Jim Benson

Photo Credit: Zachary Strain | Daily Texan Staff

MIDLAND — For many years, the landscape in West Texas was mostly uniform with dusty lots and artifacts of operating machinery left behind from a previous oil boom in the area. A generation removed from that boom, new oil rigs line roadways in the Permian Basin, where increased production will help the UT System bring in close to $1 billion in oil and gas revenue this year.

With a technologically driven oil-production boom, Midland’s landscape is transforming as the city works to build an infrastructure to support thousands of new residents while reaping the economic benefits associated with increased production. The UT System is also benefiting from the economic boom, and it doesn’t show signs of slowing down as dozens of companies have showed renewed interest in chasing the oil reserves on the 1.4 million acres the System has in the region.

Last October marked the first time land managed by the UT System produced more than 3 million barrels of oil since 1972 at the peak of the last oil production boom in the Permian Basin, said Jim Benson, executive director of University Lands.

University Lands, which has a Midland-based office, is responsible for managing the System’s 2.1 million acres that make up the Permanent University Fund.

The surge in production is part of a massive oil boom under the Wolfcamp Shale formation accessible through drilling technologies and techniques — horizontal drilling and hydraulic fracturing — that were not commonly used during the last boom in the area.

“This kind of changed everybody’s mind-sets to, ‘Now, we can go produce these source rocks or unconventional plays,’” Benson said. “That is what’s happening in the resurrection of the Permian Basin.”

With 50 oil and gas rigs actively drilling, 25-50 wells being assembled and 500 more permits waiting to be built on its land, Benson said University Lands still stands to increase its profits in the next two years as oil and gas companies leasing on the System’s land in the Permian Basin move into full manufacturing mode by 2015. 

“Even though there’s not a lot of manufacturing, there is a lot of capital expense, and our revenues are increasing in terms of the royalty rate,” Benson said. “Two years down the road, provided oil and gas prices stay as they are, we’ll make more than we did in the previous years.”

The Texas Railroad Commission defines the Permian Basin as an oil and gas producing area in West Texas 250 by 300 miles in area.

Benson said he expects University Lands to receive $850 million in royalties from production on leased land on top of the $112 million the System received in lease sale profits in the last fiscal year. 

In the last five years, the number of drilling permits approved by the Railroad Commission in the Permian Basin has almost doubled, increasing from 4,703 in 2007 to 9,3335 in 2012, according to Railroad Commission figures.

Oil and gas lease sales first skyrocketed during the September 2010 sale as the boom took off with total profits increasing during the following two sales, including a record high sale in September 2011 that brought in more than $310 million in profits.

The University of Texas Investment Management Company invests the sale profits and royalties and returns on investment make up the Available University Fund, which benefits the UT and Texas A&M systems. Last year, $205 million of UT-Austin’s $2.34 billion 2012-2013 operating budget came from the fund.

Profits from subsequent sales decreased substantially because fewer acres were available to be leased as companies jumped to lease in 2010 and 2011 when the boom picked up, Benson said. The most recent sale made only $70 million with about 16 percent of the acreage up for lease during the September 2011 sale. 

Oil was first discovered on UT lands in 1923, and the lands in the Permian Basin saw high levels of production during an oil boom in in the 1960s, during which the entire area produced 607 million barrels of oil over several years, according to the Texas State Historical Association.

Overall production in the basin totaled 312 million barrels of oil just last year, according to Railroad Commission figures. Production on University Lands, which fall mostly in the Permian Basin, reached 32 million barrels of oil in 2012 alone. 

Development and challenges

In a city where pump jacks are as common in backyards as swing sets, millions of gallons of water are being used per well for fracking. Despite a long-standing drought in the area, most locals’ concerns revolve around increased traffic and the faster-paced lifestyle that has resulted from the oil-driven migration to Midland. 

In 2005, the city’s population stood at about 99,000, according to city estimates. According to the U.S. Census estimates, the population stood at about 114,000 in 2011.

Some locals complain about the lack of supplies in grocery stores. A trip to the local Wal-Mart proves that multiple aisles have completely empty sections, including bottled water, raw chicken, sports drinks and toilet paper. Others complain about increased traffic in the area as travel time increases and major streets and roadways become a caravan of large oil transportation trucks and Super Duty Ford trucks emblazoned with oil and gas company logos.

Midland Mayor Wes Perry said the technology behind the current oil boom is essential to development in the area because it has boosted sales tax revenue, which the city is using for one-time capital projects after seeing increases in sales taxes.

“At this particular time, it’s not the typical situation like we had it in the past because it is driven by technology, not so much the price of oil,” Perry said. “When the price of oil drops, things will slow down, but it’s not going to be like it used to be where it was a boom and then a big bust cycle.”

Midland is currently undergoing various development projects to improve infrastructure, including highway widening projects and waterline extensions to industrial areas.

The increase of oil workers in the area has also transformed the city’s skyline with the construction of dozens of new hotels, which bring in hundreds of thousands of dollars in revenue for the city.

Perry said private sector developers are taking advantage of the financial opportunity in the housing market, which has faced increased levels in demand. Available and upcoming housing in Midland is projected at 5,300 available units, including 2,079 apartments and 1,301 hotel rooms, according to city housing documents.

City spokeswoman Sara Higgins said hotel units are also considered part of the available housing units because companies rent out multiple rooms and floors at some hotels during the week.

Not all have benefited from the oil boom in the area though. Local resident Marc McPeters moved to the area during the previous boom and has lived on the same plot of land for decades.

Back then, McPeters said she had to purchase her mobile home from New Mexico because housing was scarce.

Today, Endeavour Energy Resources operates an oil rig on almost half of McPeters’ property, but she said she doesn’t receive royalties from production revenue because Endeavour owns the mineral rights to her land. In Texas, land rights and mineral rights are sold separately. 

When Endeavour approached her about drilling on her property, McPeters said she wasn’t aware that her property ownership didn’t include mineral rights, which would entitle her to royalty payments on any oil production on her land.

“How they got them, I don’t know,” McPeter said. “They paid me $8,500 to put that pump jack there, and I had to pay taxes on that. They said ‘This is what we’re going to give you. Get out of the way.’”

Employment

The boom has also resulted in the lowest unemployment levels in the state as new drilling corporations have set up shop offering thousands of new jobs for locals and field workers who have moved into the area. In February, the unemployment rate dropped to 3.2 percent for the Midland metropolitan area — the lowest rate in the state and one of the lowest in the nation — according to a monthly report by the Texas Workforce Commission. The state unemployment rate, which has increased slightly this year, is 6.5 percent.

Adam Chavez, field coordinator for EagleOne, an independent transportation company that does oilfield transportation, said he moved to Midland from Plainview in 2011 because of the work opportunities in the area.

Chavez, who started as a company driver and was on call 24/7, travels home to visit his family during the weekend but lives in one of multiple RV campgrounds that have emerged throughout the Permian Basin. Some RV parks rent out space to oil workers who sleep in tents on makeshift grounds that locals call “man camps.” Man camps are not permitted on System land, according to a University Lands official. 

“I’ll be here as long as there is work and if the work doesn’t move north,” Chavez said. “I’ll be here until they say it’s dried up.”

Midland became the fastest-growing metropolitan area in the nation last year with a population increase of 4.6 percent, and Midland County was ranked as the 10th-fastest growing county, according to the U.S. Census Bureau.

High employment opportunities in the oil fields have left local restaurants that offer lower-paying jobs struggling to staff their operations while demand increases.

In the last two years, Gerardo’s Casita, a local Mexican restaurant, has lost cooks and kitchen staff to the oil fields, forcing Jerry Morales, Midland City Council member and owner of the restaurant, to step into the kitchen almost four times a week.

Morales said his restaurant has benefitted from the boom with tables occupied from open to close every day as the community thrives economically, but he has also had to make changes to adapt to the staffing challenges that come along with an increased amount of patrons.

It’s not unusual to see managers and owners working hosting and busboy duties in other restaurants, Morales said.

“It’s been very hard for us in the retail business to compete with an industry where they’re working 80 hours overtime in a week at 22 years old, bringing home a $3,000 check,” Morales said. “I’m probably paying $2-3 more [an hour] than I was 24 months ago.”

Gerardo’s Casita now closes for three hours between lunch and dinner and is closed all day on Sunday because Morales said he doesn’t have the staff to cover sufficient shifts to avoid paying current employees overtime. The restaurant has also increased menu prices to make up for the increased wages.

“It took a little while for us to understand [the boom] and it took a little to see if it was really going to last,” Morales said. “I don’t really call it a problem. It’s just a challenge.”

Photo Credit: Zachary Strain | Daily Texan Staff

MIDLAND — For many years, the landscape in West Texas was mostly uniform with dusty lots and artifacts of operating machinery left behind from a previous oil boom in the area. A generation removed from that boom, new oil rigs line roadways in the Permian Basin, where increased production will help the UT System bring in close to $1 billion in oil and gas revenue this year.

With a technologically driven oil-production boom, Midland’s landscape is transforming as the city works to build an infrastructure to support thousands of new residents while reaping the economic benefits associated with increased production. The UT System is also benefiting from the economic boom, and it doesn’t show signs of slowing down as dozens of companies have showed renewed interest in chasing the oil reserves on the 1.4 million acres the System has in the region.

Last October marked the first time land managed by the UT System produced more than 3 million barrels of oil since 1972 at the peak of the last oil production boom in the Permian Basin, said Jim Benson, executive director of University Lands.

University Lands, which has a Midland-based office, is responsible for managing the System’s 2.1 million acres that make up the Permanent University Fund.

The surge in production is part of a massive oil boom under the Wolfcamp Shale formation accessible through drilling technologies and techniques — horizontal drilling and hydraulic fracturing — that were not commonly used during the last boom in the area.

“This kind of changed everybody’s mind-sets to, ‘Now, we can go produce these source rocks or unconventional plays,’” Benson said. “That is what’s happening in the resurrection of the Permian Basin.”

With 50 oil and gas rigs actively drilling, 25-50 wells being assembled and 500 more permits waiting to be built on its land, Benson said University Lands still stands to increase its profits in the next two years as oil and gas companies leasing on the System’s land in the Permian Basin move into full manufacturing mode by 2015. 

“Even though there’s not a lot of manufacturing, there is a lot of capital expense, and our revenues are increasing in terms of the royalty rate,” Benson said. “Two years down the road, provided oil and gas prices stay as they are, we’ll make more than we did in the previous years.”

The Texas Railroad Commission defines the Permian Basin as an oil and gas producing area in West Texas 250 by 300 miles in area.

Benson said he expects University Lands to receive $850 million in royalties from production on leased land on top of the $112 million the System received in lease sale profits in the last fiscal year. 

In the last five years, the number of drilling permits approved by the Railroad Commission in the Permian Basin has almost doubled, increasing from 4,703 in 2007 to 9,3335 in 2012, according to Railroad Commission figures.

Oil and gas lease sales first skyrocketed during the September 2010 sale as the boom took off with total profits increasing during the following two sales, including a record high sale in September 2011 that brought in more than $310 million in profits.

The University of Texas Investment Management Company invests the sale profits and royalties and returns on investment make up the Available University Fund, which benefits the UT and Texas A&M systems. Last year, $205 million of UT-Austin’s $2.34 billion 2012-2013 operating budget came from the fund.

Profits from subsequent sales decreased substantially because fewer acres were available to be leased as companies jumped to lease in 2010 and 2011 when the boom picked up, Benson said. The most recent sale made only $70 million with about 16 percent of the acreage up for lease during the September 2011 sale. 

Oil was first discovered on UT lands in 1923, and the lands in the Permian Basin saw high levels of production during an oil boom in in the 1960s, during which the entire area produced 607 million barrels of oil over several years, according to the Texas State Historical Association.

Overall production in the basin totaled 312 million barrels of oil just last year, according to Railroad Commission figures. Production on University Lands, which fall mostly in the Permian Basin, reached 32 million barrels of oil in 2012 alone. 

Development and challenges

In a city where pump jacks are as common in backyards as swing sets, millions of gallons of water are being used per well for fracking. Despite a long-standing drought in the area, most locals’ concerns revolve around increased traffic and the faster-paced lifestyle that has resulted from the oil-driven migration to Midland. 

In 2005, the city’s population stood at about 99,000, according to city estimates. According to the U.S. Census estimates, the population stood at about 114,000 in 2011.

Some locals complain about the lack of supplies in grocery stores. A trip to the local Wal-Mart proves that multiple aisles have completely empty sections, including bottled water, raw chicken, sports drinks and toilet paper. Others complain about increased traffic in the area as travel time increases and major streets and roadways become a caravan of large oil transportation trucks and Super Duty Ford trucks emblazoned with oil and gas company logos.

Midland Mayor Wes Perry said the technology behind the current oil boom is essential to development in the area because it has boosted sales tax revenue, which the city is using for one-time capital projects after seeing increases in sales taxes.

“At this particular time, it’s not the typical situation like we had it in the past because it is driven by technology, not so much the price of oil,” Perry said. “When the price of oil drops, things will slow down, but it’s not going to be like it used to be where it was a boom and then a big bust cycle.”

Midland is currently undergoing various development projects to improve infrastructure, including highway widening projects and waterline extensions to industrial areas.

The increase of oil workers in the area has also transformed the city’s skyline with the construction of dozens of new hotels, which bring in hundreds of thousands of dollars in revenue for the city.

Perry said private sector developers are taking advantage of the financial opportunity in the housing market, which has faced increased levels in demand. Available and upcoming housing in Midland is projected at 5,300 available units, including 2,079 apartments and 1,301 hotel rooms, according to city housing documents.

City spokeswoman Sara Higgins said hotel units are also considered part of the available housing units because companies rent out multiple rooms and floors at some hotels during the week.

Not all have benefited from the oil boom in the area though. Local resident Marc McPeters moved to the area during the previous boom and has lived on the same plot of land for decades.

Back then, McPeters said she had to purchase her mobile home from New Mexico because housing was scarce.

Today, Endeavour Energy Resources operates an oil rig on almost half of McPeters’ property, but she said she doesn’t receive royalties from production revenue because Endeavour owns the mineral rights to her land. In Texas, land rights and mineral rights are sold separately. 

When Endeavour approached her about drilling on her property, McPeters said she wasn’t aware that her property ownership didn’t include mineral rights, which would entitle her to royalty payments on any oil production on her land.

“How they got them, I don’t know,” McPeter said. “They paid me $8,500 to put that pump jack there, and I had to pay taxes on that. They said ‘This is what we’re going to give you. Get out of the way.’”

Employment

The boom has also resulted in the lowest unemployment levels in the state as new drilling corporations have set up shop offering thousands of new jobs for locals and field workers who have moved into the area. In February, the unemployment rate dropped to 3.2 percent for the Midland metropolitan area — the lowest rate in the state and one of the lowest in the nation — according to a monthly report by the Texas Workforce Commission. The state unemployment rate, which has increased slightly this year, is 6.5 percent.

Adam Chavez, field coordinator for EagleOne, an independent transportation company that does oilfield transportation, said he moved to Midland from Plainview in 2011 because of the work opportunities in the area.

Chavez, who started as a company driver and was on call 24/7, travels home to visit his family during the weekend but lives in one of multiple RV campgrounds that have emerged throughout the Permian Basin. Some RV parks rent out space to oil workers who sleep in tents on makeshift grounds that locals call “man camps.” Man camps are not permitted on System land, according to a University Lands official. 

“I’ll be here as long as there is work and if the work doesn’t move north,” Chavez said. “I’ll be here until they say it’s dried up.”

Midland became the fastest-growing metropolitan area in the nation last year with a population increase of 4.6 percent, and Midland County was ranked as the 10th-fastest growing county, according to the U.S. Census Bureau.

High employment opportunities in the oil fields have left local restaurants that offer lower-paying jobs struggling to staff their operations while demand increases.

In the last two years, Gerardo’s Casita, a local Mexican restaurant, has lost cooks and kitchen staff to the oil fields, forcing Jerry Morales, Midland City Council member and owner of the restaurant, to step into the kitchen almost four times a week.

Morales said his restaurant has benefitted from the boom with tables occupied from open to close every day as the community thrives economically, but he has also had to make changes to adapt to the staffing challenges that come along with an increased amount of patrons.

It’s not unusual to see managers and owners working hosting and busboy duties in other restaurants, Morales said.

“It’s been very hard for us in the retail business to compete with an industry where they’re working 80 hours overtime in a week at 22 years old, bringing home a $3,000 check,” Morales said. “I’m probably paying $2-3 more [an hour] than I was 24 months ago.”

Gerardo’s Casita now closes for three hours between lunch and dinner and is closed all day on Sunday because Morales said he doesn’t have the staff to cover sufficient shifts to avoid paying current employees overtime. The restaurant has also increased menu prices to make up for the increased wages.

“It took a little while for us to understand [the boom] and it took a little to see if it was really going to last,” Morales said. “I don’t really call it a problem. It’s just a challenge.”

Marc McPeters, Midland resident with an oil rig on her property.

Photo Credit: Zachary Strain | Daily Texan Staff

For many years, the landscape in West Texas was mostly uniform with dusty lots and artifacts of operating machinery left behind from a previous oil boom in the area. A generation removed from that boom, new oil rigs line roadways in the Permian Basin, where increased production will help the UT System bring in close to $1 billion in oil and gas revenue this year.

With a technologically driven oil-production boom, Midland’s landscape is transforming as the city works to build an infrastructure to support thousands of new residents while reaping the economic benefits associated with increased production. The UT System is also benefiting from the economic boom, and it doesn’t show signs of slowing down as dozens of companies have showed renewed interest in chasing the oil reserves on the 1.4 million acres the System has in the region.

Last October marked the first time land managed by the UT System produced more than 3 million barrels of oil since 1972 at the peak of the last oil production boom in the Permian Basin, said Jim Benson, executive director of University Lands.

University Lands, which has a Midland-based office, is responsible for managing the System’s 2.1 million acres that make up the Permanent University Fund.

The surge in production is part of a massive oil boom under the Wolfcamp Shale formation accessible through drilling technologies and techniques — horizontal drilling and hydraulic fracturing — that were not commonly used during the last boom in the area.

“This kind of changed everybody’s mind-sets to, ‘Now, we can go produce these source rocks or unconventional plays,’” Benson said. “That is what’s happening in the resurrection of the Permian Basin.”

With 50 oil and gas rigs actively drilling, 25-50 wells being assembled and 500 more permits waiting to be built on its land, Benson said University Lands still stands to increase its profits in the next two years as oil and gas companies leasing on the System’s land in the Permian Basin move into full manufacturing mode by 2015. 

“Even though there’s not a lot of manufacturing, there is a lot of capital expense, and our revenues are increasing in terms of the royalty rate,” Benson said. “Two years down the road, provided oil and gas prices stay as they are, we’ll make more than we did in the previous years.”

The Texas Railroad Commission defines the Permian Basin as an oil and gas producing area in West Texas 250 by 300 miles in area.

Benson said he expects University Lands to receive $850 million in royalties from production on leased land on top of the $112 million the System received in lease sale profits in the last fiscal year. 

In the last five years, the number of drilling permits approved by the Railroad Commission in the Permian Basin has almost doubled, increasing from 4,703 in 2007 to 9,3335 in 2012, according to Railroad Commission figures.

Oil and gas lease sales first skyrocketed during the September 2010 sale as the boom took off with total profits increasing during the following two sales, including a record high sale in September 2011 that brought in more than $310 million in profits.

The University of Texas Investment Management Company invests the sale profits and royalties and returns on investment make up the Available University Fund, which benefits the UT and Texas A&M systems. Last year, $205 million of UT-Austin’s $2.34 billion 2012-2013 operating budget came from the fund.

Profits from subsequent sales decreased substantially because fewer acres were available to be leased as companies jumped to lease in  2010 and 2011 when the boom picked up, Benson said. The most recent sale made only $70 million with about 16 percent of the acreage up for lease during the September 2011 sale. 

Oil was first discovered on UT lands in 1923, and the lands in the Permian Basin saw high levels of production during an oil boom in in the 1960s, during which the entire area produced 607 million barrels of oil over several years, according to the Texas State Historical Association.

Overall production in the basin totaled 312 million barrels of oil just last year, according to Railroad Commission figures. Production on University Lands, which fall mostly in the Permian Basin, reached 32 million barrels of oil in 2012 alone. 

Development and challenges

In a city where pump jacks are as common in backyards as swing sets, millions of gallons of water are being used per well for fracking. Despite a long-standing drought in the area, most locals’ concerns revolve around increased traffic and the faster-paced lifestyle that has resulted from the oil-driven migration to Midland. 

In 2005, the city’s population stood at about 99,000, according to city estimates. According to the U.S. Census estimates, the population stood at about 114,000 in 2011.

Some locals complain about the lack of supplies in grocery stores. A trip to the local Wal-Mart proves that multiple aisles have completely empty sections, including bottled water, raw chicken, sports drinks and toilet paper. Others complain about increased traffic in the area as travel time increases and major streets and roadways become a caravan of large oil transportation trucks and Super Duty Ford trucks emblazoned with oil and gas company logos.

Midland Mayor Wes Perry said the technology behind the current oil boom is essential to development in the area because it has boosted sales tax revenue, which the city is using for one-time capital projects after seeing increases in sales taxes.

“At this particular time, it’s not the typical situation like we had it in the past because it is driven by technology, not so much the price of oil,” Perry said. “When the price of oil drops, things will slow down, but it’s not going to be like it used to be where it was a boom and then a big bust cycle.”

Midland is currently undergoing various development projects to improve infrastructure, including highway widening projects and waterline extensions to industrial areas.

The increase of oil workers in the area has also transformed the city’s skyline with the construction of dozens of new hotels, which bring in hundreds of thousands of dollars in revenue for the city.

Perry said private sector developers are taking advantage of the financial opportunity in the housing market, which has faced increased levels in demand. Available and upcoming housing in Midland is projected at 5,300 available units, including 2,079 apartments and 1,301 hotel rooms, according to city housing documents.

City spokeswoman Sara Higgins said hotel units are also considered part of the available housing units because companies rent out multiple rooms and floors at some hotels during the week.

Not all have benefited from the oil boom in the area though. Local resident Marc McPeters moved to the area during the previous boom and has lived on the same plot of land for decades.

Back then, McPeters said she had to purchase her mobile home from New Mexico because housing was scarce.

Today, Endeavour Energy Resources operates an oil rig on almost half of McPeters’ property, but she said she doesn’t receive royalties from production revenue because Endeavour owns the mineral rights to her land. In Texas, land rights and mineral rights are sold separately. 

When Endeavour approached her about drilling on her property, McPeters said she wasn’t aware that her property ownership didn’t include mineral rights, which would entitle her to royalty payments on any oil production on her land.

“How they got them, I don’t know,” McPeter said. “They paid me $8,500 to put that pump jack there, and I had to pay taxes on that. They said ‘This is what we’re going to give you. Get out of the way.’”

Employment

The boom has also resulted in the lowest unemployment levels in the state as new drilling corporations have set up shop offering thousands of new jobs for locals and field workers who have moved into the area. In February, the unemployment rate dropped to 3.2 percent for the Midland metropolitan area — the lowest rate in the state and one of the lowest in the nation — according to a monthly report by the Texas Workforce Commission. The state unemployment rate, which has increased slightly this year, is 6.5 percent.

Adam Chavez, field coordinator for EagleOne, an independent transportation company that does oilfield transportation, said he moved to Midland from Plainview in 2011 because of the work opportunities in the area.

Chavez, who started as a company driver and was on call 24/7, travels home to visit his family during the weekend but lives in one of multiple RV campgrounds that have emerged throughout the Permian Basin. Some RV parks rent out space to oil workers who sleep in tents on makeshift grounds that locals call “man camps.” Man camps are not permitted on System land, according to a University Lands official. 

“I’ll be here as long as there is work and if the work doesn’t move north,” Chavez said. “I’ll be here until they say it’s dried up.”

Midland became the fastest-growing metropolitan area in the nation last year with a population increase of 4.6 percent, and Midland County was ranked as the 10th-fastest growing county, according to the U.S. Census Bureau.

High employment opportunities in the oil fields have left local restaurants that offer lower-paying jobs struggling to staff their operations while demand increases.

In the last two years, Gerardo’s Casita, a local Mexican restaurant, has lost cooks and kitchen staff to the oil fields, forcing Jerry Morales, Midland City Council member and owner of the restaurant, to step into the kitchen almost four times a week.

Morales said his restaurant has benefitted from the boom with tables occupied from open to close every day as the community thrives economically, but he has also had to make changes to adapt to the staffing challenges that come along with an increased amount of patrons.

It’s not unusual to see managers and owners working hosting and busboy duties in other restaurants, Morales said.

“It’s been very hard for us in the retail business to compete with an industry where they’re working 80 hours overtime in a week at 22 years old, bringing home a $3,000 check,” Morales said. “I’m probably paying $2-3 more [an hour] than I was 24 months ago.”

Gerardo’s Casita now closes for three hours between lunch and dinner and is closed all day on Sunday because Morales said he doesn’t have the staff to cover sufficient shifts to avoid paying current employees overtime. The restaurant has also increased menu prices to make up for the increased wages.

“It took a little while for us to understand [the boom] and it took a little to see if it was really going to last,” Morales said. “I don’t really call it a problem. It’s just a challenge.”

Swaths of West Texas ranches dotted with cattle, sheep, rattlesnakes and cacti have never been much to look at, Sammy Hooper says with a laugh. Nevertheless, the 74-year-old rancher and his wife Mima Hooper say the recent drought and influx of the oil and gas industry have greatly impacted their operation. 

The boom of the oil industry in the Permian Basin and severe drought have taken a toll on the couple’s ranching operation. The Hoopers are one of 112 grazing lessees on University Lands’ 2.1 million acres. The drought will break eventually, but unless University administration takes some interest in preserving the natural environment, the Hoopers’ ranching future remains bleak, he said.

“We’ve spent 20 years or so ranching on University property,” Sammy Hooper said. “We’re sickened by what’s happened in the past five years.”

The problems began with the onset of drought several years ago, and the lack of water has been exacerbated by the influx of oil companies in the past two years, Hooper said. Since 2011, the Hoopers’ herd size was reduced by a third. 

“The biggest problems are when the oil field has come in and torn up our water lines, and we’re not even notified about it until it’s too late,” Hooper said. “I’m really worried about this fracking system. They’re using a lot of water for these oil wells, and I just worry they aren’t conserving the water the way they should. If oil is more important than ranching, we’re out.” 

According to Hooper, they have to pump water from deep underground to reach their herds, and the deeper the well, the more expensive it is to pay for the electricity to pump it. 

“Our only source of income is through livestock,” Hooper said. “If we have no water there’s no ranch. There’s no grass, there’s no rain, there’s no ranch.” 

Hooper said he recently tested some of his wells and discovered their levels were too low to water his herd. 

The western part of Texas has seen below average rainfall for the past two years according to Ken Rainwater, director of the Water Resources Center at Texas Tech University. The area received less than a third of its average yearly rainfall in 2011 and didn’t meet its rainfall average last year either, Rainwater said. 

University Lands Executive Director Jim Benson said no lessee has priority to water on University Lands. Benson said oil companies, which usually need millions of gallons of water for fracking wells that crack shale formations in order to extract oil and gas, are required by University Lands to minimize their water use by reusing wastewater. 

“The policy has always been that if we could prove that an oil company damaged a lessee’s well, then that company would be responsible to provide that water to the lessee,” Benson said. 

Hooper said in the past two years there has been a disconnect between how the oil companies and ranchers are supposed to operate and how those relationships interact in reality. 

“In this influx of oil invasion, we have no say,” Hooper said. “We’ve spent our last dime buying leases from the University and they have allowed the oil companies to come in and destroy the land.” 

Torn up water lines are just a small piece of the damage that’s been done, Hooper said.  

Whole pastures are now coated in limestone surface rock called caliche used to create roads for oil field workers. Grass won’t grow on caliche, and its dust coats the grass nearby, making it inedible for cattle, Hooper said. Wildlife such as deer and quail have left the ranch because of oil field traffic, according to Hooper.

“All that to get oil,” Hooper said. “If oil’s more important than the habitat of nature then that’s really messed up.” 

Hooper said ranchers previously received money from University Lands to help cover the cost of damages to their leases, but the money has stopped within the last six months. Benson said the University Lands office has budgeted money to help make improvements in the past, but funding for those projects is not always available. 

He said it is disheartening to see public land damaged by the industry, but he doesn’t have much hope for the situation to change. Hooper said anything short of directives from top university officials will be futile in protecting the grazing lands. 

“The Board of Regents are going to have to lay down the law about what the oil companies can and will do,” Hooper said. “We have talked with the local University people at great length. They apparently have no authority and it looks like their hands are tied.”

UT spokeswoman Karen Adler was unable to say how involved the Board of Regents was in monitoring interaction between ranchers and oil companies.

Deep below the dry dust surface of University Lands is groundwater that breathes life into the ranches, vineyards and oil wells that sit on top of it.

University Lands has a long history of managing its water between many divided interests, Executive Director Jim Benson said, but the recent oil boom in the region has outside regulatory entities concerned about the sustainability of water resources in the area. Bills filed in the Texas Legislature aim to impose more regulations on water extracted by oil and gas companies, while other pending bills would relax existing restrictions.  

“We’re always concerned with water in West Texas — always,” Benson said. “We don’t have any surface water on University Lands. It’s all groundwater, so we’re always concerned.”

Groundwater beneath the University Lands are part of the Ogallala, Cenozoic Pecos Alluvium and Gotham aquifers, Benson said. The exact amount of water the University Lands have in each aquifer is difficult to quantify, he said.

“We have considerable amounts of water, but I can’t tell you the exact amount we have because we haven’t spent the revenue to explore all of it,” Benson said. “As far as a massive study to explore the volumes of water, at this point it would be beyond our ability to budget that.”

The biggest consumers of University Lands water are municipalities, which Benson estimates use approximately 28 million gallons per day. The water isn’t always of the best quality, but is treatable and desirable in the climate where the resource is limited, he said.

“It’s pretty salty,” he said. “It’s fresh. You can drink it, but it doesn’t taste great.”

Up to half of the water consumed by Andrews — a town of about 11,000 people — comes from wells on University Land, said Danny Griffin, director of water production and plant management for the city. Andrews has purchased water from University Lands for more than 50 years and just signed an agreement to extend its contract for another 25 years. Although the price of water from University Lands has increased by 12 percent since 2010 and now must be mixed with surface water to dilute arsenic levels, the deal Andrews and University Lands have worked out is fairly favorable, Griffin said.

“It’s not a bad rate,” he said. “Especially because water’s a scarce resource.”

Energy companies also use freshwater in a process known as hydraulic fracturing or fracking, which uses millions of gallons of water mixed with chemicals to crack shale formations and extract oil and natural gas from deep below the earth’s surface, Benson said.

The University has tried to reduce the impact of these wells on its freshwater supply by requiring the energy companies to reuse water from fracking that would otherwise be pumped back into the ground in a disposal well at a different location. No federal or state laws or regulations force companies to reuse their wastewater if they do not operate on University Lands. 

“We’re trying to minimize the impact of oil and gas activity on the freshwater by utilizing this produced water that would otherwise be disposed of,” Benson said.

The University Lands also implemented its first groundwater management plan this year, which requires any entity drilling a water well on its property to seek approval from University Lands. 

State law requires all entities that use more than 25,000 gallons of water per day, with the exception of oil, gas and mining companies, to seek a permit from a local groundwater conservation district, if one exists, and report the amount of water they withdraw. And while oil and gas companies have to register wells with the groundwater conservation district, they don’t have to account how much water they withdraw, said Cindy Weatherby manager of the Santa Rita Groundwater Conservation District in Reagan County. 

“Oil and gas is our biggest problem right now,” Weatherby said. “There’s no way to put a finger on how much they are impacting us because they’re exempt from reporting.”

The districts are responsible for managing groundwater in the state, but that task is difficult when oil and gas companies don’t have to account for the water they use, Weatherby said. In the past year, her office has been overwhelmed by drilling registrations.

“The registrations come in so fast, I can barely keep up with putting them in the computer,” Weatherby said. “There’s some legislation that might help us. We can only pray.”

A bill, filed by state Sen. Glenn Hegar, R-Katy, and passed by the Senate Natural Resources Committee on Tuesday, would require oil and gas companies to report how much water they use for fracking to groundwater conservation districts. Lisa Craven, Hegar’s chief of staff, said current regulations on oil and gas companies drilling for fracking water were implemented before the practice was invented and need to be reformed.

“Senator Hegar believes that the oil and gas companies should have to follow the rules that apply to everyone else,” Craven said. 

Bills filed by state Rep. James Keffer, R-Eastland, and state Sen. Carlos Uresti, D-San Antonio would exempt water wells drilled for fracking purposes from the groundwater conservation district’s permitting process. 

“It’s the exact opposite of what our bill would do,” Craven said. 

University Lands, operated through the UT System’s Office of Business Affairs, sold almost $70 million of oil and gas leases during its semi-annual sale Wednesday, according to preliminary figures released by the office. 

University Lands is responsible for 2.1 million acres of land that together make up the Permanent University Fund, a state endowment established in 1876. The UT System’s investment company invests lease sale profits and revenue from production, including oil and gas extraction on the fund’s land, and returns on those investments benefit the UT and A&M systems. 

Executive director Jim Benson said he was happy with the results of the sale.

“I’m very pleased, especially in the continuing interest in University Lands for drilling purposes,” Benson said. “We had many returning companies and some new companies, too — I’m generally very pleased.” 

The sale netted slightly fewer dollars per acre than University Lands’ last sale in September. On Wednesday, University Lands offered 60,844 acres for lease, averaging roughly $1,144 per acre. In contrast, the September 2012 sale averaged $1,329 per acre. The March 2012 University Lands sale averaged $644 per acre. University Lands made record lease profits in 2011, when both lease sales averaged more than $2,000 per acre for a total of $560 million combined. 

Beyond the regular lease sale, University Lands also leased 134,000 acres in Hudspeth county in West Texas. Benson said while historically the land has not been a viable source for significant oil production, new advancements in technology might make the land more attractive to buyers. 

“It’s kind of exciting to have someone actually looking at the area,” Benson said. “The last time we leased it was back in the 1990s, and things have progressed quite a bit since then, so I’m sure the people who are interested think they might be able to find a reservoir that makes the land more economically profitable.”

Benson cited developments in horizontal drilling and hydraulic fracturing as examples of techniques that increase the odds a leaseholder will strike oil.

Printed on Thursday, April 11, 2013 as UT profits $70 million from sale of land leases 

Photo Credit: Natasha Smith | Daily Texan Staff

University Lands, operated through the UT System’s Office of Business Affairs, sold a combined $72 million in oil and gas leases during its 2012 semiannual sales.

The leases come on the heels of University Lands’ most lucrative sales in history in 2011, when lease sales totaled $560 million.

Jim Benson, executive director of University Lands, said total sales were less this year because less acreage was available to lease.

“Of our total land mass of 2.1 million acres, 1.6 million are in production in the Permian Basin, and of that 1.4 million are under leased or currently in production,” he said.

The September 2012 sale offered 49,007 acres, just a little more than an eighth of the September 2011 sale when University Lands offered 372,163 acres for lease to oil and gas companies.

University Lands is responsible for the 2.1 million acres of land that make up the Permanent University Fund, a state endowment funded by the investment of lease sale profits and revenue from production on the land. The land is leased for multiple purposes, including oil and gas production and for surface uses. 

The UT System and the Texas A&M University System are beneficiaries of the PUF.

The UT Investment Management Company invests sale profits and lease revenue in various industries including oil, gas and gold on behalf of the System. Returns on investment go straight into the Available University Fund, which usually makes up about 8 percent of UT’s operating budget.

The UT System receives two-thirds of returns on investment while the A&M System receives one-third.

The University received $205 million in returns through the Available University Fund for the 2012 fiscal year operating budget — up almost $26 million from 2011.

Mary Knight, associate vice president and UT budget director, said fluctuations in lease sale profits are smoothed over time because Available University Fund estimates are based on 12 previous financial quarters rather than only the previous year.

“Long-term declines could have a major impact on the recurring budget and could require budget reductions across all colleges, schools and departments, including research and student scholarships,” she said.

Bruce Zimmerman, CEO of the UT Investment Management Company, said the company is not looking to invest in new industries.

The bulk of revenue generated from the lands is from oil production, Benson said. University Lands receives 25 percent of royalties from all oil and gas production on its leased land and produced almost $1 billion in revenue last year. He said $600 million was from oil and gas.

“While it’s kind of exciting to see big oil and gas lease sales, the real revenue comes from long-term production on the land,” Benson said. “Of all these new leases companies buy, the ultimate goal is to get them to drill.”

The sale is a sealed bid process in which companies bid on land where they think they can hit oil. Permanent University Fund lands are primarily located in 24 counties, mostly in West Texas.

Benson said many major companies have production operations on University Land tracts.

“We get newcomers every year, but a lot of the same companies are consistently drilling and producing on our land in the Permian Basin for years,” he said.

ConocoPhillips Company, Approach Oil & Gas Inc. and Angelle & Donohue Oil & Gas Properties Inc. are among the leaseholders.

Oil was first discovered on Permanent University Fund land in 1923 in Reagan County, according to University Lands.

Printed on Friday, October 12, 2012 as: University Lands' revenue dereases