DALLAS – With low oil prices driving a lull in production, Texas transportation officials are using the respite to repair roads damaged by heavy use during recent boom times under a $3 billion program approved by voters and the state Legislature.
The Energy Sector Corridor Improvement Program is directed by a special task force created by Texas Transportation Commission.
TTC Chairman Tryon Lewis hails from Odessa, hub of the state's bountiful Permian Basin oil and gas producing region, where more than a third of the funding for heavily used roadways is ticketed.
As a state representative, Lewis opposed Proposition 1, the ballot initiative that diverted oil and gas tax revenue from the rainy day fund to highways and bridges. Lewis wrote op-ed articles in 2014 opposing the measure because he said it violated the "users-pay" principle.
"The reason Texas had the best highway system in America in the last half of the 20th Century is that we utilized a 'users pay' system in which those who use the highways pay for them through a constitutionally dedicated fuel tax," Lewis wrote in a 2014 opinion piece for the Odessa American. "The legislature has resorted to gimmicks, first using borrowed money through bond issues and now proposing a raid on our state's emergency reserve account."
With 80% of the state's voters approving Prop 1, Lewis' opposition was not heeded.
The Permian Basin is one of five of the state's major oil and gas regions, which include the neighboring Anadarko Basin of West Texas, the Eagle Ford Shale of South Texas, the Barnett Shale of North Texas, and the Haynesville/Bosier Shale of East Texas.
Combined, the Texas oil fields produced 1.26 billion barrels of oil in 2015, nearly a third of the total U.S. output, according to the U.S. Energy Information Agency.
Although the state's rig count is down sharply since oil prices fell from their mid-2014 peak, Texas is still home to 43% of the nation's operating rigs.
"Now that drilling activity has kind of normalized in many parts of the state, now's a chance for us to go in and be proactive, and strengthen these pavement structures," said Randy Hopmann, director of district operations for the Texas Department of Transportation. "We know it's just a matter of time before the price of oil is going to go back up and drilling activity is going to come back alive."
Hopmann presented plans for the rebuilding of damaged roads at a meeting of the task force in Victoria June 7.
The Texas Department of Transportation, which operates under governance of the TTC, is seeking $1.8 billion to repair, update and modify what it calls Priority 1 roads in Texas' energy sectors, while another $1.52 million is needed for Priority 2 roads.
For the Permian Basin, TxDOT is seeking $676 million for Priority 1 corridors, emphasizing the importance of safety on the heavily used roadways where vehicle crashes increased in during the boom years of 2009 through 2015.
A TxDOT presentation on reportable motor vehicle traffic fatalities in energy sector regions said that traffic deaths grew from 250 in 2010 to 430 in 2014. In 2015, that number fell to about 400 as oil field activity began to wane.
Deaths on roads in the Barnett Shale of North Texas grew from about 500 in 2010 to about 650 in 2015.
Nationwide, work deaths among workers in the oil and gas industry exceed the national average for all industries by about seven times, according to federal health officials. Nearly half of the deaths in the oil and gas industry were from fatal transportation crashes from 2011 through 2014, mostly on roadways, said Kyla Retzer, an epidemiologist at the Oil and Gas Safety and Health Program at the Centers for Disease Control and Prevention's National Institute for Occupational Safety and Health.
With the price of oil rising to the $50 per barrel level in recent trading, Hopmann said that work on the roads could be in progress when activity in the fields picks up again.
"In the past, we were forced to be reactive, repairing deteriorated roads," Hopmann told the task force. "Now, we're trying to get ahead of the game in anticipation of the energy industry improving."
On Feb. 26, 2015, the TTC awarded the first funds for projects under Proposition 1 totaling $1.74 billion.
With a top credit rating, the TTC has been able to issue large amounts of debt in recent years with low interest costs and massive savings in refunding deals.
"The Aaa rating reflects the strong fundamentals of the Texas economy, a rainy day fund that provides a healthy budgetary cushion, and low bonded debt levels," Moody's analyst Nicholas Samuels wrote in a Feb. 23 report in advance of a $623.5 million issue of general obligation bonds.
"Those strengths are offset by low oil prices that are slowing the state's economy, above-average pension liabilities and ongoing structural pressure to balance the state's finances as it seeks to maintain education and property tax relief spending amid high population growth," Samuels added.
Oil buoyed Texas' economy after the 2008 recession as the so-called "Shale Revolution" unfolded across the state. That revolution actually began in the Barnett Shale of North Texas and expanded nationwide under a favorable regulatory environment.
Thus, Texas' economy entered the recession later than most states, recovering earlier and stronger than most states.
Despite large layoffs in the energy industry in the past year, Texas continues to add jobs, according to recent reports.
Starting in October 2015, employment slowed to a pace lower than the U.S. and for the month of December Texas job growth was 1.4% over the same month in the prior year compared to 1.9% for the U.S.
Another favorable ratings factor for the state is that its general fund budget is not as directly exposed to oil and gas severance taxes as some states are, Samuels noted.
"While oil and gas severance taxes were 11.2% of general fund tax revenue in fiscal 2014 as the energy boom ended that decreased to 9.0% of tax revenue in fiscal 2015 and is estimated to be 6.0% in fiscal 2016," he said.
