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Experts say Obama won't stop Eagle Ford Shale boom

By BY DIANNA WRAY - DWRAY@VICAD.COM
Nov. 10, 2012 at 5:10 a.m.
Updated Nov. 11, 2012 at 5:11 a.m.


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For more information about the economic impact of the Eagle Ford Shale, go to ccbr.iedtexas.org

In the wake of the election, some in Texas fear President Obama's second-term energy policies will end the oil and gas boom of the Eagle Ford Shale.

However, industry analysts and longtime insiders say the Eagle Ford Shale play and the oil boom in Texas shouldn't be much impacted in the second term of Obama's administration.

John Braudway, a longtime oil industry man in Karnes County, is not in favor of Obama's policies, but he doesn't expect the president will do much to curtail production of oil and natural gas in the Eagle Ford Shale.

"It's not in his interest to shut it down," Braudway said.

During his re-election campaign, Obama made becoming less dependent on foreign oil a part of his platform, while touting the benefits of the wealth of cheap natural gas now flowing in this country and noting how shale plays have helped the country as it continues to creep toward economic recovery.

Thomas Tunstall, research director at the Institute for Economic Development at UT San Antonio, said the president is not likely to try to limit the Eagle Ford Shale boom directly. The play has been a part of the economic recovery in Texas and has helped boost U.S. oil and natural gas production to levels not seen in this country in decades, he said.

Still, Obama's second term could have some impact on the industry that could then be felt in the Eagle Ford play.

While on the campaign trail, the president said he supported the horizontal drilling and hydraulic fracturing that have created a rebirth of oil production in the country, as long as it was done safely.

The Environmental Protection Agency handed down the first regulations for hydraulic fracturing during his first term, and it is expected that more regulations will follow now that Obama has been re-elected.

While the state regulates most of these drilling practices, the EPA has jurisdiction over emissions and water usage at drilling sites. If these regulations are put in place, the oil industry could face an increase of cost linked to the regulations, which could impact the Eagle Ford, Tunstall said.

While EPA regulations may have an impact on the industry, oil and natural gas production are important to the economic recovery of the rest of the country for Obama's administration. Obviously, it's an important part of the economic engine here, Tunstall said.

"Those are unknowns at this point and could have an impact on the cost, but it's hard to say what the impact will be now," he said.

Despite the fact that Obama has advocated revoking more than $46 billion of subsidies to the oil and gas industry, the American Petroleum Institute issued congratulations to the president on the night he was elected.

However, in that same news release, API president and CEO Jack Gerard urged Obama to continue expanding domestic oil and natural gas production and to help it grow rather than allow it to be overregulated.

"He can acknowledge the effective role states are already playing in regulating oil and natural gas production and avoid the temptation to impose duplicative and unnecessary regulations on hydraulic fracturing," Gerard stated in the release.

Despite concerns, the outlook for the future of the Eagle Ford Shale play looks bright, Tunstall said.

In his analysis on the economic impact of the Eagle Ford, issued in October, Tunstall reported that the Eagle Ford has had a total economic output of almost $20 billion in the 14 counties where drilling is occurring. Tunstall's report predicted that the play would continue to prosper in those counties, with an economic output of about $62 billion by 2021.

Obama has said he plans to cut oil imports in half by 2020. That goal - and the economic growth that will come with it - won't be possible without plays like the Eagle Ford, Tunstall said.

"What's going on in South Texas is helping power the economic recovery, to the extent we have one," Tunstall said. National growth is below expectations, but in Texas the unemployment rate is below the national average and the parts of Texas that have drilling are even lower, Tunstall said.

Out in the field, Braudway is optimistic about the outlook. Karnes County has become the top oil-producing county in the state because of the Eagle Ford play, and he believes nothing will interfere with that, including the president.

"The president couldn't do that in the past, and he won't be able to in the future," Braudway said. "These companies are getting so much oil production, he's not going to shut them down."

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