The Dark Side of the Boom: Oil Is Doing Great Things for Some in Texas, but Not for Everyone
It was like landing on the moon. The thought ricocheted through Joleena Malugani's mind as she took in the vast, dusty expanse of the corner of West Texas claimed by Midland and Odessa. Malugani was fresh out of college when she came across an Ector County Independent School District booth at a job fair in Oregon. The recruiter mentioned there was an oil boom going on in the area and the district needed teachers. Malugani was in a state with one of the worst unemployment rates in the country, her student loans would soon be due and she needed a job.
Raised on the West Coast, she'd never been to Texas. It would be an adventure, she thought. In August 2012 she lined up an apartment, packed what she could fit in her car and drove more than 1,600 miles for a teaching job in the middle of West Texas. The blazing lights of oil rigs and the guttering flames of natural-gas flares blotted out the stars long before she pulled into town.
Odessa, Texas, sits on top of the Permian Basin, an oil-rich region 250 miles wide and 300 miles long that stretches across West Texas and up into New Mexico. Odessa and its sister city, Midland, went from being wide spots in the road to actual towns when oil was discovered almost a century ago. The wells came in big, and Permian production was the highest in the country for decades.
In recent years, common wisdom held that the Permian Basin's best days were behind it, along with most of Texas oil. That was before the shale boom erupted. Fracking in the Barnett in north Texas, the Eagle Ford in south Texas, and the Wolfcamp and Spraberry shale formations in the Permian Basin led to an energy renaissance. Now more than half the rigs in the country are in Texas, and 563 of those -- more than half the rigs in the state -- are in the Permian, according to the Baker Hughes rig count. For places like Midland and Odessa, built on oil, dependent on oil and obsessed with the stuff, this was the boom they'd been praying for since the big bust in the 1980s.
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But there's always a price. With prosperity comes inflation. Rental costs have soared along with the larger paychecks for some and the billions of dollars invested by oil companies. Odessa is the second-fastest-growing metro area in the country, and Midland is third, according to a U.S. Census Bureau population study. People have been flocking to the region, drawn by the promise of wealth and plenty amid one of the biggest oil booms in memory. Some are finding the modern-day American dream of overnight affluence, but the promise of oil doesn't always pan out. More people means more competition for jobs and places to live and increasing pressure on decaying local infrastructure.
The definition of "American middle class" has always been vague, but it has become increasingly difficult to remain a part of that class on top of the Permian Basin if you aren't in the oil industry. People grasping the bottom rungs of the middle class have found themselves slipping, unable to keep hold.
Joleena Malugani realized she couldn't afford to stay in a boomtown on her teaching salary.
Photo by Laurie Pearman
When the boom really started taking off in 2011, Erika Chavez, director of Odessa Links, the lead agency in the Odessa Homeless Coalition, was constantly on the phone, handling calls from people begging for help to stop evictions or looking for government housing (the wait list is currently six months to two years long). "People think that because there's a boom, no one is struggling, but for people who aren't in oil, it's very hard," she says. She has seen two and three families living in single-family apartments, and shelter officials have reported cases of families living in cars. These people aren't even a part of the annual homeless count. They make too much money to qualify for aid, according to government standards, but they don't make enough to cover rent and bills, and there's little help for them.
As Ed Hirs, an economics professor at the University of Houston, puts it: "You'd best be a heart surgeon or an oncologist if you want to live out there and you aren't in the industry." There are increases in pay, but in some situations, they aren't enough to close the cost-of-living gap created by inflation. People can work at fast-food joints making $16 an hour and still not be able to afford to live in the area.
Renee Kan, a homelessness specialist with ECISD, has seen the same thing. She even had a school counselor in her office one day a few months ago. The woman's husband had taken a job in the oil industry, but the company folded a few weeks after they arrived and the family was abruptly left homeless. "These are people you see every day and they look like everyone else, but they go home and it's a different story," she says. It's a new type of poverty, one that evades easy definition, says Linda Hamblin of the Midland Homeless Coalition. These aren't people who are simply poor. They are people who heard about the boom and came to town hoping for work, and they are people who have lived on top of the Permian Basin their entire lives. The thing they have in common is they are barely getting by.
Malugani wasn't making it. She'd been told that Odessa could be a challenging place to live. Rental prices were astronomical, and living in the middle of an oil boom was rough -- despite the legendary West Texas hospitality, it could be a lonely place for someone without friends or family. She'd dismissed the warnings.
The apartment deal fell through before she even got to town. It didn't seem so bad at first. She paid more than $100 a night to sleep in a fleabag motel room while she scrambled to find a place to live, but she found another apartment, a good deal at about $1,000 a month. Her teacher's salary had seemed like a lot when she accepted the job, but money immediately grew tight. Everything from gas to food to dry cleaning was more expensive.
Then she had to start paying her student loans, and she was living paycheck to paycheck with nothing left over. By spring 2013, she knew she couldn't stay. "It was just a joke. There was no way I could make it there," she says now. "I didn't know a lot about oil, but I knew it was a Texas thing, and I always thought it was a good thing, good for the community. It's not that simple."
There's rapid grownth in Midland and Odessa, but homeownership is hard for those not in the oil business.
Photos by Mark Sterkel
Oil booms aren't new to the Permian Basin. Midland and Odessa have been oil towns since the first big well, the Santa Rita No. 1 (named for the patron saint of fools), started gushing in 1923. The well was the first sign that the dry red earth on the edge of the Llano -Estacado, once a stop on the Comanche war trail, was worth anything. Almost from the start, Midland housed the financiers and Odessa the oil field workers; Midland was where you raised a family and Odessa where you raised hell. The two always competed, but during the last big oil boom, people in both towns lived it up, buying Rolls-Royces and private jets and drinking champagne out of cowboy boots, right up until the 1980s bust.
The Permian Basin is one of America's oldest and most important oil fields, Bill Gilmer, director of regional forecasting at UH's C.T. Bauer College of Business, says. This has been a blessing during boom times, but the area has remained isolated and has failed to broaden its economy, he says. "It's put them on a permanent cycle of being a one-industry town, wishing they had diversified in the tough times, and watching any possibility of diversification evaporate when times are good," he says. There are few communities more familiar with the complicated blessing of sitting on top of countless barrels of oil. Still, this boom took the area by surprise. Companies outside of oil have been unable to keep workers. Neither the Ector County Sheriff's Office nor the -Midland County Sheriff's Office can pay enough money to keep their deputies. People have taken jobs and then been forced to resign and leave because the positions don't pay enough for them to secure decent places to live. "It's to the point now that I warn them that they need a place, with a friend or family or something, before they get here. If they don't have that, it's too hard," Ector County Sheriff Mark Donaldson says.
Midland Independent School District got a $6 million donation from oil companies and used the money to offer new teachers a $3,000 signing bonus. Ector County Independent School District, outmatched again, gave all teachers a $2,300 raise.
Both school districts are reserving some housing at reduced rates, and ECISD is in the process of turning an old hospice building into apartments for new teachers. "It's been challenging. And it's not just teaching; it's all staff positions, because they can all go into the oil patch and earn a lot of money, and I can't fault them for that," ECISD Superintendent Tom Crowe says. His district has a 15 to 20 percent turnover rate, he adds.
Photo by Mark Sterkel
Some people just can't keep up, according to West Texas economist Karr Ingham, who is based in Amarillo. Midland is the richest metro area in the country, with a per capita income of $83,000, according to a 2013 report from the Bureau of Economic Analysis. Odessa is one of the fastest-growing metros in the country by percentage, though the city is ranked far below Midland in per capita wealth. There has been a flood of money into the area since oil activity began to pick up in 2008, which has been a blessing, but there are always residents not reached by the boom, Ingham says. "Everything is on steroids there, so the effects are magnified," he says. "Is it a virtual certainty that there are some people being left behind by what is going on? There has to be. I don't see how it can not be the case."
Born and raised in Odessa, Sonia Melendez and her common-law husband came back to town just as oil field activity was increasing in late 2009. Nothing was certain yet, but there were rumors that oil companies were leasing mineral rights, that the untapped formations beneath their feet might be reachable.
Willie Taylor, executive director of the Permian Basin Workforce Development Board, says it surprised everyone. "We thought the fields were dead out there, but that new technology has brought new life out here," he says. It also brought budget cuts for Taylor. Midland has had the lowest unemployment rate in the country, with Odessa close behind it, according to the Bureau of Labor Statistics, so funding was slashed and Taylor had to close one of the organization's offices. People are acting as if the boom will never end, he says. He warns everyone who'll listen that the current expansion will pass just as earlier ones did. "Don't take the money for granted. The money is here and there's a lot of it right now, but it's only covering up our problems. Money is doing it all, putting a Band-Aid on the system."
For Melendez and her family, the economic development has meant that rent has almost doubled every time she has had to sign a new lease. Rent is one of the main problems for those who are struggling. Melendez found cheaper places to live and took in tenants to help cover the costs. Before their son was born three years ago, both Melendez and her husband worked two jobs to make ends meet. The last place they had was cheap for the area, about $800 a month, but there was mold, and the landlord refused to fix the leaking pipes causing it, she says. They moved in with Melendez's family, but there was a falling-out, and they left after a month. In April, with nowhere else to go, they started sleeping at Love's Travel Stop on the edge of town.
There have been numerous calls for the city governments in Odessa and Midland to step in and do something about the high cost of rentals; there was even an online petition. However, Midland City Manager Courtney Sharp says Texas law actually prohibits rent control, so there's nothing either city can do.
Melendez kept her family's 2003 champagne Chevrolet Suburban neat. The air mattress was folded up and stowed in the back right corner of the vehicle during the day. Her husband often worked nights, so during the day, Melendez would drive to one of the city parks and play with her son while her husband slept. They saved money and got a family membership at the Odessa YMCA, and they went there to shower and get out of the heat during the worst part of the day. The woman at the front desk always eyed the family as they walked in, but those were the times Melendez could act as if everything were normal.
At night the family would pull into the truck-stop parking lot and crack the windows to catch the breeze that drops the temperature to something bearable. It was never quiet at the truck stop, the steady growl of more than 50 idling 18-wheelers pairing with the roar of traffic to create an ocean of sound. A drilling rig loomed on the edge of it all, lit up like the Empire State Building. While her son slept, Sonia sat in the front seat and cried. Her husband works as a line operator at a factory, making about $33,000 a year. It's not a fortune, but they would have a home in other places, she says. They were saving money for an RV, but even the beat-up ones for sale in the area were out of their price range. "They say all this money is here, but where is it? I'm seeing none of it. It's ridiculous. We try our hardest, but no matter what we do, it's not good enough."
Melendez wanted to raise her children in Odessa, but now they're planning on leaving when they can afford to. That's the choice many in their situation face, says Dominic Boyer, director of the Rice University Center for Energy and Environmental Research in the Human Sciences. This is a cost that comes with most energy booms, but there's not a lot of research on the causes because oil is such a politically contentious issue, he says. "The middle class is kind of between a rock and a hard place. We're in a situation where good-quality jobs are available, especially if you're college-educated, but prosperity doesn't inevitably follow in the wake of shale."
In more isolated communities like those on top of the Permian Basin, the boom creates sharper social stratification and there's more social inequality, says Luis Salinas, a UH professor of sociology. There are the people in oil and the ones who are not, and there's a sharp divide between the two groups. Usually that would be handled with a progressive tax structure and programs directing some of the money back to people on the lower rungs, but that's not how things work in Texas, he says.
Chavez, the director of Odessa Links, says her organization has seen a rapid increase in requests for help in the past few years without a matching increase in community resources. There isn't much pity, either, she says. Local people see hiring signs all over town, and everyone knows about how McDonald's is paying $14 or $15 an hour and how Subway was so desperate for employees to craft its sandwiches that it was offering $1,000 signing bonuses, she says. People assume that anyone not prospering just isn't trying hard enough.
Justin and Julie Hall
Photo by Mark Sterkel
The story goes differently if you're in the oil industry, says Ed Hirs, the UH economics professor. "The world is their oyster right now," he says.
Julie and Justin Hall were living in New Mexico and going nowhere. The couple married in 2009, when both were just 20 years old. They'd met on a blind date a few years before, and Justin proposed three months later. Justin's family was always in the oil field -- both his father and grandfather had worked for the company that is now Chevron -- but Justin wanted to make his own way and stay out of the business. He was laid off from his construction company job, but he and Julie married anyway, starting off with more bills than they could handle and $14,000 of debt. They worked at competing feed stores in a small town in northern New Mexico and tried to get out of debt and move forward with their life together, but nothing was working.
Justin always swore he wouldn't go into oil, but two years of grappling with bills and debt changed his mind. In January 2011, his parents told the couple they could move to Midland and Justin could finish college and get some kind of oil-related degree from the University of Texas of the Permian Basin in Odessa. His parents offered free room and board if Justin and Julie could raise enough money to get there. The couple took everything they had and scraped together enough cash to drive to West Texas. Julie worked as a veterinary technician, a job that pays about $22,000 a year, and Justin found part-time work and went to school.
They were paying off their debts and living in one bedroom in his parents' house. When Justin was close to graduating, he and Julie decided they had enough money to get their own apartment. It seemed reasonable when they signed the lease, but everything was more expensive than they'd expected. Julie worked her day job as well as holidays and night shifts at an emergency animal clinic to make extra money, and Justin worked every hour of overtime he could get, but they were barely making it. They hardly ever saw each other. Julie would come home bone-tired in the morning to sleep a few hours before she had to go back to work, and Justin would be on his way out the door. They'd been talking about buying a house and having kids -- Justin wants two and Julie wants four, so they're negotiating -- but sitting in the apartment they could barely afford, they found that other life to be a mirage. It was like they'd never left New Mexico.
Justin graduated and started roaming job fairs, talking with company men and looking for someone who would see past his lack of experience in the oil industry and give him a chance. The months ticked by, and he was still job-hunting when he walked up to the Chevron booth at a New Mexico job expo. He was hired on the spot as a field specialist, an entry-level management job. Within six months, they cleared their debt, and Julie stopped working extra shifts. Last March they bought a house, a tan brick ranch-style on a quiet street in Midland. It has three bedrooms, a couple of trees in front and a good backyard, the kind of place they'd always imagined raising their kids. A year ago this would have been unimaginable, Julie says. "Even when we had enough money to look at houses, it didn't feel real, because it happened so fast," she says, shaking her head a little as she looks around their living room.
Still, Justin knows how quickly fortunes can change in the oil industry. The worry is there every night when he walks into the house, that the whole thing could end with one sharp drop in the price of oil. "We were willing to work, and we'd have done what we needed to do even if that meant working three jobs and working at McDonald's," Julie says. But getting into the industry turned everything around. "I owe this company everything," Justin says. "Thank God the stars aligned and they hired me."
Photo by Mark Sterkel
Sheri Fincher's family has lived in Odessa for a couple of generations, but they always stayed out of the oil business, disliking the fickleness of the industry. Fincher dropped out of college when she got married, and had two sons. After she became a single mother, she worked as an administrative assistant. She made enough to provide for her family, but started thinking about returning to college when her older son, Colton, was getting ready for high school.
Fincher figured out how to get the loans and grants necessary to go back to school. She graduated from the University of Texas of the Permian Basin and was hired to work at a university program aimed at encouraging lower-income families to get their children ready for school through early childhood education. She finally had her diploma and was being paid a good salary, but her paycheck wasn't going as far as she'd thought it would.
The oil field activity was crazy. Oil workers motored through town as if the law were after them, and the newspapers constantly reported fatal wrecks on the highways. Fincher knew all this, and she knew to do her grocery shopping at strategic times unless she wanted to wait for more than an hour in the checkout line. She was grappling with rent prices that kept going up, but she'd expected that her new job, secured with that college degree, would make things a little easier. Instead, she was still at the bottom of the totem pole, a single mother juggling her checks and bill payments to make ends meet. She'd had dreams of buying a home, of finally owning something, but everything was out of her reach. "The people that used to be middle-class here lived paycheck to paycheck, but we still saw ourselves as middle-class. Now we're the same people, but we're considered lower-class," she says.
Colton went off to college in fall 2013, and Fincher helped him cobble together the funding for his education at Texas Tech through scholarships, grants and financial aid. "It's crazy, but it's actually cheaper for my mom for me to be in school in Lubbock than it is for me to be living at home," Colton says. In early 2014, Fincher looked at her bills and realized that she needed more income. She had worked at National Car Rental at Midland International Airport before she was hired by UTPB. Her old National manager was looking for someone to work nights and weekends, and she took the job. Colton started working with her at the car-rental place when he came home for the summer. "I want to help out. I know things are hard and everything," he says.
When they're asked directly, most people will say they're fine, they're getting by, Fincher says. It's a part of West Texas culture, presenting a mask of smiles and positive statements to cover up not knowing how you're going to pay the electric bill. A few months ago, Fincher was running community outreach meetings to encourage families to apply for programs that would help them get free early childhood -education. Parents who attended the meetings were willing to talk about how the town needed more parks and the schools needed more programs and their children needed more help, but her questions about how they were doing, what paying rent in this economy was doing to their finances, were met with silence and then smiles and assurances that they were doing all right.
Fincher has heard the predictions that this is the boom they've all been praying for, the one that will last forever. She doesn't know what to think about that. In this community, wanting things to end or even slow down is practically treason, but the boom has made things hard for her. She works more than 60 hours a week and never has an entire day off. Despite this, she says her situation really isn't that bad. She even smiles when she says it. She and her family are getting by, and there are people much worse off.
When it comes to those at the lower end of the spectrum, the ones who got off the Greyhound bus in Odessa with cash in their pockets and no idea how expensive it is to live anywhere near the Permian Basin, there's little available to help them. There are two Salvation Army shelters in the area, one in Midland and the other in Odessa, and neither has been renovated in decades. Public transportation is limited, and there are no funds set aside to help stranded people get out of town. One run of bad luck can put a person on the street, and the homeless population has been growing right along with the boom. "The margin of error is much smaller in these areas, so they can't sustain themselves as long as they normally could," Eric Samuels, director of continuum of care programs at the Texas Homeless Network, says. "It's not exactly a cycle of poverty, but if you're in it, it's hard to get out. It used to be something that could actually happen. It didn't happen often, but it could actually happen."
Larry Bailey has been living on the streets of Midland for about a year. He came to town looking for work but couldn't afford an apartment, and he ran out of cash before he found a job. More people like him arrive in town every day, talking about how they're going to find employment and how there's money to be made. They don't realize what they've walked into, Bailey says. "It's a trap. Midland-Odessa is the talk of the world right now -- prosperity and money and jobs; it's all supposed to be here -- and when you see it, you don't ever think of the people -outside it."
Despite the people who have been struggling, officials have preferred to wait for the market to adjust instead of stepping in, Permian Basin workforce executive director Willie Taylor says.
"There's really nothing else to do. It's feeding on itself, and it will keep feeding on itself," Midland County Sheriff Gary Painter says. "This goes with every boom and bust. There are haves and have-nots, the ones who will never make it and the ones who will make the real money in this thing and the ones who will just be here -forever."
Oil company officials are publicly predicting that the expansion will last for decades, that there are enough untapped shale formations to keep economic activity thrumming for years. History says that won't be the case, because booms always bust and the wells needed to reach shale formations are incredibly expensive to drill, at about $7 million each. Oil has hovered at around $100 a barrel for years, which makes drilling a shale well profitable, but if the price ever falls to $50 to $60 a barrel, oil companies will lose money and Odessa and Midland could go from boomtowns to ghost towns overnight.
Painter thinks of that whenever he drives past the RV parks with hundreds of people packed into spaces of flat, arid land. If it all ended, some of those people would doubtless be able to leave, but just as many others would be trapped in West Texas, and the communities would have a nightmare on their hands, he says. Some observers say the boom will never end because it's being driven by advances in drilling technology and not the price of oil. That's what the ones riding it are hoping. That's what the ones drowning in it are afraid of.
Malugani didn't stay to find out. At the end of the school year, she packed up her things and drove to Boise, Idaho. She didn't know anyone in town, and this time she didn't even have a job. She got lucky and found a teaching position within a week and started to get back on her feet.
People asked her what it was like living in Odessa, and she tried to explain the adrenaline in the air, the way everyone, even the kids, is focused on the slick black crude trapped in dense, brittle rock hundreds of feet below. She tried to talk about how it's a place where recycling is an alien concept and it can be incredibly lonely for an outsider, but where the community always comes together to help those in need. "I tried to explain it to people, but they didn't really understand. Until you're in it, living it, experiencing it, you don't understand."
Eventually, she stopped trying.
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