Sometimes Texas Gets It Right…
…but
Why Does Texas Matter?
It matters because it is one of the fastest-growing states in the US. Its affordable housing, lack of state income tax, and light-touch regulatory climate make it attractive to businesses and individuals.
Its proximity to a key trading partner, Mexico, makes it an attractive manufacturing hub. Austin has become a growing tech hub because of its allure to millennials and Zoomers.
We are going to examine Texas as a microcosm of the energy transition. First, we need to examine the history of why, one day, Texas could send ten senators to DC.
Let’s Mess with Texas
This idea first surfaced in a Texas Law Review article by Vasan Kesavan and Michael Stokes Paulsen in May 2004, entitled “Let’s Mess With Texas.”
Most recently, it was the subject of Malcolm Gladwell's first episode in the third series of his Revisionist History podcast. It deserves a prolonged shout-out because the implications are large - Texas is large.
Texas Bats Above Average
Texas is one of eight states that has provided multiple presidents. It could help shape the future of a lot more if it takes advantage of the license granted by the terms of its annexation in 1845 to create four more states within its borders.
Texas’s annexation was controversial for several reasons: it was considered potentially too large, and, as a slave state, its admission divided opinions consistent with the national debate on slavery.
Whether Texas should be annexed became a prominent issue in the 1844 Presidential election. James Polk, a Democrat and the winner, was in favor. In effect, the election of 1844 was a referendum on whether Texas should be admitted to the United States.
Treaty or Statute
A secondary issue was whether Texas should be admitted by treaty—something that would have required a two-thirds majority in the Senate—or by statute by a joint resolution of both houses.
Constitutional arguments for the latter prevailed, and razor-thin majorities in both the House of Representatives and the Senate passed the legislation, which outgoing President John Tyler signed into law as his last substantive act.
Slave History
The legislation sought to address the issue of Texas’s influence and the issue of its choice to be a slave state by giving permission to the Texas legislature to create four additional states within its borders; each state could choose on the matter of slavery.
The solution to the influence issue was strange because allowing Texas to elect ten rather than just two senators would produce the opposite effect—if exercised—to the one intended.
Article IV, Section 3 of the US Constitution
The Fourth Amendment to the US Constitution reads as follows:
“New States may be admitted by the Congress into this Union; but no new state shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or Parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress”
The amendment itself, like the second amendment, has some punctuation challenges. Is the semi-colon before the word “nor” intended to function more like a period, thus placing an outright prohibition on creating more states, or is it more like a comma?
If the latter, then it seems clear that the prohibition is not absolute: new states may be created within the borders of an existing state with the permission of state and US legislatures.
Other Precedents
The authors of the Texas Law Review have addressed the issue of interpreting Article IV, Section 3 before in their analysis of the creation of West Virginia from Virginia.
They concluded then, and again in their analysis of the Texas issue, that the “nor” was linked to the prior “but” (otherwise, what was it linked to?) and gave permission to the Congress and to the legislature of the Mother State to create new mini-states within the borders of an existing state.
Texas’s Annexation
The terms of Texas's annexation state in the second paragraph of the Joint Resolution of March 1, 1845:
“New States, of convenient size, not exceeding four in number, in addition to said State of Texas, and having sufficient population, may hereafter, by the consent of said State, be formed out of the territory thereof, which shall be entitled to admission under the provisions of the federal constitution.”
It is clear, according to Kesavan and Stokes Paulsen, that this license has not yet been revoked by the US Congress and that Texas is empowered to do this. All that would be required is for the Texas legislature to take the necessary steps.
Gerrymandering on a Grand Scale
Texas Republicans tried to redraw some of its districts in 2003 to their own electoral advantage. This popular sport is usually pursued once every ten years after the results of the required national census. It is a bad sport and threatens to undermine democracy at its core. It is currently under review in several states, including Texas, following further redistricting that took place in 2011.
Gladwell's claim, inspired by his review of the law review article written against the backdrop of the 2003 Texas redistricting, is that the Texas Republicans are thinking way too small. Why bother with redistricting when they could shoot for eight more senators?
The hesitation, of course, is that while that course might currently favor the Republicans, demographically, the trend favors the Democrats.
Energy on a Grand Scale
The article by David Blackmon from 2023 describes some of the challenges Texas has faced in managing its energy grid.
According to the EPA, the U.S. grid is divided into three major regions:
The Eastern Interconnection operates in states east of the Rocky Mountains.
The Western Interconnection covers the Pacific Ocean and the Rocky Mountain states.
The Texas Interconnected System.
Within each of these regions are interconnected local electricity grids. With multiple ways for the power to flow from generation to load centers, this redundancy ensures minimal service loss in case of local failures.
The North American Electric Reliability Corporation (NERC) is a not-for-profit international regulatory authority whose mission is to assure the effective and efficient reduction of risks to the grid's reliability and security. NERC oversees six regional reliability entities and encompasses all the interconnected power systems of Canada, the contiguous United States, and a portion of Mexico.
ERCOT Rules
The Texas Interconnected System is called ERCOT (Electricity Reliability Council of Texas). Although the three grids are connected, very little power flows between them.
Texas likes it this way and guards its independence fiercely. It has good reason to do so in the face of an increasingly activist EPA.
The EPA has recently announced a plan titled, as only a government agency could, the “New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electric Generating Units;"
Its aim is to constrain coal and natural gas-fired power plant emissions tightly. It will likely be struck down by the Supreme Court as regulatory overreach, as was its earlier iteration in West Virginia vs. EPA in 2022. In the meantime, it chills the financing appetite for expanding natural gas-fired generation.
Texas Takes Charge
Texas has a strong streak of self-determination and, keenly aware of its growing need for power, has launched its own initiative.
As Ed Ireland discusses in the linked article, boosted by strong voter support for Proposition 7 in the May 2023 statewide elections, Texas created the Texas Energy Fund, hoping to attract 10 gigawatts of new power generation.
On Friday, May 31, 2024, the state received 125 notices of “intent to apply for funds” from the Texas Energy Fund to build 55 gigawatts of new power, almost equal to the existing natural gas generation.
Those seeking low-interest loan guarantees to finance up to 60% of the cost of their project were required to file a notice of intent by Friday before applications opened the next day on Saturday, June 1.
An industry group, Powering Texans, announced that its members had submitted plans to construct 5,000 megawatts of natural gas-fired generation, including 1,000 megawatts from Houston-based Cappine, 1,600 megawatts from Houston-based NRC Energy, and 2,000 megawatts from Irving-based Vistra, including plans to convert a coal-fired plant to natural gas.
How Does This Help and Why Is It Needed?
Texas is blessed with an abundance of sunshine and wind. Unfortunately, the wind blows most in the sparsely populated western part of the state, which is the best location for large, utility-scale solar power.
The challenge is to move the power generated out west to the large population centers to the east, south, and north.
Blackmon’s recent article on Texas’s key grid weaknesses explains that the answer to congestion is to build more capacity or incentivize users to curtail their usage. The voluntary route has not been well received, so Texas must build more. It must also build closer to population centers, which means more nuclear and more natural gas.
Why is Texas a Microcosm?
The issues playing out in Texas are symptomatic of problems elsewhere, namely:
Widespread resistance to the installation of pipelines
The dead-hand of the Jones Act (link to earlier Macro Matters article)
The foolish shutdown of nuclear power - e.g., Indian Point in New York
Hysterical opposition to the production of all carbon-based power generation
An unrealistic obsession with net zero by 2050
A lack of cogent thinking about the impact of EVs and data centers on the electricity grid
Texas has taken steps to bolster its own power generation and transmission. It knows it has problems and chooses to address them rather than wait and see.
Don’t Hate Texas
Like its most conspicuous recent transplant, Elon Musk, Texas is an easy target. Its unfortunate streak of religious fundamentalism, its approach to abortion, and its recent tactic of forcing New York to grapple with the immigration problem by busing immigrants to New York City have earned it the derision of the mainstream media.
However, we need to pay attention to energy. Energy is the base layer of the economy, underpinning growth and all the conveniences we take for granted. We will regress without an abundant, sufficient supply, and bad things will happen.