© 2013 The Texas Lawbook.
By Gary Compton
Thompson & Knight
The 83rd session of the Texas Legislature is now underway, and the next several months under the Capitol dome should prove to be particularly interesting. One of the largest-ever classes of new representatives are tackling the thorny issues of public education, health care and the overall budgetary priorities.
One might naturally assume that any segment of the economy making that measure of contribution would garner increased support and protection, but legislators also are facing pressure from a range of important constituencies to increase oversight of oil and gas production. Federal agencies also are on notice to rethink controls governing the industry. No matter which party dominates Washington, upcoming debates on national energy policy most likely will turn up the heat even more on states such as Texas.
Against that backdrop, legislators face a daunting task of balancing the short-term and long-term economic benefits of the energy industry with concerns over the impact of the oil and gas production on the state’s environment and infrastructure. At the start of the session there is already a 20-page list of proposed bills covering oil and gas, water, the environment, and related tax measures.
An overlay in these controversies is found in the potential changes to the state agency that regulates Texas oil and gas activity, a statewide elected body that continues to go by the unlikely name of the Texas Railroad Commission. During the last legislative session, a proposal surfaced to change the makeup of the Railroad Commission from three elected commissioners to one elected commissioner. That recommendation did not pass the Legislature at that time due to differences between the House and Senate’s versions of the enabling legislation. Prior to the beginning of the current session, a staff report recommended moving the commission’s standalone hearings under the broader powers of the state’s Office of Administrative Hearings.
The oil and gas industry generally opposed those two recommendations, believing that the single-commissioner structure would vest too much influence in an individual, and that merging commission hearings under the auspices of a more general governance body would reduce the influence and expertise offered by the Railroad Commission.
On Jan. 9 the Sunset Commission met and voted not to pursue either of those recommendations in the current session. However, it is expected that the Railroad Commission itself will be renamed to more accurately reflect where its oversight truly lies.
The increase in urban and near urban oil and gas drilling operations have groups calling for more stringent laws to govern these operations. Existing laws make Texas among the most highly regulated markets for oil and gas production, with extensive permitting and disclosure processes. However, as these production activities have encroached on more populated areas, counties and municipalities have pursued their own newly-formulated regulatory actions, and these ordinances may contain significant differences and create major economic burdens on producers. Striking a balance between safety, the environment and industry economics will be an overriding need for any successful legislative proposals in this area.
As new methods of natural gas drilling have spread across the state – particularly in the Eagle Ford Shale in South Texas and the Barnett Shale in North Texas – many already-aging roadways have borne the brunt of increased use, particularly from the heavy-duty trucks and loads needed for pipeline construction and related work. Truckers paid nearly $147 million in overweight permit fees in the past year, a big increase from the $98 million paid just five years, ago according to state data. By comparison, the state government’s estimate for the road damage being done annually by increased truck traffic statewide is $2 billion. As a result, expect calls for increased fines and fees for the trucking industry, and wrangling by legislators from the areas most affected to designate those funds to projects in their districts.
During the past 18 months there have been a series of high-profile lawsuits, conflicting court rulings and public protests as landowners have sought to prevent interstate pipeline construction on their properties. Against this backdrop of eminent domain challenges, there are political and public demands for greater domestic energy independence and overlapping regulations from federal, state and local jurisdictions. While these issues are likely to result in proposals and debate during the session, legislators may be most likely to allow the judicial process to determine the winners and losers in this fight without substantive legislation being passed.
Particularly given the periods of statewide drought in recent years, and the documented use of water by the hydraulic fracturing process, there are legislative efforts to strengthen policies on public and private water supplies. Given the budget surplus, this is likely to be an issue that will attract a number of proposals to increase state spending for water infrastructure projects. Lt. Gov. David Dewhurst already has endorsed the establishment of a revolving, low-interest loan program that would support local governments in funding water-related projects.
Given the economic importance of the oil and gas industry and recent surge in production, legislators will be challenged to balance those realities against the state’s infrastructure needs and certain negative public perceptions of what is already a highly-regulated industry. While other issues may be more controversial or draw greater scrutiny, the responsible development of the state’s energy resources remains a fundamental and necessary need for the future of Texas.
Gary Compton is a governmental affairs attorney and lobbyist in the Austin office of Thompson & Knight. He can be reached at 512-469-6102 or gary.compton@tklaw.com
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