Booming Energy Activity in Permian Basin Grows Midland Jobs, Economy

Economic development and job growth in Midland, Texas are getting a shot in the arm from rising drilling activity in the Permian Basin, resulting in new housing projects and construction labor shortages, according to a real estate developer and the Midland Chamber of Commerce.

Economists and financial analysts point frequently to the growth in the overall job market from indirect and induced jobs and the subsequent demand for housing that occurs as a result of oil and gas activity, and the link between the Permian Basin and Midland is no exception.

Oil and gas drilling in the Permian Basin has steadily risen in 2014, according to the Energy Information Administration (EIA). The rise in crude oil production in the formation is outpacing pipeline infrastructure, and the EIA projects that August crude oil production in the Permian will be nearly 1.7 million barrels of oil per day (bopd), an increase of more than .3 million bopd year-over-year.

Oil production from new wells in the Permian Basin is at a high for the year, and the rig count for oil and gas drilling is also at a yearly high, the EIA said. The average oil and gas production figures per rig are projected by the EIA to increase in October by 3 bopd and by 7,000 cubic feet per day, respectively, over September figures.

With the increase in oil and gas activity comes a need for more housing in Midland, Roger C. Gault, AIA, the developer of a new rental project, told Rigzone. Gault is the developer of Wall Street Lofts, a new rental project located “right in the heart of downtown Midland.”

Scheduled to open in November, the Wall Street Lofts are being constructed at a cost of more than $17.4 million. The complex will offer 5,000 square feet of retail space, and well as 108 one- and two-bedroom apartments that will range from 605 square feet up to 1,136 square feet, according to the Midland-Reporter-Telegram.

The project is a response to the need for reasonably priced housing options in downtown Midland, Gault said. Driven by rising demand from workers in the Permian Basin, the median housing price in Midland has risen more than 48 percent since July 2009, and now sits near $248,000, according to the Midland-Reporter-Telegraph.

“We are beginning discussions with the city about doing a new second phase of the project because demand has been overwhelming for the first phase. There’s plenty of demand for another phase, and we’d like to do another project downtown, but the labor market is tight right now,” Gault said.

It is a scenario that is being repeated in several areas of the country, where exploration and production activity boost economic development in the region - and particularly in nearby municipalities - while also boosting real estate prices and keeping the labor market tight.

“Labor shortages are the stumbling block in construction in Midland right now. There is so much demand for labor from the oil companies that it’s difficult to find construction labor. It’s a good news, bad news scenario,” Gault said.

While the growing spurt in Midland may present some challenges, it’s a problem other localities would like to have, Nellwyn Barnett, executive vice president of Chamber Relations for the Midland Chamber of Commerce, told Rigzone.

“It’s a catch-22. Competition for labor from the oil field has created some labor shortages in Midland for jobs outside the oil and gas industry, and there is a shortage of housing to meet the demand, resulting in rising housing prices. However, the problems are definitely first-world problems, and oil and gas companies been extremely generous,” Barnett said.

The key, Barnett noted, is that “all sides are working together in a symbiotic relationship. This is West Texas, and we believe in working together and pulling yourself up by the bootstraps.”

Oil and gas company subsidies can do a lot of pulling, Barnett said, and education is a prime example. Thanks to help from the energy industry, Midland has one of the highest-paying school districts in the country.

“Six foundations and private oil companies stepped up and provided the school district with the funds to offer $10,000 signing bonuses for new teachers, and $2,500 bonuses for renewing teachers,” Barnett said, adding that the industry was aware of the importance of a strong education system. “The superintendent of the school district said that they received more applications in a two-month period than they had in the previous ten years. They aren’t looking to just put a warm body in a [teaching] position. They [the energy industry] want the best, and this gives them the opportunity to fill positions with extremely well-qualified teachers.”

The oil and gas industry makes a good partner for the city because there is a mutual need for the other, Barnett said.

“Energy companies are not just committed to the growth of their company, but also to the growth of the community, so that it’s a long-term, viable relationship.”


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LaDarean Sampson  |  October 07, 2014
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