Texas Energy

CHAPTER SEVEN

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Texas Environmental Almanac, Chapter 7, Texas Energy, Page 1

Coal was the first fossil fuel used by white settlers. Surface supplies were used throughout the early 1800s and mining of coal began in the 1850s. Coal continues to be an integral part of Texas' energy mix. Over the past two decades, the state has produced 652 million tons of soft coal (also called lignite), the equivalent of 1.5 billion barrels of oil.(2) Texas is the sixth largest producer of coal in the U.S. and the state has only begun to mine this vast resource. More than 24 billion tons of lignite still lie beneath the surface.

Since the state's first big oil discovery at Spindletop in 1901, Texas has produced 54 billion barrels of oil, providing trillions of dollars in tax revenues to state government and thousands of jobs to residents. Texas oil was a critical ingredient in the Allied war effort in World War II. The "Big Inch" and "Little Big Inch" pipelines carried much-needed Texas petroleum to industrial facilities on the East Coast. From there, Texas oil was shipped to Europe for use by Allied forces.

The Texas energy industry has survived periods of boom and bust. In 1929, Texas was the biggest oil-producing province in the world. By 1930, high-grade oil was selling for $1.10 per barrel (42 gallons). But the following year, the market fell apart. The huge East Texas Field near Kilgore began producing a million barrels of oil per day, far more than the market could absorb. Prices plummeted and Texas oil was selling for just 10 cents a barrel.(3) The problems of oversupply and disarray in the market forced the state to take action, and in 1932, the state legislature authorized the Railroad Commission of Texas to limit oil production.(4) By setting limits on the amount of oil that each field could produce, the Commission was able to prevent floods of oil from coming onto the market. But the Railroad Commission has not been able to insulate the industry from price upheavals. Another boom in the early 1980s caused a surge in oil drilling, which fell apart four years later.

The 1980s were not kind to the oil industry. Nationwide, nearly half a million Americans lost jobs in the oil industry. More jobs were lost in the energy business than in the steel and auto industries combined. In Texas, between 1981 and 1992, 24 refineries closed, the number of active drilling rigs declined from 1,300 to 209 and 160,000 Texans lost jobs in the oil and gas sector.(5) In 1981, the oil and gas industry accounted for 25 percent of the gross state product. By 1993, it had fallen by more than half, to 12 percent.(6) By the year 2015, oil and gas is expected to account for less than 8 percent of the gross state product.(7)

State tax revenues from oil have also fallen. During the 1950s the state routinely got a third of its tax revenue from oil and gas taxes. Today, the state gets less than 7 percent of total revenues from oil and gas.(8)

With 17 million residents, Texas has about 7 percent of the U.S. population, but in 1989, the state accounted for 12 percent of the nation's total energy usage. Texas consumes more electricity, natural gas, coal and petroleum than any other state.(9)

Today, the Texas energy industry is at a cross- roads. Oil production in the state is falling. Natural gas consumption is increasing but reserves are shrinking. Coal use has risen sharply. For the first time, Texas faces the prospect of becoming a net energy importer. The state whose vast oil resources once played a critical role in national defense may soon be dependent on other states and foreign countries to meet demand.(10)

Much of the state's energy demand comes from its huge appetite for electricity. Electricity demand in the state is now growing at about 2.5 percent per year.(11) More than half the new electricity coming on-line will be generated by coal-fired power plants, with one-third of the coal coming from Wyoming.(12)

Nuclear power is meeting some of the demand for electricity. The state now has 4,802 megawatts of installed nuclear generating capacity. Texas was once a dominant producer of uranium, the element that provides fuel for the nuclear energy industry. However, the market for uranium has gone soft and most of Texas' uranium mining sites are now dormant.

Harnessing the hot Texas sun and corralling the swift Texas breeze could allow the state to get much of its energy from non-polluting, renewable sources. Solar power could also supply much of the state's electricity. Studies have shown that one sunny acre of land in West Texas could produce the energy equivalent of 800 barrels of oil per year.(13) If Texas captured all of its wind resources, it could supply 10 percent of electricity needs of the contiguous United States.(14) In Texas, the wind alone could generate 136,000 megawatts of electricity, or more than twice the state's installed generating capacity.(15)

Despite the promise of wind, solar, biomass and other renewable technologies, large amounts of capital and significant changes in government policies will be needed to develop those resources. In the meantime, the state will have to increase efficiency or meet new electricity demand through conventional sources, such as coal, oil or natural gas, or through the construction of new nuclear plants.

Much of the demand for electricity could be reduced through conservation and improved efficiency of engines, motors, refrigerators, air conditioners, lights and other products. However, large electricity producers are not spending much money on efficiency improvements. The state's largest utilities are spending just $40 million per year on programs to increase electrical efficiency.(16) For comparison, Texans spent $14 billion on electricity purchases in 1991. In other words, Texas utilities spent just .003 percent of their total income on energy efficiency programs.

Some estimates show that conservation alone could reduce demand for electricity in the state by one-third. By one estimate, if Texas utilities adopted an aggressive conservation policy, consumers could be saving up to $2.5 billion annually by the year 2010. While consumers would save money on their power bills, utilities could avoid spending some $8.4 billion for new power plants and infrastructure.(20)

Energy efficiency and renewable energy resources will play critical roles in Texas' energy mix as the state heads into the 21st century. The state must soon address the need to reduce consumption of fossil fuels in order to meet the goals of the Global Climate Change Treaty. Signed by the U.S. and a host of other nations, the treaty requires signatories to limit CO2 emissions to 1990 levels. As the country's largest energy consuming state, Texas leads the nation in production of carbon dioxide and other gases linked to global warming. The global warming issue and the 1990 Clean Air Act, which requires businesses in the state to reduce their sulfur dioxide and nitrous oxide emissions (see Air Section), could force Texas to change its energy consumption patterns.

Over the next few decades, Texas will also see increased energy trade with Mexico. Even before the passage of the North American Free Trade Agreement in 1993, Texas was sending huge amounts of energy to its southern neighbor. In northern Mexico, where rapid industrialization has led to increasing demand for natural gas and electricity, natural gas (mainly from Texas fields) is fueling growth. In 1988, Mexico bought 2.3 billion cubic feet (Bcf) of natural gas from the U.S. By 1991, that figure jumped to 91 Bcf. By the year 2000, it has been predicted that Mexico will buy 300 Bcf of American gas per year.(21)

Texas may also start selling electricity to its neighbor. Since 1972, electric power consumption in Mexico has more than tripled and over the next decade, demand for electricity is expected to double.(22)

TEXAS ENERGY CONSUMPTION BY END USE

Source: The World Resources Institute, The 1994 Information Please Environmental Almanac, 272.

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Texas Environmental Almanac, Chapter 7, Texas Energy, Page 1

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