Author: Shiloh

March 9, 2023 — Low-interest loans, public emergency backup generators, cyberattack grid hardening and cancellation of state subsidies for wind and solar are among the priorities in a new multi-billion-dollar plan made up of several Senate bills unveiled in the state Legislature on Thursday aimed at helping improve Texas electric grid reliability.

State Sen. Charles Schwertner said at a Capitol news conference of state senators that so far renewables are distorting the power supply markets; he called for “more dispatchable generation to balance out and assure we have a grid that’s performing in times of need.”

Lt. Gov. Dan Patrick said there’s a strong need for both renewables and more fossil fuel energy generation to keep the grid on an even keel, which he hoped will “balance fairness and the equity” among power sources.

He said the bills are the result of hours of testimony and months of study of the Texas electric grid.

“We’re going to build these plants and we’re going to have renewables that help keep our air clean and prices low.”

Sen. Phil King is also leading the charge that included the introduction of the new Senate bills.

Perhaps the most controversial of the bills introduced is SB 6, which includes the creation of the Texas Energy Insurance Program (which would exist outside the control of any municipality and would exclude such municipalities and co-ops for a period depending on whether “customer choice” is implemented) and “other funding mechanisms” (see below) that would support building and operating new generation facilities, referred to as “reliability assets,” strictly within the ERCOT region under a state-certified ownership.

Sen. Schwertner said the new program will add 10,000 MW of power to the grid.

“This is not building a capacity market, it’s an insurance product,” he said, emphasizing the need for a backup plan in times of extreme need.

The costs of the Energy Insurance Program transmission and distribution would be borne by “all retail customers in the ERCOT power region” and participating entities would be guaranteed by the PUC to receive a “reasonable rate that recognizes the critical service the reserve” would provide, with the PUC deciding on that rate.

To be part of the new Energy Insurance Program, entities must first establish financial stability by demonstrating total assets of at least $10 billion for every gigawatt of generated capacity plus acceptable cash reserves and credit rating — plus the demonstration of energy expertise by already operating assets producing at least 15,000 MW, maintaining OCEA and standardized ratings — and entities must establish best practices for customer service and project quality standards as defined in the the bill.

SB 6 says the PUC may require an electric utility to provide, at wholesale prices, transmission service to another utility, to the Energy Insurance Program or to other entities involved….
 

By Alex Mills

Electric vehicles – better known as just EVs – have become the talk of the town in communities across the U.S. and Europe.

Encouraged by subsidies funded by federal tax dollars, the EV side of the automotive industry has experienced significant growth. The number of registrations of newly sold electric vehicles globally has increased from 3 million five years ago (2017) to 15 million in 2022.

Tesla leads EV sales in the U.S. with 64.6% market share last year. Ford had 7.5% of the U.S. market and GM had 4.8%.

Tesla’s stock price has been volatile, peaking at $407 per share on Nov. 3, 2021 and dropping to $108 on Jan. 3, 2023 but recovering to $182 on Wednesday. Tesla decreased the price of its vehicle earlier in March, but they remain higher than gasoline-powered vehicles. Tesla’s Model 3’s list price is $42,990 compared to the Model Y at $54,990, and the Model S sells for $89,900, according to its web page on Wednesday….
 

March 7, 2023 — The Public Utility Commission of Texas secured refunds and bill credits of $100,581 for Texas electric, water and telecommunications customers in the second quarter of FY 2023 (December 2022-February …

March 1, 2023  – At their Feb. 28 open meeting, RRC Commissioners unanimously voted to refer two actions by the Environment Protection Agency (EPA) to the Texas Attorney General to challenge their validity.

In 2018 the Texas Commission on Environmental Quality submitted the state’s robust Interstate Transport State Implementation Plan (SIP) for National Ambient Air Quality Standards for ozone – a plan to ensure that emissions within the state would comply with the “good neighbor” provisions of the Clean Air Act and not affect air quality in other states. The EPA disapproved the plan in February 2023, but not before proposing a federal implementation plan (FIP) plan almost a full year prior to disapproving the state plan.

The RRC is concerned that the EPA was ready to ignore the state’s expertise on regional factors, and circumvented procedures in the Clean Air Action by proposing a federal plan before its final disapproval of the SIP.

Not only that, but the proposed FIP also introduces restrictive emissions standards for stationary engines that are used in the pipeline transportation of natural gas. As the state’s oil and gas regulator, the RRC is concerned about how the proposal could hinder a vital industry that contributes significantly to the Texas economy and the state budget.

“When the federal government oversteps in the business of Texas, it is our responsibility to push back,” said RRC Chairman Christi Craddick. “This federal administration has yet again proven that they do not value the profoundly beneficial impact of the oil and gas industry in Texas, and this vote is the first step for the Railroad Commission of Texas in fighting back against unreasonable and unjust attempts to harm this state.”…
 

March 1, 2023 — Texas tax income from oil and gas, which reached record levels last year when compared to low 2021 levels, settled down last month, according to figures released from the comptroller’s office.

The oil production tax income rose only 2% when compared to February 2022, bringing in $492 million.

Natural gas production tax income actually dropped 5% last month Y/Y to $305 million.

And motor fuel taxes collected were up only 1% at $304 million.

Motor vehicle sales and rental taxes brought in $542 million, up 14% over February 2022…..
 

February 27, 2023 — The Railroad Commission of Texas has filed comments on draft guidance issued by the U.S. Department of the Interior (DOI) for utilizing formula grants to plug orphaned oil and gas wells.

Several aspects of the draft guidance have caused concern for the RRC because it could hinder the state’s efforts to use as much funding as possible for important work that protects residents and the environment.

Among the concerns is the fact that the DOI may end up changing formula funding calculations for states, which could mean Texas could get less than the approximately $318 million that was originally due to the state.

The guidance also has program requirements for states that go beyond the scope of the federal legislation that authorized the well plugging funds. These requirements are burdensome and sometimes unrealistic to implement, which will inevitably hamper the momentum of the state’s plugging efforts resulting in less wells being plugged than could be.

The comments submitted by the RRC are guided by the agency’s expertise in plugging orphaned oil and gas wells. That expertise was key to Texas’ first in the nation status utilizing federal funds to plug orphaned wells, when work began in October 2022 with the state’s $25 million initial grant.

Adding unnecessary requirements to the next phase of federal funding, the formula grants, can hinder the state’s ability to plug as many orphaned oil and gas wells as possible.

“As Chairman of the Railroad Commission, I believe it is crucial for this agency to thoroughly assess all strings attached to federal money. When dealing with the federal government, we always read the fine print,” said RRC Chairman Christi Craddick….
 

By Alex Mills

The oil and natural gas industry in Texas posted gains in employment, industry activity and production during 2022.

The Texas Petro Index (TPI), a fully inflation-adjusted tool for tracking growth rates and cycles in the Texas upstream oil and gas economy, increased 22.4% last year to 178.4 from 145.8 in 2021, according to petroleum economist Karr Ingham, who created and maintains the index.

“The expansion was spread across most indicators of upstream activity in Texas,” Ingham said.

He said the rise in oil prices, increases in the rig count and drilling permits, growing production for crude oil and natural gas, and growth in direct upstream oil and gas employment in Texas were major contributors to the increase in the TPI.

“Real (inflation-adjusted) crude oil prices were up by over 31% on average in 2022 compared to 2021, though the real December monthly average was up by only 1.2% year-over-year,” Ingham said. Oil averaged $92.14 in 2022 compared to $70.29 in 2021, according to TPI….
 

February 23, 2023 — Rate relief charges on Texas customers utility bills will secure a $3.5 billion ratepayer-backed bond deal from the pending Texas Natural Gas Securitization Finance transaction.

Fitch Ratings said on Thursday it expects to rate the ratepayer-backed bonds (Series 2023) ‘AAA(EXP)sf’, with a Rating Outlook of Stable.

Jefferies is the lead underwriter on the transaction, according to Fitch Ratings’ pre-sale report.

While Texas Natural Gas Securitization will issue the notes to the market, about nine other participating utility entities will act as collection agents to the trust.

Each participating utility will collect the fees from its respective customers and forward them to the trust, essentially fulfilling the role of servicer, Fitch suggests….
 

February 22, 203 — Todd Staples, President of the Texas Oil & Gas Association (TXOGA) issued the following statement in support of SB 1017 filed by Senator Brian Birdwell and HB 2374 filed by Representative Brooks Landgraf:

“Oil and natural gas are irreplaceable in making our modern lives not only possible, but undeniably better,” said Staples. “Misguided attempts to ban the use of particular types of engines or even specific fuel sources only serve to disrupt the lives of consumers and business owners who rely on affordable, reliable energy sources. TXOGA thanks Senator Birdwell and Representative Landgraf for filing this important legislation and we look forward to our continued work with the Legislature to protect energy choice.”

This legislation would protect energy choice by preventing political subdivisions from adopting or enforcing ordinances, orders, regulations, or similar measures which would limit access to specific fuel sources or prohibit the sale of engines based on their fuel source….
 

Baker Hughes and Nabors Industries join with universities, IEA, foundations and Project Innerspace examining geothermal energy market potentials
 

February 22, 2023 –A coalition of Texas universities and others spent five years studying details of potential resources, technology, legal problems, environmental and regulatory impacts related to geothermal energy production, and are promoting their recent report, “The Future of Geothermal in Texas: The Coming Century of Growth & Prosperity in the Lone Star State.”

Called a “multi-year, multi-disciplinary, cross-collaborative effort” by researchers at five Texas universities, the University Lands Office and the International Energy Agency resulted in “a landmark study.”

The fifteen-chapter study includes analyses of the location and quality of Texas geothermal resources, evaluations of technology developments, the role of the oil and gas industry in achieving growth and scale, as well as environmental, regulatory, economic, and legal issues pertinent to the growth of the geothermal industry, both in Texas and globally.

The study evaluates the size and potential scale of geothermal — the naturally occurring heat energy in the Earth’s subsurface — as an abundant clean energy resource in the state of Texas, as well as its potential to scale globally over the coming decades. Most importantly, it provides a scientific basis for informed decision-making as entities begin to consider the increased development of geothermal in Texas….
 

Build a geothermal energy well for your home, but then who owns it, you as property owner or whoever owns mineral rights, and who’s your regulator, the RRC or the TCEQ?
 

February 22, 2023 — Two bills filed in the Texas Senate and two companion bills filed in the House attempt to clear up questions on the up-and-coming technology related to home geothermal energy.

SB 785 and SB 786 address the questions of who actually owns a geothermal well and which state agency will handle regulation of such wells.

Geothermal energy is touted by some as the most economical and environmentally-friendly form of renewable energy, produced by harnessing heat from the ground using heat pumps and fluids (or gases) to move subsurface energy using pipes or vertical boreholes reaching several hundred feet into the ground, with energy then transferred to the electric grid (utility-scale) or rendered as heat (for homes).

There are also other methods and technologies that are beginning to gain ground in geothermal research……
 

Sen. Birdwell said, “Natural gas is a vital part of the Texas economy”

February 21, 2023 — A bill filed by District 22 state Sen. Brian Birdwell is aimed at protecting the use of natural gas by keeping cities from regulating the kinds of home appliances that may be used.

It appears to be a response to the current widely-coordinated national campaign to restrict or ban the use of natural gas in homes and businesses in favor of electrification.

His SB 783 simply states that a county or municipality may not make a regulation restricting natural gas or propane from being used in an appliance, system or component…..
 

February 20, 2023 — A major Texas energy trade association says it can work with a new electricity market system favored by the Public Utility Commission of Texas (PUC) called the Performance Credit Mechanism (PCM).

Speaking to the Texas Legislature’s Business and Commerce committee on Thursday, Executive Director of Texas Competitive Power Advocates (TCPA) Michelle Richmond said the organization representing wholesale power marketers and generators would be able to build the needed 4500 MW of new natural gas generation under the PCM.

The TCPA represents a majority of providers in the ERCOT grid, largely natural gas but also including coal and nuclear energy.

The PUC has said the PCM is intended to incentivize the production of power during peak demand hours in extreme weather when solar and wind or thermal power equipment production fails, such as occurred in Texas in February, 2021.

Ms. Richmond followed testimony from former PUC member Rebecca “Becky” Klein, who gave some historical perspective to changes in the Texas electricity markets over the past 30 years.

Ms. Klein expressed some skepticism about the PCM plan, noting that it presents a realignment of risk factors, saying she needed to study the plan further.

Ms. Richmond then provided views of the state power markets from the power providers’ perspective, saying the TCPA agrees with the PUC that the new plan would see to it that required grid reliability would be met.

“Today, the ERCOT market is a volatile market,” she said, but the PCM “removes the scarcity” therein, indicating that there is some enthusiasm for the new plan among the TCPA members.

There is about 4500 MW of power generation ready to be built, some of it in response to the announcement of the PCM, Ms. Richmond said.

The markets need to get away from scarcity power generation mechanisms, as are found today, and move toward more market stability, which the PCM provides, she added….
 

February 20, 2023 — Oil & gas investor and philanthropist B.J. “Red” McCombs has died at his San Antonio home at 95.

The following is a statement from the McCombs family:

“The entire McCombs Family is heartbroken to announce that our father, grandfather, and great-grandfather, Red McCombs, passed away on Sunday February 19, 2023. As he drew his last breath peacefully at home, he was surrounded by family that loved and adored him.

“Red was a visionary entrepreneur who touched many lives and impacted our community in immeasurable ways. But to us he was always, first and foremost, “Dad” or “Poppop.”

The Lubbock native settled in 2021 with his former executives at McCombs Energy — an entity created in 1998 along with Forney Oil to make O&G investments for his family — after a lawsuit over whether the company owed them money….
 

February 16, 2023 — In giving his Thursday State of the State address from a San Marcos rare earth manufacturing company, Governor Greg Abbott placed the building of infrastructure front and center, but did not place solutions for problems with the ERCOT electric grid on his emergency items list.

In response to the speech, Democrats sought to overcome recent attacks by Republicans that they are anti-oil and gas by praising O&G exploration and jobs.

While choosing the location of his speech acknowledged the increasing problem of procuring rare earth materials needed to build batteries for energy storage — especially on a utility scale — Gov. Abbott devoted less than a minute to addressing the need for more solutions to grid problems, a quest now undertaken by the state Legislature.

“Our booming economy and growing population means we must bolster…
 

By Alex Mills

Natural gas had an extremely good year in 2022.

Production in the United States set a record, and international and domestic markets continue to expand and show strength.

However, a new report from the Energy Information Administration (EIA) at the U.S. Department of Energy points out several challenges ahead.

Sustaining production growth depends on the continuous drilling of new wells because soon after production starts from new wells they begin to decline. “Stronger or weaker prospects for natural gas prices and resource development costs will affect production over time,” EIA said.

Natural gas prices in the U.S. were up and down in 2022 rising to a high of $9 per million British thermal units (mmBtu) during the summer and declining  41% to an average of $2.26 in January, according to EIA. EIA attributed the decline in price to a 15% decline in demand primarily due to warmer…
 

Set the standards and allow the market to meet them, longtime energy expert tells committee exploring ERCOT improvements, saying the PUC-recommended PCM system needs more time for study but time needed to implement the PCM would be longer than estimated

February 16, 2023 — The Texas Senate Committee on Business and Commerce searched for context and ideas on the ERCOT markets in its 5-hour Thursday meeting, including debate over a performance improvement plan submitted by the Public Utility Commission of Texas (PUC).

Former Bush White House staffer, current Diamondback board member and onetime PUC Commissioner (2001-2004) Becky Klein provided context for “building a model for the future” in revamping the Texas power system for the first time since 1999.

Ms. Klein is also founder of the Texas Energy Poverty Research Institute.

Commissioner Klein explained how the current power system came about, including the deregulation movement that was “sweeping the nation” in the late ’90s and the research trips taken by state legislators (to states such as California that had already begun deregulation) to find the efficacy…
 

February 16, 2023 — Texas’ legacy energy economy and geology are ideal for developing a robust hydrogen market, which will play an important role in sustainability, but a successful energy transition also requires a shift in policy and market structure, according to a new report from Rice University’s Baker Institute for Public Policy.

Converting the state’s legacy infrastructure and current industrial uses of hydrogen to low-carbon production technologies is likely the most expedient path to broader hydrogen use, the report argues.

“Texas is in a very advantageous position to play a leading role in driving hydrogen market growth, but the evolution of policy and market structure will dictate whether or not this comes to pass,” wrote co-authors Ken Medlock, senior director of the Baker Institute’s Center for Energy Studies, and Shih Yu (Elsie) Hung, research manager at the center….
 

February 16, 2023 — No damage has been reported following an early morning earthquake in the Abilene area on Thursday, other than some residents saying walls shook, books fell from shelves and pictures were knocked off walls.

The magnitude 4.3 quake was originally reported at 5.0 by the US Geological Survey, but was downgraded later in the morning to 4.7, then 4.3 centered about 16 miles east of the City of Snyder, almost 25 miles northwest of Sweetwater and 55 miles northwest of Abilene……