By Ashley E. Organ, Assistant Editor The Texas Alliance of Energy Producers (TAEP) held a briefing for news media at the Houston Petroleum Club on July 22, 2010. Karr Ingham, a petroleum economist with Ingham Economic Reporting, provided the results of the most recent Texas Petro Index (TPI). The TPI, created by Ingham in 1995, is a barometer of industry activity that measures Texas energy operations based on indicators such as rig counts, energy prices, production volume, and well completions. According to Ingham, the index tends to fluctuate in accordance with the overall US economy, rising during expansions and dropping during recessions. Pat French, TAEP vice president, said, “High-profile challenges have given the oil and gas industry a bad rap, which allows anti-oil and gas folks to move their environmental and political agendas.” TAEP uses the TPI as a value-added concept and public relations tool for the industry’s contribution to Texas. Further, French spoke out against cap-and-trade legislation saying the environmental movement in the US has capitalized on the opinions of residents opposed to drilling rigs in their backyards. Ingham added, “Essentially, every energy proposal by the Obama administration – from carbon tax and cap-and-trade to tax policies in the proposed budget – would have the ultimate outcome of reducing the supply of petroleum products to the marketplace.” He said the energy industry should refrain from using tax-friendly euphemisms such as “subsidies” and “incentives” when referring to cap-and-trade because it suggests the industry agrees with the legislation. According to the TPI, the Texas rig count still is increasing from early 2009 when it hovered around 350, a loss of two-thirds from the 2008 high. This year, the index is down compared to last year due to higher oil prices and fewer year-to-date oil and gas completions, Ingham said. In June 2010, the Texas rig count was 663, down from the peak of 946 in September 2008. Through June 2010, there have been 2,819 oil-well completions, down 19.4% from the same time last year. Gas completions have decreased significantly with 2,250 through June 2010, a 60.7% drop from 5,719 in the first half of 2009. Gas prices increased to US $4.67 in June 2010 from $3.58 in June 2009, but still fall below the $5 to $6 minimum required by most operators to make unconventional drilling economical, Ingham said. Still, a high gas price is not as necessary to justify shale operations as it once was. The index is down when compared to last year, however has grown for its sixth consecutive month after it bottomed out in December 2009. Crude oil production currently is driving Texas activity, Ingham said, but probably is a temporary fix since crude oil will stop being as easy to produce as natural gas. Some natural gas legislation, however, may prevent overall growth and activity for both oil and gas in Texas; natural gas production has not been cut as much nationwide as it has in Texas. Future activity of the state requires a return to a steadily growing US economy. Ingham predicts natural gas prices might improve, assuming the US exits the current plodding economy. Oil and gas-related employment accounts for only 2% to 3% of the total work force in the state. Still, the oil and gas industry accounts for 12% of Texas’s direct economy and 25% of total state tax benefits. For more information on the TAEP, visit www.texasalliance.org.
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