by Chris Hosek
Principal Texas Star Alliance📷
Texas has always been synonymous with energy production. We have all seen the stories of success and wealth created by individuals willing to take great risks to develop the state’s oil and gas assets. Unfortunately, this same message of opportunity also translates to a seedier element of our society. Those willing to steal oil and energy service equipment to pick up a quick illegal dollar are exploiting the abundant production all over our state.
For example, the Permian Basin, which stretches 250 miles wide and 300 miles long, has seen a dramatic rise in oil field theft over the past decade. As the largest and most productive formation in the U.S., the incentive for criminal activity is high. Ten years ago, after the problem became too large for local county law enforcement to manage, a task force with the FBI was formed to focus on the theft. While the exact loss is hard to quantify, some estimates put the price tag around $800,000 per month of stolen goods, including both crude oil and oil field equipment.
The theft of crude oil presents a particularly challenging problem because once the stolen liquid is transported to a holding facility, it is typically mixed with legitimate crude production. Obviously, oil doesn’t have identifying markers, so the stolen good is easily assimilated into normal production sales and difficult to track.
Oil field equipment poses its own similar challenges. Given the isolated nature of some storage yards, thieves can gain easy access to equipment and valuable recyclable metals. In addition, Texas’ two major energy-producing formations (Permian Basin and Eagle Ford) are close to the border of Mexico, facilitating the quick sale of stolen product by blurring the regulatory requirements from one country to the next.
Law enforcement isn’t the only organization working on the issue. The Energy Security Council (ESC) is a non-profit organization focused on curtailing this illegal activity. Made up of executives, security professionals and mid-level managers representing energy production, power generation, refining and transportation, the ESC has partnered with local law enforcement to collaboratively reduce these crimes.
The Texas state legislature crafted one important solution to this problem this past legislative session by passing the Oil Field Theft Bill. Filed by State Senator Judith Zaffirini, this bill (SB 1871) enhanced the penalty for theft of crude oil to a felony. State Representative Richard Raymond guided this bill through the Texas House of Representatives. Both members acutely understand this issue since they represent the Eagle Ford shale in South Texas, the second most productive energy formation in the country. Governor Abbott signed this legislation into law this past May and goes into effect September 1.
The passage of this legislation is a great first step. It sends the right message to would-be thieves that the new penalties for stealing crude will be severe. Looking forward, we may need to focus on the theft of oil field equipment. This high-value equipment is a prime target for thieves and, when stolen, is not only a loss to the operator, but to the state as well by potentially causing a full-scale shut down of the site. Every day that a site is shut down from production, a royalty owner’s payment decreases and the state collection of the severance tax (production tax on oil and natural gas) diminishes.
Anyone considering this nefarious activity should know that the industry and law enforcement have a renewed focus on this type of theft. When you are stealing Texas oil, you are stealing from Texas. And as the saying goes, Don’t Mess with Texas…