The Texas Legislature meets in a regular session every two years, convening on the second Tuesday in January of every odd-numbered year in Austin. These biennial sessions are limited to 140 days. The governor has the authority to call special sessions as necessary, which cannot exceed 30 days. The 88th Texas Legislature is set to meet Jan. 10 through May 29. On the first day of prefiling, Nov. 14, 2022, Texas legislators filed 921 bills and resolutions including 646 House bills and 198 Senate bills.
The New Mexico Legislature convenes in Santa Fe on the third Tuesday in January of each year. The Legislature holds 60-day sessions in odd-numbered years and 30-day sessions in even-numbered years. The 56th Session of the New Mexico Legislature will open on Jan. 17 and adjourn March 18. Lawmakers will begin prefiling bills on Jan. 3.
Top Priority: BUDGET
Lawmakers in both the Lone Star State and the Land of Enchantment are first and foremost focused on passing a state budget.
Unlike the last session, overshadowed by the pandemic and a projected deficit, lawmakers will head into their respective sessions with an anticipated budget surplus. In his latest letter to the Texas Legislative Budget Board, Texas Comptroller Glenn Hegar reported an expected $149.07 billion in General Revenue-related funds for the 2022-23 biennium, resulting in a projected fiscal 2023 ending balance of $26.95 billion.
“We are very proud of the role oil and gas plays in supporting the state budget,” said Ben Shepperd, president of the Permian Basin Petroleum Association (PBPA). “Essentially all of the revenue surplus is due to oil and gas. It’s a very fortunate situation the Texas Legislature finds itself in, particularly with the backdrop of the national economy.”
The Economic Stabilization Fund (ESF: the state’s “Rainy Day Fund”) and the State Highway Fund (SHF) both receive funding from oil and natural gas severance taxes. In fiscal 2023, the ESF and SHF each will receive $3.58 billion in transfers from the General Revenue Fund for severance taxes collected in fiscal 2022. After accounting for appropriations and investments and interest earnings, the state projected a fiscal 2023 ending Rainy Day Fund balance of $13.66 billion. (For more information on Hegar’s revenue estimate, see our related article: From the Comptroller.)
In mid-August, New Mexico’s Legislative Finance Committee projected $2.5 billion in “new” money during the budget year that starts in July 2023. The current state budget, which went into effect July 1, 2022, includes $8.4 billion in the recurring general fund.
New Mexico state agencies are requesting $665.6 million more from the general fund for the fiscal 2024 budget year, a 19 percent increase over current budget appropriations.
As an advocate for the oil and gas industry, the PBPA uses a two-pronged approach to legislative sessions:
- Seek out the positive within proposed legislation and lend support.
- Address any initiatives that could harm or hamper the industry, which includes communities and individuals who live and work in oil- and gas-producing regions.
With that said, the PBPA’s slate of concerns is continually shaped by the prior session(s), interim charges and studies, and filed bills. For example, the 87th Texas Legislature addressed the Texas power grid with the passage of Senate Bill 3, which called for new rules to be administered by the Railroad Commission, the Public Utility Commission of Texas, and the Electric Reliability Council of Texas.
At the end of November 2022, Lt. Gov. Dan Patrick published his list of legislative priorities, which once again includes improving the reliability of the electric grid.
“The real questions boil down to winterization requirements,” noted Shepperd, who worked through the interim to ensure the industry had a seat at the table.
“The industry is affected from all sides, both as a producer and as a consumer,” observed Stephen Robertson, PBPA executive vice president. “Obviously, this will be a topic we will continue to be focused on.”
While a budget surplus is a welcome scenario, one thing is for certain: The competition for funds will be fierce. The PBPA will do its part to advocate for additional funding to support infrastructure using what Robertson described as the continual beat of the drum: “We are still here. We are generating the revenue. We need more support.”
Sometimes, lawmakers are lulled into a false sense that the Permian Basin is slowing down, Robertson surmised. However, it’s important to remember that the Permian’s output has quadrupled during the last 15 years.
“This does not come without an increase in truck traffic,” he continued. “Industry traffic has put a strain on county roads and bridges, and we need dramatic improvements. We need to send more money back to the areas that are producing the energy.”
Both Shepperd and Robertson were quick to point out that infrastructure is not limited to electricity and roads. The list extends to broadband, school systems, medical facilities, and water availability, all of which affect the industry and employees and their families. The PBPA will monitor legislation in all of these areas.
The 88th Session will include Sunset reviews of both the Texas Commission on Environmental Quality and the Public Utility Commission of Texas. Sunset is the regular assessment of the continuing need for a state agency or program to exist. The Legislature sets a Sunset review date in an agency’s statute. With few exceptions, the agency is automatically abolished on this date unless the Legislature passes a bill to continue it.
The Sunset review process normally includes proposed changes to agency operations, which will be of great interest to the PBPA, Shepperd stated.
As of press time, prefiling was still under way. State Rep. Brooks Landgraf, chair of the 87th Texas Legislature’s Environmental Regulations Committee, prefiled House Bill 33 (H.B. 33) to stall the implementation of any new federal regulations on oil or natural gas production in Texas. H.B. 33, nicknamed the “Texas Energy Independence Act,” is the first of several pieces of legislation Landgraf plans to file during the 2023 legislative session to defend Texas energy.
“The goal of H.B 33 is to ensure no Texas state taxpayer dollars or resources are used to implement any new federal regulations on oil and gas production in Texas,” Landgraf said. “The Biden Administration has Texas energy in its crosshairs, and we need to make sure that we aren’t supplying them with ammunition.”
H.B. 33 prohibits Texas state agencies and officials from contracting with or providing assistance to any federal agency or official regarding the enforcement of a federal statute, order, rule, or regulation regulating oil and gas operations if the regulation is not already existing law.
“Texas oil and gas production provides billions of dollars of tax revenue and directly or indirectly employs Texans in every corner of the state.” Landgraf emphasized.
“We greatly appreciate the political leadership at the Texas Capitol and all of the work Chairman Landgraf has done,” Shepperd stated. “I appreciate Chairman Landgraf looking at the bigger picture in respect to energy production in our state.
“The Permian Basin is privileged to have a number of strong voices in Austin, and each member brings his or her own unique experience and perspective,” Shepperd continued. “Along with Chairman Landgraf, there is our former Speaker of the House, Rep. Tom Craddick, who is the longest current serving member of a state legislature anywhere in the United States, and newly elected Senator for District 31 Kevin Sparks, a career oil man and son of the Permian Basin.”
How You Can Help
“The PBPA is the voice of the Permian Basin oil and gas industry and plans to be that voice for many years to come,” Shepperd said. “Members’ involvement with the association, through our committees, talking with our staff and leadership, and overall membership support of the association are each great ways for members to help with advocacy.”
For more information on PBPA and the Texas and New Mexico legislature, go to https://www.pbpa.info/resources/legislation.
Dates of Interest for the 88th Regular Session of the Texas Legislature
Official deadlines will be set when the House and Senate adopt their rules, but until then, the Texas Legislative Council Drafting Manual provides the following general calendar:
Bill pre-filing began: Nov. 14, 2022
1st day of session: Jan. 10, 2023
60-day bill filing deadline: March 10, 2023
Adjournment sine die: May 29, 2023
Post-session 20-day deadline for governor to sign or veto: June 18, 2023
Effective date (91st day after adjournment): Aug. 28, 2023
Bill pre-filing begins: Jan. 3, 2023
1st day of session: Jan. 17, 2023
Deadline for introduction: Feb. 16, 2023
Session ends: March 18, 2023
Legislation not acted upon by governor is pocket vetoed: April 7
Effective date of legislation not a general appropriation bill or a bill carrying an emergency clause or other specified date: June 16, 2023
From the Texas Comptroller
In mid-July, Texas Comptroller Glenn Hegar revised the Certification Revenue Estimate (CRE) upward, increasing his November estimate of General Revenue-related (GR-R) funds available for certification by $13.75 billion.
In a letter to state leadership, Hegar said the state will have $149.07 billion in GR-R funds available for general-purpose spending for the 2022-23 biennium, resulting in a projected fiscal 2023 ending balance of $26.95 billion, an increase of $14.95 billion from the earlier projected balance. The ending balance does not account for any 2022-23 supplemental appropriations the Legislature may make.
“This revised estimate includes a net decrease in projected GR-R spending of $1.5 billion yet is mostly driven by tax revenues that rebounded strongly in recent months after being suppressed by the pandemic in the previous biennium,” Hegar explained. “In fact, many tax revenue categories reached their highest collections on record, and this fiscal year has experienced the largest one-year increase in total tax collection, as compared with the prior fiscal year, in Texas history. This is especially true of state sales taxes, where monthly collections for each of the last 15 months exceeded $3 billion and averaged $3.5 billion.
“Severance taxes performed extremely well due to elevated oil and gas prices caused by energy market volatility. This is due in part to a strong global economic recovery coupled with the war in Ukraine and a period of limited investment in fossil fuel production and refining capacity. It is important to realize that inflation is a significant contributing factor as to why we have seen record tax collections in sales tax and other revenues over the last year.
“This estimate is subject to substantial uncertainty,” Hegar continued. “High inflation, geopolitical conflicts, and renewed COVID restrictions among our global trading partners could impair economic activity. While this is not a recession forecast and continued economic growth is expected, the rate of economic growth is anticipated to slow. Revenue growth in fiscal 2023 is estimated conservatively in view of the degree of uncertainty and heightened risk of a recession.”
By Julie Anderson