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By James MacPherson and Ramit Plushnick-Masti, Published October 17 2013

Boomtowns prepare for inevitable bust

MIDLAND, Texas – In a faded West Texas town dotted with vacant buildings and potholed streets is a sparkling storefront window and a curious display: rows of diamond-studded Rolex watches, awaiting buyers whose pockets are packed with oil money.

The surge in oil drilling has drawn money and men like a magnet to run-down communities that haven’t seen a boom since the 1980s.

But leaders and residents here are increasingly mindful that the runaway riches tapped by hydraulic fracturing will eventually run out.

“Don’t go overboard. It’s not going to last,” Midland Mayor Wes Perry wants to shout, as a reminder to his own neighbors and a warning to communities in Pennsylvania and elsewhere that have never boomed like this.

For now, Midland is the picture of prosperity. Since 2008, sales tax revenue has shot up from $24 million a year to more than $38 million in 2013. The unemployment rate is the lowest in Texas, hovering just above 3 percent. The town has hundreds of unfilled jobs.

This, longtime residents know, is what an oil boom looks like. And it’s always been followed by a steep, painful decline.

That lesson was learned a generation ago. Midland and Odessa, along with parts of North Dakota, boomed in the late 1970s. Then in the early 1980s, the bottom fell out of the oil barrel.

Those who benefited from the boom went bankrupt. Home foreclosures skyrocketed. Banks failed.

The most recent boom has largely been ushered in by new hydraulic fracturing technologies combined with horizontal drilling. Those systems allow once out-of-reach oil and gas to be extracted from rock.

The big boys are back, and Midland and Odessa have seen their populations rise by at least 10 percent since 2010.

It’s the newcomers, suddenly earning $2,000 and more a week, who are spending, said Judy Farris, 58, general manager of The Bar in Midland and a lifelong resident.

“You can tell the difference between the people who have been here and been through it and those that haven’t,” she said.

Just ask those in North Dakota’s Oil Patch. Williston, in the heart of the Bakken shale petroleum reserves, was left in the 1980s with $28 million in debt and saddled with abandoned trailer parks.

But now the state leads the nation in population growth, boasts a nearly

$2 billion budget surplus and has the lowest jobless rate in the nation.

Mayor Ward Koeser believes the city is doing a better job than it did in the 1970s.

Some decisions, however, indicate memory may be short. Williston is building a community center so large a Wal-Mart Supercenter could fit inside. Funded by the city’s sales tax collections, it’s designed to keep oilmen busy when they aren’t working and encourage their families to move in, Koeser said.

For Midland and Odessa residents, such projects run the risk of becoming vacant symbols of boom-time mistakes.

Larry Melton, the former mayor of Odessa who stepped down in November after 12 years, says homes have to be built. Schools must expand. Police officers need to be hired. Road and infrastructure improvements can be delayed for only so long.

And yet, a good plan needs to consider the future, too, he said.

“At some point, we’re going to have a downturn,” Melton said. “We’ll have excess housing. We’ll still have transportation problems, and we’ll still have water issues.”