Report from CIEL describes COVID-19 impacts on O & G industry

Pandemic Crisis, Systemic Decline: Why Exploiting the COVID-19 Crisis Will Not Save the Oil, Gas, and Plastic Industries

From the Center for International Environmental Law (CIEL), April 2020

Amidst a global pandemic caused by the novel coronavirus, the oil, gas, and plastic industries are exploiting the crisis by aggressively lobbying for massive bailouts and special privileges in a desperate attempt to revive an oil and gas industry already in decline.

Pandemic Crisis, Systemic Decline: Why Exploiting the COVID-19 Crisis Will Not Save the Oil, Gas, and Plastic Industries documents how long-term systemic declines in the oil and gas industry had been accumulating long before the coronavirus pandemic emerged. Compounded by the impacts of the pandemic and related economic crisis, the industry’s collapse has accelerated, with leading companies losing an average of 45% of their value since the start of 2020.

While the current crises have exacerbated the industry’s collapse, its underlying risks remain unchanged. Ultimately, government bailouts and regulatory rollbacks will not reverse the inevitable decline of the oil, gas, and plastic industries.

Recommendations:

>> Public Officials taking policy action to respond to COVID-19 and the economic collapse should not waste limited response and recovery resources on bailouts, debt relief, or similar supports for oil, gas, and petrochemical companies.

>> Institutional Investors and Asset Managers should recognize the overwhelming evidence that the risks of continued investment in fossil fuels now substantially outweigh the benefits, and they should rebalance their portfolios to eliminate their exposure to volatile and declining oil and gas assets.

>> Frontier Countries considering whether to open their lands, waters, and democracies to new oil and gas extraction should urgently reassess their prospects in light of the collapse in oil prices and demand, demonstrated severe risks of economic dependence on volatile oil markets, ongoing long-term decline of the sector, and its fundamental incompatibility with climate action.

>> Local Communities and Decisionmakers should reject demands from the oil, gas, and petrochemical sectors for public subsidies, tax abatements, lax environmental enforcement, or other special concessions. They should interrogate industry promises of long-term sustainable employment actively and skeptically, and they should require evidence to support those claims that goes beyond simplistic assumptions of market growth. In the rare circumstances where these burdens are met, affected communities should require project proponents to irreversibly commit the funds required to restore communities and the environment when the project reaches the end of its economic life.

Read the full report here: Pandemic Crisis, Systemic Decline: Why Exploiting the COVID-19 Crisis Will Not Save the Oil, Gas, and Plastic Industries, CIEL, April 2020, pp. 28.

CIEL Overview — Since 1989, the Center for International Environmental Law (CIEL) has used the power of law to protect the environment, promote human rights, and ensure a just and sustainable society.

>>> CIEL (Headquarters), 1101 15th St NW, 11th Floor, Washington DC, 20005. E-mail: info@ciel.org

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See also: Bankruptcy looms over U.S. energy industry, from oil fields to pipelines – Oil & Gas 360, April 23, 2020

More shale producers are expected to seek bankruptcy protection in coming weeks, industry and banking sources say, following Whiting Petroleum, which announced such steps earlier this month. Many small and mid-sized producers, including Chesapeake Energy Corp., have retained debt advisers.

The forecast loan default rate for 2020 among energy companies is 18%, according to Fitch Ratings, while nearly 20% of all energy corporate bonds are trading below 70 cents on the dollar, indicating distress, according to data from MarketAxess.

See the westernvaluesproject.org

From the FracTracker Alliance, March 30, 2020

The COVID-19 health crisis is setting off major changes in the oil and gas industry. The situation may thwart plans for additional petrochemical expansion and cause investors to turn away from fracking for good.

Persistent Negative Returns

Oil, gas, and petrochemical producers were facing financial uncertainties even before COVID-19 began to spread internationally. Now, the economics have never been worse.

In 2019, shale-focused oil and gas producers ended the year with net losses of $6.7 billion. This capped off the decade of the “shale revolution,” during which oil and gas companies spent $189 billion more on drilling and other capital expenses than they brought in through sales. This negative cash flow is a huge red flag for investors.

“North America’s shale industry has never succeeded in producing positive free cash flows for any full year since the practice of fracking became widespread.” IEEFA

Plummeting Prices of oil AND natural gas are BOTH problematic

Shale companies in the United States produce more natural gas than they can sell, to the extent that they frequently resort to burning gas straight into the atmosphere. This oversupply drives down prices, a phenomenon that industry refers to as a “price glut.”

The oil-price war between Russia and Saudi Arabia has been taking a toll on oil and gas prices as well. Saudi Arabia plans to increase oil production by 2 – 3 million barrels per day in April, bringing the global total to 102 million barrels produced per day. But with the global COVID-19 lockdown, transportation has decreased considerably, and the world may only need 90 million barrels per day.

If you’ve taken Econ 101, you know that when production increases as demand decreases, prices plummet. Some analysts estimate that the price of oil will soon fall to as low as $5 per barrel, (compared to the OPEC+ intended price of $60 per barrel).

Corporate welfare vs. public health and safety

Oil and gas industry lobbyists have asked Congress for financial support in response to COVID-19. Two stimulus bills in both the House and Senate are currently competing for aid.

Speaker McConnell’s bill seeks to provide corporate welfare with a $415 billion fund. This would largely benefit industries like oil and gas, airlines, and cruise ships. Friends of the Earth gauged the potential bailout to the fracking industry at $26.287 billion. In another approach, the GOP Senate is seeking to raise oil prices by directly purchasing for the Strategic Petroleum Reserve, the nation’s emergency oil supply.

Speaker Pelosi’s proposed stimulus bill includes $250 billion in emergency funding with stricter conditions on corporate use, but doesn’t contain strong enough language to prevent a massive bailout to oil and gas companies.

Hopefully with public pressure, Democrats will take a firmer stance and push for economic stimulus to be directed to healthcare, paid sick leave, stronger unemployment insurance, free COVID-19 testing, and food security.

The industry is now grasping at straws

Fracking companies were struggling to stay afloat before COVID-19 even with generous government subsidies. It’s becoming very clear that the fracking boom is finally busting. In an attempt to make use of the oversupply of gas and win back investors, the petrochemical industry is expanding rapidly. There are currently plans for $164 billion of new infrastructure in the United States that would turn fracked natural gas into plastic.

There are several fundamental flaws with this plan.

One is that the price of plastic is falling. A new report by the Institute for Energy Economics and Financial Analysis (IEEFA) states that the price of plastic today is 40% lower than industry projections in 2010-2013. This is around the time that plans started for a $5.7 billion petrochemical complex in Belmont County, Ohio. This would be the second major infrastructural addition to the planned petrochemical buildout in the Ohio River Valley, the first being the multi-billion dollar ethane cracker plant in Beaver County, Pennsylvania.

Secondly, there is more national and global competition than anticipated, both in supply and production. Natural gas and petrochemical companies have invested in infrastructure in an attempt to take advantage of cheap natural gas, creating an oversupply of plastic, again decreasing prices and revenue. Plus, governments around the world are banning single-use plastics, and McKinsey & Company estimates that up to 60% of plastic production could be based on reuse and recycling by 2050.

Sharp declines in feedstock prices do not lead to rising demand for petrochemical end products.

Third, oil and gas companies were overly optimistic in their projections of national economic growth. The IMF recently projected that GDP growth will slow down in China and the United States in the coming years. And this was before the historic drop in oil prices and the COVID-19 outbreak.

“The risks are becoming insurmountable. The price of plastics is sinking and the market is already oversupplied due to industry overbuilding and increased competition,” said Tom Sanzillo, IEEFA’s director of finance and author of the report.

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See also: Proposed PTTGC Petrochemical Complex in Ohio Faces Significant Risks, Institute for Energy Economics and Financial Analysis, March 2020

“Financial outlook dims as financial and policy pressures mount”

The PTTGC Petrochemical Complex planned for Belmont County, Ohio by Thailand-based PTT Global Chemical (“PTTGC”) and Daimler of South Korea promises jobs, taxes and spinoff benefits to the State of Ohio and the people of southeastern Ohio. The project is also a critical element of a larger plan to establish a second U.S. petrochemical hub in the Ohio River Valley, akin to the Gulf Coast. This report highlights risks to the PTTGC project. The risks, left unheeded, strongly suggest that the plant will face financial distress when it opens and into the foreseeable future, reducing potential economic benefits.

U.S. Fracking Oil Industry in Trouble: Investors Losing Faith?

From the Editor of Marketslant, August 10, 2017

Even though U.S. shale oil production continues to reach new record highs, investors might be finally losing faith in the industry that just isn’t profitable. A perfect example of this, legendary oil trader Andy Hall, known as “God” in the industry, is shutting down his main hedge fund. Hall, who is a noted bull in the oil market, saw his hedge fund, Astenbeck Master Commodities Fund II, lose 30% in the first half of 2017.

While Hall’s hedge fund likely lost money betting that oil prices would rise, the entire energy complex took a beating last week, even though oil and natural gas prices increased. According to the article, Oil Has A Crisis Of Faith, the situation in the U.S. E&P energy sector took a turn for the worst:

If tumbling oil and gas prices aren’t the obvious reason for the sell-off in E&P stocks, then what is?

The likeliest culprit is fear that, even if oil prices aren’t falling further, they are low enough to affect E&P firms’ growth plans — as evidenced in guidance given on a number of quarterly earnings calls this week and last.

One of the biggest losers this week has been Pioneer Natural Resources Co., down 16.5 percent since reporting results on Tuesday evening. Part of the reason it was clobbered so badly is that while it merely trimmed its overall growth rate, it sharply cut its guidance for how many more barrels of higher-value oil it will produce this year. Pioneer blamed this on problems it had with what it called “train-wreck” wells suffering from changes in pressure and the amount of water coming up, forcing the company both to delay its drilling schedule and spend more to strengthen wells.

As we can see in the chart above, all types of energy stocks sold off even though the price of oil increased. In addition, Pioneer Resources stock price is now down nearly 17% since their second quarter news release:

Pioneer Resources is one of the larger players in the Permian oil basin in Texas. According to the data put out by Gurufocus.com, Pioneer suffered a negative Free Cash Flow of $155 million Q1 and $252 million in Q2. Actually, Pioneer spent a great deal more on capital expenditures (CAPEX) in the second quarter of 2017, by investing $731 million versus $519 million in the first quarter.

Which means, Pioneer spent $212 million more on CAPEX in the second quarter, only to suffer a larger negative free cash flow of nearly $100 million more versus the previous quarter. Of course, this makes perfect sense in our TOTALLY INSANE business world today to spend $212 million on CAPEX only to lose an additional $100 million in free cash flow.

Another large oil player in the Permian, Occidental Petroleum, lost $300 million in its core upstream U.S. segment. The upstream segment of an oil company’s earnings comes from its oil and gas wells. Downstream is the selling of its petroleum products in retail markets and etc. Not only did Occidental lose $300 million in its domestic U.S. upstream earnings in Q2, it also lost $191 million in the first quarter.

Big 3 U.S. Oil Companies Still Struggling Even With Higher Oil Prices

The Big Three U.S. Oil companies have also suffered losses in their U.S. upstream earnings. Exxonmobil lost $201 million and Chevron lost $22 million in the first half of 2017 in its U.S. upstream earning segment. ConnocoPhillips lost $2.7 billion in its U.S. earnings segment during the first half of 2017, however this was mostly due to a huge impairment write-down.

Regardless, no one is really making money producing oil and gas in the United States. While some of these companies may now be reporting positive free cash flow, this has been mainly due to the huge cutting of their of CAPEX spending. For example, these top three U.S. oil companies were spending a great deal more on CAPEX in 2013 than they will in 2017:

Top 3 CAPEX Spending (Exxonmobil, Chevron & ConnocoPhillips):

2013 = $86.6 billion …….. 2017 Est. = $31 billion

These top three U.S. oil and gas majors will reduce their CAPEX spending by $55.6 billion in 2017 compared to 2013. This is a decline of two-thirds in CAPEX spending in just four years. When a company drastically cuts its CAPEX spending, it becomes easier to make free cash flow. However, by cutting their capital expenditures by two-thirds, these U.S. oil majors will not be adding much in the way of new discoveries or additional oil production in the future.

Moreover, Occidental Petroleum, the largest oil producer in the Permian, enjoyed decent free cash flow during the second quarter of 2017. However, a large percentage of their $1 billion in free cash flow was due to a NOL- Net Operating Loss adjustment of $737 million. Occidental actually suffered a negative free cash flow of $111 million in the first quarter of 2017.

That being said, Occidental, was able to enjoy free cash flow because it cut its overall CAPEX spending from $8.4 billion in 2013, down to an estimated $3.3 billion in 2017. So, by cutting its CAPEX spending by $5 billion, it’s much easy to make positive free cash flow:

Not only has Occidental CAPEX spending declined since 2014, so has its cash from operations. Hence, the reason for the huge cut in CAPEX spending. Occidental reported a healthy $11 billion in operating cash in 2014. However, this fell to $3.4 billion last year as the price of oil dropped to an annual low not seen since 2004.

As U.S. oil companies continue to sacrifice exploration and capital expenditures to become profitable or at least break-even, this will cause big problems for oil supplies in the future. That being said, the oil industry has another negative factor to deal with that could spell additional trouble for the fracking oil industry in the future.

One little factor that seems to be overlooked in the media is the staggering amount of water consumed in the production of shale oil and gas in the United States. According to a study reported by Scientific America back in 2015, stated:

Oil and natural gas fracking, on average, uses more than 28 times the water it did 15 years ago, gulping up to 9.6 million gallons of water per well and putting farming and drinking sources at risk in arid states, especially during drought.

Though fracking is used to produce natural gas in less-arid regions such as Pennsylvania, many of the nation’s fracking operations occur in places where water may become scarcer in a warming world, including Texas, the Rocky Mountains and the Great Plains—regions that have been devastated by drought over the last five years.

As the USGS study indicates, a lot of the oil and gas fracking is taking place in more arid climates. One such arid climate is the Permian Basin in West Texas. According to another article titled, As The Oil Patch Demands More Water, West Texas Fights Over Scarce Resource:

“The Permian Basin is basically a desert, and that immediately presents challenges in finding adequate water,” French said. “You can do without a lot of things. But you can’t do without water.”

At least three other companies in the region are selling or planning projects to sell water to energy companies that use it by the billions of gallons to crack shale rock and release oil and gas. Water use in the Permian has risen six-fold since the start of the shale oil boom, from more than 5 billion gallons in 2011 to almost 30 billion last year. Energy research firm IHS Markit predicts demand will double by the end of this year, to 60 billion gallons, and more than triple by 2020, to almost 100 billion.

As we can see in the chart above, oil and gas companies in the Permian are estimated to consume a staggering 60 billion gallons of water in 2017, double from the 29.6 billion gallons last year. And if these energy companies get enough silly investor money, they will need nearly 100 billion gallons of water by 2020 to produce oil in gas in the Permian. See the graph below!

Unfortunately, water is a scare resource in West Texas as farmers, ranchers, environmentalists and residents are worried that the tapping into billions of gallons of water in underground aquifers will impact the local cattle industry, agricultural crops and possibly dry up natural springs in the area.

The race for the U.S. to produce more oil than we have in more than four decades is costing an arm, leg and a foot, as well as consuming one heck of a lot of fresh water. I believe we are going to look back at this point in history and wonder… WHAT IN THE HELL WERE WE THINKING???

As I have mentioned in several articles and interviews, the wonderful U.S. Shale Oil & Gas Industry really hasn’t made any money for nearly a decade. However, they have added a great deal of debt. Let me present this chart one more time because nothing has changed since the last time I posted it:

Over the next three years, the debt (low investment grade energy bonds) that these energy companies will have to pay back jumps from $67 billion in 2017 to over $230 billion in 2020… just at the time the Permian Basin is forecasted to peak in oil production. However, I have my reservations on that prediction.

While the U.S. continues to produce oil that isn’t really profitable, the overall debt level in the energy sector will likely increase. The only way for this FACADE to continue is under the Fed Policy of low or zero interest rates. If the Fed continues to raise rates, this will certainly put a real KIBOSH on the U.S. Shale Oil and Gas Industry’s ability to finance their ever increasing amount of debt.

Lastly…. oil production in the U.S. will likely continue to rise for a while. The Mainstream media will point to American ingenuity and the push for energy independence as the reasons for all this wonderful new oil production. Unfortunately, someone along the way forgot to mention that most this oil was produced at a loss. The POOR SLOBS that are really going to feel the pain are the investors who went after HIGH YIELD returns as they couldn’t find it in the market today.

Even though the U.S. shale oil and gas companies continue to pay their interest expense (yield to these investors), that has an expiration date. Once that expiration date arrives, and these investors ask for the original funds back….. is when they wish they had purchased gold and silver instead.

But….. sometimes it really takes getting beat up financial to wake up to the fundamentals of owning physical precious metals.

Fracking Oil Wells In The Permian Basin Consumes A Staggering Amount Of Fresh Water

Oil & Gas Shales are Hot Topics in the USA

Undaunted by oil bust, financiers pour billions into U.S. shale

From an Article by Ernest Scheyder, Reuters News Service, April 16, 2017

Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry’s resurgence.

In the first quarter, private equity funds raised $19.8 billion for energy ventures – nearly three times the total in the same period last year, according to financial data provider Preqin.

The quickening pace of investments from private equity, along with hedge funds and investment banks, comes even as the recovery in oil prices from an 8-year low has stalled at just over $50 per barrel amid a stubborn global supply glut.

The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a barrel in the past two years. Investors also believe the glut will dissipate as demand for oil steadily rises.

That gives financiers confidence that they can squeeze increasing returns from shale fields – without price gains – as technology continues to cut costs. So they are backing shale-oil veterans and assembling companies that can quickly start pumping.

“Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range” per barrel of oil, said Howard Newman, head of private equity fund Pine Brook Road Partners, which last month committed to invest $300 million in startup Admiral Permian Resources LLC to drill in West Texas.

Data on investments by hedge funds and other nonpublic investment firms is scant, but the rush of new private equity money indicates broader enthusiasm in shale plays.

“Demand for oil has been more robust than anyone imagined three years ago,” said Mark Papa, chief executive of Centennial Resource Development Inc.

Papa referred to the beginning of an international oil price crash in 2014, which took many firms in the shale sector to the brink of bankruptcy.

Centennial is a Permian oil producer backed by private equity fund Riverstone. Papa, a well-known shale industry entrepreneur, built EOG Resources Inc. into one of the most profitable U.S. shale producers before he retired in 2013.

The chance to further develop the Permian, he said, was enough for him to come out of retirement to deliver one of its bigger recent successes. The value of Riverstone’s original $500 million investment has grown nearly four times since Centennial’s initial public offering last fall.

‘A TON OF PRIVATE CAPITAL’

Riverstone this year copied the Centennial model, putting experienced managers atop a startup charged with acquiring operations or assets. The equity fund hired Jim Hackett – the former head of shale producer Anadarko Petroleum Corp. — to run the newly created Silver Run Acquisition Corp II.

Hedge funds Highfields Capital Management LP and Adage Capital Management have taken stakes in the new company, which has a valuation of about $1 billion after going public last month.

Private equity fund NGP Natural Resources XI LP invested $524 million last fall in Luxe Energy LLC, a shale producer formed in 2015 by former Statoil executives. NGP’s investment was effectively a bet that Luxe could repeat its success of early 2016.

Then, NGP contributed about $250 million to Luxe, which used the money to acquire land in the Permian – and sold it seven months later for a double-digit profit.

This year’s drilling rush could be tested if global supplies grow too fast or if demand cools. The U.S. drilling rig count is rising at its fastest pace in six years and U.S. crude stockpile are close to 533 million barrels – near an all-time high and enough to supply the United States for 25 days.

But some investors say even a decline of $10 in the oil price would not dissuade them. “There is a ton of private capital to invest in the U.S. oil industry,” said Gerrit Nicholas, co-founder of private equity fund Orion Energy Partners. Nicholas said he is comfortable lending even if oil prices fall to $40 per barrel.

Orion this month helped finance the expansion of a Florida oil-storage terminal, a move predicated in part on growth in U.S. oil exports. Since the U.S. lifted its oil export ban last year, crude exports have climbed to about 746,000 barrels per day, according to U.S. Energy Information Administration data.

BETTING ON OPEC’S SELF-INTEREST

The oil industry has seen boom-and-bust cycles since the first well was drilled about 160 years ago, and industry and government have sought to tame the volatility for just as long.

Texas regulators set output quotas from the 1920s through the 1970s, a practice that served as a model for the creation of the Organization of the Petroleum Exporting Countries (OPEC).

The U.S. boom has caused concern among OPEC member nations ahead of its meeting next month in Vienna, where they will consider extending oil production cuts that first took effect in January. Investors believe the cartel’s members will extend the cuts because it is in OPEC’s financial interest to prevent a steep drop in oil prices.

That likely will keep money flowing to nimble U.S. oil producers and the companies that provide them with services and equipment. Investors see the United States as the new swing producer, having the ability to quickly increase supply in response to any sudden increase in demand.

“The U.S., with its substantial inventory capacity and swing oil producer status, should see strong onshore activity for the next few years,” said Charlie Leykum, founder of private equity fund CSL Capital Management LLC, in an interview.

CSL has invested in several oilfield service business in the past year. It partnered with Goldman Sachs and Baker Hughes Inc., for instance, to create a shale services company.

Centennial’s Papa expects the flood of fresh capital to push U.S. production up 23 percent to 11.3 million barrels a day (bpd) by 2020, based on strong demand for oil.

“We’re still in a hydrocarbon-based economy,” said Papa.

For a graphic on private equity investment in U.S. energy, see the Article.

See also: www.FrackCheckWV.net

Marcellus shale drilling & fracking: boom & bust

The boom is becoming a bust; so how to handle this fracking bust?

From an Article by Lydia DePillis, Washington Post, January 15, 2015

PHOTO: Workers tap into Marcellus natural gas at an active hydraulic fracking operation outside of Wellsboro, Pa., operated by Shell. This rig is the only Shell crew operating in the area.

This is the introduction to a five part series about how communities can deal with a natural gas boom. Find the rest of the installments here: Part One, Part Two, Part Three, Part Four, Part Five.

WELLSBORO, Pa. — The sand trucks barely rumble along the quaint main street in Wellsboro anymore. Three years ago, it was difficult to have a conversation with someone walking next to you, the roar of traffic was so constant. Driving, it could take an hour to get from one end of town to another. But the trucks also came with business: Mining companies had started drilling wells all over the rolling hills surrounding this town in northern Pennsylvania, extracting the precious natural gas that lay beneath.

Hydraulic fracturing (“fracking” for short) brought a bonanza to this town the likes of which it hadn’t seen even in the heydays of lumber and coal. With 800 wells drilled over five years, royalties paid to landowners for their mineral rights flowed through the community, helping people buy new farm equipment and donate to local charities. New tax revenues poured into local government coffers that never had much to begin with.

But like all booms, it only lasted while the money was good. Natural gas prices hit a high of $13.42 per million BTU in October 2005, stayed high for three years, then started falling, fast, bottoming out at $1.95 in April 2012, and stood at $3.48 last month. Without enough profit to justify further investment, most of the activity vaporized. Shell Oil, which had bought up most of the leases in Tioga County, went from a dozen drilling rigs to one. Businesses that had been gearing up for years of sustained growth were left hanging.

PHOTO: Workers tap into Marcellus natural gas at an active hydraulic fracking operation outside of Wellsboro, Pa., operated by Shell.

“With really no warning at all, the bottom fell out of that,” says Jim Weaver, the Tioga County planner, who advises the county’s commissioners on land use decisions. “In hindsight, looking at boom and bust cycles that have gone on forever, we should’ve known that. But when the dollar’s dangling in front of you and you’re chasing the carrot, before you know it you’re out on a limb, and the limb gets sawed off.”

Already, some states have decided to avoid the chase: In November, New York Gov. Andrew Cuomo announced that he would not lift the state’s ban on fracking, out of concerns about the potential environmental and health impact. The 185-page report referenced studies conducted in Pennsylvania on outcomes like the birth weight of babies and the accident rate of truck traffic. While the evidence rarely showed conclusive adverse health impacts from fracking, it was enough to convince Cuomo that the benefits didn’t outweigh the risk.

For much of the rest of America with gas beneath it, however, there’s no going back. The discovery of “unconventional” oil and gas reserves in a handful of major subterranean shale formations known as “plays” — the Marcellus underneath Pennsylvania and Ohio, the Eagle Ford in Texas, the Bakken in North Dakota — have completely transformed American energy production, increasing income and tax revenues and driving unemployment down. The shale boom has been credited with reviving domestic manufacturing and bringing natural gas prices to levels many thought America would never see again, and even environmentally-minded politicians are reluctant to give up the economic stimulus the industry provides.

PHOTO: County planner Jim Weaver works in his office in the Tioga County Courthouse building. The natural gas boom has come and gone in Tioga County, Pa., and Weaver is in charge of making sure the community is developed in the way citizens would like.

“I want to have my cake and eat it too,” said Pennsylvania’s new Democratic Gov. Tom Wolf, in response to New York’s decision. But with gas prices so low — and other forms of energy, especially oil, becoming much less expensive — the future of communities who bet their future on fracking is uncertain. They are at risk of falling into what researchers have called the “resource curse,” where local economies over invest in a cash cow, only to sacrifice industries that might provide more sustainable growth over the long term, like tourism or manufacturing.

“Ultimately, Tioga County is a cautionary tale,” the authors wrote. “The economic benefits associated with shale development are limited, come at a price, and may disappear as swiftly as they arrived.”

America, after all, is a nation of booms and busts, from the gold rush of the 1850s to the housing bubble of the 1990s. In this latest boom, worst-case scenarios make headlines all the time: A crime wave and crippling fires and explosions struck North Dakota, for example, where cozy relationships between lawmakers and gas companies led to lax enforcement. Towns in Wyoming suffer when mining booms just pass through, over and over, while profits leave the state and then the country. And then, further down the line, the oil industry blows huge holes in the budgets of drilling-dependent states when prices sink too low to keep the rigs around.

Pennsylvania is trying to avoid that cycle, with mixed success. When gas drilling started in the mid-2000s, Pennsylvania was almost entirely new to the industry. And it has yielded undeniable benefits: According to investment advisors Raymond James, 90 percent of Pennsylvania’s job gains between 2005 and 2012 came from oil and gas. When you’re in the middle of that kind of fossil-fueled expansion, it’s tempting to think it might never come to an end.

But it always does. Whether because some newer, cheaper source of gas gets discovered, or because some key distribution point gets cut off, or because some ballot measure stops drillers in their tracks.

So the question is: If you’re in the path of the oil (and gas) industry, how can you gain from its presence, without becoming so dependent that everything falls apart once it leaves? In other words, can the resource curse be broken?

Tioga County has some of the answers. But they learned them the hard way. In the spring, researchers from the Pennsylvania Budget and Police Center did a case study on the county, and found that the positives and negatives of drilling activity basically came out in the wash.

“Ultimately, Tioga County is a cautionary tale,” the authors wrote. “The economic benefits associated with shale development are limited, come at a price, and may disappear as swiftly as they arrived.”

This is the introduction to a five part series about how communities can deal with a natural gas boom. Find the rest of the installments here: Part One, Part Two, Part Three, Part Four, Part Five.