American Oil and Gas Reporter - April 2016 - 116

ernment, media and academia largely
have lost considerable public confidence,
most people continue to trust their local
communities, he indicated, and so local
actions offer the likeliest impetus for improvement. "I have worked on state representative campaigns all the way up to
the White House, and realized the biggest
changes happen in our neighborhoods,
small groups and communities," Dowd
maintained. "Big no longer meets the
needs and desires of consumers or constituencies. The greatest innovation and
change-the greatest disruptor in our country's history-always has come from a
small group doing something differently
and other people mirroring it. That is
what I think we are going to get from the
aftermath of this election."
TIPRO members are leaders in their
industry and communities, he held, which
means they must work to create a leadership model. "We have to start with innovation in our governance and politics,"
Dowd prescribed. "We have to broaden
our sense of imagination. The answers
from yesterday no longer work. I am not
saying to abandon the values we hold
near and dear. I am saying-tactically and
strategically-we have to change our imaginations."
Texas Outlook
Comptroller Hegar told TIPRO that
although the Texas economy was slowing,
the state still was much better than during
the 1980s oil bust, when unemployment
approached 10 percent. "Today, we are
at a little over 4 percent," he reported.
"For 108 months in a row, Texas unemployment has been under the national
average."
Nevertheless, he observed, since third
quarter 2014, oil and gas, which constitutes
13.5 percent of Texas' gross state product,
has shed a significant number of jobs, as
has the manufacturing sector, which accounts for 13.9 percent of the GSP. Even
so, he observed, "Last year, Texas had
only two months of (net) job losses," he
detailed. "We still gained more than
160,000 jobs in 2015."
Texas public officials are aware of the
industry's significant challenge, Speaker
Straus assured. "I understand this is not
a great time for your industry," he acknowledged.
The private sector drives economic
growth, and often the best thing government can do is get out of the way, Straus
said. But he went on to cite moves from
the Texas House that he said might help
the industry keep its footing.
One example he mentioned is HB 40,
governing oil and gas regulatory jurisdiction, which passed the 2015 Texas

Legislature. "We worked closely with
you and many other stakeholders to ensure
local oil and gas regulations were reasonable and practical," Straus recalled.
"HB 40 struck the right balance between
local control and private property rights."
The next legislative session will not
convene until January 2017, he observed,
but that session's work is under way already, including efforts by two House
committees to recommend ways to sustain
energy development and workforce growth
amid slumping commodity prices, as well
as a special House committee the speaker
created to study the economic implications
of federal environmental regulations.
"Our Energy Resources Committee is
considering whether we have sufficient
laws to effectively prosecute oil field
theft," he mentioned. "The committee
also is looking at how the energy transformation in Mexico is affecting Texas'
energy economy.
"Each of these charges will affect how
the House thinks about the most important
issues we will face next year," he added.
"It will allow us to hit the ground running
with good data and solid recommendations."
Tax Reform Pitfalls
Representative Conaway's remarks included a glimpse of his work to persuade
colleagues to end the United States' selfimposed sanctions on American crude
oil. One key moment he recounted arose
when he and House Energy and Commerce
Committee Chairman Fred Upton, RMi., were speaking with Ukrainian Prime
Minister Arseniy Yatsenyuk during a 2015
trip to that country.
"I asked the prime minister whether
his country would be better off if it could
buy oil directly from the United States
instead of Russia," Conaway recalled.
"(Yatsenyuk) lit up like a Christmas tree
and said that would be great. I nudged
Fred."
Conaway also considered the outlook
for federal income tax provisions important
to independent oil and gas producers, including their ability to deduct intangible
drilling costs and take a percentage depletion allowance. Those items were not
on the proverbial negotiating table during
the omnibus legislation that ended the
crude exports ban, he said, "because, at
that point, we were talking only about
temporary tax provisions-an extenders
package-and not a broad tax bill."
Nevertheless, he continued, industry
advocates are wise to keep a close eye
on every congressional preceding in which
the tax code arises. "Every time you
make a deal, it has long-term potential
and residual impacts that no one really

116 THE AMERICAN OIL & GAS REPORTER

Political analyst Matthew Dowd tells
TIPRO that the country's current period
in some ways parallels the Great Depression, the U.S. Civil War and the American
Revolution. Dowd, who worked for both
former President George W. Bush and
Senator Lloyd Bentsen, D-Tx., spoke on
the second day of TIPRO's convention,
Feb. 22-24 in San Antonio.

can foresee," Conaway allowed. "You
need the right people on the Ways and
Means Committee who understand what
your industry does and does not do."
The congressman went on to recount
an episode in which his colleague, Representative Peter Welch, D-Vt., passionately decried oil and gas production subsidies from the House floor. Afterward,
Conaway said he explained the nature of
the tax provisions to Welch. "I walked
him through the subject and when I was
done, he said he wished he had not talked
to me," Conaway chuckled. "He was a
whole lot more comfortable arguing
against them before that."
Tax reform efforts that cut rates, but
eliminate the deductions are misguided,
Conaway advised. "We had an accountant
run some numbers to see what tax rates
independents would need to come out
even if they gave up those tax treatments,"
he reported. "The tax rate would have to
be in the order of 8-12 percent. Those
numbers are never going to be in the
conversation."
❒

Coming In May
The California Independent Petroleum Association will hold its 2016
annual meeting June 9-12 at the Meritage Resort in Napa, Ca. See the Official Convention Section in the May
issue of The American Oil & Gas Reporter.

American Oil and Gas Reporter - April 2016

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