.The Texas Energy Report

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……
 

By Rashda Khan

February 15, 2023 — Two years after Winter Storm Uri wreaked havoc on Texas’ power grid, a majority of Texans support expanding the country’s reliance on solar and other alternative sources of energy, according to the most recent survey report released by the Hobby School of Public Affairs at the University of Houston.

While 64% of Texans favor expanding U.S. reliance on solar power plants, 59% favor reliance on geothermal plants and 57% favor reliance on wind turbine farms.

In comparison, 42% favored increasing reliance on nuclear power plants and natural gas-fired power plants. The majority of the 41% who preferred expanding U.S. reliance on onshore conventional oil and gas came from the Boomer/Silent Generation.

Texans also overwhelmingly (90%) supported net-metering legislation that would allow homes and businesses with solar panels to sell any extra power they generate back to the electric grid for the same price that the utility charges consumers to buy the electricity. And 82% supported tax incentives for homeowners and businesses to install rooftop solar panels and battery storage….
 

Data source: U.S. Energy Information Administration, State Energy Data System

In 2021, expenditures by U.S. natural gas consumers totaled $192 billion, a 37% increase from 2020 after adjusting for inflation, according to our State Energy Data System. The increased spending followed rising U.S. natural gas prices, particularly in the electric power sector across the southern United States. Total U.S. natural gas consumption remained virtually unchanged from 2020 to 2021….
 

February 14, 2023 — In response to Russia’s plan to reduce oil production by 5% beginning in March, Railroad Commission of Texas Commissioner Wayne Christian submitted the following statement:

“As President Biden doubles down on his anti-oil and gas agenda, our enemies overseas smell blood in the water and are using their production as leverage against the West.  We have the natural resources, the technology, and the manpower to be energy independent. We just need the federal government to get out of the way.

“Mr. President — I commit to you today that if you stop your war against domestic oil and gas production, Texas can make up this 500,000-barrel difference and more. There truly is no downside! You even admitted so in your State of the Union address that we will need more oil for the foreseeable future. Let’s start here at home. We can defend our national security and our European allies, all the while increasing supply, reducing costs, creating jobs, stimulating our economy, and protecting our environment!…
 

February 14, 2023 — The Railroad Commission of Texas joined the Texas Commission on Environmental Quality in filing comments this week on the Environment Protection Agency’s (EPA) proposed supplemental rule to regulate methane and greenhouse gas emissions in the oil and gas industry.

In the comments, the state expresses concerns that the proposed rule exceeds EPA’s statutory authority under the Clean Air Act and will significantly limit domestic energy supply. At a time of energy fluctuations due to international conflict, the United States cannot afford to clamp down on its most important oil and gas producing state.

Texas also commented that the proposal also lays out unrealistic assumptions and artificially high metrics to estimate the climate benefits of the rule, whereas in practice, the rule would place an unjustifiable burden on states and the energy industry for little real benefit to the global climate.

In addition, the RRC is concerned that EPA did not provide sufficient time for affected stakeholders to review and comment on the extreme breadth of its proposal. The proposed rule was published immediately before the holiday season, on December 6, 2022, amidst several other significant regulatory proposals. Despite receiving numerous requests to extend the comment period, EPA declined to provide additional time….
 

By Alex Mills

Russia’s decision to invade Ukraine one year ago has sent economic shock waves throughout Russia, Europe, and across the globe.

The United Kingdom and members of the European Union (EU) – along with United States, Australia, Canada and Japan – agreed to participate in a variety of actions designed to reduce revenues to Russia from the sale of petroleum products and natural gas.

The first action prohibited insurance companies based in these countries from insuring shipping companies that transport cargoes of Russian crude oil unless the oil was purchased below $60 per barrel. The sanction became effective on Dec. 5.

On Feb. 5, a $100 price cap on diesel and $45 cap on fuel oil was slated to become effective, but there continues to be disagreements on implementation….
 

February 13, 2023 — Lt. Governor Dan Patrick says he includes increasing the number of natural gas plants for production of electricity as an essential part of his priorities to increase the reliability of the ERCOT grid.

Lt. Gov. Patrick listed the two items among his list of 30 high-priority bills released on Monday.

A list of the 30 bills appears at the end of this article.

In a statement, the Lt. Governor said the legislators will pass something like 600 bills this session, so “just because a bill does not make the priority list does not mean it is not a priority for me or the Senate.”

Mr. Patrick has been pushing since the 2021 legislative session for more solutions to the state’s grid problems…
 

February 8, 2023 — “In the last 200 years, society has undergone major energy transitions associated with introducing new energy sources, such as coal, oil and natural gas.

“To address climate change, the world must experience another energy transition where fuels and chemicals are sourced from sustainable feedstocks,” according to Texas A&M University and its College of Engineering.

“The only practical, sustainable feedstock is biomass — anything that is biodegradable. Although there are fuels and chemicals currently made from biomass, such as corn, sugar and vegetable oil, these feedstocks are not sufficiently abundant to be scalable. Process innovations are required to access more plentiful biomass feedstocks to achieve feasible, long-term solutions.

“Mark Holtzapple, professor in the Artie McFerrin Department of Chemical Engineering at Texas A&M University, has spent more than three decades creating a method to convert biomass into essential fuels and chemicals, such as jet fuel and acetic acid…..
 

February 7, 2023 — The Texas Senate Business and Commerce committee met on Tuesday without Chair Charles Schwertner, diving into discussion about changes that will be needed to strengthen the ERCOT grid.

Vice Chair Sen. Phil King, chairing the committee, complimented the RRC, ERCOT and the PUC for their recent response to strong winter weather and called for open-mindedness in considering potential solutions to the state’s electric reliability problems.

Sen Robert Nichols encouraged attention to all sides of power generation, keeping the increasing solar power that will be coming online in the next 36 months while watching new generation plants.

Other senators joined in with Sen. King to call for “balanced” solutions from power generation problems.

Sen. Lois Kolkhorst expressed concern over passing along emergency pricing costs to consumers; Sen Donna Campbell cautioned against haste, preferring to give changes already made a chance to come to fruition….