Texas Governor and Presidential candidate Perry recently announced his plan to put 1.2 million folks back to work. Perry's plan would repeal regulations and unleash national, full-bore oil and gas development. Many observers, ranging from The Atlantic to Michelle Bachmann, are speculating on this plan's economic impact.
Perhaps we could learn about the potential for Perry's plan by examining what happened to the 55,000 people in Port Arthur Texas, who recently experienced the impacts of massive oil and gas development under Perry.
In 2007, Port Arthur's oil companies announced some of the largest refinery expansions in history, coupled with the multi-billion dollar construction of the nearby Golden Pass liqueified natural gas import terminal.
This boom in oil and gas development generated a peak of 10,000 new construction jobs for the last 4 years and is still ongoing.
In response, Port Arthur's unemployment has nearly tripled, from around 5% in 2007 to almost 15% in August, 2011. Despite 10,000 construction new jobs in a town with an 18,000 person workforce, unemployment skyrocketed.
Despite a $1 billion a year jump in construction payroll, Port Arthur never experienced even a modest increase in sales tax collections.
This may be the hidden story of Perry's plan for economic growth through energy development. It hasn't always worked.
Port Arthur perches on a high bluff above where the 400-foot-wide Sabine River sweeps towards the Gulf of Mexico, providing a bountiful natural port. The River allows marine access inland into Texas and outward to the Gulf and the World.
The fabled Lucas well discovery spouted oil into the sky near Port Arthur in 1901, and the oil and gas industry swiftly blanketed Port Arthur with refineries, chemical plants, and marine terminals.
The gritty Port Arthur workers battled the Texas Rangers to form unions in the 30's. Modestly sized, victorian style homes still dot Port Arthur's residential areas, reminding observers that in days past, union wages could pay for a nice house, two cars, and you could even buy a boat to ply the Gulf for speckled trout and grouper during your two weeks of annual vacation.
Port Arthur's side of the River was prettier than the Louisiana side. In Cameron Parish, Louisiana, centuries of hurricanes have wiped out every tree from horizion to horizon. There, bayous teeming with gators and gars intersect the pool-table-level countryside, interrupted by the spilled-spagetti tangles of massive pipes and steaming stacks that characterize natural gas pumping and processing plants. In contrast, rolling hills with groves of hardwoods cradle Port Arthur.
Yet many energy speculators closed their Port Arthur oil and gas processing plants over the decades when the equipment grew too decrepit to replace. They often preferred to relocate 2 hours west to the Houston Shipping Channel, where the unions had already been weakened. And in Houston, you could eat a steak dinner downtown with the big boys in the oil and gas industry.
What are now the Total, Valero, and Motiva Refineries still remained in Port Arthur, along with a smattering of related facilities. Oil and gas production plants still lined the county roads in every direction, with offshore derricks out to the eye's limit in the Gulf of Mexico. Countless pipelines criss-cross beneath the crashing surf of the Gulf.
Port Arthur, always racially mixed, became 45% black. Too many of those victorian-style homes have been shuttered as jobs disappeared. Per capita annual income stagnated at about $21,000, compared to the $29,000 national average.
Yet the refinery workers still clung to their unions, and home-grown environmentalists still defended their community against the fetid eye-stinging odors from the chemical processors' smokestacks.
Then in 2007, energy speculators promised an economic boom. The Motiva refinery announced it would double in size. Total and Valero also announced large refinery exansions. And the Golden Pass LNG terminal announced their construction project. The total construction costs for these projects was about $10 billion and the total economic benefit to the community was calculated at $20 billion or more.
Collectively, these and other projects would provide up to 10,000 new construction jobs for over 4 years, and the expanded refineries and new LNG terminal would hire hundreds of new fulltime workers. Those appeared to be massive benefits in a town of only 55,000, with a work force of about 18,000 that included 2000 construction workers.
Yet those massive economic benefits never appeared in Port Arthur's economic statistics. Local and regional unemployment rose, even accelerated. City sale tax revenues stagnated at about $800,000 a year, even with an army of construction workers in town, staying at motels, and buying food and beer and gas and lap dances.
Part of the problem is that the refineries' out-of-state construction contractors shopped around the globe for the most desperate construction workers willing to labor for the lowest wages in unsafe conditions. Apparently too few Port Arthur residents were hired for the construction work to make a dent in the local unemployment figures.
Crime rates rose as the thousands of imported construction workers turned Port Arthur into a boom town. Police arrested one out-of-town construction worker for a shocking murder. Another worker died gruesomely, when a crane accidently dropped its load directly onto that poor soul.
And now, as the last of these huge construction projects begin winding down, unemployment has nearly tripled. Of course, the national recession and Hurricane Ike both hit in 2008, but unemployment now in Port Arthur is fully 50% higher than the national average and almost double the unemployment rate in Texas.
And all this happened in the midst of this multi-billion dollar grouping of oil and gas construction projects, perhaps the largest concentration of industrial construction in the entire United States for a decade or more.
I have studied the economic impacts of large construction projects for 25 years. This was by far the biggest. Developers commonly exaggerate the economic benefits of big construction jobs, but I've never before seen unemployment skyrocket in the middle of a construction boom.
I do not understand why Port Arthur's suffering has expanded drastically in the very midst of multi-billion dollars worth of economic development.
Port Arthur's hapless and clueless former mayor claimed unemployment was high because the locals were all dope addicts without high school diplomas, and the unemployment rate was calculated with the wrong census data. However, Port Arthur's high school graduation rate is well above the national average.
The current mayor claimed that thousands of laid-off out-of-town construction workers must have stuck around and filed for unemployment in Port Arthur. Yet Port Arthur has actually lost population in recent years, undermining that assertion.
Why, then, did billions of dollars worth of oil and gas development accompany the near-tripling of Port Arthur's unemployment? Maybe Governor Perry can explain.