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Energy Policy Watch

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Host Jack Belcher is joined by Jason Modglin, president of the Texas Alliance of Energy Producers, for the latest installment of Energy Policy Watch.

Modglin has served as Director of Public Affairs for Railroad Commissioner Christie Craddick as Chief of Staff, the House Energy Resources Chairman Drew Darby and as a policy analyst for the Texas Agricultural Commissioner Todd Staples.

In this installment of Energy Policy Watch, Modglin discusses which Biden administration policies are helping and hindering the oil and gas industry and the legislation required to boost American energy production.

Jack Belcher: So there's a lot going on in Washington, obviously and it it is interesting that you are working in both spheres in Austin and in Washington. What are some of the policies in the Biden administration? How have they been affecting oil and gas producers, your members in Texas?

Jason Modglin: Well, it's been kind of downright antagonism. You know, and really it's unfortunate because I think this is a missed opportunity. You've certainly had a number of guests on the show talk about just the advantages of American oil and gas, the lower emission rates, the higher environmental standards that we have here, the higher labor standards that we have here. And rather than seek to boost American oil and gas and really build up production here the administration has gone to Venezuela, they've gone to Iran. They've gone to OPEC frequently in OPEC+ asking them to boost production rather than really coming here you know, not choosing Midland over Moscow. And, and so, you know, that's really been the missed opportunity that we've seen. We do think a lot of these policies are misguided.

The over emphasis on environmental concerns without thinking about the global picture, about how a barrel of oil produced here Bcf of gas produced here is so much cleaner and that opportunity to export it around the world either replacing far dirtier fuels or really advancing the global economy that that was the opportunity for this administration. I think they can still get back on track if we have a change in Congress or maybe maybe some, some sensible realization that the, the policies they're pursuing are not working. But it, it hasn't been going well the past two years.

JB: Are there some specific policies that have been particularly impactful that that you'd like to talk about that are impacting your members?

JM: Absolutely. The methane rules that are, are pending at EPA, we're likely to see over this next 30 days conveniently after the election, but, but probably right before this next cop meeting in in Egypt. And, and really we'll see how that plays out. We were actually very grateful that the EPA invited us to participate in a small business advisory group in formulating those rules. It, it wasn't a lot of give and take. Unfortunately it was a lot of just us speaking on some of the challenges that, that smaller operators have in complying with new requirements new mandates to replace old equipment or, or, or additional monitoring requirements that would be put in place. And so we tried to articulate that to the administration as, as well as we could, and we'll see ultimately how this rule plays out. There's, there's been very few leaks on what it actually looks like. And so we're, we're very eager to see what it looks like and then ultimately how that will interact with the Inflation Reduction Act. There was quite a bit tied in to the methane tax in that bill that would be dependent on if you were compliant with the methane rule. And we haven't seen the methane rule yet. And so we don't know exactly how the tax will be implemented.

JB: Speaking about that Inflation Reduction Act, can you tell us a little bit about some of the provisions you mentioned, obviously, one, are there other provisions that are impactful in that piece of legislation?

JM: Well, it's always good to start with the, with the good, right? And so there, there were some good items in that bill. As you know, it was kind of a grab bag between Senator Manchin and Senator Schumer as to how they, they ultimately put it together. So the, the 45Q provisions are very positive. Those, those were increased. We think it would've been better to even out EOR and, and sequestration. Because ultimately if you're, if you're putting a ton of CO2 down hole, it really shouldn't matter what type of project it is. But, but ultimately that those were good items that were put into the bill. They also put in direct air capture, which will be phenomenal. I mean, that, that technology is being pioneered right here in Texas.

And so if that can get off the ground, we can see some, some truly some remarkable technology put into place, then that will have a tremendous benefit to the state. And, and, and obviously to, to the companies and the landowners that are participating in that program. I think the bad, really squi is squarely on the tax provisions of the bill. Both the methane tax, which, which will be harmful not only to producers, but it is going to raise the cost of natural gas here in the country. And when we're experiencing just record inflation coupled with heating fuel costs that, that are, that are going up exponentially in the Northeast, we really have a challenge in accessing affordable, reliable energy. And so anything that adds to that cost really doesn't make sense to us.

Because ultimately that cost gets passed on to consumers. There's also a tremendous provision in there called the book tax. I I think y'all have touched on that previously before, but really implementing this federal minimum tax again, that is going to raise the cost of business for corporations in this country and ultimately lead to less investment. And, and that's just disappointing. That's what we saw yesterday in the announcement with the Wind Pro Windfall profits tax. Obviously that has not passed and really is unlikely that Congress would, would pick that up. But it, it shows the just misguided direction and policies that this administration is pursuing with their energy policy.

JB: So speaking of the next legislative session, what are you anticipating being the big issues coming up next session?

JM: Well, this is gonna be one for the record books. I mean, they have a 27 billion budget surplus thanks in large part to just very steady oil and gas tax collections both in terms of severance taxes but also sales tax property tax and and oil and gas taxes that are paid a, a after, after refining. So one, they're gonna have to figure out how to, how to dispense with that, whether that's a return to the tax better payers, or whether it's, it's new ways to spend it. We've also seen house committees look at ways to increase oil and gas production. We think there's some really exciting opportunities there, even though we've had some significant challenges over the past couple years. Both in terms of takeaway capacity, labor drilling rigs the Alliance really focused on steel pipe limitations.

The last administration put on some pretty hefty tariffs quotas and other limitations on, on foreign steel into the country. Unfortunately, those have been continued by this administration really in hopes of trying to get domestic labor domestic steel producers to increase steel pipe production that really hasn't happened at a sufficient rate for, for production to really ramp up here. And so we think that that's going to continue to be an ongoing limitation until the administration either rescinds that policy or allows for additional countries to, to import steel into the country. And so if you've got those challenges on new wells we think there might be some opportunities with existing assets to look to increased production there. And that probably is with enhanced oil recovery and, and carbon sequestration as we talked about before, or it's restimulating existing assets. And so I, I think there's gonna be a couple different efforts on both those fronts to make Texas look even more attractive for capital investment and, and potentially set even higher production levels.

JB: Well, it's a nice problem to have, right? Most states are grappling with deficits. We are, we're grappling here in Texas with having a lot of revenue.

JM: Yeah, absolutely. Absolutely. It's a great problem to have.