Posted: Sunday, June 26, 2016 10:29 pm, Midland Reporter Telegram
By Trevor Hawes email@example.com
If there’s one thing Texas has a lot of, it’s pipelines. The energy capital of the U.S. has about 400,000 miles of pipeline delivering energy products throughout the state and into Mexico, which is hungry for more of Texas’ natural gas as the nation’s energy demands grow.
Railroad Commissioner Ryan Sitton spoke with the Reporter-Telegram on Thursday to discuss the Trans-Pecos Pipeline and what it will mean for Texas and Mexico’s futures.
MRT: How important is the state’s pipeline infrastructure to the economy?
Sitton: As all of these markets grow — oil and natural gas — infrastructure, such as pipelines, are going to be crucial to being able to move that product and get a good market for that product.
One of the things that any producer has to be thoughtful about and mindful of is, ‘I can drill a well and produce that oil or natural gas out of that well, and maybe the spot price today says I can command a pretty nice margin unless I can’t get it to market. If I have to put it in a truck, that’s going to chew up a lot of that margin through shipping it.’ So, pipelines are really vital, and industry has done a fantastic job in this state in building that infrastructure.
Mexico has 120 million people, produces something like 2.5 million barrels of oil and has 6,000 miles of pipeline. The state of Texas has 27 million people, produces around 3 million barrels of oil, and we have 400,000 miles of pipeline. One of our big advantages is our infrastructure. What we need to be doing, from a regulatory perspective, is making sure our environment that we are maintaining really continues to promote that development.
We had a case just two days ago that was a somewhat landmark case at the Railroad Commission because it dealt with the rates that pipeline operators can charge. Are we going to use a market-based rate or are we going to use a cost-of-service rate? I was very public about the fact that I thought market-based rates were vital because that allows companies that will invest huge capital to get a return on that capital from those who use these pipelines.
MRT: What will the Trans-Pecos Pipeline mean for the Texas and Mexico economies?
Sitton: I think it’s vital to both. Having made a trip to Mexico two months ago, we heard them talking about how one of their top priorities is to expand their electricity production using natural gas. We are, by far, the largest provider of natural gas to Mexico.
So, it’s crucial to them. It will enable them to build a robust energy infrastructure, and it’s a huge economic opportunity for us to sell that natural gas and gain a trade advantage. In other words, we sell that raw product and bring in those revenues both from a business perspective and a tax perspective right back into the state of Texas. So, it’s absolutely huge.