“Texas has recovered 100 percent of the jobs lost during the recession and added 597,000 beyond the previous peak in August 2008.” - Texas State Comptroller Susan Combs
On Thursday, December 12, the Texas Comptroller’s Office released a report detailing the current state of the state’s budget. The report was titled “Tracking the Texas Economy – Key Texas Economic Indicators”. But given the content of the report, a better title might have been:
“Merry Christmas, Texas, From Your Oil and Natural Gas Industry”
According to the Comptroller, the state ended its 2012-2013 biennium with a surplus of more than $2.6 billion, almost three times the previously projected amount of $964 million. The reason why? Because the Texas oil and natural gas industry’s tax payments were more than $2 billion more than anticipated.
That is truly extraordinary, and just as encouraging is what all this means for the State’s Rainy Day Fund. Some observers had expressed concerns earlier in the year that the Fund might be somewhat depleted when the 2015 session of the Legislature convenes, after the 2013 Legislature had tapped the fund for several billion dollars in earmarked funds for the State Water Plan and to help counties in heavy oil and gas development areas pay for road repairs.
But because the Rainy Day Fund is financed almost solely by severance taxes on oil and natural gas production, this large uptick in industry tax payments now enables the Comptroller to project that the Fund will have a balance of around $8.1 billion in January 2015, when legislators return to Austin. Dale Craymer, President of the Texas Taxpayers and Research Association (TTARA), thinks that estimate is actually conservative, and that the fund balance will actually significantly exceed that estimate. Past results would indicate that Mr. Craymer is likely to be proven correct.
Then there’s the jobs report, as indicated in the quote from Mrs. Combs at the top of this story. The ability of this state to have more than fully recovered at this point from the deepest recession in 70 years in the face of an otherwise moribund national economy is a testament to the state’s resource base, its people, its business climate and its leadership in Austin. It is important not to discount how crucial the last part of that equation is.
You haven’t seen this kind of recovery take place in other resource-rich states like California and New York, and the reasons for that are easy to discern. New York is in the fourth year of a self-imposed moratorium on hydraulic fracturing for purely political reasons, and Governor Chris Cuomo shows no sign of ending his Nero-like fiddling act anytime soon, despite the known existence of very rich Marcellus Shale natural gas reserves underneath the southwestern quarter of that state.
California’s business climate is so generally over-regulated that hundreds of people leave that state every day to move other states where it is possible to actually do business. Many large operators are anxious to get busy developing the enormous oil-bearing Monterey Shale play in that state, which the US Energy Information Service conservatively estimates contains 15.4 billion barrels of recoverable oil, but the regulatory climate there is so uncertain that development is proceeding at a snail’s pace. Governor Jerry Brown is doing his best to speed up the process, but is delayed at every turn by members of his own political party.
So we have jobs in Texas because Texans value jobs. We have economic development in Texas because Texans value economic development and vote for policymakers who will enable it to happen. We have half of the active oil and gas drilling rigs in the U.S. in Texas because Texans understand the oil and gas industry and the value it brings to their daily lives.
The activities of the oil and gas industry reverberate throughout the economy – the jobs aren’t just oil and gas jobs. The ready availability of oil and gas feedstock is creating a similar boom along the gulf coast in the petrochemicals, fertilizer and plastics industries, with tens of billions of dollars in new investment planned that will create thousands of good paying jobs. The boom is visible in the huge rail terminals in towns like Three Rivers and Cotulla. It’s visible in all the new public infrastructure being built in the Eagle Ford Region and West Texas.
It’s visible in all the new high rises and other office complexes being constructed in Houston and San Antonio. And it’s visible in all the new cafes, restaurants, shopping centers, hotels and motels being built and filled up all over the state.
It’s a great time economically for Texas because it’s a boom time in the oil and gas industry, and the boom shows no signs of ending anytime soon. Yes, supplies of oil and gas are growing by leaps and bounds, but demand for these fuels is growing just as rapidly all over the world, as the global economy continues to rise slowly, and developing nations work to bring affordable energy to their populations.
Texas is at the tip of the spear in creating this brave new energy world that is transforming the balance of global supply and steadily diminishing the influence of the OPEC cartel. One of the most stunning pieces of recent news is that, by this time next year, Texas alone will produce more oil on a daily basis than all but 2 of the OPEC countries.
So Feliz Navidad, Texas, and God Bless you.
