The name “Spindletop” holds a central place in American energy history. It was here, on a hill in southeastern Texas in 1901, that a group of prospectors brought in production from the first giant oil field in the United States. While oil had been produced in other parts of the nation previously, Spindletop’s massive scale of production signaled the beginning of a much more prolific era in American oil and put the state of Texas at the center of the national and soon-to-be global energy market.
The first gusher at Spindletop led to a rush of additional prospectors sinking dozens of wells in the area. These dozens of wells brought with them thousands of wildcatters, laborers, merchants and all other manner of entrepreneurs seeking their fortune — or just a steady living — in the oil fields. Seemingly overnight, the area around Spindletop turned from a sleepy, humid farming community to a bustling, overcrowded industrial boomtown.
Spindletop in 1902. (Courtesy of the Independent Petroleum Association of America)
Over the past hundred years, most of the oil available under the hill at Spindletop has been drained. As a result, Spindletop is no longer a hill at all, but instead a fallow field marked by a single silver pole that denotes the site of the original oil gusher. Across a busy state highway, the Spindletop/Gladys City Boomtown Museum recreates the town of Gladys City, which sprouted up next door to Spindletop. Gladys City provided a type of suburb where wealthier citizens moved to escape the pollution, overcrowding and houses of disrepute common in Spindletop proper.
The author at the Spindletop/Gladys City Boomtown Museum.
While the Shale Public Finance project does not focus directly on the social and economic issues surrounding boomtowns, it has involved trips to a number of modern-day versions. Places such as Watford City and Williston, N. D.; Cotulla, Texas; and other cities experiencing rapid growth in drilling activity and population face some of the same challenges and opportunities as did Spindletop. The opportunities for local governments include an increased tax base and the ability to provide additional services for residents, while the challenges come from managing that growth and paying for the increased service demands that inevitably follow an influx of workers and residents.
The Spindletop/Gladys City Boomtown Museum.
Beaumont, Texas, the city that eventually sprang up around Spindletop, has built its economy on the processing and transportation of oil and gas, industries that grew to accommodate the massive amounts of oil and gas produced in the region. Indeed, the economy of the state of Texas has become heavily dependent on the production, processing and transportation of oil and gas—traits that serve it well during the good years, but lead to challenges when oil and gas prices fall.
Today, oil prices are high, but natural gas prices are low. This divergence has created very distinct economic conditions in the various locations we’ve visited for the Shale Public Finance project. However, our research — described briefly in these blog posts — indicates that the financial impact to local governments does not follow such a simple narrative. In the reports we will produce at the end of our research, we’ll dive into the details to understand how different state and local policies affect local government finances during the boom and during the bust.
This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.