They Had No Idea

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The oil pump, industrial equipment

It is an observable truism that rejecting a reality does not result in removing that reality; it only makes the person doing the rejecting look ridiculous. One wonders if, years from now, social commentators will scratch their heads in confusion regarding our concerted and seemingly relentless effort to refuse the abundant, affordable, powerful energy resources of oil, natural gas and coal in exchange for energy poverty and economic upheaval — all in the name of an undeniably uncertain belief that we can influence the global climate in any meaningful way, if at all. Will our descendants look favorably upon our decision to precipitate economic recession or depression, poverty and death from inadequate access to energy, electricity and fuel in the short term — indeed, in real-time — because we believed we could stop or slow down hurricanes, tornados, wildfires, floods, droughts and every other unwelcome event in Mother Nature’s arsenal? The deleterious effects of energy poverty are demonstrable and certain; whereas our ability to change weather patterns could be fairly characterized as “not so certain.”

I just started a new semester, teaching a brand-new group of law students in my Oil & Gas Law I course. As I often do, I surveyed the students regarding their familiarity with oil and gas and their knowledge about the pervasive roles that oil and natural gas play in our twenty-first-century economy in the form of electricity, fuel and an endless list of manufactured products. As part of the set-up for that question, I have my students read several articles and watch several videos that do a good job presenting the substantial ways in which oil and natural gas make modern life possible. I am always heartened to read the students’ responses. Invariably, they confess that they had absolutely no idea how important oil and natural gas are to absolutely everything we do every day. I only spend one day at the start of each semester to cover this topic, but if I didn’t do it, they would never know it. Admittedly, there is so much more to know, but at least I have opened the door for them to this reality, a reality that they now can develop further. While it is encouraging to add, even a few, to the number of those who are now aware, it is nevertheless disheartening to realize how many are not, and will never be, aware — and how many of those are affecting our energy policy. 

The Texas Oil & Gas Association (TXOGA) just released their Annual Energy Economic Impact Report for 2021, and it is, once again, a sobering reminder of just how much the oil-and-gas industry contributes to the Texas economy. It would be informative, educational and refreshing to see the various media outlets publish this information for the general population. My guess is, however, that you will be reading about it this one and only time in my column in this industry magazine. Well, if nothing else, please forward this information to your friends and colleagues yourself; sometimes, self-help is the only option.

TXOGA’s report states that the oil-and-gas industry paid a total of $15.8 billion in state and local taxes and state royalties in 2021, which translates to $43 million every day. There is no other industry that can make such a representation. Adding it to totals from past years dating back to 2007, which is only 15 years (when TXOGA started tracking this data), that comes out to $178.7 billion. Not to state the obvious — but that’s a lot of money.

The oil-and-gas industry also employed 422,122 Texans in 2021, which is an even more impressive number, given the effects of COVID and the adverse policies of the Biden administration. Employees in the oil-and-gas industry were paid an average of $108,988 per job in 2021. Employees in other private sectors averaged only $63,027 per job. An oil-and-gas industry employee paid more than $37,000 in state and local taxes and state royalties, on a per-employee basis. TXOGA states that this amount is 6.3 times more than any other private sector paid on a per-employee basis. Every direct job in the oil-and-gas industry created an additional 2.2 indirect jobs. In other words, in addition to all of the benefits we derive from oil and natural gas, its employees also carry a substantial portion of the public-sector load.

State-owned lands with oil-and-gas production generated almost $1 billion in royalties for the Permanent University Fund, which benefits the University of Texas and Texas A&M University systems. They also generated $1.1 billion in royalties for the Permanent School Fund, which benefits K-12 in our public schools. On a more local basis, independent school districts received almost $2 billion in local property taxes from the oil-and-gas industry. Counties received $640 million in local property taxes from the oil-and-gas industry.

Another significant, but typically unknown, way in which the oil-and-gas industry benefits all Texans is by paying into the Economic Stabilization Fund (aka the “Rainy-Day Fund”). This fund was created in 1988 by an uncharacteristically visionary state legislature, and its revenue comes from the severance tax imposed on oil and natural-gas production. In 2021, the oil-and-gas industry paid another $1.1 billion into the fund, bringing the current balance to over $10 billion. In its 33-year existence, the oil-and-gas industry has paid over $18 billion into this account. Funds from this account have been used to pay for public schools, transportation projects, future water infrastructure needs, disaster recovery, and more. It has been very comforting to know the state has such a rainy-day fund; it would also be nice for Texans to know where that money comes from.

Texas is the number-one producer of crude oil and natural gas in the U.S. The TXOGA report states that Texas accounts for 43% of the crude oil production in the U.S. We also account for 26% of the natural-gas production in the U.S. Texas also provides 31% of the nation’s refining capacity. Apart from the rest of the U.S., if Texas were its own country, we would rank third in the world in crude-oil production, behind only Russia and Saudi Arabia.  

For those in positions of leadership, authority and responsibility, who passionately but all too casually call for an end to oil and natural gas, one has to wonder if they have even the slightest concept as to what they are wishing for. A simple review of just how much the oil-and-gas industry meant to Texas in 2021 alone should be enough to give even the most ardent opponent of oil and gas some pause. If it doesn’t, how can they possibly be taken seriously?  

About the author: Bill Keffer is a contributing columnist to SHALE Oil & Gas Business

Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He

also served in the Texas Legislature from 2003 to 2007.

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