By Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO)
The 86th Texas Legislature officially convenes on January 8, 2019, for another regular session. The Texas legislature, which meets every two years for 140 days, is required to pass a state budget and consider legislative proposals. Thousands of bills will be filed to address many issues facing the collective constituency in Texas. This includes hundreds of bills that pertain to the Texas oil and gas industry, a cornerstone of the state economy. Some of the many legislative priorities facing Texas producers and mineral owners next session will include:
Transportation infrastructure investment, road repair and maintenance have been key priorities for the Texas oil and natural gas industry for many years. Quality infrastructure benefits local communities and ensures that product can get to market in the most efficient way, promoting a healthy and vibrant economy. This issue is of critical importance to support continued oil and natural gas operations, as well as to protect the millions of individuals utilizing our roadways on a daily basis. TIPRO, along with the entire oil and gas industry, remains committed to working with all stakeholders on identifying solutions to improve the quality of state and county roads.
As the state’s oil and gas industry continues to grow at a rapid pace, ensuring that a qualified workforce is available to support that sustained growth is crucial. Currently the Texas oil and natural gas industry is facing a shortage of available talent as production and employment needs keep growing. With the right state policies in place, Texas can prepare the workforce of the future to allow the continued success of the oil and gas industry and other key sectors.
Water conservation and air quality standards are two issues state lawmakers will focus on during the 2019 Legislative Session. TIPRO diligently advocates for fair regulatory policies that will enhance environmental stewardship, without promoting administrative barriers that hinder economic growth through slower permitting or reduced exploration and production activities. The organization also promotes water conservation through recycling and reuse, and positive energy emission trends resulting from ongoing innovation, industry best practices and over $200 billion in investment in greenhouse gas emitting technologies over the past two decades.
Ad Valorem Taxes
If you ask any property owner in Texas what their policy priorities might be, getting relief from the growing burden of rising property taxes is likely at the top of their list. Texas does not have an income tax, so property taxes are a vehicle for funding various aspects of local and state government, such as local infrastructure and public schools. Recent reports have indicated, however, that since 1997 property tax collections in Texas have increased 195 percent. The state’s oil and gas producers are certainly not immune to these tax increases, and TIPRO is focused on achieving beneficial and permanent solutions to this ever-rising problem.
During times of economic downturn, operators face the same tough decisions as any other business owner; occasionally that means halting production from certain wells. The Railroad Commission has reported an annual average of over 100,000 inactive wells for the past few decades, many of which are still economically viable. Texans know that every barrel counts, so TIPRO will continue to work with policymakers to find commonsense solutions to bringing inactive and orphaned wells back to production, and provide the tools necessary to sustain that production regardless of the economic and regulatory climate.
As production increases in key basins, having adequate pipeline infrastructure to transport oil and gas is essential. To address takeaway capacity constraints in West Texas, pipelines are being expanded, built, planned or proposed. However, the bottleneck may not be fully resolved until late 2019, assuming infrastructure projects and production stay on track. This market challenge illustrates the importance of having sufficient infrastructure in place to support further oil and gas production and its transportation, industry employment, and to sustain an important tax revenue base that supports all aspects of the state economy. TIPRO will continue to advocate for a balanced approach to critical infrastructure needs that recognizes the dominance of the mineral estate, existing laws and regulations, and private property rights.
The oil and gas industry is the backbone of the Texas economy, supporting over 1 million direct and indirect jobs and an annual payroll exceeding $40 billion. Texas leads the nation in crude oil and natural gas production, contributing over 40 percent of U.S. crude oil production and approximately 30 percent of U.S. natural gas. Additionally, Texas producers paid state taxes and state royalty payments in excess of $11 billion last year, which support all areas of the state, including transportation and infrastructure investment, water conservation projects, schools and education and first responders, to name but a few. Finally, the Texas Economic Stabilization Fund, which is funded almost entirely by oil and gas severance taxes, will have a projected balance of $12 billion over the next biennium. The oil and natural gas industry will continue to be essential in meeting our state’s financial obligations, priorities and supporting the overall Texas economy.
TIPRO looks forward to working with legislators on these important issues and other energy policies that support the responsible development of oil and natural gas and the enormous benefits it provides to our state.