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Texans like to brag that our legislature only meets for 140 days every two years, laughingly concluding that this limits the damage that they can do to the state. But the infrequent nature of the sessions raises their importance, whenever the legislature does convene, because Texans must live with what is done for two years.
For the oil and gas industry, the 2013 session was like most. “Success” hinged upon succeeding on a few key initiatives, while avoiding damage in other areas. Given these criteria, this session was a limited success. The industry avoided damaging legislation in several areas, including water, roads and taxes, while enjoying some significant victories that we’ll discuss later. In the end, no real damage had been done, and everyone enjoyed the end-of-session “sine die” parties in a jovial mood.
One main reason why the session was such a success was the fact that the state enjoyed a very significant, $8-billion-plus budget surplus, when the legislature convened in January. This contrasts with the $15-billion-or-more budget shortfall that policymakers faced when the 2011 session began. The fact that the current surplus was due largely to the economic impacts and increased tax collections from the ongoing boom in the oil and gas industry helped immensely. It reduced, dramatically, any pressure to seek tax increases.
RRC’s status. The most important single item that the industry wanted to see get done, going into the session, was the reauthorization of the Texas Railroad Commission (RRC) for another 10 or 12 years through the state’s sunset process. This was the second consecutive session in which the RRC was up for renewal, given that the 2011 legislature failed to enact a full reauthorization, choosing instead to punt the matter to the 2013 legislature with a temporary, two-year renewal.
Whether one likes dealing with regulators, or not, the industry’s continuing success in Texas is largely dependent on the effective, efficient regulation of its activities. No regulatory body in America does this better than the RRC. The industry must retain the public trust to remain highly active. Having an effective regulator is essential to achieving that goal.
The RRC began regulating oil and gas during 1917, and for the last 96 years has been recognized around the world as one of the most effective regulatory bodies with that charge. The last 10 decades are filled with example after example of actions taken, and regulations written, by the RRC being emulated, not just by other states, but by other nations.
Given all that, one might have thought that renewing the commission’s charge for another 12 years through the Sunset review process would have been an easy sell, but that was not the case. Late in the session, efforts to renew the RRC almost failed entirely, but last-minute negotiations produced a four-year renewal, with strings attached.
Thus, when the 2017 legislative session convenes, the RRC will be put through the sunset review process for the third time in four sessions. But better to have a commission than none at all.
Water issues. The funding of the state water plan was another big priority for the oil and gas industry, and most every other business interest in the state, given the critical role that water plays in pretty much all of life’s pursuits. The funding mechanism—a one-time allocation of $2 billion from the Rainy Day Fund—requires a constitutional amendment, so it will be on the ballot for voter approval this November. Assuming that happens, this long-standing state priority will finally come to fruition after 18 years of trying.
Other big industry wins include:
- No changes to the High Cost Gas Tax Program, which has made Texas, far and away, the leading state in natural gas production
- $225 million for county roads, in counties that are experiencing heavy oil and gas development activity
- $225 million for state road maintenance (This was increased to $2 billion per biennium in the just-concluded special session)
- $16-plus million for modernization of the RRC’s computer systems
- Raised the cap on the fund that pays for the plugging and clean-up of abandoned wellsites via fees on the industry, to $30 million
- Four-year extension of the RRC under the Sunset Review process
- A CNG/LNG Motor Fuels Tax collection at the pump, solving a problem for the Comptroller’s office
- Roughly $28 million in Texas Emissions Reduction Program (TERP) funding for new CNG/LNG stations and conversions, and for conversion of drilling and other oilfield equipment to natural gas
- Elimination of the payment of the system benefit charge on electricity purchased in ERCOT (Electric Reliability Council of Texas), which will result in significant utility bill savings for businesses and individuals.
Pipeline issue lingers. One issue that was not addressed successfully is the controversy over the process for midstream pipeline companies to qualify as “common carriers,” and thus obtain the right to exercise eminent domain in securing the rights-of-way for their pipeline projects. Several bills were introduced, but none made their way to the governor’s desk. Thus, this key issue will likely be addressed by the courts in coming years.
But much was accomplished by this legislature. We will see how it all shakes out over the next 18 months before the process starts again. God Bless Texas. 
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