American Oil and Gas Reporter - July 2020 - 65

IssuesUpdate: Texas Independent Producers & Royalty Owners

Oil Price Stability Offers
Optimism In Texas
SAN ANTONIO-The impacts of the
COVID-19 pandemic continue to affect
human health and economic activity, but
the Texas Independent Producers & Royalty
Owners Association asserts those following
medical guidelines can move back toward
normalcy and get down to business.
TIPRO is planning to hold its annual
summer conference on Sept. 23-24, at
San Antonio's Hyatt Hill Country Resort
and Spa, and association Chairman Eugene
Garcia says it's important for association
members to come together and talk about
how they are reacting to events, not only
from the pandemic standpoint but also in
terms of the country and world's need
for energy.
"It will be very beneficial for TIPRO
members to see each other face-to-face,
and to have the opportunity to dialogue
with and learn from the meeting speakers,
to give them a chance to get updates on
where opportunities exist," says Garcia,
president of Hurd Enterprises Ltd. in
San Antonio.
TIPRO President Ed Longanecker says
the conference will kick off with a reception on Sept. 23. A full day of speakers
will follow, along with a reception and
chairman's dinner.
"In addition to learning from experts
on how operators are responding to market
conditions and what changes may be in
store for the state's upstream exploration
and production sector, the TIPRO conference also will host the candidates running this year for the open seat at the
Texas Railroad Commission. We also
will hear about the state and federal political outlook," he describes.
"We want to reassure all attendees that
the hotel is strictly following all Centers
for Disease Control guidelines and safety
protocols to maintain a healthy environment
for guests," Longanecker adds. "TIPRO
will incorporate additional measures at
this year's meeting to protect our members,
including, but not limited to, providing
personal hand sanitizers and optional face
masks. We also are exploring a virtual
option for those unable to attend in person.
We are confident that our conference can
proceed in a safe and responsible manner."

Recovery Questions
Garcia says he takes some comfort
from oil prices' relative stability in a
range around $30.
"Is it a rebound? It's a little too early
to say," he acknowledges. "There still is
a lot to be determined in terms of our national economy and peoples' willingness
and ability to get back to work that will
help dictate energy use. There still are
too many variables in terms of vaccines
or treatment processes, and questions
about how companies come back in this
era of ambiguity and what that means
for industry, travel and leisure that really
underpins a lot of our energy economy."
When the oil and gas industry revives,
workers again will see employment opportunities, Garcia predicts. "We will get
back to a dynamic industry and an economy that helps growth in our country
and state that will continue to need energy
of all forms, specifically natural gas and
oil. That is bound to happen. The question
simply is when," he ventures.
TIPRO remains a staunch advocate for
independent producers and mineral owners
regardless of market conditions, Longanecker says, adding that under both favorable circumstances and periods of extreme
volatility, the association aggressively pursues pro-business policies and sciencebased regulations to support responsible
development of oil and natural gas.
"During the past several months, TIPRO
has worked directly with regulatory agencies,
state leadership, legislators and the comptroller's office to seek ways to provide
relief to the industry, while continuing to
communicate frequently with members regarding market, policy and operational
challenges," he says. "As we have experienced from previous downturns, the Texas
oil and natural gas industry is resilient and
will emerge stronger and more efficient as
the economy gets moving again. Commodity
prices will rally and solutions adopted by
our policymakers will help us weather current and future market conditions."
Texas' oil and gas industry already
was struggling before the pandemic destroyed a huge amount of demand, Longanecker notes, citing the example of how

capital constraints in 2019 pushed the
number of rigs running from 485 to 173.
"More operators were moving to a
cash flow yield model in 2019. Between
2010 and 2018, spending in the U.S. upstream sector was a cumulative $245 billion more than cash flow. And there is
more than $200 billion in debt maturing
during the next four years, including $40
billion in 2020," he reports. "In the past
several months, tens of billions of dollars
also have been cut in capital expenditures
and thousands of industry layoffs have
occurred in Texas, which will continue
until market conditions stabilize."
Economic Relief
Garcia says TIPRO has been talking
with the state comptroller and other fiscal
officials about the possibility of securing
economic relief from crude oil severance
taxes while low oil prices persist.
"The idea is to find an opportunity for
the severance tax to reflect what happened
to oil prices. As we saw this year, going
into the beginning of 2020, oil prices
dropped significantly after the first part
of January. That is when oil severance
taxes are set, in terms of property valuation.
We know that value is not going to reflect
the true value for the rest of fiscal 2020.
So, some consideration and due process
needs to be made."
Texas has seen other options to aid the
oil and gas industry. In early May, the
RRC rejected a motion offered by Pioneer
Natural Resources USA and Parsley Energy
to order operators to cut production. According to media reports, the three commissioners agreed such a move would
not impact global production enough.
TIPRO communicated directly with
the RRC as it discussed prorationing, Longanecker recounts, including submitting
written comments and testifying its concerns
about a forced production curtailment.
"Based on market conditions, without
a government mandate, we project a conservative decline of 2.5 million-3.0 million
barrels of oil a day in the United States
before the end of this year, with more
than 40% of that reduction coming from
Texas," he calculates. "Once we get past
JULY 2020 65

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