The Lone Star State

I was expecting Texas to provide a real counterpoint to California, in terms of policy, challenges and the energy sector more broadly. Truth be told, the similarities outweighed the differences:

  • The approvals process and regulation are raised as key barriers to project development
  • Social licence is also challenging (perhaps in different ways, which I’ll discuss below)
  • Both states are leading producers of both fossil fuels and renewable energy (although California are more vocal and ambitious about their renewables production)
  • Government (especially Federal) funding is playing a key role in dictating where investment in the energy transition is going; this is interesting given the shotgun approach the Inflation Reduction Act is taking
  • The grid is a challenge (this is particularly pronounced in Texas, where the grid is islanded – much like Western Australia. This was brought into sharp relief a couple of winters ago when there were widespread outages).

One of the other similarities that I found was comparing the oil-producing Californian Kern County with Port Arthur, on Texas’ Gulf Coast. Granted, I’m working from a very small sample size here, but both areas – despite the richness in energy, and their criticality to the sector – at a local level are behind on all kinds of socioeconomic metrics. This was particularly pronounced in Port Arthur, where the proximity of the refineries (some of the largest in the US) also have real health impacts on residents. In terms of energy justice, Port Arthur feels like ground zero.

Unsurprisingly, there were also some differences between the jurisdictions:

  • California are far more ambitious in terms of their targets, including the reduction in the oil and gas sector
  • The oil and gas sector/lobby in Texas is clearly far more powerful in Texas than in California (which relates to the point above and below)
  • Whilst California appears to be motivated by environmental targets, the Texas approach to decarbonisation is far more economically focused; that is, the way that decarbonising can preserve existing jobs and value and create new ones – rather than focusing on the environmental outcomes
  • The cost of energy (both electricity and fuel) is much higher in California – whether this is correlative or a result of the point above, I am not completely certain
  • Projects in Texas, particularly in the CCS space, have been opposed by those both on the left – who see the technology as a means for perpetuating the oil and gas sector – as well as the far right, who have concerns around some of the land issues relating to underground pore space, as well as (in extreme cases) a general distrust of anything that might be linked to ESG.
  • Where Teslas (and EVs generally) are ubiquitous in California, large pick-up trucks (F150s and bigger) are at least as common, if not moreso, in Texas

The Texan economy-first approach struck me as somewhat analogous to WA/Australia more broadly. (Especially when reflecting on the recent CSIRO survey regarding Australian attitudes towards renewables). More broadly, the ‘economics first’ approach – whilst prone to a whole range of negative externalities – certainly holds some water as a way to get both industry and community on board with potential changes. The risk is either appearing to, or actually slowing the required transition process to avoid overshooting climate targets. Recognising though, that without either some form of incentive, or appropriate regulatory frameworks (carrots or sticks) neither industry or consumers are likely to do things which will have a material negative impact upon their operations or lives.

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