In 2023, Texas oil and gas industry companies paid a record-breaking $26 billion in state and local taxes and state royalties. That’s equal to about $72 million a day for funds that support state education, infrastructure and first responders.
But Todd Staples, president of the Texas Oil and Gas Association, says that kind of performance might not continue in the group’s annual energy and economic impact report. He warns that new federal policies could “undermine progress” in the industry.
So, what can we expect from the energy sector in 2024? Matt Smith, energy analyst for Kpler, spoke with the Standard about why last year was so profitable for Texas oil and gas, and what may be to come. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: These do seem like surprisingly strong numbers. Was it a surprise to you?
Matt Smith: Yeah, they are big numbers. It’s driven by state royalties and local and state taxes, but, you know, property values of oil and gas-bearing mineral properties more than doubled in a single year. So that’s driving it.
But really kind of the underlying theme here is because U.S. production is so strong in their records. So for example, just last week, the [Energy Information Agency] EIA, the Department of Energy, published data that showed that U.S. production in November hit 13.3 million barrels a day. That’s the highest that it’s ever been for a month. And then natural gas production for the same month was was getting close to the records we saw for August.
So that’s what’s really underpinning these big numbers – is big production, big exports, big refining numbers.
And I presume that means, or it implies, big demand, right? I mean who’s getting this oil?
Oh, we’re in a world where global demand is over 100 million barrels a day here, and it continues to grow. So over a million barrels per day as well. At least for now and in the coming years here there’s going to be incremental demand for U.S. oil and natural gas.
In terms of where it’s going, specifically now with all the issues with the Red Sea, we’re seeing a lot of U.S. crude being pulled to Europe. A lot of US diesel as well. So there’s definitely an international market there for it, while at the same time, in the U.S., we’re still consuming about 20 million barrels per day as well.
I’ve heard that something like 45% of the oil that the U.S. relies on comes now from the Permian Basin or through Texas. Does that line up with what you understand?
Yeah, we’re about 6 million barrels per day out of the Permian there, out of that 13 million barrels a day. So, yeah. And it’s not just the Permian in Texas, right? It’s it’s the Eagle Ford as well.
And that’s ideal because I actually thought the stat you were going to give was 45% of U.S. refining is on the U.S. gulf coast, because that’s what it is. And so that Permian crude is not only going straight to the U.S. gulf to be exported, but it’s also going there to be refined into other products as well and consumed domestically and exported internationally.
Todd Staples, who is the president of the Texas Oil and Gas Association, said that the Texas, energy industry – or, you know, fossil fuel industries – has achieve these record breaking milestones “in spite of our federal government using every opportunity to thwart growth by delaying permits, canceling pipelines and introducing regulatory uncertainty.” Well, if it’s that bad for the industry, we’re seeing these record breaking profits. How does that line up?
It doesn’t necessarily, right? From the perspective that we see so much strength coming through on the production side.
Economics drives everything, right? So as long as there’s profitability in producing oil and refining oil, then and exporting these products, then it’s going to continue. The one challenge, I think, that we have here – and we see this with the Biden administration heading into the presidential election at the end of this year – is that there’s a lot of pressure being put on the administration from environmentalists.
One example last week is with LNG export permits. They’re putting a pause on those. We’re seeing a lot of liquefied natural gas terminals being approved and being built and exporting stuff. And they’re trying to to balance that between, you know, being environmentally conscious as well.
Just like a couple of weeks ago, the administration said they would no longer approve facilities that might export LNG to other nations. They want to assess their economic and environmental impacts.
Yeah, exactly. And so it’s kind of walking that fine line. But at the same time, there’s so much underway already that the U.S. is going to be exporting a lot more LNG next year than it is this year, and so that growth is there. They’re just trying to hit the brakes for things that are getting built in the years to come.
You see this winning streak continuing for the oil and gas industry in Texas, or no?
Oh, probably a little slower.
So to put it in context, from an oil perspective, we saw oil production grow by about a million barrels per day last year. We can’t expect that to happen year after year here. So we’ll perhaps not see as emphatic numbers out in terms of royalties, etc.