Dean Barber

A Revolution in the Making

In Site Selection on March 2, 2014 at 7:20 am

Living  in Texas, it would be easy for me to see this shale gas boom that our country is experiencing as something bigger than what it really is.

But the fact is more likely that you and I don’t fully comprehend just how big this thing really is. What is becoming clear is that shale gas is so big that it has global ramifications with the United States almost overnight becoming an energy powerhouse for decades to come.

All this has largely happened because of technologies developed here in Texas. Not only is this transforming the world stage, but it is changing rural communities across the nation in ways that are simply astonishing. 

Ask anyone with more than a cursory knowledge about the Bakken Shale play in North Dakota. I know from personal experience that economic developers in Pennsylvania are excited about the continuing possibilities of job growth as a result of Marcellus Shale play, which reached 13 billion cubic feet a day of natural gas production in 2013, over six times the level of 2010.

Friends in Ohio say the same thing will happen with the Utica Shale play there.

Shale Plays Everywhere

In the past couple of years, I have learned about shale plays where I never knew they existed. They have included the Fayetteville Shale play in Arkansas, and the Tuscaloosa Shale play in Louisiana, where announced billion dollar energy projects are now almost commonplace. The Haynesville Shale play extends from Louisiana into East Texas and is said to have great potential.

Speaking about great potential, Texas has it in spades. Of the nearly 1,800 operating oil and gas wells currently in production in the U.S., referred to by the industry as the “rig count,” nearly half are in the Lone Star State.

There are at least 10 shale plays with production potential in Texas. Right now, only a few of them are being tapped. Even so, Texas oil production is on a tear, producing 2.139 million barrels a day last November. That breaks a 25-year record.

I live not far from the Barnett Shale in North Texas centered around Fort Worth. It was in this general area where Mitchell Energy in the 1990s pioneered much of the directional drilling and hydraulic fracturing technology that subsequently allowed energy companies to capture oil and gas that was previously beyond their reach.To say that technology has proved to be revolutionary is an understatement.

Then there is the Eagle Ford, which had more than a $60 billion dollar impact on the local South Texas economy in 2012 and more than 116,000 jobs were supported in the 20-county area impacted by the play. The Eagle Ford is the most active shale play in the world with over 200 rigs running. 

The Mysterious Cline

But most recently I have been learning about the Cline Shale play, spanning nearly 10,000 square miles in West Texas. There is debate within the industry as to its potential, but some see the largely untapped (and unknown) Cline Shale as the granddaddy of them all, with some estimates putting the total recoverable reserves at 30 billion barrels, bigger than the Bakken and Eagle Ford combined.

If that number is right, and some industry observers say that is a best scenario number, at $100 a barrel, that’s a $3 trillion dollar resource sitting there. You might want to read that again.

A recent economic impact study by the University of Texas San Antonio Institute for Economic Development found that a 16-county region of West Texas impacted by the Cline Shale supported 21,450 full-time jobs in 2012 for workers in oil and gas, drilling, support operations, pipeline construction, refineries and petrochemicals.

Boom/Bust?

Leave it to say, West Texas communities are excited and I think they have good reason to be. But there are questions to be asked and plans to be enacted.

So how does a local economy based on the extraction of a natural resource leverage that reality into lasting job growth? It is a central question that faces economic developers on the front lines of the shale gas revolution all over the country and not just in Texas. 

People in Texas and throughout much of the West are well aware of boom/bust cycles and how that can leave its marks on a place. They’ve seen the ghost towns that were once boom towns, and suspect the same thing could happen with shale gas.

We’re in the First Inning

But because of the newer technologies developed and being developed, most operators of the drill rigs are saying most of the shale plays should be productive for decades to come.

“We’re in the first inning of a nine-inning game on the shale revolution in the United States,” said Ryan Lance, chairman and CEO of Houston-based ConocoPhillips at an event recently at Rice University.

“What people are learning is we’ve only scratched the surface on what technology can do to improve that outlook over the years,” Lance said. “This is a layer that is going to last for quite some time.”

That should mean that there are and will be sustained growth opportunities for communities for years to come, and not just solely on the energy side, but also  in ancillary industry groups – be they manufacturing and/or service. For many places, this shale gas revolution will be just that.

The U.S. Energy Information Administration sees no end to skyrocketing natural gas production. The U.S. recently became the world’s largest natural gas producer, and the EIA forecasts a 56 percent increase in American natural gas production over the coming two and a half decades.

A Godsend to Manufacturing

Natural gas is also a feedstock in making a wide range of products, and its use for American manufacturing is expected to rise by 22 percent in the next dozen years.

President Barack Obama picked up on that theme in his State of the Union address in January. “One of the biggest factors in bringing more jobs back is our commitment to American energy,” he said. “Businesses plan to invest almost $100 billion in new factories that use natural gas,” he added, pledging to cut red tape to help get the facilities built.

I don’t know where the president got that number, but that’s beside the point. The fact is that gas in Europe and Asia sells for three and four times than what it sells for here, which should give U.S. manufacturers a big cost advantage.

A Future Role in Site Selection

A friend of mine who is a senior executive with an energy company based near my home in Plano told me how his company was involved in developing gas production wells in the Marcellus shale in Pennsylvania that allowed a longstanding manufacturing plant to become completely self-sufficient in its energy needs.

In short, the plant was sitting atop these gas reserves which were tapped into and made useable through conversion processes. My guess is that we are going to see more of that in the future and that such possibilities of total plant energy independence, being off the grid, may figure in on where certain intensive energy using manufacturing facilities locate. As a site selection consultant, I find this exciting.

As a consultant for industry, I advise companies on their site selection needs with the goal of finding an optimal location for future operations. Energy costs are certainly one important factor, as are many others, but this shale gas revolution provides an added twist to manufacturers looking for a competitive edge.

Communities that Win

As a consultant for economic development groups, I hope to help communities better compete and capture corporate investment that even takes place in an anemic economy. In the long run, we want our community to be desirable as a place to live and work for us, for our children and for their children. That is what sustainability should be all about.

It is those places with good infrastructure, housing, skilled and educated workers, recreational opportunities and a pro-business climate that will grow. Developing a strategic plan and then acting on it will give a community a huge advantage.

And when the day comes, it may be decades from now, when the shale gas energy boom will have played itself out, it is those towns and cities that planned and acted for sustained growth that will survive and even prosper. That can be the future.

The Fury

Now I have been to many a baseball and basketball game in Dallas as the guest of various economic development groups. They’re fun and I enjoy attending.

But Pueblo, Colorado, invited me to a different kind of event Saturday night. I found myself in a suite in AT&T Stadium, home of the Dallas Cowboys, where I watched in fascination and sometimes horror with what comes with an event by Professional Bull Riders. It just so happens that PBR has its world headquarters in Pueblo, where it employs about 200 people.

At one point, Rich Werner, vice president of the Pueblo Economic Development Corporation, took me down to ground level where I could see the fury up close.

I reckon it’s fame and fortune as to why these young men would lash themselves to the back of these seemingly crazed beasts. But the price paid by the riders’ many injuries is considerable. Watching them and the bulls do their thing was watching a train wreck/tango happen every time the chute opened.

Thank you, Pueblo, for inviting me to an event that still has me pondering. And congratulations for your recent win by which pewag, a 400-year old Austrian company that once made the chain mail for armored knights, will soon begin producing in your community traction snow chains for vehicular use.

And thank you Jackson County Economic Development Foundation (Mississippi) and Boise Valley Economic Partnership (Idaho) for visiting with me earlier in the week.

I’ll see you down the road. 

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

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  1. Dean – Yet another great post! The unexpected impact on rural communities requires local leaders to develop long term strategic plans that leverage the shale energy industry impact as a catalyst to create sustainable economic vitality. What happens after the initial industry investment is as, or maybe more, important to enabling residents to achieve their American Dream. Readers may be interested in this post I wrote discussing the need for planning – http://strengtheningbrandamerica.com/blog/2012/03/new-ebook-on-strategic-planning/

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