The surge in oil and natural gas prices was a boon for the state of Texas in 2022. The Texan oil and natural gas industry paid a record $24.7 billion in taxes and royalties last year, crushing the previous annual high of $16 billion set in 2019 by 54%, according to the Texas Oil and Gas Association. The money goes toward funding a range of public interests such as education through public schools and universities, roads, first responders and other essential services. With direct and indirect impacts Texas oil and natural gas industry supported 30.4% or $560 billion of total private sector Texas GDSP in 2021, this number will be significantly number in in 2022.
In 2022, 99% of the state’s oil and natural gas royalties were deposited into the Economic Stabilization Fund (commonly known as the Rainy-Day Fund), the Permanent School Fund (PSF) and the Permanent University Fund (PUF). The fund supports the University of Texas and Texas A&M University systems, putting them at or near the United States’s wealthiest endowments.
“The Texas oil and natural gas industry plays an extraordinary role in securing our state and national economy and advancing global stability. However, growth is not guaranteed, and policy can promote prosperity, or can hinder it,” TXOGA President Todd Staples said. “Policies and politics in Texas and across our nation will determine if we can continue to deliver for Texans while meeting our nation and the world’s energy needs.”
Highlights
Taxes and Royalties
- Production taxes and royalties to state funds more than doubled over fiscal year (FY) 2021.
- Production taxes grew by $5.8 billion, a 116% increase
- Royalties to state funds increased by $2.2 billion, a 102% increase.
- Oil and natural gas production taxes exceeded $10 billion for the first time in Texas history.
Royalty revenue supports Texas education, transportation, healthcare and infrastructure.
- In 2022, 99% of the state’s oil and natural gas royalties were deposited into the Economic Stabilization Fund (commonly known as the Rainy-Day Fund), the Permanent School Fund (PSF) and the Permanent University Fund (PUF). These are funded almost exclusively with taxes and state royalties paid by the oil and natural gas industry.
- The value of these two funds now stands at an estimated $56.8 billion and $28.8 billion respectively.
- In FY 2022, Texas school districts received $1.65 billion in property taxes from mineral properties producing oil and natural gas, pipelines, and gas utilities. Counties received $608.6 million in these property taxes.
- Midland ISD in West Texas ranked #1 receiving $113.3 million from mineral properties producing oil and natural gas, pipelines, and gas utilities.
- Reeves County ranked #1 with $44.9 million paid in oil and natural gas property taxes.
- Since 2007, when TXOGA first started compiling this data, the Texas oil and natural gas industry has paid more than $203.4 billion in state and local taxes and state royalties, a figure that does not include the hundreds of billions of dollars in payroll for some of the highest paying jobs in the state, taxes paid on office buildings and personal property, and the enormous economic ripple effect that benefits other sectors of the economy.
Oil and gas industry Employment
- In 2022, the industry employed 443,000 Texans who earned an average $115,300 each—roughly 40% higher than the average pay in other private sectors.
- For every direct job in the industry, conservative estimates indicate that an additional 2.2 indirect jobs are created.
- In total, 1.4 million Texans’ jobs ultimately derive from the state’s oil and natural gas industry.
Energy Prices for Q4 2022
Energy prices were higher over 2022 but broadly decreased in the fourth quarter of 2022. West Texas Intermediate (WTI) priced in Midland, closer to the wellheads of the Permian Basin, and Dated Brent spot prices were at $77.37 and $81.52 per barrel, respectively, for the four-week moving average ending Dec. 30, 2022. Those were the lowest nominal prices since December 2021, but they remain above prepandemic levels (Chart 1).
Oil prices have been falling due to worries of a potential recession in Europe, rising interest rates and a COVID-19 policy in China that could curtail fuel demand. Prices have fallen roughly 30 percent from their peak in mid-2022.
Texas Oil and Gas Production
The Permian Basin saw continued production increases to close out 2022 the Dallas Fed reported.
Total U.S. oil production stood at 130 mb/d from January to November of last year, with the Permian accounting for 44 percent of total production and the other basins mentioned accounting for only 29 percent combined.
Oil production is up 11 percent from the year-ago level. Total production for both oil and gas together is up 19 percent from prepandemic levels. November saw 5.5 million barrels per day (mb/d) of oil production and, using an oil-equivalent conversion factor, 3.7 million barrels per day of gas (Chart 2).
However, producers in the region are uncertain about the growth outlook in 2023 because of cost inflation and shortages in drilling equipment, rigs and crews. With gas production on the rise, analysts, and industry leaders worry that the Permian’s natural gas infrastructure capacity will become constrained by late 2023 and limit production increases.
Aggregate oil and gas production in other oil-focused shale basins (the Anadarko, Bakken, Eagle Ford and Niobrara) rose 7 percent to 7.5 mb/d in November 2022 (Chart 3).
That level is still 10 percent below prepandemic levels. Oil production rose from 3.4 to 3.6 mb/d, 16 percent below prepandemic levels.
Source: TXOGA Dallas Fed
From The TradersCommunity News Desk