Two planes, a Rolls-Royce and an Aston Martin – meet fracking millionaires of Kenedy, Texas
That’s the loot Michael Joseph has amassed just by selling the mineral rights to his land.
David Usborne reports from Kenedy, Texas – a town teeming with instant millionaires thanks to America’s shale gas revolution
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Midway through his chicken-fried steak Michael Joseph, rancher, big game hunter and pilot, kicks himself for not having offered his visitor a spin in his aircraft for an aerial view of what is going on hereabouts in Karnes County, one hour south of San Antonio. “You’d be amazed.” Then again, low clouds mean it would have been a bust anyhow.
But you grasp what’s going on pretty quickly at ground level. Even this place, the timber-frame, raucous Jerry B’s in Kenedy, tells its own story. Bursting at the rafters and with hard hats resting on every table alongside plastic jugs of iced tea, it is not, shall we say, a restaurant for old men. Like the country all around.
Welcome to the new American oil rush. Measure it anyway you like, including the instant riches it has bought to so many who were living here before. Mr Joseph actually has two aircraft sharing a hangar on his ranch with a new Rolls-Royce Ghost and an Aston Martin. (A Bentley is on its way.)
One is a Citation eight-seater jet. These were not paid for by his cattle or even his salary as a captain for Southwest Airlines. He has mineral rights and his tale of cheques dropping on the doormat is only one of a multitude here. He knows how to spend them; not everyone does.
Karnes County is one hour south of San Antonio in Texas Karnes County is one hour south of San Antonio in Texas Or we can count drill rigs and barrels.
US crude oil production is forecast to grow by almost 50 per cent between 2011 and 2014, a rate not seen in nine decades.
Output of natural gas is exploding, too, even though most of it is simply being burnt off in orange flares that punctuate the landscape of mesquite trees and cactus. Mostly, this is thanks to advances in fracking, where wells go more than a mile deep before turning horizontally to penetrate huge oil- and gas-soaked deposits of shale.
Texas is producing three million barrels a day, most of it from fracking in two huge shale fields. Here, we are atop the Eagle Ford formation. In West Texas a similar frenzy has descended on the even larger Permian Basin.
By next year, Texas will be spewing four million barrels, which will put it ahead of old oil powers such as the United Arab Emirates, Iraq and Iran. If it were a nation, Texas would already be the ninth biggest oil producer in the world.
It is globally transformative too, turning the US into an energy superpower again and threatening to end the grip of Opec on world markets and, maybe one day, Russia’s natural gas hegemony over Ukraine and western Europe.
It’s no surprise that this week Congress, with Vladimir Putin in its sights, called for accelerated exports of shale-produced gas across the Atlantic.
Like all blessings, it comes with potential costs, not least the danger posed, according to environmental groups, to local water supplies. That, though, might not be a conversation you’ll want to strike up in Jerry B’s.
“They don’t know what they are talking about,” declares Ignacio Farias, 31, who started out washing tanks and today is pulling in upwards of $300,000 a year as a supervisor with an oil field support firm, Supreme Vacuum Services. He has opened four bank accounts for members of his extended family.
Another cost is the hammering disruption to the old ways of life in towns such as Kenedy and countless others all across the 400-mile-long Eagle Ford formation.
Karnes County used to be the poorest part of Texas. Now it is the beneficiary of the biggest inflow of industrial dollars in American history.
But it can’t keep up. Roads are collapsing, sewage and electrical grids are overwhelmed, and roadsides are suddenly crammed with welding shops, pipeline suppliers, brothels, half-built hotels and clusters of metal, one-window dwellings not much bigger than dog kennels for workers to sleep in.
In nearby Tilden, in McMullen County, a surly fellow invites us inside to sign a rental agreement for one such hutch for $2,400 a month. He calls his not-quite-paradise the Tilden Country Inn.
It is a rough place where crime is rising but any man with stamina and strength can make out like a bandit. Barcley Houston just recently sold both his Eagle Ford wells and a company that helped oil companies dispose of contaminated waste water – his forebears include Sam Houston, the first president of Texas before it joined the US.
He says: “There is a disproportionate amount of wealth creation going on here in an IQ bandwidth of 80 to 100. This is the definition of Darwinism down here.” As for crime, he says, whole tankers filled with oil have been known to self-drive off into the night, never to return.
But perhaps nothing has been more disruptive than the creation of so many instant millionaires. Mostly, they were people making a living, often an extremely modest one, farming cattle and cereals, but who happened also to hold those precious mineral rights beneath the sod when the oil boys rolled in.
Rancher Michael Janosak, 52, bought a helicopter so that his son could fly around shooting wild hogs that invade his maize fields. Asked how many millions he receives a year from oil companies drilling on his acreage, he replies: “I don’t know – many millions.”
He mocks a neighbour who has agreed to let one of them run a pipeline across his land for a mere $5,000. “Five thousand dollars? I wipe my ** with that every morning,” he says.
For Mr Joseph, it started with a note left on his door from a company asking to lease his land for drilling. He got together with neighbours and they held out until they got the deal they wanted. He has bought his toys in the hangar and pledged an annual $50,000 scholarship to his alma mater, the University of Texas, in perpetuity. He won’t say how much he is collecting in monthly cheques.
“You look at me and it’s a Cinderella story,” he admits. But meanwhile he tells of his postman, Bennie, who is still carrying letters, even though he is probably collecting about $3m a year.
Most crazy is the predicament of the local banks, which are taking in so many deposits that they can’t fund the margins over and above them required by federal regulations, and also can’t make money with loans because no one needs them any more.
“We are awash with cash, but if you can’t make any business with it, then that becomes a big responsibility,” laments Ron Hyde, who runs the local credit union bank in Kenedy and is also lunching in Jerry B’s. Recently, when customers have been coming in with suitcases of cash, he has been turning them away, he says.
These are all the problems of oil-boom Karnes County, problems most of us would like to have.