Editor’s note: opinions of Hart Energy contributors are their own.
The Texas Legislature is back in session, tackling matters old and new that may impact the oil and gas industry. Since the body meets for only 140 days every two years, legislation will be moving fast and furious. From water to eminent domain to road funding, there are myriad issues that may directly affect you and your business.
First, a quick update on the make-up of both chambers: The Republicans are still in control of the Senate, retaining two-thirds majority rule for bringing legislation to the floor. In the House, the party balance is 87 Republicans and 63 Democrats, with 32 new members. Educating and updating these members on the oil and gas industry continues to be an important endeavor.
Here are the main legislative policy areas to monitor over the next four months.
Texas Governor Greg Abbott, Lt. Governor Dan Patrick and new Speaker of the House Dennis Bonnen have said they will focus on property taxes and school finance reform this session. These issues will drive budget priorities, potentially impacting the energy industry. As major taxpayers in the state, oil and gas businesses must watch any proposals closely. Texas Comptroller Glenn Hegar recently estimated that oil production and natural gas tax collections will generate $10.7 billion for the 2020-2021 budget cycle (up about 10% from 2018-2019).
The industry continues to strain road infrastructure, making it a perennial issue on the Legislature’s agenda. Last session, several proposals to allocate more funding met with minimal success. While private endeavors such as the Permian Strategic Partnership are collecting dollars for improving roads, the industry should continue to support public funding.
For example, a bill filed by Rep. James White dedicates two percent of oil and gas production tax revenues to a Severance Tax Trust Fund for distribution to counties. Each county’s share of the fund’s revenue is equal to its pro rata share of statewide oil and gas production. A county may use the proceeds only to supplement construction and maintenance of county roads and bridges that are impacted by exploration and production activities. This will be contingent upon passage and voter approval of a constitutional amendment.
Eminent domain is another critical infrastructure issue the Legislature will address. Balancing the public good (e.g., getting our goods to market) versus private property rights remains a flash point for the electorate. The industry must remain vigilant against bills that will force the industry to pay for landowner grievances, such as their attorney fees and more.
Water is a running policy debate in the Legislature. Tax incentives are again being considered for operators and recyclers. These remain controversial in the industry and with elected officials. However, this effort may have new support with the continued scrutiny on induced seismicity from produced water disposal. In addition, induced seismicity remains a regulatory threat. Questions also remain regarding the ownership of produced water.
Having a strong and impartial state regulator may be the best way to combat federal overreach as well as safeguard the industry, the environment, and the State of Texas. The industry should support the Railroad Commission’s budget request for 2020-2021. The agency is asking for a baseline budget of $252.75 million, which is close to its 2018-2019 biennium budget. Within this amount, the Railroad Commission is asking for an additional 22 full-time pipeline inspectors and $10 million to modernize its IT systems. The agency is not asking for an increase in appropriation or taxes and fees.
All Texans—all Americans—have an interest in keeping the oil and gas industry strong. Help us stand together to advocate for policies that support the industry and fight those that may be detrimental.
John Tintera is the president and chief of staff of the Texas Alliance of Energy Producers. The Alliance is the largest state oil and gas association in the country for independent producers and will be hosting their annual conference the first week of April.