Oil and gas industry is on the decline in Texas. What does that mean for state’s future?


BY HALEY SAMSEL
AUGUST 12, 2021 

Play Video Duration 1:03
Sign of the times: See dozens of oil tankers off California coast as demand plummets
Dozens of oil tankers anchor off the Californian coast near Los Angeles and Long Beach as the reduced demand for oil takes hold. The tankers are acting as storage tanks for oil as demand has reduced throughout the coronavirus pandemic. 

Video: 4/23/20 BY U.S. COAST GUARD VIA STORYFUL

It’s no secret that the Texas oil and gas industry took a massive hit from the COVID-19 pandemic, leading to the loss of nearly 60,000 jobs last year. Trade groups have trumpeted the importance of supporting energy production as part of the state’s economic recovery plan, highlighting the $411 billion that oil and gas generated for Texas in 2019.

But a new independent report is challenging some of the tried and true wisdom that “what’s good for oil is good for Texas.” The analysis from the Institute for Energy Economics and Financial Analysis found that the oil and gas industry is responsible for 10 percent of the Texas gross domestic product, down from 21 percent in 1981.

While Texas oil and gas companies continue to dominate in refining and petrochemical production, their contributions to tax revenue, employment and overall economic growth across the state have been in decline for decades, according to report co-author Trey Cowan.

“What’s happened is that other industries are growing much faster than the oil and gas industry,” Cowan told the Star-Telegram. “Oil and gas has been replaced as far as contributions to the economy goes by services, which has taken its place as number one.”

The “services” industry includes professional and business services, computer systems, healthcare, food services, entertainment and educational services. Complementing Texas’ surge in population and employment, services industries account for 28 percent of Texas’ economic production — growing by 17 percent since the 1980s.

Oil and gas companies no longer provide the same tax revenues that could be expected 30 years ago, when the industry accounted for 28 percent of total revenue. That number has lingered beneath 10 percent for more than two decades, according to Cowan’s analysis.

Cowan hopes the report will draw attention to Texas’ economic realities and other “red flags” facing the industry, including growing competition from foreign producers and the disruption caused by renewable technologies, including solar, wind and electric.

Policymakers need to “recognize the potential risks of continuing to buoy an industry that faces” unprecedented challenges, he said.

“We’re trying to address that misconception that oil and gas is the be all, end all for Texas,” Cowan said. “If we start looking at all these other industries that are contributing to the growth of Texas, maybe we can come up with an economic development plan for the future so that we don’t see communities suffer like coal communities like in West Virginia or Kentucky.”

Cowan and environmental advocates like Virginia Palacios, who runs a nonprofit organization urging reforms at the Railroad Commission, are concerned about the futures of communities reliant on oil and gas jobs.

Where drilling jobs once boomed and producers paid high percentages of property taxes, hotels housing oilfield workers are vacant, Palacios said.

“State leaders have a chance to invest in these shale communities and diversify their economies,” Palacios wrote in the San Antonio Express-News. “This shift in investment requires acknowledging oil and gas are in decline.”

Oil and gas advocates have produced their own reports in an effort to persuade Texas lawmakers to continue their support for the industry. Just last month, the Texas Oil and Gas Association and the American Petroleum Institute released a data analysis showing that their industries directly and indirectly supported more than 2.5 million jobs across the state in 2019.

“As America’s economy comes back, the natural gas and oil industry will serve as the foundation for long-term growth and prosperity in Texas,” Mike Sommers, president and CEO of the institute, said.

He added that the industry study serves as a reminder of what’s at stake if “policymakers restrict access to affordable, reliable energy and make us more dependent on foreign sources.”

Cowan’s report, which draws different conclusions from government datasets, isn’t meant to knock the oil and gas industry, he said. Instead, Cowan wants his research to be used to spur action that will prevent the downfall of communities dependent on oil and gas jobs.

Detailed plans have been produced for towns affected by military base closures, and Cowan envisions similar blueprints for rural areas to pivot to other industries and strengthen their tax bases in the process.

“Oil and gas is going to be a much smaller piece of the pie going forward,” Cowan said. “People need to measure how they conduct themselves as far as policies that they’re setting for the next several years based on that reality instead of basing it on some myths about what used to be.”

A new independent report is challenging some of the tried and true wisdom that “what’s good for oil is good for Texas.”

 JOYCE MARSHALL TNS

HALEY SAMSEL
covers environmental issues across North Texas for the Fort Worth Star-Telegram. Her position is supported by Report for America and a grant from the Anita Berry Martin Memorial Fund at North Texas Community Foundation. Samsel grew up in Plano and graduated from American University in Washington, D.C., where she served as the editor-in-chief of the student newspaper, The Eagle. A shortlist of her interests include the Mavs, K-pop and stand-up comedy.