Critics: Budget reconciliation bill would hurt oil industry, impact Texas the most

By Bethany Blankley

Included in the budget reconciliation bill are proposals that would hurt the oil and gas industry and hit Texas, the nation’s top oil and gas producer, the hardest, several groups argue.

Provisions included in the bill would increase energy costs and dependence on foreign oil and gas at the expense of U.S. jobs and the economy, critics argue.

Some of the provisions include penalizing electric utilities, establishing a taxpayer-funded climate corps, creating a new tax on methane, as well as other policies already implemented in European countries.

“Record high energy prices across Europe should be a lesson for the United States to avoid,” Jason Modglin, president of the Texas Alliance of Energy Producers, said. “The rush to transition away from fossil fuels and nuclear power has left Europe heavily dependent on Russian natural gas to meet emergency winter needs. This is because renewables [like solar and wind] are not able to meet demand for reliable, affordable power without a natural gas backstop.

“Congress’ budget reconciliation package proposes that same bad policy by making us dependent again on foreign sources of energy from countries with lower environmental and labor standards,” repeating Europe’s mistakes, he added.

One problem with the bill is the Clean Electricity Performance Program (CEPP), Modglin and other critics argue. The $150 billion federal program would impose financial penalties on utilities that don’t meet arbitrary increases in renewable electricity generation. It has been touted as a means to reach President Joe Biden's goal of having 80% clean electricity by 2030 and 100% by 2035.

An independent analysis from Analysis Group purports that the CEPP would over the next decade expand the workforce by nearly 8 million jobs, generate nearly $1 trillion in the economy, raise $154 billion in tax revenue for federal, state and local governments, and drive economic development by building over 600 GW of new solar, wind and other clean energy projects.

But the version that passed the House Energy and Commerce Committee last month would cost American jobs, increase reliance on foreign production, and expand the federal government, critics argue. It’s also unbalanced in its approach, the American Public Power Association and the National Rural Electric Cooperative Association argue. The two groups oppose the bill and argue that “smaller not-for-profit utilities could be left bearing the proposed $40-per-megawatt-hour fees for falling short of the 4 percent clean energy target under the plan,” because several major public utilities are excluded from complying, Energy Wire reports.

Another unbalanced provision is a new tax on methane, the Texas Independent Producers and Royalty Owners Association (TIPRO) argues.The proposal primarily taxes methane from oil and natural gas production but doesn’t tax three of the top four methane-producing industries in the U.S.: agriculture, waste management and coal sectors.

The provision authorizes the EPA to charge $1,500 per ton of methane emissions produced at oil or natural gas facilities, which TIPRO argues, “could cripple small Texas oil and gas operators and severely burden American taxpayers.”

The tax would “have a ripple effect through the entire U.S. economy, negatively impacting American jobs, domestic energy production, household energy bills and the cost of goods and services, including the price of gasoline,” TIPRO President Ed Longanecker said in a statement. “The U.S. oil and natural gas industry has demonstrated its commitment to reducing emissions through innovation, collaboration and investment of hundreds of billions of dollars in greenhouse gas mitigating technologies throughout the value chain, and with quantifiable success.”

The proposals come at a time when oil and natural gas demand is skyrocketing and the Texas upstream oil and gas sector is adding jobs every month to meet the demand.

Even during the statewide shutdown in 2020 when the oil and gas industry experienced sharp decines, Texas companies still produced 43% of the nation's crude oil and 26% of its marketed natural gas.

Nearly one fourth of the nation's operable refineries and one-third of the U.S. total refining capacity are in Texas, the Energy Information Administration (EIA) reports, with 31 petroleum refineries processing a combined total of almost 5.9 million barrels of crude oil per day.

Texas also produces more electricity than any other state, EIA notes, generating nearly twice as much as Florida, the second-highest electricity-producing state.

Roughly one-fourth of U.S. dry natural gas reserves and three-tenths of the 100 largest natural gas fields in the U.S. are located either partially or entirely in Texas. In 2020, Texas produced one-fourth of the nation's natural gas, with the majority produced in the last decade from the Eagle Ford shale and Permian Basin.

Modglin said that because of U.S. technological innovation, natural gas production has actually lowered emissions, making the U.S. the world leader in emission reductions.

“Turning back the clock on carbon dioxide emissions and every other major air pollutant, natural gas leads the way,” he said, which “didn’t happen by accident.”

Additionally, increased natural gas production “through innovation and efficient practices brought back manufacturing jobs and saved American families $204 billion a year through lower electricity, oil and natural gas prices,” Modglin added. “That’s the equivalent of $2,500 a year for a family of four.”

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