.The Texas Energy Report

July 5, 2023 — State of Texas production tax income from natural gas dropped 58% year-over-year last month, according to the latest figures from Comptroller Glenn Hegar.

The natgas production tax brought in $184 million during June; oil production tax gathered $456 million, down 33% from June 2022.

Motor fuel taxes totaled $324 million, down less than 1% year-over-year, with motor vehicle sales and rental taxes up 2% from a year ago, at $597 million.

Yet Mr. Hegar stated upon releasing the figures, “Receipts…
 

NOTE: D. Alex Mills enlisted in the U.S. Army Security Agency in 1966 and was discharged in 1970. He lives in Wichita Falls, Texas, but he has family in the Kalamazoo, Michigan area. Through his family’s non-profit  O’Leary Foundation, Mr. Mills was asked to participate in an honor flight.  This is his report.

By D. Alex Mills

On a chilly Saturday morning in May, I had the honor and pleasure of accompanying 87 other veterans on an honor flight to the nation’s capital.

The emotional journey, organized by Talons Out Honor Flight, began at 4:30 a.m. with our arrival at Kalamazoo, Michigan Airport. Amazingly, some people were there and cheered and shook our hand during our arrival.

We registered, got our picture taken, got a sack breakfast, and waited to board the airplane for the nation’s capital. About an hour later a young lady announced that we were ready to board our chartered flight courtesy of American Airlines, but first we were going to sing the national anthem. As we began to sing, some saluted, others removed their caps and placed them over their heart and everyone sang together. Very moving.

Most of the veterans – 74 – served during Vietnam and 11 served during Korea and 3 during World War II. A majority of the vets served in the Army followed by Navy, Marines and Air Force.

Also, each veteran was accompanied by a family member or friend, called “guardian,” who was assigned to take care of us if needed because about one-third of the vets were in wheel chairs and most of the remainder of the group probably had not walked the six miles or so we encountered on the one-day tour. My guardian was my great nephew, C.J., who served in the Marines in Afghanistan.

The hour-and-fifteen minute flight received a water cannon salute in Kalamazoo and again at Washington Reagan Airport. Very impressive! The respect given to these soldiers, sailors, and airmen who served many decades ago brought tears of joy.

The weather in the nation’s capital was overcast, but cloudy skies and drizzling rain was not going spoil this day for these guys and ladies. By the way there were 3 women veterans in the group.

A short bus ride to Arlington National Cemetery and we arrived at the Tomb of the Unknown Soldier and the changing of the guard. The precision of the march of the guards, the timing of the three guards during the exchange of duty, and the beauty of the bugler playing Taps brought chills down my back and tears to my eyes.

Next stop the statue of Marines raising the flag of the United States at Iowa Jima during World War II, then to the Vietnam wall, Lincoln Memorial, Korean conflict, and World War II Memorial.

Everywhere we went in Washington we were greeted with strangers shaking our hand and thanking us for our service to the nation. Some even said “Welcome Home.”

During the flight back to Kalamazoo, the volunteers and staff of Talons Out Honor Flight gave each veteran a letters-from-home package, which included letters, cards, notes, etc. from our family members (adults and children) and some from even strangers expressing many emotions but they all boiled down to the feeling of “Welcome Home.”

“Welcome Home” touches the heart of all veterans but especially to Vietnam-era veterans because many did not get that “Welcome Home” feeling when they returned home some 50 years ago.

I, for one, always had pride I served in the Army, but many Vietnam-era vets were shaken by the controversy during the war and the treatment they received. Now, groups of citizens, like those in Kalamazoo, Michigan, have taken it upon themselves to say “Welcome Home” and it feels good!

The plane arrived just as the sun began to set in Kalamazoo, and we were met with a parade with a police escort to a nearby museum where hundreds of people warmly welcomed us home.

God bless and thanks to all of the staff and volunteers who took the time and effort to work on such a special event.  And thanks to everyone who thanks all veterans for their service and “welcomes us home.”

By Alex Mills

Oil and natural gas companies have experienced a rugged time during the first half of 2023.

Inflation, supply chain issues, and attacks by politicians in the U.S. and Europe have resulted in a decline of investment capital from financial institutions and outside investors.

Out of the top eight oil and gas producing companies, six have had their stocks decline since Jan. 1. Chevron’s stock price has declined 12%, Conoco and EOG down 11%, Pioneer Natural Resources off 9%, ExxonMobil down 5%, and Oxy off 3%. All of these companies are headquartered in the U.S.

The only two with an increase in stock price are Shell up 9% and BP up 3%. Both of these companies are headquartered in Europe.

Crude oil prices are off 30% and natural gas prices are down 40% from a year ago.

The drilling rig count in the U.S. is down 11% to 695, which has resulted in a decline in the companies that provide drilling rigs….
 

By Railroad Commission Chair Christi Craddick

June 23, 2023 — Texas’ oil and gas industry has historically pumped billions of dollars into the state’s coffers, allowing lawmakers to fund critical programs while reducing the burden on taxpayers. With the Permian Basin setting a new record in natural gas production in 2022, never before have revenues been as strong as they were heading into the 88th Legislature. These additional dollars meant that lawmakers had an unprecedented surplus to fund priorities, including local schools, public safety, and investments in local communities and health care programs for the state’s most vulnerable.

To help keep Texas thriving, the Legislature made important investments in the Railroad Commission that will promote our ability to safely, fairly, and effectively oversee this vital industry that our economy and national security depend on.

With the largest pipeline infrastructure network in the nation and one-sixth of the total pipelines in the United States, Texas moves critical energy sources across our state to power homes, businesses, and transportation. This session the Railroad Commission received funding to expand our ability to monitor and maintain the safety of more pipelines across Texas. The Commission added 100,000 miles of gathering pipeline to the agency’s areas of oversight responsibility, which already numbered more than a quarter-million miles of lines across the state. Funding from the legislature will allow the agency to hire and train more safety inspectors to keep up with the growth.

To assist with the surging increase of Oil and Gas Environmental Permit requests and streamline the application process, the Legislature provided additional funding for key staff to more quickly review applications and perform post-permit monitoring. As an agency, we are always looking for ways to eliminate unnecessary delays while protecting environmental quality and ensuring public safety.

This session, the Legislature provided additional resources needed to update the electricity supply chain map. Frequent changes in the supply chain require stronger security features to ensure the information is timely and accurate. By securing and streamlining this process, the Railroad Commission can more readily share information with partner agencies, making the state better prepared in emergency situations.

We also saw important investments in cybersecurity and data protection tools to better inventory, organize, and protect agency information, as well as state-of-the-art cameras and other monitoring equipment to help further reduce gas flaring and venting.

Our primary role is to protect the interests of all Texans and to best serve the state. To accomplish that mission, we are in the process of creating an Office of Public Engagement. Employees in this office will serve as liaisons to give the public a stronger voice and make our agency even more responsive to their needs and requests.

In that same spirit, the Legislature funded our plans to digitize historical records and make them available electronically to the public. This project means easier access to historical well records, refinery reports, and a variety of other forms previously only available in one physical location. As the oldest regulatory agency in the state and one of the oldest in the country, preserving and sharing our history is important.

With the support of the Legislature’s investments, the Commission is as committed and capable as ever to protect the lives and livelihoods of Texans across the state and ensure a strong and safe energy industry for the long term.

Christi Craddick is the current Chair of the Railroad Commission of Texas, on which she has served since 2012.

By Jim Henson & Joshua Blank, Texas Politics Project at the University of Texas

June 23, 2023 — After a regular legislative session that found lawmakers attempting to use a historic budget surplus to address major fiscal issues and infrastructure needs while also pushing some cultural hot buttons, the latest University of Texas/Texas Politics Project Poll found Texas voters with low expectations of the impact of their actions, and dim views of the legislature’s responsiveness.

When asked in general terms about their confidence in legislative efforts to address areas deemed critical by voters in Texas Politics Project polling conducted earlier in the session, most Texas voters lacked confidence in lawmakers’ efforts. Fewer than one in five voters was willing to say they were ‘very’ or ‘extremely’ confident that the legislature had increased the reliability of the electric grid or the water supply, improved the safety of Texas’ public schools, or improved security along the Texas-Mexico border.

In a more general assessment that also illustrates Texans’ low expectations of the legislature’s efforts, asked at the conclusion of the regular session whether the legislature had “made the lives of Texans like you better, made the lives of Texans like you worse, or had no impact on the lives of Texans like you,” only 5% said the legislature had made their lives “a lot better,” joined by 24% who agreed that lawmakers had made their lives “somewhat better.” The plurality, 26%, expected no impact, while 3 in 10 expected the legislature to have made Texans’ lives “somewhat worse” (16%) or “a lot worse (14%).

At the same time, nearly half of Texans (49%) said that Texas’ state government “mostly ignores the needs of Texas residents” — up nearly 20-points since the question was first asked in October of 2012 — while only a little more than a third (36%) said that state government mostly addresses Texans’ needs — down from 54% in October 2012.

As the Texas legislature remains riven by intra-party conflict over property tax reform during the current (first called) special session, Texas voters expressed disapproval of legislative efforts on key issues flagged as priorities by the state’s leadership and, in some cases, by voters themselves, according to results in the latest UT/TXPP Poll. The most striking examples of public skepticism toward recent and current legislative efforts were in response to issues voters identified as urgent in Texas Politics Project Polling conducted earlier in the legislative session: property tax reduction, the reliability of the electric grid, and school safety.

THE PROPERTY TAX IMPASSE

Texans largely disapproved when asked to rate legislative efforts to reduce property taxes, with 45% disapproving and only 25% expressing approval. While all three of the state’s major elected leaders – the governor, lieutenant governor, and Speaker of the House – publicly prioritized cutting property taxes prior to the session, and subsequently committed large shares of the state’s budget surplus to that effort, the House and Senate failed to agree on an approach to achieving those cuts, leading to an impasse that has continued into a special session called by Gov. Abbott to address the issue. This state of affairs appears to be informing public evaluations.

Voters’ evaluations of state leaders’ attempts to reduce property taxes saw the lowest total approval rating from among 16 issue areas voters were asked to evaluate, as well as the lowest net approval rating (-20)…
 

June 23, 2023 — The Texas Supreme Court ruled Friday that the Electric Reliability Council of Texas cannot be sued for damages that happened during Winter Storm Uri.

The state high court affirmed sovereign immunity for ERCOT, placing it firmly within Texas government, thereby placing it outside vulnerability to lawsuits based on the execution of ERCOT’s official duties and actions.

The 5-4 ruling is a reversal of an earlier lower court ruling stating that ERCOT, as a non-profit corporation, is not a government agency…..
 

June 23, 2023 — With weather forecasters calling for possible Texas high temperatures next week nearing 110 degrees, the Electric Reliability Council of Texas is issuing an advisory that electricity demand will also …

June 21, 2023 — Governor Greg Abbott has been vetoing bills related to energy matters, along with nearly 70 other unrelated bills, perhaps signalling at least some energy bill activity this summer in upcoming special sessions.

The governor’s deadline to sign most bills was Sunday, June 19th.

Governor Abbott and Lt. Gov. Dan Patrick have been feuding over details of property tax relief legislation during the current special session; the two have competing plans, with Gov. Abbott threatening to veto bills related to property taxes and other bills that might be brought up again later.

Mr. Abbott made good on those threats over the weekend.

Prominent among those vetoed bills is Senate Bill 1404, which would have created a coal-to-nuclear conversion work group to study the benefits of converting sites in Texas “with coal-fired electric generating facilities to use nuclear electric generating facilities instead and to develop a model plan for implementing coal-to-nuclear conversion to provide affordable and sustainable power in Texas,” according to the bill analysis.

In his veto proclamation, Gov. Abbott wrote, “While Senate Bill No. 1404 is important, it is simply not as important as cutting property taxes. At this time, the legislature must concentrate on delivering property tax cuts to Texans. This bill can be reconsidered at a future special session only after property tax relief is passed.”

In fact, the Mr. Abbott made that same proclamation about the following three bills too:

The governor vetoed SB 2010, which would have required the independent market monitor’s existing report to provide more information and be more widely distributed and to require the Public Utility Commission of Texas (PUC) to provide an annual report regarding these issues to the legislature.

And SB 2399, also vetoed by Mr. Abbott, would have clarified rules about Voice over Internet Protocol (VoIP), a technology used by a variety of providers in telecommunications and broadband. VoIP technology can help lower costs and provide a more robust, reliable network.

Recently, the general counsel of the PUC took “as a new position in a proceeding that the PUC does not have jurisdiction to grant a service provider certificate of operating authority to VoIP providers, but that position is seen as contrary” to extensive PUC precedent.

HB 4106, also vetoed, would have directed the PUC to simplify the complaint resolution process when a tenant and owner have a small (under $500) discrepancy on a water…
 

By Alex Mills

Mixed economic indicators for the upstream oil and gas industry in Texas have industry watchers wondering which direction the industry will be going during the remainder of the year.

The Texas Alliance of Energy Producers’ “Texas Petro Index” (TPI) has declined during the last three months, but is still ahead of the same period in 2022.

The culprit: primarily lower prices.

“Once again, weak pricing for crude oil and natural gas are largely responsible for the decline, with downward pressure on the index coming from prices themselves, as well as the falling value of crude oil and natural gas production,” Alliance Executive Vice President Karr Ingham, who is a petroleum economist and author and founder of the TPI, said.  “Drilling permits are the other TPI component to register year-over-year negatives for April and the first four months of the year.”
…
 

June 15, 2023 — Governor Greg Abbott has signed four Texas energy bills, with notable attempts to reduce air emissions, improve the state’s participation in advanced clean energy projects, raise preparedness for natural …

June 13, 2023 — Modular nuclear reactor company X-Energy Reactor and Ares Acquisition Corporation have revised downward the valuation of their partnership from $2.1 billion to $1.8 billion with hope of establishing a more attractive entry point for investors — but the re-valuation doesn’t affect the partnership’s proposed advanced small modular reactor nuclear project at the Dow Seadrift plant near Freeport.

Dow and X-energy are to continue to prepare and submit to the US Nuclear Regulatory Commission a construction permit application, as announced last month, with an aim for construction to begin in 2026.

X-Energy said Monday the announcement of the Dow Seadrift project was made after the …
 

June 13, 2023 — The move toward increasing energy conservation is underway in Texas with Governor Greg Abbott‘s signing on Monday of a bill from the Texas Legislature to bring a statewide framework for the implementation of natural gas-saving programs.

HB 2263, authored by Rep. Drew Darby, was written as an attempt to bring together a wide-ranging array of programs from natural gas suppliers directly to homes and businesses that promote energy efficiency in order to reduce electricity consumption.

The new law goes into effect…
 

June 12, 2023 — Crude oil and natural gas production as reported to the Railroad Commission of Texas (RRC) for March 2023 came from 160,742 oil wells and 87,487 gas wells.

Crude oil production reported by the RRC is limited to oil produced from oil leases and does not include condensate, which is reported separately by the RRC. For full oil and gas production statistics, you can visit the links below.

Statewide totals: https://www.rrc.texas.gov/oil-and-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/

County rankings: https://www.rrc.texas.gov/oil-and-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production-by-county-ranking/…
 

June 12, 2023 – ERCOT has launched the ERCOT Contingency Reserve Service (ECRS), a new daily procured Ancillary Service. As energy demand continues to grow in Texas, adding ECRS will support grid reliability and mitigate real-time operational issues to keep supply and demand balanced.

“As summer temperatures begin to rise across Texas and with high demand forecasted, we will continue to use all operational tools available, including implementation of new programs like ECRS,” said ERCOT President and CEO Pablo Vegas. “ERCOT will also execute previous sessions’ legislative reforms, such as our weatherization inspections, and we’ll continue our reliability-first approach to operations, always prioritizing grid reliability.”

ECRS will complement and provide support to the four procured Ancillary Services ERCOT currently uses: Regulation Up, Regulation Down, Responsive Reserve Service and Non-Spin Reserve Service. The public can view the Ancillary Services and system frequency dashboards here.

ECRS is the first daily procured Ancillary Service introduced to the ERCOT market in more than 20 years….
 

June 12, 2023 — Among the results of the Texas Legislature‘s examination and approval of possible upgrades for the ERCOT (and non-ERCOT) grid system in the state are several bills that have now become law with their signing by Governor Greg Abbott in the past several days.

One thing is clear: The state legislature has endorsed for now, with some substantial changes, the Performance Credit Mechanism for ERCOT.

Two bills that could result in the building of more power plants have been getting all the publicity. They are:

Senate Bill 2627 (signed by the Governor but requires a public vote on November 7th of this year) — creating the Texas Energy Fund, providing up to $10 billion in loans and grants to incentivize the construction, maintenance and operation of electric generating facilities to ensure the reliability of the ERCOT grid.

At the signing, Governor Abbott said, “It provides low-interest loans for the construction of up to 10,000 MW of new dispatchable power generation and provides related completion bonuses to help bringing facilities online as quickly as possible. Companies must apply for those loans by the end of the year.  And it provides grants for backup power and improvement of transmission and distribution facilities for non-ERCOT regions of Texas.”

The bill requires a change to the Constitution of Texas and therefore a public vote is needed through SJR 93, which has been filed with Secretary of State Jane Nelson.

House Bill 1500, the “Sunset Bill for the Public Utility Commission of Texas and the Office of Public Utility Counsel,” which Governor Abbott said “ensures greater public stakeholder input at commission meetings” and “clarifies the PUC’s complete oversight of ERCOT and established guardrails” over the PCM (the Performance Credit Mechanism) ensuring that “costs associated with building new transmission lines are more evenly shared between the generation resource and the broader customer base.”

It also instructs ERCOT to “procure a new ancillary service designed to help ERCOT account for certain operational challenges” and establishes “performance requirements for certain generation resources to ensure a more reliable and predictable grid.”

And it instructs ERCOT to “make information related to unplanned outages of generation resources more publicly accessible and provides for a greater transparency in reporting of any potential misconduct in the ERCOT market.”

The PUC adopted the PCM just after the start of the just-ended regular legislative session, helping to ensure that new power plants are profitable while paying bonuses to reliable power plants for firing up when needed.

The Texas Senate added more than a dozen new guidelines as amendments to the original HB 1500 for companies to gain the credits, adding a penalty up to $1 million for a violation of a voluntary mitigation plan, defining some energy resource references, requirement of notice of “material” unplanned service interruptions within a reasonable time, adding the “postage stamp” method of pricing and adding more duties for the PUC, among other changes.

It becomes effective September 1st.

9 Other Bills Now Law

Among the lesser-known bills that are now law following the governor’s signing:

SB 2013 — “This bill protects the Texas electric grid from hostile foreign nations and actors,” Governor Abbott said at the signing ceremony. It’s aimed at “ensuring…
 

June 8, 2023 — RRC Chairman Christi Craddick, Commissioner Wayne Christian, and Commissioner Jim Wright each sent letters to Texas Senator John Cornyn and Commerce, Science & Transportation Ranking Member Senator Ted Cruz outlining concerns about S.576, the Railway Safety Act of 2023, and its specific impacts on the energy supply chain in America. They are concerned the legislation grants rulemaking authority to the U.S. Department of Transportation that could detrimentally limit the transport of fossil fuel-based energy products on freight cars.

“The current federal administration is doing everything it can to limit domestic energy production, and this bill is just the latest effort to shut down the oil and gas industry in America,” said Chairman Christi Craddick. “I urge members of the Senate Committee on Commerce, Science, & Transportation, and members of Congress to implement guardrails in this legislation before it moves forward. Americans are already paying the price for failed energy policies coming from the federal government – we can’t afford to limit our access to clean, responsibly produced energy anymore.”….
 

By Alex Mills

Demand up, supplies questionable, and price “remains highly uncertain.”

That’s a summary of the Energy Information Administration’s (EIA) short-term market forecast for petroleum products released this week.

“We expect to see demand for travel to increase, which drives our forecast for record consumption of petroleum products,” said EIA Administrator Joe DeCarolis. “The petroleum market remains highly uncertain, so we will continue monitoring developments and tracking supply and demand dynamics.”

EIA forecast Brent crude oil price, which is traded on the international exchange, will average $79 per barrel during the second half of 2023 and $84 during 2024. Brent closed on Wednesday at $76.89, and West Texas Intermediate closed at $72.49.

EIA believes global oil inventories will decline slightly during the remainder of this year primarily because of Saudi Arabia’s announcement on June 4 that it will reduce production 1 million barrels per day (b/d) beginning July. OPEC+ produces about 40% of the world’s oil supplies (40 million b/d). Saudi Arabia produces about 10 million b/d.

This is the second cut this year. Saudi Arabia and Russia said they would reduce production by 1.6 million b/d in April. Market analysts question the validity of Russia’s production, because Russia dumps huge volumes of cheaper crude to get around sanctions placed by U.S. on other countries.

EIA forecast global liquids fuels consumption will rise by 1.6 million b/d in 2023 from an average of 99.4 million b/d last year. Consumption grows by an additional 1.7 million b/d in 2024. Most of this growth comes from non-OECD countries….
 

According to our Short-Term Energy Outlook (STEO), U.S. electricity generation from natural gas reached a record-high 619 billion kilowatthours (BkWh) during the most recent winter heating season (November 1–March 31), averaging more than 120 BkWh per month and accounting for 38% of the country’s electricity generation mix. Electricity generation from natural gas increased in the United States this past winter due to increased demand for electricity and continued reductions in electricity generation from coal….
 

June 2, 2023 — The Railroad Commission of Texas issued a total of 805 original drilling permits in May 2023. The total includes 702 to drill new oil or gas wells, 11 to …

June 2, 2023 — Texas PUC Chairman Peter Lake has resigned effective July 1st, Gov. Greg Abbott announced on Friday, with Chairman Lake drawing praise for his tumultuous tenure while the Governor said he would name a replacement.

Mr. Lake took over the agency just two months after Winter Storm Uri knocked out power in much of the state, providing a steady hand during a restructuring of ERCOT and new staffing at the PUC, while working to reassure electricity customers that work is underway to restore reliability to the system.

He’s been a major mover in trying to implement the Performance Credit Mechanism (PCM), an attempt to meet the requirements of the 87th Legislature‘s Senate Bill 3, requiring the PUC to create grid reliability standards.

The PCM plan was …