Texas lawmakers are circling the wagons. Politicians from the Lone Star state are preparing for an escalating war on oil and gas, the lifeblood of the Texan economy, and they’re determined not to go down without a fight. The Permian Basin has been in a bad way for years now. Even before the spread of the novel coronavirus dealt a devastating blow to global oil demand in general and the West Texas Intermediate crude benchmark in particular, the United States shale revolution had been in decline for years as wells aged, glut swelled, and growth finally slowed. This is all to say that oil and gas was in a particularly tough spot after the double whammy of the COVID-19 pandemic hit the already-faltering sector. And then Joe Biden, with his climate and clean energy intensive platform, stepped onto the scene, immediately putting Big Oil and all of its advocates on the defense.
“Unfortunately, our economic bedrock of oil and gas is under attack by an administration that is bent on eliminating millions of jobs,” Republican Congressman Brian Babin told the public back in February at a press event along with six other Texan lawmakers, as he meaningfully stood in front of the refineries and petrochemical plants of the Houston Ship Channel. And indeed, on Biden’s very first day in office, he pulled the plug on the massive Keystone XL pipeline project, confirming all of Big Oil’s worst fears...until it turned out that the Biden presidency really hasn’t been that bad for oil and gas at all.
“Since taking office two months ago, Biden’s been more boon than bane for a fossil-fuel industry that was wary of the ascendance of a politician bent on accelerating the energy transition,” Bloomberg reported and the end of March, based on Goldman Sachs’ own assertion that overall, the Biden administration has actually been bullish for oil.
Related: Three Things That Will Drive Oil Prices In May Despite this surprising development, Texan lawmakers clearly feel that oil and gas remains firmly under threat. Public sector notwithstanding, Big Oil is clearly falling out of favor with large swaths of the private sector, which are increasingly divesting from emissions-heavy industries. Many a think piece has been written on whether Big Oil is the new Big Tobacco, soon to become anathema to all who touch it.
It is in response to exactly this phenomenon that Texas lawmakers are now trying to push through two pieces of legislature that aim to protect big oil from divestment and other initiatives to curb greenhouse gas emissions. On Tuesday, the Texas State House of Representatives granted final approval to Senate Bill 13, which, if enacted, would require state entities to divest from fossil fuel.
Related: Russia Boosted Oil Production In April
Entities such as state pension funds and the state’s enormous K-12 school endowment would be legally required to divest from companies that “cut ties with or ‘boycott’ fossil fuel companies,” as summed up by reporting this week from the Texas Tribune. “Oil and gas is the lifeblood of the Texas economy,” state Rep. Phil King, R-Weatherford, stated on Monday on the House floor. “In the world of capital, there’s a movement to deny funds to businesses that will not sign on to extreme anti-fossil fuel policy.” While the Senate Bill 13 has been granted final approval by the house, however, it still has to be re-reviewed by the senate before moving onto Governor Greg Abbott’s desk for the final decision.
The other piece of petro-protectionist legislature currently on the Texas docket is House Bill 17, which would prohibit Texas municipalities from barring natural gas as a fuel source in newly constructed residences, subdivisions, and other developments. This is a preventative measure in response to such bans which have already been enacted in states like California, which have required new homes to be powered with more climate-friendly energy sources. Texas is far from the only state to file such a bill; about a dozen similar bills have already been filed in states including Kansas, Minnesota and Ohio.
While Texan lawmakers rush to protect and cement the energy supremacy of the oil and gas sector, many industry leaders and energy specialists think that the state should actually be headed in the opposite direction. With peak oil hovering over our heads, in the long term Texas may be better off positioning itself not as the last of the old guard for fossil fuels, but at the forefront of the renewable movement, establishing its place at the helm of wind, solar, and energy storage in the U.S.
By Haley Zaremba for Oilprice.com
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So many things are made with the same feedstocks that can also be used to produce fuel that E&P cannot be said to have fossil fuel wells. Are these people so ignorant that they think that asphalt, tires, paint, wire insulation, foam, etc. all come from some magical source separated from fuels?
Without fossil fuels where exactly do these people think everyone is going to obtain their energy to heat and cool their homes and businesses? With coal produced Chinese solar cells and batteries? With fickle wind power? Or are they also fully in support of modern nuclear power and the huge energy cost hike required to fund the expensive grid expansion to make everything electric?
The state politicians are right to maintain energy sanity and protect this industry and the working class from groups who ignore the hard realities and extreme costs of what they desire. Manufacturing and most jobs in the economy depend on low-cost energy. Replace it with expensive energy and you simply devastate the state economy and cause those jobs to move to other more sane states or countries without excessive regulations, and leave Texans unemployed.
A pragmatic approach is for the Oil and gas industry to continue producing oil and gas and thus underpinning the economy of Texas while at the same time doing its best to reduce emissions. In a nutshell, reduce the emissions in fossil fuels not the fossil fuels themselves.
For the oil industry to invest in the energy transition it needs plenty of cash 80%-90% of which is generated from oil and gas. As one chairman of an IOC put it succinctly “Black pays for Green”.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
While millions of jobs may be lost, millions more can be created.