Recent Economic and Community Impact of Unconventional Oil and Gas Exploration and Production on South Texas Counties in the Eagle Ford Shale Area

Abstract

Abstract. Unconventional oil and gas extraction efforts have raised the specter of the resource curse in affected communities, as has been demonstrated in other industries or geographies. Yet because these developments in unconventional extraction industries are so new, data for analysis is limited. This study examines recent activity in the Eagle Ford Shale area of South Texas with a time-series cross-sectional (TSCS) approach using data collected from 14 actively producing counties over a four year period from 2008-2011. Results indicate that the number of completed oil and gas wells has had a positive impact on per-capita income to-date. Previous research suggests that communities in South Texas have the opportunity to overcome the resource curse, but that it will require good local governance and thoughtful long-term planning.1. IntroductionRecent unconventional oil and gas exploration in the United States has produced unexpected benefits in the balance of trade and global energy security. The impacts are also being felt at the community level in several parts of the U.S. One such area is the Eagle Ford Shale in South Texas, which has historically been among the poorest areas in the state.The Eagle Ford is a unique formation; whereas most shale oil and gas fields are predominantly either oil or gas, Eagle Ford contains significant quantities of oil, gas, and condensate. As such, the recent boom in energy production presents an interesting case study about how local communities are addressing the opportunities and challenges. This study will take a very preliminary look at the shale oil and gas field in the Eagle Ford in South Texas in order to assess the prospect of the resource curse in the early stages of development.2. Theoretical frameworkThe relatively recent development of unconventional oil and gas fields in the United States has prompted research on economic impacts. Extant literature suggests that recent shale oil and gas exploration, while limited, can be examined in the context of the resource curse theoretical framework. Much research has been performed at the international level on the curse of natural resources, which proposes that resource-abundant countries have stagnated in terms of economic growth (Sachs and Warner, 1995, 2001). Other studies have focused on within-country impacts of resource abundance (Michaels, 2010; Weber, 2012). Whether researchers look across or within countries, it is difficult to find a clear validation of the resource curse theory (Brunnschweiler and Bulte, 2006; Torvik, 2009; Michaels, 2010; James and Aadland, 2011). The resource curse is cited frequently in the literature, which suggests that there is an inverse correlation between natural resource abundance and long-term economic growth (Mikesell, 1997). Yet the tendency for slower growth effects is not uniform across nations, states, or even counties, where the least amount of research has been done (Peach and Starbuck, 2011). While a significant number of the cases examined in the literature show some kind of negative impacts regarding the resource curse, there are enough successes to suggest that factors other than mineral resource abundance alone are at work.There is often a divide between economic development theory and practice. Further, despite a regional emphasis in the literature, development in the real world tends to be highly subject to more localized political boundaries (Currid-Halkett and Stolarick, 2011). The approach in this article will be to attempt to shed light on economic development and the resource curse by analyzing the applicable data that are available at the local level for the 14 counties most actively producing oil and gas in the Eagle Ford in South Texas.The limited number of counties makes a combination of time-series and cross-sectional analysis attractive from the standpoint of number of observations and corresponding degrees of freedom. Four years of data from 2008-2011 for 14 counties yields 56 total observations. …