AUSTIN, TX.–The Texas Independent Producers & Royalty Owners Association has released the eighth edition of its “State of Energy Report,” which offers a detailed analysis of national and state trends in oil and natural gas employment, wages and other key economic factors for the energy industry in 2022. The association says it developed its State of Energy Report series to quantify and track the economic impact of domestic oil and natural gas production, particularly in Texas.

“Despite facing a number of unique challenges, including supply chain bottlenecks, inflationary pressures, workforce shortages and an adversarial federal policy environment, the U.S. oil and gas industry continued to offer significant economic support in 2022,” reflects TIPRO Chairman Jud Walker, president and chief executive officer of EnerVest Ltd. in Houston. “Oil and natural gas development, led by Texas operators, will play an important role in meeting growing global energy demand for decades to come under any realistic scenario.”

To show how many Americans depend on oil and gas for their paychecks, the report cites several statistics:

• The industry supported 948,943 direct U.S. jobs last year, a net increase of 39,721 direct jobs over 2021, with total direct and indirect jobs tied to the industry exceeding 19 million.
• The U.S. oil and natural gas sector paid a national annual wage averaging $120,665 during 2022, 74% higher than average private sector wages.
• Payroll in the U.S. oil and gas industry totaled $114 billion.

The industry’s direct gross regional product was $854 billion in 2022, or approximately 3% of the U.S. economy, TIPRO estimates. According to the association, total U.S. goods and services purchased in 2022 by the oil and natural gas industry exceeded $744 billion from more than 900 business sectors.

As part of the association’s ongoing efforts to educate policymakers and the general public about the industry, TIPRO says, the report aims to fully quantify the industry’s economic contributions. In 2023, TIPRO notes it has expanded the report’s scope to include the petroleum lubricating oil and grease manufacturing segments, as well as plastics material and resin manufacturing.

The report also details specific data and analysis on the upstream oil and natural gas sector, which consists of oil and natural gas extraction, drilling oil and gas wells, and support activities for oil and gas operations. The report concludes with a supplemental analysis for the gasoline stations with convenience stores sector, which TIPRO notes will be added to the association’s industry definition next year with historical analysis.

Employment Powerhouse

“Despite facing a number of unique challenges, including supply chain bottlenecks, inflationary pressures, workforce shortages and an adversarial federal policy environment, the U.S. oil and gas industry continued to offer significant economic support in 2022, while providing reliable and affordable energy to meet growing domestic and global demand,” the report states.

Of the United States’ 948,943 direct industry jobs in 2022, TIPRO finds that 347,828 were in Texas, compared with 323,097 in 2021, a net gain of 24,731, subject to revisions. The other top states for industry jobs last year were:

• California (80,772);
• Louisiana (68,733);
• Oklahoma (46,486); and
• Pennsylvania (33,079).

“Total direct and indirect oil and gas employment was nearly 2.6 million in Texas in 2022,” TIPRO adds. “These jobs also pay extremely well, with an average annual wage of $139,061 in Texas, 103% higher than average private sector wages in the state.”

The Lone Star State’s 2022 oil production reached 1.83 billion barrels in 2022, the report estimates. Last year’s other top-ranked producing states were:

• New Mexico (534 million bbl);
• North Dakota (393 MMbbl);
• Alaska (160 MMbbl); and
• Oklahoma (147 MMbbl).

Natural gas production in Texas reached a new record in 2022, TIPRO observes, at more than 11.2 trillion cubic feet. According to the report, the next four states ranked by natural gas production were:

• Pennsylvania (7.6 Tcf);
• Alaska (3.6 Tcf);
• Louisiana (3.6 Tcf); and
• Oklahoma (2.7 Tcf).

In 2022, the report continues, total direct gross regional product for the Texas oil and natural gas industry was $323 billion, or 16% of the Texas economy. Citing the typical multiplier effect of 2.5%, TIPRO estimates that the Texas oil and natural gas industry supported 40% of the Texas economy last year. The state’s industry also purchased $264 billion in U.S. goods and services in 2022, 82% of which came from Texas businesses.

The state’s oil and gas industry paid a record $24.7 billion in state taxes and state royalty payments in 2022, the association calculates, adding that these funds support all aspects of the state economy, including schools and education, first responders and transportation infrastructure investment. Moreover, it details, Texas is home to approximately 2.5 million of the United States’ 12.5 million mineral owners, with oil and gas royalties generating billions of dollars for more than 860,000 Texans last year.

TIPRO’s report cites trends identified in the U.S. Energy Information Administration’s Short-Term Energy Outlook (STEO), including rising natural gas production rates, increasing liquefied natural gas exports and high winter electricity prices. The STEO also projects that renewable resources will increase their share of power generation, a development TIPRO indicates will make firm power from natural gas even more necessary to maintain reliability.

“In combination with these identified trends, the Russia-Ukraine war and the economy bouncing back after the Covid-19 pandemic, the United States energy sector is in a serious state of flux,” TIPRO’s report says.

Implications

“So, what does all of this mean for Texas energy?” TIPRO poses:

• U.S. natural gas exports will increase in 2023.
• U.S. winter energy prices are high—particularly in the Northeast—because of inadequate energy infrastructure.
• U.S. natural gas production will continue to climb, with much of that increase coming from the Permian Basin.
• Renewable energy is growing, but will need natural gas to provide reliable energy.
• Natural gas is underpinning America’s energy future.

TIPRO points to EIA predictions that U.S. natural gas exports are likely to increase in 2023, stemming largely from growth in LNG exports and demand from regions such as Europe, which previously relied on Russia for its energy.

“In 2022, the U.S. natural gas trade sector experienced a variety of changes that influenced output both positively and negatively,” the report observes. “This included factors such as facilities operating near maximum capacity and a fire at the Freeport LNG facility that reduced exports by 2.0 billion cubic feet of product a day.”

The group notes that the Freeport terminal is on track to regain its output capacity by March. “Additionally, to meet the high demand for natural gas in Europe and Asia, U.S. facilities will continue to operate near maximum capacity,” TIPRO relates. “Combine these factors, and the EIA expects U.S. LNG exports, most of which come from Texas, to break new records by March 2023.”

On the matter of U.S. production increases, TIPRO cites STEO’s prediction that in 2023, U.S. gas output will grow about 2% more than in 2022, and about 10% more than pandemic levels. The major drivers of that production growth include increased drilling activity in the Haynesville region and the Permian Basin.

“Expansion projects to increase pipeline infrastructure also played a major role in increasing the U.S. production of natural gas,” TIPRO continues. “As such, it is important for lawmakers and regulators to support expanding the U.S. pipeline system to keep on track with progress.”

To reinforce that adequate takeaway capacity is necessary to allow producers to meet rising demand, TIPRO quotes EIA’s statement that “The pace at which these projects are completed is a notable uncertainty in our forecast, and delays could result in lower production than we expect.”

TIPRO’s report also points to STEO’s recognition of steep winter electricity prices, particularly in New England and New York, where EIA says on-peak wholesale power prices will average 35% more in January 2023 than January 2022. “As a result, the region’s upcoming surge in wholesale electricity prices will be significantly higher than the rest of the nation, particularly Texas, which is projected to have the least increase of any region,” TIPRO says.

“High electricity prices are also tied to the need for pipeline infrastructure to ensure the United States can achieve its energy security goals,” the association continues. “In the case of rising electricity prices in the Northeast and New England regions, lack of adequate natural gas delivery systems is leading to the adoption of more costly alternatives such as imported LNG or fuel oil to meet demand. In these scenarios, because of fuel adjustment clauses, expensive costs are passed on to customers in the form of higher bills. To address this, the area needs to invest in pipeline infrastructure to increase access to cheaper fuels that minimize surges in costs.”

Regarding renewable energy’s expanding role in the U.S. electric generation mix, TIPRO notes that the STEO indicates renewable power will increase its share of electric generation. “Wind and solar power-derived electricity will increase from 14% in 2022 to 16% in 2023, while natural gas is estimated to drop from 39% to 37%,” the association details. “But because renewable power is intermittent, meaning those resources do not generate energy while the sun is not shining or the wind is not blowing, the U.S. must continue to expand investments in reliable resources like natural gas, which can produce energy as needed.”

Ultimately, TIPRO maintains, natural gas will continue to play a vital role in powering the country. “As a result, natural gas production and LNG exports will continue to increase to meet rising demand,” the group says. “Expanding the current pipeline infrastructure is key to ensuring the United States can efficiently provide needed resources. This reason alone is a major cause of the Northeast and New England regions’ extreme wholesale electricity prices. Additional pipeline infrastructure will be needed in the United States to keep production rates rising and prices low.”

Other Trends

Oil and gas producers have demonstrated their commitment to reducing greenhouse gas emissions and minimizing flaring, TIPRO states, and the industry is achieving quantifiable results.

“Texans for Natural Gas (TNG), a project of TIPRO, recently released its annual methane emissions intensity analysis, finding the Permian Basin’s rate has fallen by more than 76% from 2011 to 2021, even as production increased by over 345% in the same period,” TIPRO illustrates. “From 2020 to 2021, methane intensity in the Permian fell by 20%—a significant reduction over the course of just one year.”

That analysis, Permian Basin Producers: Charting A Cleaner Energy Future, is TNG’s fourth report on methane and flaring intensity in the Permian Basin, TIPRO notes. The association says the report draws on data from the World Bank, EIA, the U.S. Environmental Protection Agency and Rystad Energy to show that Permian producers are leading the world when it comes to responsibly meeting growing global energy demand.

TIPRO’s State of Energy Report mentions some highlights from the TNG report:

• Flaring intensity in the Permian Basin decreased by more than 34% from 2020 to 2021. Texas as a whole achieved an even greater reduction, with its flaring intensity falling 60% over the same period.
• The Permian Basin stands apart from other global producers not only because of its prolific production, but also through its flaring intensity. In 2021, flaring intensity was 2,621% higher in Venezuela and 339% higher in Russia.

Describing 2022 as the year that energy security took center stage, TIPRO notes that it published a report on U.S. LNG exports, Delivering Energy Security: Texas LNG Is Helping Keep Europe’s Lights On. According to the association, the report offers several key takeaways:

• The United States drastically increased its LNG exports to Europe, such that 74% of all U.S. exports went to Europe in the first half of 2022. In that same period in 2021, exports to Europe only represented 34% of U.S. LNG exports.
• U.S. LNG exports shifted from Asia to Europe. In June 2021, the top two destinations for U.S. LNG exports were South Korea and China. By June 2022, the top two destinations were France and the Netherlands.
• Europe turned away from Russian natural gas. In fact, there was a 40% decrease in Russian piped natural gas to the European Union and United Kingdom from January to July 2022.

Several of the report’s observations focus on Texas’ role in U.S. LNG exports:

• Texas produces about a quarter of U.S. natural gas.
• Texas ports such as Corpus Christi provided essential infrastructure to meet European demand, with 90.1 million tons of LNG moving through Port of Corpus Christi in the first half of 2022.
• Texas export facilities will feed future European demand. About 96% of planned U.S. LNG export capacity will be located in the Gulf of Mexico region and supplied largely by Texas natural gas.