EDC head predicts Hobbs retail growth in 2019
While Lea County is the third highest oil-producing county in the nation and climbing, local economic leaders are seeking to expand oil and natural gas-related businesses while diversifying the local economy to better weather the ups and downs of the oil and gas industry.
Steve Vierck, president and CEO of the Economic Development Corporation of Lea County, says a doubling of new housing in Hobbs in 2018 may be followed up with significant retail growth this year.
“I think this is going to be the year of new retailers in the community,” Vierck said while giving an economic update Wednesday at the quarterly membership luncheon of the Hobbs Chamber of Commerce.
Vierck said among the leading challenges identified by businesses surveyed since July is a need for more retailers and restaurants.
“What has held us back primarily?” he asked. “Well, there are so many retailers that are interested in this market, but retailers … rarely want to build their own building. They want to go into a shopping center and they want to occupy space and they want to lease it. They’re not in the real estate business. They don’t want to build a building, they want to lease a building. We just haven’t been able to get a large shopping center in.
“It’s just been tantalizing close at times, but we haven’t been able to get it done.”
Vierck said Pegasus Development of Las Vegas, Nevada, has bought the Kmart center in Hobbs, and with dozens of Kmart stores closing around the country, there’s a possibility the Kmart building could be available.
“So keep an eye on that one,” Vierck said. “Our retailers have been really interested in that market, they’ve just have had no place to go.”
Vierck said several retailers have expressed an interest in the local market, including Marshalls, Famous Footwear, PetSmart, Kohl’s, Chick-fil-A, Ross Stores, Ulta Beauty and Fallas.
“I’m not saying any of these people are coming in, I’m just saying there’s a good chance some of them will,” he said. “There are retailers and restaurants that really like this market. They just haven’t been able to figure out a way to come in. I think there’s a way to come in now.”
In recent years, gross receipts taxes in Lea County have mirrored rig counts as the oilfield services drives the local economy. As the county’s rig count has grown steadily since February 2016, from fewer than 10 rigs to now over 50, GRT revenues to Lea County have climbed from less than $1 million a month to $2 million.
“You couldn’t hardly find a tighter correlation than rig count to GRT,” Vierck said of the county’s 50-plus rigs. “Which is a tremendous number of drilling rigs for one county, and frankly a large number for any state to have.”
In addition to being the nation’s third-leading oil producer, Lea County produces half of the state’s oil and is the leading oil-producing county in the Permian Basin.
“It’s really amazing what’s going on,” Vierck said. “A lot of what’s happened has been relatively new. Even though they’ve been drilling for oil here since 1927 or 1928, it’s really only been recently that we’ve seen these big surges in oil production. Oil production in Lea County has tripled in the last five years, from 4 million barrels a month to 12 million barrels a month. It’s just amazing how much these volumes have grown.”
Last month, the U.S. Geological Survey reported an estimated 46.3 billion barrels of oil assessed in the Wolfcamp Shale and overlying Bone Spring Formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin. The USGS also reported 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids.
Vierck said between 2013 and 2018, 2,100 new wells were drilled in the southern part of the county.
From November 2016 to November 2018, the county’s unemployment rate fell from 8.8 percent to 3.8 percent, while the average weekly wage rose from $918 to $1,017. Total employment in the county from November 2016 to November 2018 grew from 23,756 to 28,836.
“That’s a lot of jobs,” Vierck said. “That’s a 20-some percent increase in employment.”
While oil production has surged, Vierck said the EDC, whose mission it is to expand and diversity the local economy, is seeking to grow and diversify the economy.
“In order to undertake economic development here in New Mexico and in Lea County, we know we need to do other things,” he said. “You can’t just bring the jobs in and then it happens, you have to have those basic requirements in place in order to be successfully economically.”
Vierck said the oil extraction process is requiring less labor per well as oil companies become more efficient.
“We know, over time, it’s going to require less labor per well, so we’ve got to make those jobs up, we’ve got to make that tax revenue up in other places,” he said. “We really live or die, to a large extent, in terms of the front-end of the production process. So as long as we have the oil, as long as they drill for it, we’re good. But otherwise, at least from a municipality’s standpoint, it’s a real challenge because of that dependance. It shows the need that we’ve got to find other sources of jobs and we’ve got to find other sources of tax revenues.”
Vierck said the five areas of growth the EDC is focusing on, in addition to retail growth, are oilfield services, midstream processing, medical and housing. He said there are currently 180 oilfield service companies in the Lea County.
“Oilfield services is very important,” he said. “Obviously, it’s the main driver of the economy.”
Mining jobs in Lea County, which include oilfield jobs, increased from 5,389 positions in 2016 to 7,095 in 2018, while transportation and warehousing jobs grew by almost 500, to 1,846 jobs.
Vierck said midstream processing facilities don’t have the numbers of employees as production companies, but they still pay well.
“They provide certain benefits, but jobs is not necessarily one of them,” he said. “This is an area of great opportunity, but mostly tax opportunity because there aren’t that many jobs, except for the construction.”
Medical sector growth in Lea County has been enhanced in recent months by new physicians and specialists at Lea Regional Medical Center and Nor-Lea Hospital, Vierck said, although he said too many local residents are still seeking medical and dental treatment in Lubbock.
“That money is leaking out of the economy. That is not a good thing,” Vierck said. “If we close the back door, so to speak, this is really going to help in a lot of ways.”
A doubling in new housing in Hobbs in 2018 from the last two years, with 164 permits issued for new single-family homes last year, is encouraging, Vierck said.
“If we don’t have the housing, we’re not going to get the employees. If we don’t have the employees, we’re not going to get the businesses. If we don’t have the businesses, we’re not going to get the GRT and the property tax,” Vierck said. “We’ve got to have housing. It’s the linchpin to everything we’re trying to achieve.”