Despite Low Prices, Texas Oil Group Stays Optimistic

Texas’ oil and gas industry is touting its record-breaking 2014 contributions to state and local government coffers, an effort to stay positive amid 2015's far gloomier revenue outlook.

State and local governments collected $15.7 billion in taxes and royalties from the industry last year, the highest total in Texas history, the Texas Oil and Gas Association announced Tuesday.

“Production and demand, we hope, will remain strong, and we hope there will be a turnaround,” Todd Staples, the group’s president, told reporters in a conference call. “Even with the low prices that we’re experiencing today, you can count on oil and gas to become a big part of the economy.”

The 2014 total more than doubled what state and local governments collected in 2010 and was $3.6 billion higher than the 2012 total.

But don't expect a repeat this year.

The per-barrel price of West Texas crude has plummeted to around $50, less than half what it was worth last June. By far, that tumble has hit Texas operators hardest.

In the past three months, operators have idled more than one-third of the drilling rigs that were running in Texas, according to Baker Hughes, which publishes weekly industry data. Meanwhile, several major petroleum and oilfield service companies have already sliced their budgets and announced layoffs.

Staples, the former Texas agriculture commissioner, said he’s optimistic that prices will soon rebound after hovering around the $50 mark for several weeks.

How low oil prices might factor into legislative debates about the industry’s effects on the environment and public health is unclear. 

Environmental groups want changes to a number of industry activities. They've asked for tightened rules for drilling waste injection wells, more reporting on water use and new efforts to limit the flaring of natural gas. Environmentalists also support the Railroad Commission’s request for money to hire more well and pipeline inspectors.  

In an interview on Friday, Rep. Drew Darby, R-San Angelo, said the rough market should make lawmakers more reluctant to tighten industry regulations.  

"Do we want to put further burdens on an already struggling industry?” the new chairman of the House Energy Resources Committee said. “We need to do no harm."

Asked Tuesday is if his group planned to wield low oil prices as an advantage in any such legislative debates, Staples said it shouldn’t need to.

“We recognize there are valid concerns with any commercial or industrial activities associated with oil and gas,” he said. “The economic uncertainty, I think, really gives anyone that’s concerned with what’s going on today a little bit of breathing room. Because with low prices and the rigs being idled, you’re not seeing the number of new wells planned that once were.” 

Cyrus Reed, conservation director with the Lone Star Sierra Club, said the industry’s slowdown doesn’t change Texas’ need for new environmental safeguards and more enforcement.

He acknlowedged that push will prove difficult for a variety of reasons.

"It may be a good time to put in the regulations now, when everybody’s not rushing to get permits done," he said.