Higher oil prices lift Texas revenue
Lone Star producers last year paid 17 percent more in royalties and state and local taxes
Energy companies had a much better year in 2017 as oil prices climbed toward $60 a barrel. So did the Texas state treasury.
Texas oil and gas producers paid more more than $11 billion in royalties and state and local taxes in the last fiscal year, a 17 percent jump from $9.4 billion they paid in 2016, the Texas Oil and Gas Association, a trade group, said Tuesday.
The increase stemmed largely from the drilling boom concentrated in the Permian Basin in West Texas, where record amounts of oil and gas were produced. Led by the Permian, which accounts for about half the active oil rigs in the country, U.S. oil production topped 10 million barrels a day for the first time in 50 years in November. The surge has continued since then, with U.S. crude production reaching a record 10.2 million barrels a day in January, surpassing Saudi Arabia’s output.
The boom, unleashed by technologies that opened previously inaccessible reserves in shale rock formations, has transformed Houston and the Gulf Coast into an energy exporting hub to rival that of the Middle East. American oil exports, most of them moving through Gulf Coast ports, hit record levels late last year. The U.S. Department of Energy expects that the nation will become a net exporter of natural gas this year for the first time since 1957.
"These energy outcomes were unthinkable a decade ago," Todd Staple, president of the Texas Oil and Gas Association said in a conference call. "American crude oil is a game changer in in-
ternational trade."
The production boom has prompted an expansion in the state's pipelines, ports and refineries to transport the nation’s burgeoning supply of energy products and process them into gasoline, petrochemicals and other products.
Recently, the Trump administration included in the U.S. Army Corps of Engineers' civil works budget $13 million to expand the port of Corpus Christi to raise its export volumes of U.S. oil and natural gas. The port exported over $6 billion of crude oil last year.
The export surge has created new opportunities for pipeline and terminal companies such as Houston’s Enterprise Products Partners, which last year saw its earnings rise to $2.8 billion from $2.5 billion in 2016. The company is working with U.K.-based Navigator Holdings to build a new Gulf Coast export facility with the capacity to ship a million tons a year of ethylene, which is the building block for most chemicals.
Though many of the nation’s energy exports are destined for overseas markets, Mexico has emerged as a major consumer of U.S. natural gas in the wake of a reform of the country's energy markets. In 2013 and 2014, Mexico opened its energy market to foreign investment and pledged to rely on cleaner sources. The Energy Department anticipates that U.S. natural gas exports to Mexico will top 14 billion cubic feet a day by the end of the year, roughly double the volumes shipped in 2015. Texas accounts for much of the supply.
Staples said his association supports the continuation of the North American Free Trade Agreement, which plays a major role in facilitating the export of natural gas and other energy products to Mexico and Canada. The Trump administration has threatened to withdraw U.S. support of the agreement.
“Texans know firsthand the importance of this trade agreement in creating jobs and strengthening our economy,” Staples said. “We would like to see a permanent agreement.”
Despite the overall increase in production, Texas school districts and counties saw a decline in mineral property tax collections last year because the taxable value of the oil and gas resources has not yet caught up to the rebound in energy markets. Last year, school districts and counties collected $1.1 billion and $336 million, respectively, down from $1.7 billion and $530 million in 2016.