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West Texans Jaded Instead of Giddy During This Oil Boom

August 4, 2008

By Mike Snyder, Houston Chronicle

Aug. 4–KERMIT — The lights on the rigs pierce the black West Texas night, illuminating mesquite shrubs and jack rabbits scampering across the flat landscape. The glow sends a reassuring message: Good times have returned to the oil patch.

Pump jacks nod vigorously alongside the highway. Fat royalty checks arrive monthly in the mailboxes of ranchers and other landowners. Teachers and retail clerks abandon their jobs for better-paying work in the oil fields as long-idle wells surge to life.

Yet, the people of Kermit and other Permian Basin towns have learned that petroleum-based prosperity is too fragile to squander in wild exuberance. They’re paying off debts and investing in public institutions that will endure beyond the boom-and-bust cycles of the oil business.

“I’ve pissed away three booms in my lifetime, but this time, no,” said Gary Blue, 43, who says his business preparing sites for drilling is turning down about as much work as it accepts these days.

Rodney Hayes, 49, who owns Kermit’s only floral shop, said he and his neighbors haven’t forgotten what happened when oil prices plummeted in the 1980s and the town’s population dropped from 10,000 to its current 6,000 in a matter of months.

“It was like a suitcase parade” as companies and their workers left town, Hayes said.

Although prices have retreated a bit in recent weeks, their record-breaking levels this year have prompted exploration companies to make big plays in West Texas.

Los Angeles-based Occidental Petroleum Corp., for example, plans to invest more than $1.5 billion in the area. It will drill about 250 wells and build a plant and pipelines to distribute carbon dioxide that will increase the company’s Permian Basin oil production by at least 50,000 barrels a day, spokeswoman Stacey Crews said.

These investments, of course, produce higher tax revenue for local governments. In Kermit, the Winkler County seat about 40 miles west of Odessa, community leaders are trying to spend the money wisely by paying off bonds issued to finance public improvements as quickly as possible.

The effects of recent prosperity are evident in a quick drive around the town, whose businesses, houses, parks and schools are scattered over a couple of square miles surrounding the intersection of two state highways.

Construction crews are finishing work on a new county hospital and a new elementary school. The emergency medical service now has its own building where paramedics can sleep and prepare meals. Until the building opened recently, they had to bunk in vacant hospital rooms.

“It’s a lot more relaxing atmosphere,” said Tiffany Fambro, a 24-year-old emergency medical technician, showing visitors the big-screen TV and workout equipment in the new facility.

At Winkler County Memorial Hospital, administrator Stan Wiley pointed to a new, $1 million CT scan machine. He beamed like a teenager showing off his first car. Up-to-date equipment and a modern replacement for a 60-year-old building have helped attract a third full-time physician and expand services at the rural health clinic, Wiley said.

“It keeps your town alive,” he said. “With the price of oil like it is, we should be able to get this paid off while the price is still up.”

The sudden infusion of money also causes some problems. “Help wanted” signs at convenience stores and fast-food restaurants show how hard it is for small businesses to hold onto workers tempted by $30-an-hour jobs in the oil fields.

Perhaps the biggest challenge, local leaders say, is finding housing for all the new oil field workers. The nearest home-building firms are an hour away in Odessa and Midland, so at least one energy company is building its own houses for employees in Kermit.

Stefanie Haley, 70, has learned to take the swings in the oil business in stride during the decades she has lived in West Texas. Her family owns a ranch west of Kermit where companies are producing natural gas, and she works in a related family business that supplies saltwater that helps maintain pressure in wells.

Haley’s daughter has planned a party to celebrate the dream home that contractors are building on a section of the ranch that she and her brother own. Haley calls it “the house that gas built.”

The gas beneath the ranch, Haley said, is buried deep in the earth — too deep to justify the expense of extracting it until recently. Now, the pastures are dotted with oil rigs, pump jacks and natural gas wells with solar panels to help transmit data read by company executives in Houston.

A burst of activity in the oil fields also provides unusual business opportunities. Haley was reminded of this when a catering truck from Odessa pulled up bearing lunch for a rig crew on the ranch.

Haley knows of a fast-food place in one nearby town that charged $9 for a hamburger, knowing that a hungry roughneck with a pocket full of money and nowhere else to go might be willing to pay that much.

“It’s a big burger, but still,” said Haley, shaking her head.

While the people of Kermit enjoy their newfound prosperity, they’re keeping an eye on a future that might not be built quite so thoroughly on petroleum. New technology is enabling companies to wring more oil and gas from West Texas fields, but no one is certain when the reserves will play out.

Some local leaders hope a new wind energy project in Winkler County will help sustain the economy after the oil and gas stop flowing.

“Boom times are back for now, but resource-driven regions like the Permian Basin face a recurring dilemma,” the Federal Reserve Bank of Dallas said in a report last spring.

“At the bottom of every cycle, when the oil industry is shrinking and times are tough, nothing is pursued with more fervor than industrial diversification,” it said. “Yet, on the way up, the oil industry can be so profitable it pushes other businesses to the side.”

Winkler County Judge Bonnie Leck said this is the sobering counterpoint to the good times the community is enjoying now. Diversification isn’t easy in a region that’s far from urban centers and too arid to sustain much agriculture, she said.

“It’s a real challenge,” Leck said, “and it’s something that people are thinking about all the time.”

mike.snyder@chron.com

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