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In Texas, where oil and gas producers have a freight train of momentum akin to Earl Campbell barreling toward the end zone back in the day, what could the industry possibly have to worry about?
Alex Mills, the president and chief of staff of the Texas Alliance of Energy Producers, points out that crude production in the state has increased 180% during the last four years. Daily crude production, he said, has surpassed 3 million barrels. Furthermore, the value of oil production in the first six months of 2014 is about $50 billion.
The news on the gas side is also positive as production has increased 40% since 1995. Mills contributes the uptick to horizontal drilling and hydraulic fracturing in the shale formations.
And then there’s the Texas Petro Index, a yardstick for measuring production in the state. It has bumped upward to new highs for seven consecutive months.
So then, what’s the worry?
According to Mills, an uncertainty about regulations hangs over the state like the thick, sticky Gulf Coast humidity.
For starters, traffic and roads conditions are problems that the industry cannot speed away from. “It seems that some people think that the traffic brought about by the oil and gas industry has created a transportation problem,” Mills said at the NAPE South summer exposition on Aug. 20. “This is especially true in South Texas, where we have a lot of roads that are not designed to handle all of that traffic and heavy trucks.”
Mills points out that the Texas Legislature has allocated $450 million from its Rainy Day Fund to smooth out the road problems. The fund, which is mostly fed by oil and gas production taxes, sets aside budget surplus money to finance special projects.
Texas voters have approved the funding of the roads repairs.
In a state that is dealing with drought, water is a copious issue. “We’ve always said that whiskey is for drinking and water is for fighting over,” Mills quipped.
While he admits that water usage has become an issue because of the increase in hydraulic fracturing and horizontal drilling, he contends that the industry uses only a sliver of the supply. “We only use 1% of the water that’s used in the state of Texas (for industrial purposes), compared with agriculture that use 65% and manufacturing that uses 35%,” he said.
“A lot of new issues have popped up with water disposal. Some people point to seismic activity, otherwise known as earthquakes. We’ve had some seismic activity in areas where there has been some disposal of water,” Mills said. But he didn’t go so far to tie seismic activity to practices of frack-water disposal.
Regarding air quality, Mills mustered an “oh, boy” while standing on the podium. He was specifically referring to Quad O, the Environmental Protection Agency’s (EPA’s) regulations for air standards that will govern upstream and midstream operations. Producers will be required to meet most requirements by the end of 2015.
Mills also talked about flyovers that monitor emissions at drilling sites. “The TCEQ [Texas Commission on Environmental Quality] and the EPA are doing flyovers of oil and gas facilities and taking pictures with a special camera that shows emissions. It doesn’t tell you what kind of emissions but it does show that there are emissions,” he said.
The industry is watching a Nov. 4 referendum in Denton, Texas. If approved by voters, fracking within city limits would be banned. Mills said, “We’re very concerned about this. This is not just a city of Denton issue.” It’s also a major issue for the industry, he noted.
In conclusion, he said the industry is feeling pressure from environmentalists to more thoroughly reveal the composition of chemicals used in fracking fluids. By state law, producers are currently exempt from revealing ingredients that they consider to encompass trade secrets.
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