Environmental and Energy Law Blog

Tuesday, January 31, 2017

Prospects Look Good for Texas Oil Patch in 2017

How will oil and gas production in Texas fare in the coming year?

Buoyed by a rise in oil prices and forecasts of the Trump administration's pro energy policies, the prospects in 2017 for the Texas oil patch are bright. And the Dallas Federal Reserve's energy survey for the fourth quarter of 2016 bears this out.

The Fed's survey indicated that energy activity spiked from 27.7 to 40.1, an indication energy production will surge in the coming year. The survey includes oil and gas companies with national and international operations in the Dallas Fed's district which comprises Texas, southern New Mexico and northern Louisiana.

In a prepared statement, senior economist Michael Plant of the Dallas Fed said, “The oil and gas sector is entering 2017 on a positive note, as activity continued growing in the fourth quarter and outlooks improved significantly.”

In sum both oil and gas production indices for fourth quarter were up sharply, and the projections for capital spending in the coming year are also significantly higher. In addition the labor market indices are also improving. In the fourth quarter, 18 percent of companies reported new hiring while 15 percent said there were layoffs.

With Texans like Rex Tillerson and former Gov. Rick Perry slated to take the reins at the State Department and the Department of Energy, respectively, some observers believe the U.S. will develop a comprehensive energy policy that will dovetail with favorable tax and business policies, all of which should be beneficial to Texas.

Moreover, as we have previously reported, the Permian Basin is on the precipice of significant production by Apache Corp. and the overall levels of oil and gas shale activity across the state are trending upwards. The only fly in the ointment is the effect OPEC's recently announced production cuts of 1.8 million barrels a day for six months. The question remains, however, as to whether member nations will enforce the cuts, given their lack of cohesion and resolve in recent years.

In the final analysis, the country is about to reposition it's energy policies, and oil and gas production will be key drivers of economic activity in Texas. Nonetheless, increased energy production also poses challenges, particularly the potential of disputes over mineral rights and royalties and environmental impacts. Ultimately, these issues require the advice and counsel of a leading health, safety and environmental law attorney.

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