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Energy Update - June 2017

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June 1, 2017

The number of drilling rigs at work in Texas rose to a count of 458, more than double the rig count of 173 at this time last year according to a May 26th report by Baker Hughes. Nationally, there were 908 rigs at work, up from 857 at this time last month. Overall, US crude production is rising slowly and is expected to average 9.3 million barrels/day for the year of 2017. The price of West Texas crude continued to hover around $50/barrel for the month of May.

In the waning hours of the Texas Legislative Session, the House and Senate reauthorized the Texas Emissions Reduction Plan (TERP) and provided it with the new mission of transitioning state vehicle fleets to alternative fuels like natural gas, hydrogen fuel cells, and electric power. This plan had originally been included in Senate Bill 26, which failed to clear a procedural deadline in the Texas House. The bill’s House and Senate authors then attempted to add TERP reform to HB 4180 and HB 2305. These bills also did not advance. However, TERP reform was finally saved when a 2-page House amendment to the unrelated Senate Bill 1731 was replaced with the 69-page TERP bill in conference committee, a move that survived a “point of order” in the Texas Senate.

SB 1731 has now been sent to the governor and extends the TERP fund until federal ozone standards have been met in major metropolitan areas. However, the fees that fund TERP are set to expire, as legislation to extend them failed to advance off the Senate Floor. Senator Uresti was the Senate author of the same TERP Legislation in 2015, which he filed as Senate Bill 12.

In Washington, President Trump announced that the United States was suspending compliance with the Paris Climate Accord and would begin to withdraw altogether, calling the 195-member agreement a “bad deal.” The announcement was met with worldwide condemnation. Some state that withdrawal is likely to reverse progress to combat climate change as well as endanger the United States’ position and influence in world affairs. Soon after the withdrawal, China and the European Union both expressed interest in leading future international efforts to combat climate change. Others claim withdrawal from the accord could benefit the U.S. economy.