Eagle Ford Counties Win Royalties

New Bill Gives Counties Minerals Under Roadways
be safe. be smart.

Eagle Ford Roads in Disrepair

New legislation allows Eagle Ford counties to keep some of its mineral wealth, which is good news for the failing road system.

Governor Greg Abbott recently signed SB 951, overturning an old provision that stripped counties of the proceeds from the minerals that ran under their roads. Since 1960, the state has received all mineral royalties, even though they do not maintain county roads.

Over a 40 month period, the money for drilling under roads in Karnes, DeWitt and Gonzales counties generated $16 million for the state. The new law allows the counties to keep this money, which will be vital to maintaining their road systems that have been significantly impacted by the shale boom.

Eagle Ford Roads Impacted by Higher Traffic & Inadequate Funding

Eagle Ford production has been great for local economies, but has taken its toll on their roadways. Small gravel roads originally built for passenger cars now host huge rigs that travel at high speeds and often create deep, hazardous craters. Some road edges are shredded and the pavement can unexpectedly drop off half a foot.

The bill was filed by State Sen. Carlos Uresti who also worked last session to gain an additional $225 million to counties for road repair.

Senator Uresti commented, “For the first time that anyone can remember in decades, the state funded the county roads. That’s always been a county function: counties, you’re on your own. But again, given all the activity, I was able to get my colleagues to pass this bill,” Uresti said, adding that more was needed.

Another Fatal Crash in the Eagle Ford

Poor Road Conditions and Heavy Traffic Persists
be safe. be smart.

TxDot Works to Make Roads Safer

On January 15, another fiery crash took the lives of five oil field workers in Dimmet county. This latest tragedy, involving a crude oil tanker truck, highlights the serious roadway issues that have plagued the Eagle Ford and Permian Basin over the past couple of years.

Poor road conditions, increased traffic and heavy equipment brought on by the oil boom contribute to the unsafe conditions. Roads in the Eagle Ford Shale are under intense pressure from the huge volumes of truck traffic that are regularly running up and down South Texas highways – literally hundreds of trips per day in many cases. And, often, the counties have not been able to keep up with the problems caused by the increased volume.

Related: Eagle Ford Roads Impacted by Higher Traffic & Inadequate Funding

Related: Heavy Load Trip Planning Tips

According to TxDot, “In the Eagle Ford Shale energy sector, a 26-county region that stretches from Laredo to Madisonville, TxDOT crash reports indicate there were 3,450 traffic crashes that resulted in serious injuries or fatalities in 2013, an increase of 7 percent over the previous year.  The result was 238 traffic fatalities in the region in 2013.”

Over the summer, TxDOT launched a public education campaign designed specifically for motorists who frequent roadways heavily used by energy workers. The ‘Be Safe. Drive Smart.’ campaign promotes roadway safety and is being heavily marketed on radio, TV and billboards across the Eagle Ford and Permian Basin. This initiative is in response to the increased in traffic problems, crashes and fatalities in the area since the oil boom began.

Be Safe. Drive Smart. is the latest TxDot campaign to bring roadway improvement to the Eagle Ford. Since 2013, the agency spent almost $8 million for road repairs in Dimmit and Maverick Counties. They have also built new passing lanes to increase safety, bringing the number to five on US 277 from Eagle Pass to Carizzo Springs and another nine lanes on US- 83 from I-35 to Carizzo Springs.

Read more at txdot.gov

Eagle Ford Roads Impacted by Higher Traffic & Inadequate Funding – Tunstall

Current Tax Revenue Mechanisms Do Not Address Road Damage Caused by Development
I-37 Gravel Road Frontage in Live Oak County - TxDOT

I-37 Frontage in Live Oak County – TxDOT | Click to Enlarge

Roads in the Eagle Ford Shale are under intense pressure from the huge volumes of truck traffic that are regularly running up and down South Texas highways – literally hundreds of trips per day in many cases.

The traffic highlights a disconnect in the Texas political economy between how tax revenues are generated and how roads are then funded. With TxDOT’s recent announcement that approximately 83 miles of FM roads have been slated to be returned to gravel (66 miles of them in the Eagle Ford area), it’s worthwhile to examine road funding mechanisms in Texas.

How Is Road Construction Funded?

Let’s start with the state gas tax that we pay at the pump, which is a total of 38.4 cents. Immediately, 18.4 cents goes directly to the federal government, which leaves 20 cents for state use. However, 5 cents of that goes to public education. Only the remaining 15 cents is used to fund TXDOT projects directly. Texas motor vehicle fuel sales taxes are flat taxes that have not been raised since 1991 and are not adjusted for inflation.

The unprecedented activity on the roads in the Eagle Ford Shale area is having an impact that is overwhelming traditional highway funding sources. As an example, it takes nearly 1200 truck trips (equivalent to 8 million cars) to complete a single oil or gas well. Another 350 or so are estimated to be required for annual production.

So, what about other potential funding sources for roads?

Let’s look at sales taxes in Texas, which have a statutory maximum rate of 8.25%. Of that total, 6.25% goes to the state. Cities, counties, transportation authorities and economic development corporations can add up to an additional 2% to their sales tax rates. Some counties charge no sales tax, such as McMullen County, so the maximum rate there is 6.25%. Since city and county sales taxes in the Eagle Ford Shale area have increased significantly starting around 2010, it might seem to make sense for these entities to pick up the tab for increased road wear. In some cases, for example, county tax increases jumped between 300-500 percent in a single year. While this sounds like a lot of money, it pales in comparison to the cost of building roads.

In round numbers, county roads typically cost around $250,000 per mile to build. Farm-to-Market and Farm-to-Ranch (FM) roads cost twice that – about $500,000 per mile. State highway grade roads cost in excess of $1 million per mile. When county and FM roads are repaired to their current standard, the cost can be less – “only” $120,000 per mile – but heavy volumes of truck traffic can tear them back up in less than a year.

Karnes County Example

One of the most active counties in terms of Eagle Ford production is Karnes County. In 2010, county sales tax receipts were $837,038. By 2012 that number had risen to $7,961,495 – a huge increase by any measure. And yet, if every dollar of increased county sales tax revenue were applied to roads in the area, Karnes County would be able to build about 28 miles of county roads, 14 miles of FM-grade road, or only 7 miles of state highway-grade road. Clearly the orders of magnitude for the road impact as a result of oil and gas exploration and production activity is beyond the scope of county budgets.

One the most significant source of potential revenue for roads and perhaps the most applicable is the state’s severance taxes, which are imposed for the extraction of non-renewable natural resources, such as oil and gas. These taxes are on the rise because Texas is producing more oil than it has in over 30 years. In fiscal year 2013, Texas collected $4.5 billion in severance taxes. Overall, about $2.5 billion will go into the Rainy Day Fund (more formally known as the Economic Stabilization Fund) – most of that the result of increased severance tax receipts.

In fact, some of these severance taxes are being channeled to road projects. During the most recent legislative session, $1.2 billion per year was allocated from the Rainy Day Fund for roads across the state (pending approval by voters in November 2014). In addition, a one-time infusion of $225 million was allocated for road systems in South and West Texas areas affected by oil and gas production. And just this month, TxDOT announced that it had identified another $250 million from vehicle registration fees.

However, plans remain in place to convert the 83 miles of formerly paved FM roads to gravel in order to save money. TxDOT has held public hearings to address community concerns, but the larger issue has yet to be addressed. It is becoming clear that several aspects related to the costs of shale oil and gas production (roads in particular) will not necessarily be remedied by current tax revenue mechanisms. As such, any chance for a more permanent solution will be up to the Texas Legislature, which does not convene again until 2015.

Truck Driving in the Eagle Ford Shale Play

Is it a good career move?
Mission Well Services Frac Spread

Hundreds of trucks used in oil & gas operations | Click to Enlarge

Even those who are not in the trucking industry have an inkling of an idea about the driver shortage. Ads for jobs for holders of commercial driver’s licenses pepper the newspaper classifieds. Recruitment ads fill television and computer screens not to mention the Job Board on this site, suggesting to even the casual viewer that drivers are in demand. [Read more…]

Will Paved Roads In The Eagle Ford Be Converted To Gravel?

Paved Roads Cost $500,000 To Maintain - Gravel Roads Cost $10,000
I-37 Gravel Road Frontage in Live Oak County - TxDOT

I-37 Frontage in Live Oak County – TxDOT | Click to Enlarge

Near the end of July, the Texas Department of Transportation (TxDOT) announced plans to convert 83 miles of road to gravel in South and West Texas. Roads have been damaged by higher traffic and can be converted to gravel much more quickly than they can be repaired.

The conversion will affect roads in four South Texas counties: Dimmit, La Salle, Live Oak, and Zavala.

Three miles of I-37 frontage in Live Oak County and a portion of FM 1916 in Dimmit County have already been converted. [Read more…]

State Legislature Sets Aside $225 Million For County Roads

South Texas Roads Will Hopefully Lose A Few Bumps
Tanker Truck on the Highway

Click to Enlarge

In what looks to be a start to fixing local roads in South Texas, the state legislature has set aside $225 million in what was deemed a “Transportation Infrastructure Fund”.

The Texas Department of Transportation (TXDot) will administer a grant program that will distribute the funds. The beneficiaries will be counties in West and South Texas who have been affected by high volumes of oilfield traffic. [Read more…]