Managing the Jed Clampett Effect

Beverly HillbilliesI know this reference will be lost on a few of you, so let me explain. The Beverly Hillbillies is a situation comedy broadcast by CBS from 1962 – 1971. The story line centered on the trials and tribulations of the Clampett family who moved to Beverly Hills, California after the OK Oil Company discovered oil in Jed Clampett’s swampland. If you are not familiar with the show, you can watch the episode where Jed strikes oil and get a quick feel for it. By the way, if you do watch the episode, there is nothing wrong with your monitor. The show was broadcast initially in black and white.

So what does Jedd Clampett have to do with shale gas? Jedd’s story illustrates just one of the challenges economic development professionals will need to consider when managing their community brands successfully through the upside opportunity created by shale gas.

More on Jedd in a minute. First, let’s frame the challenge so we can better understand the role economic development professionals can play.

The Key is Good Stewardship

Susan Christopherson is a J. Thomas Clark Professor in the Department of City and Regional Planning at Cornell University. She has been studying the community level economic impact of shale gas development. One of her observations that helps frame the challenge is shale gas is not a renewable energy source. When a well is played out, it is gone. On the surface, you might think “no duh”. But, if you know that a revenue stream has a fixed life then you are a lot more motivated to think about how a community will deal with the time when the revenue stops.

Susan’s counsel is to provide good stewardship. That includes being a good steward of the environmental impact, but also of the impact on the community’s economic well-being. The key will be to reap as much of the positive benefits as possible, mitigate the downside risk, and come out of the cycle with a stronger sustainable economic position. That will require anticipating what will happen in the short-term when the drilling accelerates, and in the long-term when the natural gas reserve is depleted. It is going to take economic development leadership.

What Are Some of The Impacts You Might Expect?

Here are three broad areas to consider:

  1. Social – The ramp up of drilling will increase the local population as drilling crews from other shale gas operations are brought into the community to help with the extraction process. Seeing so many out-of-state license plates in a community can be disconcerting to many residents. The absolute increase in demand at entertainment venues, grocery stores, gas stations, etc. can be a new and perceived major inconvenience as people see their traditional way of life changing. Since most of the local employment won’t come until the post-drilling phase, there may be initial resentment that jobs created for the drilling phase are not helping to reduce local unemployment levels.
  2. Services – More people means an increased demand on services like police, fire, and education. An increase in truck traffic means the potential for increased accidents and demand for emergency response and health related services. There can be an increased demand for rental housing as well as hotel and motel rooms. Restaurants will likely see an increased demand.
  3. Infrastructure – More trucks means an increase in wear and tear on the road system, along with an increase in dust in the summer and traffic noise year round.

What is the Jed Clampett Effect?

Let’s revisit Jedd now. In the field of psychology there is a condition called the Sudden Wealth Syndrome. One day you are poor and the next day you are making millions from payments made by an energy company for the mineral rights on your property. Most of us have an immediate visceral reaction like – Give me a problem like that … please. But, you might want to be careful what you ask for. Studies conducted by Dr. Goldbart in the 1990’s of instant millionaires created in Silicon Valley found many suffered from a variety of stress-related disorders linked to having to deal with instant wealth. They has symptoms such as excessive guilt, paranoia, fear of loss of control and sleep issues. In addition, often people who become instant millionaires may find friends and relatives asking for handouts or acting jealous. This further compounds the feeling of guilt. Without proper management, friends may stop speaking to each other, families can begin feuding, the entire communities can become fractionated. In short, the culture of the community may be forever changed. This will have a direct impact on your community’s ability to deliver your brand promise.

How Can You Manage The Impact On Your Community

As an economic development professional, you can view the challenge in the context of place brand management. You know the current image of your community is about to go through a transformation process and a new identity will be formed. The “product” (your community) is about to undergo a fundamental change. The goal of your work should be to ensure your new community identity is even more appealing for both citizens and potential capital investors.

Your professional role is to help lead your community through the transition, by forming a vision for what your community could be after the shale gas is depleted, enrolling and energizing the community in that vision, and then working with your public and private sector leaders to create a proactive development plan that results in a diversified industry portfolio that can sustain your community’s economic well-being. Having and executing an economic development plan will help the public and private sector leadership ensure a positive long-term outcome.

Designing and deploying the plan takes strong personal leadership and hard work. But, it certainly can be done successfully.

Economic development professionals in communities affected by the Marcellus and Utica Shale Plays are working through the challenges right now. This is a living case study that all economic development professionals can learn some new best practices from. I encourage you to weigh in with your thoughts. If you are an economic development professional in an area with a shale gas play, please share your experience and observations. The more we can learn from each other, the better we will all be able to perform our roles.

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5 Comments so far

  1. Z. Joe Kulenovic

    June 2, 2011

    Thanks for sharing this, Ed. Reference to the Beverly Hillbillies is a great attention getter, at least for those of us who still remember that show!

    You make an excellent point about the need to plan for what comes after a source of tremendous wealth generation is depleted. Countries benefiting from their vast mineral reserves have often parked the surplus into a sovereign wealth fund, with varying degrees of success. Those focused on domestic infrastructure, raising educational levels, and economic diversification have generally done much better than others who invested their wealth abroad, or simply squandered it. Or the government can run a structural fiscal surplus and direct it into a “rainy day”-type fund. The experience of Australia and Chile in particular has been quite positive. At the regional or local level, newfound wealth can often price producers in other sectors out of markets, as their business costs surge with rising property values, congestion, labor shortages, etc. Planning ahead is thus critical indeed. Thanks for yet another thought-provoking conversation starter!

  2. Ron Strauss

    June 2, 2011

    Sudden wealth is a ‘problem’ if you don’t have a plan in place for what happens during and after the ‘boom.’ Yes, there may be some short term issues for some in the community as housing prices rise, etc., but there will also be benefits in the form of higher property tax revenues, sales tax revenues, ad valorum taxes, etc.
    The core issue is how to use the relatively short term benefits and surplus as a window of opportunity to realize longer term structural improvements in the wealth creating potential of the community. You need a migration path.
    This path can best be perceived based on the current competences of the community, and how they can be leveraged for future growth. What investments need to be made now? In what areas? Looking at current capabilities and looking at how they may be extended into adjacent industries or capabilities can often provide clues.

  3. Mark Barbash

    June 3, 2011

    Ed: Thanks for advancing the discussion. It’s worthwhile for EDPs to take a longer-term look at the shale gas opportunity that many areas are being presented.

    I would suggest that the “good environmental stewardship” aspect of this needs to be expanded upon. I have seen many good economic development intiaitives go by the wayside on the weight of the either/or discussion concerning the environmental impact of a development, whether it’s the location of a water bottling plant, the development of an industrial park on top of lands containing indian arrowheads, or the installation of wind turbines along a vista.

    The EDP stewardship role here should be one of gathering and distilling FACTS for their stakeholders. This may be a new role for some, as we tend to focus on “the deal.”

    We need to help our decision-makers (and funders) by providing them with the best available information, so that efforts are well educated. We should be taking INFORMED risk, which means that as we promote shall gas development, we are able to state that we have done the best we can to understand the environmental impacts and have suggested reasoned development strategies. In the case of shale gas, research is still being done in a range of areas and there is a very critical documentary making the rounds.

    Too often, similar projects die when we discover that we don’t have all of the information and we are surprised by the criticism coming from advocates of one sort or another.

    This also suggests that we should be widening our economic development stakeholders to include enviornmental advocates, just as we should be including labor in our partnerships.

    Mark

  4. David R. Eatwell

    June 10, 2011

    Ed, you raise some valid points that often remain hidden until they poke you. Great wealth that comes from an outside entity always has strings attached to it. As they say in the circus, “Be careful when you ask the gorilla to dance, because the gorilla always wants to lead.” Being armed with an accepted comprehensive plan and a community’s unified vision, it is possible to maintain come control. Sound environmental stewardship and a vibrant economy are not mutually exclusive. It is possible to achieve both goals, but it demands all decisions to be made based on the long-term considerations.

  5. Jim Le Mon

    June 13, 2011

    Thanks for the article.

    I look at call centers in the same manner. Once the domain of US-based companies in cities like Phoenix, Tampa and San Antonio, call center have migrated eastward to Europe (Ireland, Poland, France…) in the 1990s and moved further east to India and Manila, in search of the lower cost FTE in 2000 and beyond. As call centers pick-up and move east, they leave a scorched earth footprint on the area. The highly coveted entry-level call center jobs have left and the supporting infrastructure is looking for the next wave of economic development.

    There’s a renewed emphasis on US-based “rural sourcing”, migrating jobs from off-shore call/contact centers back to the US, but in places where talent can be attracted quickly and inexpensively. I would urge “rural sourcing” communities to begin planning for their eventual demise of call and contact center work and start to create a sustainable “service” organization.

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