Increased oil and natural gas production in the US has been an economic and geopolitical boon for the country. Aside from the revenues generated by extraction, transportation, and processing, being able to source a large portion of our hydrocarbon needs locally has helped moderate inflationary pressures and keep the cost of doing business manageable. Yes, prices here have gone up. But not to the degree seen in so many other countries which remain dependent on others for most if not all their supplies of these still-essential building blocks of modern 21st century life.
Geopolitically, the abundance of hydrocarbons in the US has allowed us to directly help our allies in a time of dire need. These resources have also given us a flexibility of action that will prove increasingly important as we face not just Russia’s ongoing war in Ukraine, but other concerns such as mounting pressure to address climate change, and an increasingly complex relationship with China.
It was fitting then for the current US House Subcommittee on Energy, Climate, and Grid Security to go the heart of US crude oil production—Midland, Tex., in the Permian basin—for its first field hearing: “American Energy Expansion: Improving Local Economies and Communities’ Way of Life.”
The US Energy Information Administration (EIA) expects both Permian crude production (5.68 million b/d) and natural gas production (22.2 bcfd) to reach record levels in March 2023, and EIA forecasts further increases as the year progresses. The benefits to local tax bases have been substantial. In fiscal 2022, according to the subcommittee, the Texas oil and natural gas industry paid $24.7 billion in state and local taxes and state royalties, with 99% of the latter—$4.2 billion, more than twice the previous year’s amount—deposited in funds supporting public education in the state.
Roughly 443,000 people work in the oil and natural gas industry in Texas, earning an average of $115,300/year, roughly 40% more than the average in other private sectors. In the upstream alone—the predominant segment in the Permian basin—the workforce grew by 36,100 in 2022.
US-based oil and gas companies’ record 2022 profits were also buoyed by the Permian. Chevron Corp.’s US production was higher than ever at 1.2 million boe/d, led by 16% growth in Permian basin unconventional output. ExxonMobil Corp., meanwhile, liquidated the large inventory of drilled but uncompleted wells it had built during the COVID-19 pandemic to grow its net Permian production for the year by roughly 90,000 boe/d.
Getting the boom right
The mayor and the chairman of the Midland Hispanic Chamber of Commerce—both of whom also hold executive positions in the industry—attended the hearing as witnesses, as did the chairman of the Independent Petroleum Association of America and the deputy director of Commission Shift, an advocacy group focused on enacting changes at the Railroad Commission of Texas. And with this much money flowing into coffers of all shapes and sizes it was appropriate that among the issues the subcommittee expressly examined were expansion of opportunities for employment and impediments to continued economic and community development.
Without concerted efforts to make sure the wealth being generated benefits the region and its citizens, the next downcycle—and there will be a next downcycle—will bring the same hardships they always have. Energy & Commerce Committee Chair Cathy Rogers (R-Wash.) recognized the importance of such efforts when she noted that “it begins with the workers, the families, all the people living and working in energy producing communities like Midland.”
Maybe such words will lead to meaningful action. Maybe the field hearing was yet more political theater. Only time will tell. But as Rep. August Pfluger (R-Tex.), whose district includes Midland, said: “It is time for Congress to follow the Permian basin’s lead and rise to the occasion.”
