Study: Texas lost $7.7 billion, forfeited 8,600 jobs from declining natural gas use

Natural gas’ declining share of the Texas power generation market from 2005 through 2011 translated into a $7.7 billion economic loss to the state, according to a study by Dr. Michael J. Economides, a chemical and biomolecular professor at the University of Houston, and petroleum engineering consultant Philip E. Lewis.

The study compares the direct and value-added economic impacts from the three dominant power generation energy sources in Texas: coal, natural gas and wind. Over the past two decades in the U.S., natural gas has increasingly become the preferred energy source for power generation. Starting in 2005, however, Texas’ reliance on natural gas began to decrease, as national use continued to rise.

Since virtually all the natural gas used for electric generation in Texas is produced in-state, this divergence represents a loss of more than $7.7 billion to the state since 2005 – $2.5 billion in lost potential revenue, including leasehold improvements, production royalties, severance taxes to state and local governments, sales taxes, and local property taxes, as well as $530 million in lost wages in 2011 alone. The state also forfeited 8,600 jobs that would have otherwise been created by the Texas natural gas industry. The analysis was commissioned by America’s Natural Gas Alliance.

“Over this study period, Texas increased its reliance on out-of-state coal as a substitute for Texas natural gas. This does little for our economic development and job creation,” according to Economides. “Greater use of Texas natural gas will aid the state’s employment, which has suffered as a result of this trend.”

The time is ripe for such a transition, and the recent CPS Energy announcement that it will mothball an older coal plant and purchase an 800-MW natural gas plant may signal a slowing or reversal of this trend.

Natural gas is affordable and available at competitive costs for Texas electricity consumers and projections show long-term stability in natural gas markets. Texas natural gas companies also pay five times more in state and local taxes and royalties on a per-job basis than the average company in other industries. Community hospitals, emergency services and Independent school districts in Texas depend on the benefits from natural gas. In fact, about 75 percent of the total independent school districts in Texas each receive an average of $1.35 million per year in ad valorem revenues from the production of natural gas.

In addition to its economic benefits, abundant Texas natural gas is a cleaner source of electricity. A combined-cycle natural gas plant emits virtually zero sulfur dioxide and particulates, while smog-forming nitrogen oxides emissions are substantially lower than coal-fired power plants.

Texas natural gas is a unique energy source given the compounded benefits it provides the state – from direct use as cleaner fuel, to the significant jobs it creates and substantial boost to the state’s economy, to its use as a vital feedstock for ancillary industries that in turn also create jobs and economic benefits.

“A failure to take full advantage of Texas natural gas in power generation is a substantial missed opportunity for our state because of how tightly integrated natural gas development and related industries are with the state’s economy,” Dr. Economides said. “Texans ignore the benefits of this abundant local resource at their economic and environmental peril. Embracing greater use of natural gas is key to Texas’ long-term growth, prosperity and clean air.”