State and Industry Leaders Highlight Clout and Environmental Stewardship at Virtual Texas Energy Day

Akin Gump Strauss Hauer & Feld LLP

During the 2021 Texas Energy Day, hosted by Todd Staples of the Texas Oil and Gas Association at the Texas state capitol, event speakers aimed to strengthen support for the oil and gas industry and impart a message of strength for Texas energy. The biennial event, last hosted in 2019, featured numerous Texas and industry leaders, including Gov. Greg Abbott, State Sen, Jane Nelson, Texas House Speaker Dade Phelan and Pulitzer Prize-winning author Daniel Yergin. Remarks focused largely on environmental improvements that have taken place within the oil and gas industry; the role to be played by hydrocarbons in the energy transition; the financial impact the oil and gas industry has in Texas, both with respect to monetary reserves and job creation; and the impact winter storm Uri and resulting grid failures may have on the current legislative session.

The speakers were quick to point out the positive changes happening within the oil and gas industry with respect to environmental impact. Carbon dioxide emissions are at a 30-year low, methane emission rates dropped nearly 70 percent between 2011 and 2019 and, overall, the U.S. has reduced aggregate emissions of the six criteria air pollutants by 73 percent since 1970. In addition to environmental improvements, Texas producers are capturing 99 percent of natural gas produced in Texas for beneficial use. Speaker Phelan imparted that a thoughtful transition to renewables and infrastructure was necessary and that rapid transition away from fossil fuels would lead to budget and infrastructure issues. Speaker Phelan remarked, “folks in apartments can’t put solar panels on their roofs, therefore they’re on the grid paying a higher rate while those who can’t afford options get subsidized off the grid.”

Speakers of the day impressed the need to consider the financial impact the oil and gas industry plays in the Texas economy. Oil and gas producers paid taxes amounting to significant fiscal year 2020 budgetary contributions, including $1.665 billion allocated to the Rainy Day Fund, $1.665 billion to the State Highway Fund, $942 million to the Texas Permanent School Fund and $771 million to the Texas Permanent University Fund. An energy transition away from oil and gas would need to consider further taxation on renewable energy sources. Speaker Phelan raised concerns that significant taxing of renewables would price Texas out of the energy market and that Texas did not want to “bite the hand that feeds us.”

Given the recent impact of winter storm Uri and its devastating financial impact on the Texas economy, the legislature is set to take up infrastructure in the wake of the storm. Additionally, legislators indicated that changes may be forthcoming to allow upstream producers to be exempt from power interruptions, regardless of whether or not they are servicing an electric producer. How those changes will come to pass remains to be seen. Given comments that raised concerns that a loss of efficiency of 3-5 percent in an effort to winterize could impact summer performance, it seems unlikely that sweeping change is coming for the electric grid.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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