This January, as many Texans recover from the holidays and gaze into what some folks call winter here, members of the Texas Legislature will gather in Austin to be sworn in for the 86th legislative session. The Texas Legislature is charged with meeting for only 140 days every two years. A common saying is it would be better if they met for two days every 140 years. Nevertheless, the 2019 legislative session is upon us. Here is what we can expect to see and which issues could impact your business in the energy world.
On the political side, Texas has a much different looking House of Representatives and Senate this coming session. The Senate will see six new members in the 31-member body. The Republicans control 19 seats, with the Democrats having 12 senators. The House saw a dozen Republicans lose their seats. A new Speaker of the House will also be selected in January. Speaker Pro Tempore Dennis Bonnen announced in November that he secured enough votes to become the new Speaker.
For the Texas energy industry, we will see several past issues resurface, including these five that could have a big effect:
School Financing: Property taxes and school finance will play a major role this legislative session. Governor Greg Abbott, Lt. Governor Dan Patrick and Bonnen have discussed the need to reform the current system. Senators and Representatives alike have heard from constituents, educators and policy experts on this issue. We should anticipate seeing plans circulate the capitol. The oil and gas industry, a significant taxpayer in the state, will need to understand each of these proposals and determine as to how it may impact their business.
Road Funding: Another key issue will be road infrastructure. As the industry continues to grow, we are putting pressure on local highway systems. Last session, the oil and gas industry supported several plans to focus more dollars on this critical infrastructure, with some limited success. Look for road funding to again be a public policy topic that will be debated.
Eminent Domain: The use of eminent domain will be one of the most important issues for the energy industry this session. Before the 2017 session, a group of large landowners formed “Texans for Property Rights” to address several issues they saw as wrong with the current process of utilizing eminent domain. Working with some legislators, they had filed a bill that included a long list of grievances. Some of these issues included forcing the industry to pay for their attorney’s fees, venue location, aggressive sales tactics by right of way agents, “low-ball” offers, and the lack of oversight to file a complaint against perceived abuse of the system.
The energy industry responded by worked individually and as part of the “Coalition for Critical Infrastructure,” which is an organization composed of ports, railroad, municipalities, water companies, counties and other entities that use eminent domain.
The eminent domain bill died last session and the issue was referred to study through the past year.
A House committee studying the various eminent domain issues has held several interim hearings these past few months. Industry opposition is bringing forth examples of the threat and abuse of Eminent Domain. The committee is also looking at the issue of “market value” or “throughput” value in their scope of fair compensation. They will also continue to argue “transparency.”
Water: Water is always a major policy debate in Texas. In this legislative session, it will be no different. We must watch this carefully since water impacts our business in several different ways and is vitally important to continue our production and growth.
On the produced water side of the policy debate, efforts to look at water recycling will continue. These may include trying to identify and streamline any regulatory or legislative issues. We may also see an effort to offer some type of incentive to recycle the water. This effort may have new support as induced seismicity continues to be debated and monitored. The industry worked several sessions ago to create and fund the TexNet program, to help understand and better monitor any issues.
Railroad Commission: One of the major obstacles to federal overreach in Texas energy production is a properly funded, fully staffed Railroad Commission. Their budget is an important factor to watch this session. Having worked there, the Legislative Appropriations Request (LAR) is one of the most important documents produced to set the budget. This session the Railroad Commission is requesting 22 new pipeline inspectors and $10 million to advance their IT systems operations. They are not requesting any new fees or taxes.
Building off the success of the last session, Texas Energy Day will be Feb. 20 at the Texas Capitol. This is a time for energy employees to meet their legislators and talk about what oil and gas production means to them, their families and their communities. I would encourage all to attend. Communicating effectively with the legislators is key to keeping our industry successful.
As winter gives way to spring, the legislative session days will grow longer into the night. The oil and gas industry has given so much to this state: a strong economy, massive tax revenues and royalty payments, and an Economic Stabilization Fund (rainy day fund) that is the envy of most states. It is important for all Texans to advocate to keep the oil and gas industry strong.
About the author: Chris Hosek is a principal of Texas Star Alliance, specializing in direct lobbying and state agency relations. He has experience with a broad range of legislative issues and policy initiatives including a specific expertise in the energy sector. Chris served as the Chief of Staff for five years to the Chair of the Railroad Commission of Texas.
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#HJR13 and #HB42 propose to repatriate a small portion of the Severance Tax back to the counties where theta was generated in order to provide revenue to pay for the damages caused by the unconventional drilling methods in place today. Local property tax revenue cannot keep up with the demand to repair and rebuild county roads that were not build to handle the heavy volume and weights needed to support the efforts of industry.