Overview

Resources and Consumption

Texas leads the Nation in fossil fuel reserves and in nonhydroelectric renewable energy potential. Texas crude oil reserves represent almost one-fourth of the U.S. total, and Texas natural gas reserves account for over three-tenths of the U.S. total. Although Texas’s oil reserves are found in several geologic basins throughout the State, the largest remaining reserves are concentrated in the Permian Basin of West Texas, which contains more than 20 of the Nation’s top 100 oil fields. Similarly, deposits of natural gas are found in abundance in several Texas production basins, with the largest fields heavily concentrated in the East Texas Basin in the northeastern part of the State. Texas’s fossil fuel reserves also include substantial deposits of lignite coal, found in narrow bands in the Gulf Coast region, and bituminous coal, found in north central and southwestern Texas.

Texas is also rich in renewable energy potential, including wind, solar, and biomass resources. Wind resource areas in the Texas Panhandle, along the Gulf Coast south of Galveston, and in the mountain passes and ridgetops of the Trans-Pecos offer Texas some of the greatest wind power potential in the United States. Solar power potential is also among the highest in the Nation, with high levels of direct solar radiation suitable to support large-scale solar power plants concentrated in West Texas. Due to its large agricultural and forestry sectors, Texas has an abundance of biomass energy resources. Although Texas is not known as a major hydroelectric power State, substantial untapped potential exists in several river basins, including the Colorado River of Texas and the Lower Red.

Due to its large population and an energy-intensive economy, Texas leads the Nation in energy consumption, accounting for more than one-tenth of total U.S. energy use. Energy-intensive industries in Texas include aluminum, chemicals, forest products, glass, and petroleum refining.

Petroleum

Texas leads the United States in both crude oil production and refining capacity. (Louisiana surpasses Texas as the leading U.S. oil producer when production from the Louisiana section of the federally administered Outer Continental Shelf is included in its State production total). The State’s first major oil boom began in 1901 with the discovery of the Spindle Top oil field in the upper Gulf Coast basin. Since then, major discoveries have been made in East Texas, West Texas, and offshore in the Gulf of Mexico. Texas oil production increased until 1972, when it peaked at more than 3.4 million barrels per day. Afterward, production declined rapidly, and in recent years Texas crude oil output has fallen to less than one-third of its 1972 peak.

Although Texas oil production is in decline, the State’s signature type of crude oil, known as West Texas Intermediate (WTI), remains the major benchmark of crude oil in the Americas. Because of its light consistency and low-sulfur content, the quality of WTI is considered to be high, and it yields a large fraction of gasoline when refined. Most WTI crude oil is sent via pipeline to Midwest refining centers, although much of this crude oil is also refined in the Gulf Coast region.

Texas’s 27 petroleum refineries can process more than 4.7 million barrels of crude oil per day, and they account for more than one-fourth of total U.S. refining capacity. Most of the State’s refineries are clustered near major ports along the Gulf Coast, including Houston, Port Arthur, and Corpus Christi. These coastal refineries have access to local Texas production, foreign imports, and oil produced offshore in the Gulf of Mexico, as well as the U.S. Government’s Strategic Petroleum Reserve, which operates two large storage facilities in Bryan Mound and Big Hill, Texas. Many of Texas’s refineries are sophisticated facilities that use additional refining processes beyond simple distillation to yield a larger quantity of lighter, higher-value products, such as gasoline. Because of this downstream capability, Texas refineries often process a wide variety of crude oil types from around the world, including heavier, lower-value varieties.

Refineries in the Houston area, including the Nation’s largest refinery in Baytown, make up the largest refining center in the United States. Refined-product pipelines spread out from Houston across the country, allowing Texas petroleum products to reach virtually every major consumption market east of the Rocky Mountains. This network includes the Colonial Pipeline system, which is the largest petroleum product pipeline system in the United States and is vital for supplying markets throughout the South and East Coast.

Texas’s total petroleum consumption is the highest in the Nation, and the State leads the country in consumption of asphalt and road oil, aviation gasoline, distillate fuel oil, liquefied petroleum gases (LPG), and lubricants. Texas LPG use is greater than the LPG consumption of all other States combined, due primarily to the State’s active petrochemical industry, which is the largest in the United States. Four separate motor gasoline blends are required in different parts the State to meet its diverse air quality needs, including the reformulated motor gasoline blended with ethanol that is required in the metropolitan areas of Houston and Dallas-Forth Worth. The agriculture-rich Texas Panhandle has several corn- and milo-based ethanol plants that are operational or under construction.

Natural Gas

Texas is the Nation’s leading natural gas producer, accounting for approximately three-tenths of total U.S. natural gas production. In the early days of Texas oil production, natural gas found with oil was largely considered a nuisance and was often flared (burned off) at the wellhead. Although some Texas cities and towns located near oil fields began using natural gas for energy, it was not until the State banned flaring after World War II that oil producers began to find new markets for natural gas. Two pipelines that once carried crude oil to the East Coast were converted to carry natural gas and a new natural gas pipeline to California was built, setting the stage for strong natural gas production growth in the 1950s and 60s. Texas natural gas production reached its peak in 1972 at more than 9.6 billion cubic feet of annual production. Output declined steadily to less than three-fifths of that level by 2005, but has subsequently increased to approximately four-fifths of the 1972 peak production level.

Today, an expansive network of interstate natural gas pipelines extends from Texas, reaching consumption markets from coast to coast, including those in California, the Midwest, the East Coast, and New England. Natural gas is also supplied to Texas via pipelines entering the State from New Mexico, Oklahoma, and Mexico. Texas has 7 natural gas market hubs located in both East and West Texas, more than any other State, and its natural gas storage capacity is among the highest in the Nation. A majority of the State’s 34 active storage facilities are depleted oil and gas fields converted for storage use, and the others were developed in salt dome formations. These facilities allow Texas to store its natural gas production during the summer when national demand is typically low and to ramp up delivery quickly during the winter months when markets across the country require greater volumes of natural gas to meet their home heating needs. However, due to the growing use of natural gas for electricity generation in the United States, Texas has occasionally withdrawn natural gas from storage during the summer months to help meet peak electricity demand for air-conditioning use.

Texas consumes more natural gas than any other State and accounts for nearly one-fifth of total U.S. natural gas consumption. Texas natural gas demand is dominated by the industrial and electric power sectors, which together account for more than four-fifths of State use. Because Texas demand is high, and because the State’s natural gas infrastructure is well connected to consumption markets throughout the country, several liquefied natural gas (LNG) import terminals have been proposed along the Gulf Coast in Texas. The State’s first LNG terminal became operational in April 2008 with a capacity of 1.5 billion cubic feet of natural gas per day. Another LNG terminal in Sabine, Texas is currently under construction and several other terminals have recently been approved for construction.

Coal, Electricity, and Renewables

Natural gas-fired power plants typically account for about one-half of the electricity produced in Texas and coal-fired plants account for much of the remaining generation. Although Texas produces a substantial amount of coal from its 11 surface mines, including five of the 50 largest in the United States, the State relies on rail deliveries of subbituminous coal from Wyoming for the majority of its supply. Nearly all of the coal mined in Texas is lignite, the lowest grade of coal, and all of it is consumed in the State, mostly in arrangements where a single utility operates both the mine and an adjacent coal-fired power plant. Although lower in energy content than other varieties of coal, lignite coal is also low in sulfur, an important consideration in the State’s efforts to lower emissions. Texas consumes more coal than any other State and its emissions of carbon dioxide and sulfur dioxide are among the highest the Nation.

Texas is a major nuclear power generating State. Two nuclear plants, Comanche Peak and South Texas Project, typically account for about one-tenth of the State’s electric power production. Until the recent capacity increase of the number 2 reactor at Palo Verde in Arizona, the two South Texas Project nuclear reactors were the largest in the Nation.

Although renewable energy sources contribute minimally to the Texas power grid, Texas leads the Nation in wind-powered generation capacity, and substantial new wind generation capacity is under construction. Texas became the country’s largest wind energy producer in 2006 when it surpassed California, Currently, there are over 2,000 wind turbines in West Texas alone, and the numbers continue to increase as development costs drop and wind turbine technology improves. In 2007, Texas became the first State to reach the milestone of one gigawatt of wind capacity installed in a single year. At 736 MW, the Horse Hollow Wind Energy Center in central Texas is the largest wind power facility in the world.

Texas produces and consumes more electricity than any other State. Despite large net interstate electricity imports in some areas, the Texas Interconnect power grid is largely isolated from the integrated power systems serving the eastern and western United States, and most areas of Texas have little ability to export or import electricity to and from other States. Texas per capita residential use of electricity is significantly higher than the national average, due to high demand for electric air-conditioning during the hot summer months and the widespread use of electricity as the primary energy source for home heating during the typically mild winter months.

In August 2005, Texas adopted a law requiring 5,880 megawatts of new renewable generation be built by 2015, representing about 5 percent of the State’s total 2005 electricity demand. The new law also set a target for 10,000 megawatts of renewable generation by 2025, with 500 megawatts from non-wind generation sources.