American Oil and Gas Reporter - July 2018 - 108

ConventionSection: Texas Independent Producers & Royalty Owners

Infrastructure Key To
Texas' Success
By Danny Boyd
Special Correspondent
AUSTIN, TX.-Members of the Texas
Independent Producers & Royalty Owners
Association will gather for their summer
conference, Aug. 8-9 at the Hyatt Hill
Country Resort in San Antonio, to get
the latest from industry experts on crucial
issues, including how limited take-away
capacity for members in West Texas could
worsen price discounts for Permian Basin
crude, as growing production volumes
line up for access to markets.
San Antonio is celebrating its 300th
anniversary this year, and TIPRO has
been conducting meetings in the Alamo
City for much of the past 40 years, observes President Ed Longanecker. The
summer conference hosted by TIPRO
will recognize San Antonio-area companies such as Hurd Enterprises Ltd. and
its president, new TIPRO Chairman Eugene Garcia, who has become the company's third generation of leaders to
occupy the association's top officer post,
Longanecker reports.
Convention themes about the San Antonio area and take-away capacity also
look to overlap some, he adds. "Some
companies from around San Antonio active
in the midstream sector will talk about
take-away issues and moving crude oil
and natural gas from West Texas to the
Port of Corpus Christi, Tx.," Longanecker
describes. "Other discussion will focus
on our relationship with Mexico. There
has been a lot of industry concern related
to the Trump administration's tariffs on
steel and aluminum and ongoing negotiations tied to the North American Free
Trade Agreement, so we are going to
spend some time talking about our relationship with Mexico as a strategic partner
and other issues related to the oil and gas
sector. And we will bring in elected officials
and industry representatives to talk about
other oil and gas issues as well."
Something's Gotta Give
As market conditions improve, TIPRO
continues to raise concerns about midstream bottlenecks, particularly in the

TIPRO Summer Conference
San Antonio, Tx.
Wednesday, Aug. 8
1 p.m. Audit Committee Meeting, Hyatt
Hill Country Resort
3 p.m. Board of Directors Meeting
5:30 p.m. Welcome Reception

Thursday, Aug. 9
8 a.m. Membership Breakfast, Hyatt Hill
Country Resort
9-11:45 a.m. General Session
Noon Keynote Luncheon
2-4 p.m. General Session
6 p.m. Reception
7 p.m. Chairman's Dinner
Presentation of the 2018 Mr. TIPRO
Award
Casino Night

Permian Basin, Longanecker says, as the
association also highlights other infrastructure challenges such as the limited
funds for road improvements in areas
critical to industry operations.
There are some encouraging signs, he
notes, citing a May announcement that
Apache Corp. and Noble Energy Inc.
will be principal shippers on a new crude
line to connect the Permian with Corpus
Christi. Nevertheless, he says, the big
picture can seem daunting. "Natural gas
and crude oil in the Permian are expected
to exceed take-away capacity," he says.
"When that occurs, we can see additional
crude discounting until more pipeline capacity comes on line."
To help matters, the Texas Railroad
Commission continues to examine allowances for flaring of associated gas from
Permian wells, Longanecker notes. The
agency typically approves requests for up
to 180 days for flaring, but beyond that exemption, producers must either pipe away
the natural gas or shut in the well, he adds.
"We have not seen a notable impact yet
on production levels related to pipeline
constraints, but that is going to change this
year," Longanecker predicts. "Some analysts
still project an increase in Permian production and others are less optimistic, but
regardless, this has been a big issue. Member
operators and many others believe that

108 THE AMERICAN OIL & GAS REPORTER

trucking and rail may not be viable options
to alleviate Permian take-away bottlenecks.
We may see production slow to allow midstream infrastructure to catch up."
Fortunately, a number of projects
planned or under way will increase capacity, he says, but some projects are not
expected to begin service until 2019 and
2020.
"We are going to see a period of adjustment until the midstream sector catches
up, but this industry is known for adapting
to any market challenge and I think the
ultimate impact will be minimal," Longanecker comments.
The Road Ahead
Garcia says TIPRO also will continue
to push for additional state funds to improve roads and other transportation infrastructure. "We need the funding mechanism to ensure it is done economically
while we also work in partnership with
local communities," he reflects. "The
focus is on the Permian, but there are infrastructure issues in the Eagle Ford in
South Texas as well. While infrastructure
is a concern in West Texas, TIPRO represents members with operations statewide
and we consider it critical for the legislature
to make sure counties get ample infrastructure funding."
In the past, TIPRO supported the legislature's creation of County Energy
Transportation Reinvestment Zones as a
source of additional road funding, but
that measure eventually was deemed unconstitutional. The association also was
part of an unsuccessful effort to pass HB
4231, which would have channeled some
oil and gas severance tax revenue from
general revenue to a trust fund for counties,
Longanecker reviews.
"We expect another challenging budget
cycle next session, with issues that include
Hurricane Harvey relief, education and
other funding needs," he says.
Nevertheless, TIPRO will continue its
push by pointing to the disproportionately
large share of taxes and state royalty payments the oil and gas industry contributes
every year, Longanecker says, noting that
the number totaled $11 billion in 2017.

American Oil and Gas Reporter - July 2018

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