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Eagle Ford Shale: Amid the oil boom, roads go bust
By Mark Collette- Corpus Christi Caller
Sunday, March 11, 2012
CORPUS CHRISTI — If the Eagle Ford boom is a shot in the arm to South Texas, then crumbling roads and highways are its nagging side effect.
Oil field trucks laden with water, chemicals and equipment inflict far more damage on South Texas roads than anyone expected, prompting the formation of a state-level task force faced with staggering repairs and few immediate solutions.
Texas Department of Transportation spokesman Mark Cross said the department has not calculated the potential long-term road maintenance costs associated with the shale drilling, but early accounts suggest it will be immense.
In the department's Corpus Christi district alone, where three of the 10 counties lie atop the Eagle Ford Shale formation, projected maintenance needs during the next five years reach $500 million, District Engineer John Casey said. That's triple the amount projected before the drilling boom, and it doesn't include millions more that counties will have to find to repair roads off the state highway system.
For both the state and the counties, there is no clear funding source to deal with the problem.
County judges and transportation officials said some oil field companies are paying their fair share and others aren't. State law doesn't give counties the authority to mandate additional road repair fees on companies that already have drilling permits from the state.
The counties in the Corpus Christi district represent only a fraction of the need. Combined with the Barnett Shale in North Texas, more than 50 counties have streets, farm roads and highways disintegrating under a perpetual caravan of overweight trucks. As the roads fall apart and narrow, farmers and rural residents compete for smaller lanes with hurried truckers working long shifts.
The large geography, dozens of local governments and hundreds of oil field companies involved present a need for a comprehensive approach, Casey said.
"This really needs to be a statewide effort," he said. "I'm a little amazed it hasn't happened already. It needs to be led by the oil companies."
The Texas Oil and Gas Association has formed a committee dedicated exclusively to road issues and is aiming efforts not only to address repairs but to improve future road construction to handle the heavier traffic, said Debbie Hastings, director of environmental affairs. Industry will work closely with government, she said through a spokeswoman. Discussions are ongoing, but Hastings couldn't provide details of any proposals under consideration.
STEADY POUNDING
It takes thousands of truckloads of materials to build and maintain a well using new technologies that unlock vast stores of oil and gas beyond reach until about 2009.
The process, hydraulic fracturing, involves injecting millions of gallons of fluid into a well. The liquid sometimes is piped in, but more often, it travels the same roads as ordinary cars and trucks. This sheer amount of heavy liquids — pure water weighs 8.3 pounds per gallon — is why the new boom brings more infrastructure damage than those that preceded it, Casey said.
Rick Collins, director of research and technology implementation for the transportation department, said the truckloads for a single well are equivalent to adding the weight of 8 million car trips on rural highways and county roads never expected to take that kind of a beating. There are more than 1,000 active wells in the Eagle Ford and more than 3,000 permits for new wells.
The most immediate effect: roads that fall apart from the edges, creating dangerous drop-offs and narrow stretches that lead to wrecks.
State transportation crews and county road departments are throwing resources at the most dangerous sections: roads narrowed to less than 22 feet. In some cases, transportation officials say, it's safest and most cost effective to grind up the road, flatten, widen and bind the rubble, and leave it this way until the boom ends.
The transportation department has $40 million in its maintenance budget that could be allocated to deal with these immediate trouble spots in Eagle Ford and Barnett shales, Collins said. But the agency has identified more than $100 million in immediate needs on 400 miles of highway — long enough to drive from Corpus Christi to Houston and back.
LACK OF MONEY
Long-term planning also is a huge challenge because the drilling activity is expected to last at least 20 to 40 years or longer.
To pay for road maintenance, counties are trying to leverage a combination of property tax revenues and voluntary fees paid by oil and gas companies. But state and county officials across the region said not all companies are paying their fair share.
"We have good neighbors paying a lot of money for our roadways and then we have bad neighbors who aren't paying a dime and who are enjoying what the good neighbors just did," Casey said.
Even in cases where drilling companies have agreed to fees, funds still fall short.
In DeWitt County, in the heart of the shale formation, two major drilling companies — Pioneer Natural Resources and Petrohawk Energy Corp. — agreed to pay a road repair fee of $8,000 for each well they drill. Since 2010, the county has made $1.6 million in fees.
The county also adopted the highest tax rate it could set without triggering a rollback election and devoted the revenue to road and bridge funds. That put another $531,000 in the pot for repairs.
The pot won't last long. An independent engineering study estimates the county's tab for drilling-related road damage at more than $100 million, County Judge Daryl Fowler said.
State highways, even more expensive to build and restore, present a major long-term funding problem.
"If a good state highway or federal highway is built with 20-year expectation of use at a certain level of traffic, when you quadruple the traffic and start doing double and triple the loads, roads are going to crumble that much sooner," Fowler said.
FINDING ANSWERS
Casey is part of a transportation department task force studying the situation and looking for funding options. Within 90 days, the task force plans to convene a meeting of local governments, law enforcement, oil and gas regulators and industry leaders to float ideas and develop recommendations for state lawmakers.
The government, already strapped for highway maintenance and construction funds, is likely to turn to industry to shoulder most of the burden. Leaders in the U.S. House and Senate are trying to pass highway bills that would keep construction and maintenance money flowing for the next few years, but long-term funding remains elusive. Fuel taxes no longer generate enough to pay for highways at current spending levels.
That means problems like those in Texas' shale drilling regions will need unique solutions.
"I think realistically it can't come from cities or counties or the state," Casey said. "It needs to come from industry as a win-win opportunity that makes the playing field even for everybody."
Fowler, the DeWitt county judge, said determining how much companies should pay for roads is difficult because of the complexity of drilling operations. The truckers directly damaging the roads, he notes, don't reap large profit margins like the oil companies that contract them.
Theoretically, haulers already should be paying for the damage they inflict on highways by purchasing permits for overweight trucks. But the state collected only about $113 million in permit fees in 2011, and only $82 million went to the highway fund — not even enough to cover repairs in one Eagle Ford county.
Just $52,000 in overweight permit fee money trickled back to DeWitt County in 2011, Fowler said. In the same year, the state earned $57.8 million in severance tax from oil and gas extracted from the county. The tax, which is split between the state's general fund and the Rainy Day Fund, could be part of the solution for road maintenance, Fowler said.
COST OF BUSINESS
In a December report on the impact of energy developments on highways, the Texas Transportation Institute suggested funding strategies may include donation agreements with energy companies and using energy-related fees, taxes and lease revenues for highway repairs.
Because of the complexity and scope of the problem, industry and transportation officials seem to agree that long-term solutions almost certainly will require new legislation.
Oil field companies are eager to find one, because the current patchwork approach, in which road repair arrangements may vary down to the county precinct level, can make it much harder to do business. So can unusable roads.
One oil field company is paying $100,000 to improve a bridge to a weight limit that will accommodate its loads, Fowler said. The larger drilling companies, which tend to dominate fracturing because the process is expensive, are generally cooperative, he said.
"They won't necessarily own up to it," Fowler said, "but it's easy enough to track them down and say, 'Your overweight load took this bridge out and we need some help, otherwise we'll shut it down and you'll be out of business.'"
AT A GLANCE
The Center for Transportation Research at the University of Texas studied impacts of new energy developments on the state highway system. These are the conclusions of their 2011 report.
The rate of road deterioration and the funding available for maintenance create an unsustainable situation.
Growth in the energy sector contributes to economic prosperity but impacts service life of pavements.
New funding sources are needed to maintain infrastructure and ensure the transportation system can serve the energy sector in the future.
TASK FORCE
State transportation officials are convening a task force to deal with road damage associated with oil and gas activities in the South Texas Eagle Ford Shale and North Texas Barnett Shale, regions that span more than 50 counties. Here are their plans:
Within 90 days, convene an executive-level meeting of local governments, law enforcement, transportation officials, Railroad Commission, energy industry leaders.
Continue research, data gathering and sharing.
Identify future energy developments.
Strategize use of new technology.
Discuss potential legislative issues.
Develop funding strategies.
Routinely monitor, evaluate and revise plans.
Source: Texas Department of Transportation