Eagle Ford Shale Task Force Report, March 2013

On March 12, 2013, Texas Railroad Commissioner David Porter released the Eagle Ford Shale Task Force Report. The Task Force was formed in 2011 with a diverse group of 24-members who represent community leaders, local elected officials, water representatives, environmental groups, oil and gas producers, pipeline companies, oil service companies (including a hydraulic fracturing company, a trucking company, and a water resources management company), landowners, mineral owners, and royalty owners. Meeting ten times from July 2011 to November 2012, the group studied eight basic issues which are set out below, along with summaries of the findings.
  1. Workforce Development: In 2011, the Eagle Ford Shale supported 38,000 full-time jobs in 14 counties; and the average income for an oilfield job was $117,000, an 18% increase from 2010. However, there is currently an acute shortage of well-trained, experienced labor in the area. Research indicates that the demand for oil and gas skilled labor will continue to remain strong. During the exploration phase, the companies need occupations dealing with mineral leasing, site construction and management, drilling rig support, and material transport. In the production and processing phase, the companies require a workforce composed of business management and administrative support personnel, as well as the processing gas, oil and condensates occupations. Area residents must acquire technical skills and training. A number of colleges and community colleges in the area are offering oil and gas-related programs. Even some high schools are developing industry- related programs.
  2. Infrastructure – Roads, Pipelines, Housing: The increase in Eagle Ford Shale drilling and production is the source of remarkable economic benefits. At the same time, the increased activity has heightened infrastructure challenges for the region’s communities. Truck traffic and road quality, pipeline placement and safety, and a shortage of affordable housing are top concerns. Traffic has increased by 86% on the main roads in the Eagle Ford Shale area, causing deterioration of the road bed and bridges. In addition, vehicular accidents in the area are on the increase. Heavy traffic is expected to increase until additional pipelines are completed. Demand for pipelines outpaces the supply. Research indicates that almost 1,200 loaded trucks are required to bring one gas well into production; over 350 are required per year for maintenance of a gas well; and almost 1,000 are needed every five years to re-fracture a well. The construction of one, 20-inch crude oil pipeline running 50 miles would displace 1,250 tank truck trips per day.
  3. Water Quality and Quantity: Common concerns about hydraulic fracturing include: (a) potential stress on surface water and groundwater supplies, resulting from withdrawal of large volumes of water for use in oil and gas operations; (b) potential contamination of drinking water aquifers, as a result of faulty well construction or other activities; and (c) potential compromised water quality due to challenges of managing surface activities and disposing of contaminated wastewaters which contain chemicals, salts, metals, and other residues from oil and gas activities. Railroad Commission records do not include a single documented groundwater contamination case associated with hydraulic fracturing, a process that has been employed in Texas for more than 60 years. The Commission’s strict well construction rules provide for several levels of protection for usable quality groundwater. Dr. Darrell Brownlow, a hydrologist and environmental consultant who spoke at a Task Force meeting, stated that the estimated average water use for drilling and hydraulically fracturing a well in the Eagle Ford Shale is 4,875,000 gallons. He advised that the Carrizo-Wilcox Aquifer which lies one mile above the shale was crucial to the success of the play. He anticipated that future demands on water for hydraulic fracturing can be met since the water for future drilling usage would come from about a dozen aquifers.
  4. Railroad Commission Regulations: The Railroad Commission (RRC) has statutory authority to regulate Texas’ energy industry, with primary responsibility over the oil and gas industry, pipelines moving oil and gas, and pipeline safety. Due to the increased oil and gas exploration within the Eagle Ford Shale, the RRC has directed more resources toward oversight of field operations and the timely processing of permit applications. The RRC regulates the discharge of produced water into surface water in the state. With the increase of drilling, there has been an increase in waste haulers. The RRC has partnered with the Texas Department of Public Safety to monitor waste haulers to be sure that they are properly permitted and the amount of waste being transported is not above the amount specified in the permit. The RRC has proposed amendments concerning recycling of solid waste and water.
  5. Economic Benefits: Since 2008, the number of drilling permits issued for the Eagle Ford Shale have increased (2008, 26; 2009, 94; 2010, 1,010; 2011, 2,826; and 2012, 4,145). Capital investments continue to pour into the area. One economic analyst predicts that the total Eagle Ford Shale capital expenditure for 2013 will be approximately $28 billion. From 2010-2011, oil production reached 28 million barrels and gas production exceeded 271 billion cubic feet. In 2011, a 20-county area in the Eagle Ford Shale supported 47,000 full-time jobs, paid $3.1 billion in salaries and benefits to workers, generated $12.63 billion in gross regional product, produced $257 million in local government revenues, and paid $358 million in state revenues, including $120.4 million in severance taxes.
  6. Flaring and Air Emissions: The Commissioner introduced his Flaring Initiative, which includes ensuring that operators fully comply with current flaring and venting rules, amending the rules to correspond with the increased production from the shale plays, encouraging the use of efficient and environmentally protective flares, and studying a pilot program to use gas as a source of power for on-lease operations in lieu of flaring the gas.
  7. Health Care, Education, and Social Services: Community and social service organizations are feeling the effects of rapid growth and the need to adapt and change. The Eagle Ford Shale counties do not have enough healthcare providers to handle the increased population, needing approximately 3,850 physicians, registered nurses, dentists, and pharmacists. The educational system has experienced surges in the number of special needs students and in students with limited knowledge of English. Traditionally “property poor” school districts have become “property wealthy” districts, creating numerous budgeting challenges, including the possibility of returning an estimated $12 million to the state in the form of recapture. Several oil and gas companies provide funding and targeted programs (such as sponsoring Science Technology Engineering and Math education, establishing a local science club, hosting field tours for teachers, and funding Project SHARP (Strategic, Hands-On After-School Resources and Progress)) to help meet community needs.

This post was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice.