(Bloomberg) In January 2012, I traveled to Oklahoma City for the first time to report on what was considered a surprising development: a U.S. oil boom. Until then, hydraulic fracturing—aka fracking—was best known for boosting U.S. natural gas production. It was just starting to be used to unlock oil trapped in deep underground layers of rock like the Bakken Shale in North Dakota, the Eagle Ford in Texas, and the Mississippi Lime in Oklahoma.
Still folded in my notebook is a typed list given to me that week by Gene Pflughoft, then the executive director of Central Oklahoma Regional Development. It enumerated the benefits of tapping shale: “Leasing the land, drilling rigs, built with hundreds of components, thousands of employees; trucks to deliver drilling rigs; drilling: many employees, highly skilled; training facilities, teachers, cooks, coordinators, janitors. Restaurants full. Motels full. Welding shops opening.”
The list now reads like a prediction of everything that’s being lost in the bust. Oklahoma City was once the beating heart of the shale revolution, home to pioneers such as Chesapeake Energy, Devon Energy, and Continental Resources. It’s now an object lesson in how quickly things fall apart when energy prices collapse. A somber symbol of the reversal: Thousands gathered in Oklahoma City to honor Aubrey McClendon, 56, co-founder of Chesapeake and one of the industry’s best-known champions, who died in a car crash on March 2 , the day after he was indicted on bid-rigging charges.
Back in 2012 the prospect of a bust seemed remote. Oil was trading at $98 a barrel. U.S. crude production had begun ticking upward for the first time since the 1980s; Oklahoma’s unemployment rate was 5.4 percent, almost three percentage points below the national average; and the companies that could claim credit for it were smack in the middle of the State That Oil Built. “It’s been tremendous in terms of how reliant the state is on oil and gas,” said Chad Wilkerson, economist at the Oklahoma City branch of the Federal Reserve Bank of Kansas City.