot of flat bed incidents. You’ll be behind a flatbed trailer and you can see whenever they hit a bad spot in the road and they start shaking and they are trying to regain control, they fishtail,” Shaw said. “I know a lot of the elderly people in our community have told me they feel they are shut in.”
Fowler also said he was concerned about roadway safety. Roadways consumed by the heavy truck traffic become dangerous for regular drivers, as well as for the heavy truck drivers themselves. In some counties, school buses have stopped driving down county roads due to the steep drop-offs and deep potholes. Impatient driving in areas not used to the heavy traffic is another concern. In other cases, tanker trucks have gotten stuck after hard rains and have had to be hauled out by bulldozers, he said.
The new roadway dangers are so great that TxDOT partnered with oil and gas companies and the Department of Public Safety to create a “Be Safe. Drive Smart” campaign to raise awareness of the hazards and encourage safer driving.
But Shaw said she believes more should be done. She would like to see an increased presence of highway patrol cars so that drivers slow down and stop multi-tasking.
“In Texas, the gold standard for safety has always been a black and white car. When you see that black and white car, you know that’s a safety solution. We’re not seeing enough of them,” she said. “We have to look at the humanitarian aspect of this. We have to look at how it’s affecting their small counties, how people are being hurt, how things are changing.”
The Economics of Road Repairs
Since the recent drilling boom began, studies have shown that it’s much more expensive to rebuild a road after it’s been destroyed than it is to armor up a road before the traffic hits. In testimony to the House Appropriations Subcommittee on Budget Transparency and Reform regarding the possible creation of a short-term grant to help address the already existing problem, Texas Department of Transportation (TxDOT) Director John Barton said the reactive cost of fixing 12.61 miles of FM 2688 will be $13,756,000, compared to the proactive cost of $2,004,536, assuming there are no more well permits issued that would impact the road.
But counties expecting an influx of overweight truck traffic don’t see financial benefits on the tax rolls until years after the drilling begins, making it nearly impossible to proactively armor county roads without state funding. “You don’t have money in the bank, you don’t have the tax base to solve the problem,” Fowler said.
Fowler said several of the oil and gas companies — including Petrohawk Energy, which is now the county’s largest taxpayer — volunteered to help pay some money for road repairs to make up for the lag time.
“They came forward in the summer of 2010, recognizing that they were creating a lot of damage, recognizing that they have a duty, and offered us an $8,000 donation per well that they drilled as an interim source of funds,” Fowler said, adding that the county’s second largest taxpayer, Pioneer Natural Resources, followed suit. Together, the companies gave the county $2.5 million over a two-year period to make up for their damage.
Shaw said her county has received about $7.5 million in donations from oil companies, but has had about $200 million worth of damage to its county roads.
“It’s not above us to ask for something,” she said. “But we have bridges that are in horrible shape on little county roads, areas you can’t get through, areas that have literally just been destroyed.”
And not all oil companies have responded charitably. Some companies didn’t volunteer to pay anything, or only paid when they absolutely had to so that trucks could move down the road, as was the case in the tanker-truck bulldozer incident. “After that episode, they came to us and wanted to donate, do whatever they could, to get that road fixed up so they wouldn’t have any additional impediments to business,” Fowler said. “It cost that company $190,000.”
Once the oil and gas companies were added to the DeWitt County tax base, the county was able to add $3.6 million to its budget while keeping its tax rate the same. But it would have only been able to generate $472,000 if it had lived within the constraints of the tax code, which states that counties cannot increase property taxes by more than 8 percent each year without facing a rollback election — another problem counties face once drilling starts.
“It certainly raised a lot of eyebrows when we had to start advertising for a 53 percent revenue increase even though we didn’t raise the tax rate,” said Fowler, adding that counties face another problem once the drilling stops and the oil and gas money disappears from the tax base.
“In the future, if this is not repaired and we adhere to the rollback rate limitations, we could see a tax rate approaching zero. That’s how drastic this is,” Fowler said, adding that he has spoken to the Legislature about amending the tax code so that minerals can be exempted as a new improvement when counties make their tax rate calculations.
A Statewide Issue
The Texas Railroad Commission has issued hundreds of drilling permits for DeWitt County this year and hundreds more all across the Eagle Ford Shale, a 23-county area across South Texas. Besides DeWitt County, much of the drilling has taken place in Karnes, La Salle, McMullen, Dimmit, Gonzales, Webb and Live Oak counties. For a week in January, there were 255 rigs running across the shale.
Of course, the Eagle Ford Shale is just one oil and gas economic generator for the state, and it’s not the largest. On Feb. 15, 839 rigs operated in shales across the state, including the 403 in the Permian Basin in West Texas, 47 in the Granite Wash Formation in the Panhandle, 34 in the Barnett Shale in North Texas and 21 in the Haynesville Shale in East Texas, according to the Baker Hughes Rig Count. While the Eagle Ford Shale is expected to hold about 7 to 10 billion barrels of recoverable oil — a production of about 2.4 million barrels of oil a day by 2020, according to Hart Energy estimates — the new 140-mile-large Cline Shale in West Texas is expected to recover about 30 billion barrels of oil, according to media reports.
That is a huge long-term economic boost to the state, but also a lot of damage to both state and county-owned infrastructure.
“The research quantified the cost for rebuilding the infrastructure being consumed by these energy-related activities at approximately $2 billion per year on the state’s highway system and an equivalent amount on local transportation systems, such as city streets and county roads,” stated the Task Force on Texas’ Energy Sector Roadway Needs in its report to the Texas Transportation Commission, released in December.
That report lists a variety of potential methods for paying for the infrastructure, including road use maintenance agreements, property tax code alteration, increasing the commercial driver’s license fee, increasing fines levied on overweight permit violators, the creation of an excise tax on overweight tires and public-private partnerships, among other ideas.
So deciding how to pay for the damage to county roadways resulting from oil and gas drilling is a statewide issue and a topic that has gained significant attention from the Legislature this session. But whether it’s gained enough attention in the face of other large-scale issues, such as funding the state water plan, remains to be seen.
The state reaps financial rewards from the drilling through a variety of methods:
It collects a 4.6 percent severance tax on the market value of produced crude oil and a 7.5 percent tax on the market value of produced natural gas. A quarter of that money goes toward the permanent school fund and the rest goes into the rainy day fund. According to the Eagle Ford Shale Task Force Report, in 2011, the state collected $323 million in severance tax just from the Eagle Ford Shale counties alone.
The leasing of right-of-ways to the drilling companies, even if the right-of-ways are along county-owned and maintained roads. During a presentation at the TAC Pre-Legislative Conference last year, Fowler said the state earned $1.9 million in just one year from leasing right-of-ways in DeWitt County.
The collection of fees from overweight truck permits, which are issued for trucks involved in the development of both oil and gas rigs and wind farms. Each 2060 permit costs $245, with money going directly to the state.
Fowler and others have advocated for plans that would take 25 percent of the money collected from the severance tax and put it toward county road infrastructure projects in impacted areas, either directly or via a grant program that would be administered by TxDOT and would require that counties match funds. But that would decrease the amount of money put into the rainy day fund, which many legislators would like to see go toward water planning.
Of course, without quality roads, oil and gas production would be impossible, and that money wouldn’t be in the rainy day fund at all.
“Using the severance tax is highly appropriate to solve some of these road issues,” Fowler said. “In my mind, there’s a strong correlation.” ✯