The Last Barrel

We’ve all known that the Eagle Ford shale would be an economic boon to Texas, south of San Antonio, but just how much was not known until late last month. According to a study released on March 26, by the Center for Community and Business Research in The University of Texas at San Antonio (UTSA), the Eagle Ford generated a staggering $61 billion-plus for the South Texas economy in 2012.

Even more remarkable is the fact that the Eagle Ford is projected to generate $89 billion and 127,000 jobs for the 20-county region in 2022, said the center, which is part of the Institute for Economic Development at UTSA. Last year, alone, the South Texas region supported 116,000 full-time jobs in oil and gas production, drilling, support operations, pipeline construction, refineries and petrochemicals.

UTSA scholars examined the region’s 14 oil-and-gas-producing counties (Atascosa, Bee, DeWitt, Dimmit, Frio, Gonzales, Karnes, La Salle, Live Oak, Maverick, McMullen, Webb, Wilson and Zavala), as well as the six surrounding counties that serve as staging areas for the Eagle Ford. The latter include Bexar, Jim Wells, Nueces, San Patricio, Uvalde and Victoria Counties, which have “significant employment growth.” For example, shale-related jobs in Bexar County (San Antonio is the county seat) exceed 20,000, up from less than 5,000 in 2011.

Fiscal impacts to the State of Texas are significant, said the study. The Eagle Ford added more than $2 billion in state and local revenue ($1.2 billion in state receipts and $1.0 billion in local revenue) to governmental coffers during 2012. “In 2008, we saw very little activity in the Eagle Ford shale,” said Thomas Tunstall, director of the center and the study’s principal investigator. “Today, it has become one of the most significant oil and gas plays in the country, and has generated a tremendous amount of wealth for Texas. Over the next 10 years, the annual revenue generated and jobs created will continue the steady progress upward, helping to ensure environmental and economic goals can be realized together.”

Obama belittles Keystone benefits, offends Canada. People in the U.S. have become accustomed to Mr. Obama’s twisting of facts, but last month he took presidential arrogance to new heights, putting his foot in his mouth not once, but twice. And it all happened in a closed-door meeting with House Republicans.

First, he belittled the benefits that constructing the final segment of the Keystone XL pipeline would bring to the U.S. Then, he seemed to insult Canada. As described by Rep. Lee Terry (Rep. – Neb.) to the Associated Press, Mr. Obama said that Keystone’s benefits have been overstated, because many of the jobs created would be temporary, and much of the oil transported through the pipeline would be exported. “He said that there would be no permanent jobs,” Terry told AP, “and that the oil will be put on ships and exported, and that the only ones who are going to get wealthy are the Canadians.”

Terry described Obama as looking “conflicted” about the pipeline, because while belittling its benefits, he also acknowledged that the dire environmental consequences predicted by Keystone’s opponents are exaggerated. Rep. Steve Scalise (Rep. – La.) told AP that Obama said the pipeline “is not going to create as many jobs as you (Republicans) hope.” Both congressmen confirmed that the President did not reveal any clues to how he may decide the pipeline’s fate. Indeed, a White House spokesman later insisted that Mr. Obama has not yet made up his mind.

For his part, Congressman Terry has run out of patience. Two days after the White House meeting, Terry introduced a bill in the House that would eliminate the need for a presidential permit to build the Keystone XL pipeline. “Over 1,600 days ago, the initial permits were filed to apply to build the Keystone pipeline,” said Terry. “To put that timeframe in perspective, it took the United States just over 1,300 days to win World War II; and it took Lewis and Clark just over 1,100 days to walk the Louisiana Purchase.”

While Terry’s bill sounds impressive, it unfortunately is mostly symbolic, since any legislation passed by the House and Senate still requires a presidential signature to become law—Mr. Obama is not going to take himself out of the Keystone game.

Sulfur standard likely to boost gasoline prices. Obama administration officials like to hide bad news, especially if it costs Americans money, releasing it on Friday afternoons, when they think nobody is looking. That’s exactly what happened on March 29, when the EPA released its new Tier 3 regulations that require a reduction in the amount of sulfur in gasoline. These new regs will require a 70% cut in gasoline sulfur content, from 30 ppm today, down to 10 ppm by January 2017. This requirement is similar to standards in California, Japan and South Korea.

Now for the bad news—a study commissioned by API has found that reducing sulfur to 10 ppm will increase gasoline prices 6 cents to 9 cents per gallon. And, said API, if EPA adds an additional vapor reduction regulation, the cost increase will soar to 25 cents per gallon. Acknowledging that the Tier 3 regulations will add $3.4 billion per year in compliance costs to consumers, EPA justifies the move by saying that in 2030, annual, monetized health benefits would be between $8 billion and $23 billion.

The Washington, D.C.-based Heritage Foundation says these health benefit figures are greatly exaggerated, providing the refineries can even stay in business. There are fears that implementation of these regulations could result in a number of refinery closures that would squeeze supply and further increase gasoline costs. Heritage Foundation analysts say that the current Tier 2 regulations are “stringent enough,” and that “Congress should use any means necessary to prevent the EPA from implementing Tier 3 gas regulations.”