This Week in Texas Energy: Houston Pushes Aside Cushing in Oil Trading Ranking
Plus: Texas installs quite a few solar panels, CenterPoint Energy has a gas outage in Northeast Texas, and pipeline companies worry about their tax break.
A New Top Dog
The small town of Cushing, Oklahoma, has long called itself as the “Pipeline Crossroads of the World,” a reference to the oil pipelines and storage that have made the town a global hub for oil trading and the top reference point for setting U.S. crude oil prices. However, recent changes may upset their claim to that title. As shale fields have increased their output and after restrictions on crude oil exports were lifted, customers are looking to Houston, rather than Cushing, for their West Texas Intermediate Crude pricing, reports the Wall Street Journal. “WTI Cushing did a good job when we didn’t have an alternative,” Liz Bossley, chief executive of Consilience Energy Advisory Group, told the Journal. She added that now people “will grab WTI at Houston with both hands, saying ‘this is the best reflection of what our market is like and what our prices are doing.’” Cushing and Houston used to average the same price, but now the difference in pricing has grown to about $5, with Houston’s pricing aligning closer with Brent, which serves as a global benchmark for oil prices. Analysts differ on whether Houston will last long on top, but Cushing’s faced setbacks before, including in 2011 when their WTI prices were down $28 in comparison to Brent due to a limited supply of pipelines. Cushing bounced back after installing new pipelines, but this time around Adam Bedard, chief executive of ARB Midstream, told the Journal that foreign buyers are preferring Houston’s pure crude oil from the Permian Basin over the mixed oil stored in Cushing.
According to a report by GTM Research, the U.S. added over 22,000 megawatts of solar capacity in the last three months and Texas added 277 megawatts of solar panels—enough to provide power to 44,000 homes. Only Nevada and North Carolina added more. Even with the high installation ranking last quarter (not to mention the potential for solar power in Texas) the Dallas Morning News reports that just 0.6 percent of the state’s electricity is generated from solar power, placing Texas’s overall rank in the U.S at seven. Gas and coal, at 39.6 percent and 31.9 percent, respectively, still lead in electricity generation in the state.
A rupture in a CenterPoint Energy gas pipeline caused an outage in several Northeast Texas towns on Wednesday. Thousands of customers in Mount Vernon, Mount Pleasant, Winfield, and Talco were affected as CenterPoint turned off the natural gas meter for each customer in order to make sure that their pipelines were free of air and to perform other safety checks. In a series of tweets explaining the situation, CenterPoint explained that they were bringing in other technicians from around the state to assist in getting their gas service back in working order, a process they estimated would take 48 to 72 hours. CenterPoint crews were still working into the weekend to restore gas services.
And a Tax Break
The Republican tax reform is on everybody’s mind, and that “everybody” includes pipeline companies, reports the Houston Chronicle. Last week, the Interstate Natural Gas Association of America (which represents gas companies like the Cedar Creek–based Kinder Morgan) wrote a letter to House Republicans raising concerns about a provision in the Senate version of the tax bill. The provision places a limit on the amount of interest pipeline companies can deduct for construction projects. “These projects often require capital investments in the billions of dollars, and as a result, significant debt must be incurred to finance these investments,” INGAA president Don Santa wrote. He warned that failing to address the provision could result in an increase of higher energy costs for consumers. Senate and House Republicans are still working to get together a bill they can pass and present to President Trump before the new year. “The goal is to simplify the tax code and lower the rate for everyone,” a staffer for Representative. Kevin Brady (R-Woodlands) told the Chronicle. “We’ve heard from industries across the board on their take on tax reform.”