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West Texas Oil Companies Will Pay Customers to Take Their Natural Gas

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Natural gas is a secondary product made in the production of oil. In much of the world, it’s considered quite valuable. However, in West Texas, some of the companies running oil wells are now paying people to take this byproduct off their hands. Without the proper number of pipelines to get the natural gas to market, oil companies have been practicing “flaring,” or burning off the excess gas. In a recent report, it was revealed that the amount which was destroyed through flaring was enough to power every home in Texas. Due to the price of oil being on the uptick, oil companies have since opted to pay people to take the natural gas away.

West Texas Oil Companies Will Pay Customers to Take Their Natural Gas

Photo: Pixabay

Joshua Rhodes, a UT Austin Energy Institute Research Associate, told kut.org that power-producing natural gas plants pay for the byproduct, “burn it, make electricity and sell that electricity on the market. But now they might actually be able to get paid to take that natural gas and get paid to make electricity.” With the circumstances that are happening in the West Texas oil boom, natural gas power plants could potentially sell electricity at negative prices as a result of getting paid to take the gas off the hands of the oil companies. Subsequently, the Electric Reliability Council of Texas is changing the current rules to soon allow this to happen, whereby the electricity from natural gas power plants can be sold for negative-$20 per megawatt hour, as a direct result of this new negative natural gas price.

West Texas Oil Companies Will Pay Customers to Take Their Natural Gas

Photo: Pixabay

What does this mean for the Texas consumer? Lower electricity bills could result. However, industry experts don’t feel this negative pricing of natural gas will be long-term. Rhodes went on to tell kut.org, “Negative price natural gas is not a sustainable thing. Somebody will build a pipeline, and there are companies out there building pipelines right now to move that gas to market.” One of these examples is that of the Kinder Morgan Permian Highway project. This proposed pipeline is nearing construction after having received its approvals. This has faced a variety of disapproval at local levels along the proposed Texas Hill Country route, leaving some to believe the negative natural gas pricing may be in effect for a lot longer than experts anticipate. Whether lowered electricity bills or increased competition for pipeline development result, West Texas remains at the heart of an industry boom that could see enormous energy market consequences, both positive and negative.