“It is San Antonio’s time.”

Within moments of each other, those words were uttered by Mario Hernandez and Judge Nelson Wolff at the Texas CEO Magazine Speaker Series Event in San Antonio. Hernandez is President of the San Antonio Economic Development Foundation and Wolff is a former Mayor of San Antonio and now Bexar County Judge.

While many industries contribute to economic growth in San Antonio, there is none bigger than the energy exploration tied to Eagle Ford shale. According to the Milken Institute in 2011, one out of every five jobs in the United States was created in Texas. Their best performing cities report listed San Antonio as the number one metro in the U.S. for economic performance.

Bart Koontz, CEO Koontz McCombs; Marsha Hendler, CEO, TerraFinaEnergy; Judge Nelson Wolff; Mario Hernandez, President, San Antonio Economic Development Foundation; Adam Haynes, Senior Director, Chesapeake Energy

According to Hernandez the employment growth has exceeded expectations. In a 2011 study completed by the University of Texas-San Antonio, Eagle Ford generated 6,800 full time jobs and paid $311 million in salaries and benefits in 2011. Adding in all the ancillary jobs tied to area workers, the numbers increase to 12,600 jobs and $512 million in salaries. Those statistics cover one year of operation.

Railroad Commissioner David Porter wrote in a recent opinion piece the development of Eagle Ford shale “has the potential to be the single most significant economic development in our state’s history.”

As Fort Worth has served as an anchor city for resources tied to the Barnett shale play in North Texas, now it’s San Antonio’s turn in South Texas.

Listening to experts on infrastructure, energy and development, San Antonio business leaders heard firsthand how to get in on the deal flow from Eagle Ford shale.

Judge Nelson Wolff shared statistics on the jobs being created and the dollars invested in South Texas. The numbers are significant on the oil and gas field services side:

• Baker Hughes – investing $30 million, creating 385 jobs
• Weatherford – investing $17.5 million, creating 120 jobs
• Halliburton – investing $79 – $90 million, creating 1,400 jobs
• Clearwater International – investing $19 million, creating 50 jobs
• Schlumberger – investing $30 million, creating 200 jobs (agreement in process)

For up-stream producers like Chesapeake Energy, the long-term investment will likely be over $1 billion. “When you invest this kind of money, you’re here for the long term,” said Adam Haynes, Chesapeake Senior Director. And, noted Haynes, Chesapeake is far from alone in its investment in South Texas. It is joined by Anadarko Petroleum, Petrohawk Energy, Apache, Pioneer, ConocoPhillips, ExxonMobile, Murphy Oil, Cabot, Marathon and others.

The Challenges & The Opportunities

For smaller producers like TerraFina Energy, CEO Marsha Hendler believes the infrastructure for oil and gas production is one of her biggest challenges in the Heart of Texas Field located in Bell, Burnet, Coryell and Lampasas counties. “Along with taking several years to find a mid-stream company willing to invest in a pipeline to the Heart of Texas field, we had to use equipment from Oklahoma and a fracking crew from the Texas Panhandle to handle the job.”

Infrastructure issues go beyond servicing the production of oil and gas wells. As Bart Koontz, CEO of Koontz McCombs, said, people have to have a place to sleep and South Texas is a rural part of the state that wasn’t ready for the influx of workers tied to Eagle Ford.

As real estate developers and contractors, Koontz McCombs is building what Koontz described as “one and two bedroom casita cottages” in a new housing development called Sendero Ranch in Pearsall, the county seat of Frio County, about an hour’s drive from San Antonio. “We’ve had to handle every element of development because almost nothing is there – water, wastewater, power lines – everything.”

Big producers like Chesapeake face a challenge finding skilled workers. Haynes said, “What we need is that high school student athlete who got good grades and shows mature, responsible behavior.” Once those workers are hired, Chesapeake will fully train them, pay about $60,000 per year to start and provide full benefits – all with a high school education.

For those who don’t want to work in an oil field, Haynes says employees with soft skills are needed, too, such as bookkeepers, accountants, and IT professionals. “Petrophysicists and petrochemical engineers are positions we also need to fill,” said Haynes.

Hernandez observed both the San Antonio community colleges and universities have done an excellent job of providing employees for oil & gas refining and marketing companies like San Antonio-based Valero & Tesoro and are ready to help develop the workforce necessary for Eagle Ford.

Investing

How can people invest in the production?

“Since you have publicly traded companies in the sector, buy stock,” suggested Chesapeake’s Adam Haynes. But be careful. Hendler has seen promoters soliciting investments for drilling projects over the phone and for projects that didn’t really exist. “Would you buy gold over the phone?” Hendler asked.

The Risk

A great deal of business is done through relationships and without them, starting from zero can bring no results. For companies looking to expand into the boom, cash flow, equipment purchases, and connections are critical to success. “Often, it’s still who you know,” observed Hendler. According to Hendler the greatest challenge for a small independent energy group is access to investment capital.

As Bart Koontz observed, “Even though you have a good idea, you have to factor in the additional time from delays and extra costs on every project.” Koontz said his business partner, Red McCombs, has forecast 25 years for the Eagle Ford play.

Judge Wolff and others on the panel have all experienced the crumbling road surfaces in key state and county highways. “Solutions are going to require cooperation from the state level to the smallest counties,” said Wolff. And for now, there is no clear funding source to deal with the problem. “Economic development cannot happen to its fullest without good road roads and a full infrastructure,” noted Wolff.

The Texas Department of Transportation has assembled a task force to study the roads situation and look for funding options. By June, the task force plans to convene a meeting of local governments, law enforcement, oil and gas regulators and industry leaders to develop recommendations for state lawmakers. There is currently no state law to give counties the authority to mandate additional road repair fees on companies having drilling permits.

In Conclusion

For comparison purposes, the exploration of Barnett shale in North Texas began in 1999. It currently has 14,000 producing wells, generating 1.8 billion cubic feet of natural gas. Eagle Ford Shale had nearly 221 billion cubic feet of natural gas drilled in 2011, compared with predictions of 122 billion cubic feet. The tentative forecast calls for activity to possibly peak with a total of 25,000 wells drilled versus 14,000 in the Barnett Shale play.

To attendees, Haynes offered this suggestion to be a part of Eagle Ford, “Just get on I-35 and drive south of San Antonio and take a look.”

Publisher’s Note: To read the full economic impact study conducted by UTSA and released in May, 2012 click here:

http://ccbr.iedtexas.org/index.php/Latest/new-report-the-impact-of-eagle-ford-shale.html

The Texas CEO Magazine Speaker Series is sponsored by:

MAKING EDUCATION EVERYBODY’S BUSINESS

By Julián Castro

I’ve been fortunate enough in my life to have attended and graduated from a great college and law school. But the most enduring memory of my scholastic career dates back to when I was 11 or 12 years old. 

My brother and I were sitting with our mother at what was supposed to be our orientation into Rhodes Middle School on San Antonio’s West Side. A school administrator asked all of us to take a long look at our classmates in the incoming sixth-grade class because, in her estimation, as many as half of us would not be around when it came time to complete the eighth grade.

My mother promptly yanked us out of Rhodes and enrolled us at another junior high. In her mind, no school that was willing to write off half of its student body was good enough for her kids.

While I didn’t fully understand it then, that standard – the refusal to accept failure from our schools – has stayed with me the rest of my life.
A lot of ink has been spilled recently about my decision as Mayor of San Antonio to get involved in school district issues, whether it be holding the first-ever citywide school board candidate forums or my endorsement of specific candidates for school board positions. Skeptics say school governance is not the purview of a Mayor who has no direct control of the city’s 15 school districts.

I say the schools are everybody’s business whether you have school-age children or not. In the Spring of 2009, the San Antonio Branch of the Federal Reserve Bank of Dallas issued a report comparing San Antonio to Phoenix, San Diego, San Jose, Austin, Dallas-Fort Worth and several other cities.

Overall, it was a positive assessment of the city’s potential for future economic growth in the 21^st century global economy. San Antonio is already home to four Fortune 500 companies and the city’s leading economic sector is now in the biosciences. 

But the report’s authors struck an ominous chord over education, noting that San Antonio trailed all of its peer metros in terms of the percentage of people over the age of 25 with at least a bachelor’s degree. “Not only is higher education crucial to increasing San Antonio’s growth,” the report concluded, “but improved school districts can also help attract residents.” 

With the right resources, attention and mentoring, I’m convinced many more San Antonians can share the experience I did of obtaining a college degree and finding the career of my dreams right here in San Antonio. I refuse to believe I was more gifted or any smarter than my public school classmates in the San Antonio Independent School District.

That’s why, in my first term as Mayor, I pushed for the creation of Café College, a one-stop college counseling and test preparation center that offers free services to area students regardless of where they grew up or what schools they attended. With an average student to counselor ratio of 420 to 1 in Texas public schools, I don’t want another student in our city to miss out on the opportunity to go to college simply because she didn’t know how to apply for financial aid or where to begin the application process. 

I’ve also realized that elected officials are granted access to the bully pulpit for a reason. After listening to the city’s political, business and neighborhood leadership complain for years about the uneven stewardship on our myriad school boards, how could I in good conscience not speak out on an issue as fundamental to a city’s success as education?

I think about my two-year-old daughter, Carina, who will likely be educated in the San Antonio Independent School District. Every day, SAISD touches the lives of more than 55,000 students and their parents. Yet it is rated academically unacceptable. That cannot and will not stand in the globally competitive San Antonio we’re trying to build. Yes, we are the seventh-largest city in the nation with a diverse economy and a culturally vibrant population to match. But we also must fully appreciate and embrace the fact that brainpower is today’s currency of success.

As we attract broader pools of candidates to seek school board positions, we will create the conditions where committed teachers can succeed and bright-eyed students can excel. As we demonstrate that strong neighborhood schools are the difference between older neighborhoods that deteriorate and ones that attract reinvestment, we will draw more people back to our urban core. 

At the end of the day, the question before me as Mayor was not whether I should get involved in the education of our city’s youth. With the stakes for San Antonio’s future prosperity so high, the question was how dare I not get involved.

Julián Castro is the Mayor of San Antonio. Mayor Castro graduated from Stanford University and the Harvard Law School.