PBPA Tracking Industry-Related Issues
By Julie Anderson
So many issues. So little time. Playing defense here. Coordinating offense there. Monitoring, testifying, convincing. When it comes to the New Mexico and Texas legislative sessions, the game plan is complex partly because the issues are layered, much like the stacked multi-pay zones that permeate the Permian.
Wheels in Motion
The New Mexico Legislature began its 60-day session on Jan. 15 and will adjourn on March 16. The governor of New Mexico may call the legislature into special sessions; the legislature, itself, can call for an extraordinary session. The New Mexico Constitution does not limit the duration of each special session, and lawmakers may consider only those issues designated by the governor in his or her special session call. The Texas Legislature convened on Jan. 8 for its 140-day regular session, which will end May 27. The governor of Texas is authorized to call additional special sessions as necessary, which cannot exceed 30 days. The governors of both states can add issues to the special sessions they have called.
State Leadership Sets the Tone
Before either gavel fell, the powers that be in the Land of Enchantment and the Lone Star State prioritized their issues. Texas Gov. Greg Abbott, Lt. Gov. Dan Patrick, and new Speaker of the House Dennis Bonnen announced in the early going their intention to focus on property taxes and school finance reform this session. On a similar note, New Mexico Gov. Michelle Lujan Grisham said she will push for additional funding for early childhood education and teacher salaries.
Unpacking the Legislative Layers
No. 1: The Budget
Both states are looking to pump billions into the school system, which will have an impact on the overall budget. When it comes to the budget, two obvious and understandable industry concerns come to mind: tax laws and agency funding.
Oil and gas companies are major taxpayers. In fact, 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, which is up some 10 percent from 2018-2019.
As far as budget appropriations, the funding of the industry’s regulatory agency, the Railroad Commission of Texas (RRC or Commission) is THE concern.
“One of the highest priorities for the Permian Basin Petroleum Association [PBPA] and its members in Texas is the funding of the RRC,” said Ben Shepperd, president of the PBPA. “We believe a properly funded Commission is important and critical to ensure the public that we have a strong, effective regulator overseeing the oil and gas industry.”
The RRC has made a baseline budget request of $252.75 million, which is close to its 2018-2019 biennium budget. This amount includes money 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 fees.
As of press time, the Texas Senate and House had just released their preliminary budgets; industry supporters will be maintaining a watchful eye as the budget process continues to play out.
No. 2: Infrastructure
“Whether you’re talking about roads, electrical transmission and distribution systems, or pipelines, infrastructure is a high priority in both Texas and New Mexico,” Stephen M. Robertson, executive vice president of the PBPA, emphasized. “We’re working to ensure that elected officials understand that the economic growth the Permian Basin has provided for both states is only possible if infrastructure growth is supported as well.”
Statutes that could impact infrastructure include changes to eminent domain laws and road funding.
No. 3: Workforce Livelihood
People are a vital component of infrastructure, particularly those doing the work to help make sure everyone else arrives home safely at the end of the day, Robertson noted.
“That’s where the support for cost-of-living increases for the Texas Department of Transportation, Department of Public Safety, and even RRC employees in the Permian Basin comes into play,” he continued. “People are the most valuable asset the Permian Basin has, and we need to support those people.”
To further assist in this area, the PBPA is supporting state-funded programs that repay student loans for doctors, and residency programs that pay doctors who agree to work in Permian Basin communities for four years.
No. 4: Relationships and Understanding
In New Mexico, the PBPA is heavily focused on strengthening relationships.
“There are significant headwinds in New Mexico for the Permian Basin,” observed Mike Miller, government affairs spokesman for PBPA in New Mexico. “The midterm elections brought a sea change from the last administration.”
As new lawmakers learn the landscape, the PBPA is hopeful that they will realize that industry revenue plays a vital role the state’s financial picture, and that working together to address industry concerns is in everyone’s overall best interest. However, early indications have not been encouraging.
“Many of those newly elected officials call themselves progressive and are hostile to oil and gas,” Miller said. “In the first full week of the session, we already began hearing about anti-oil and gas legislation. However, we’re cautiously optimistic we will forge a balance between those who feel we need to have tighter environmental regulations, and those who feel they shouldn’t be so tight that they run everyone out of the state.
“I’m hopeful there will be a nice balance reached,” Miller concluded. “But it will be a continuous, non-stop debate for the entire 60 days.”
When it comes to Texas, the PBPA finds itself on different footing. Few legislators negate the powerful impact the oil and gas industry has in Texas, whether it be pumping up state coffers, boosting employment, or contributions to counties and communities. However, not all legislators understand that in order to continue playing such a prominent role, the Permian Basin requires special attention.
“Our main objectives in Texas all center on the need to convince those elected officials who benefit from the oil and gas produced in the Permian Basin but who don’t have constituencies out here that supporting what goes on in the Permian Basin supports the entire state,” Shepperd explained.
Filed Legislation
With committee members now appointed, the pace of bill filings will increase significantly. However, as of the first of February, multiple bills were already on the radar of industry supporters:
New Mexico
HB 206, a state version of the National Environmental Policy Act called the Environmental Review Act, and SB 186, a bill that would change the penalties for violations under the Oil and Gas Act, are already garnering attention among lawmakers.
Along with tax bills that are in the works, the PBPA will keep a close eye on the governor’s plans for an aggressive renewable portfolio standard, meaning an increased production of energy from renewable sources, including wind and solar.
“We are watching to see what impacts such a standard may have on electricity costs,” Miller stated.
Texas
Multiple bills were filed early that touch the oil and gas industry, including:
SB 59: enumerating lawful use of images taken by unmanned (drone) aircraft, including electric or natural gas utilities for maintenance, air quality sampling, oil pipeline safety and protection, and many other uses.
HB 223: would amend the state Health and Safety Code, allowing funding through greenhouse gas emissions fees of energy efficiency programs administered by certain utilities. The bill also would amend the Utilities Code to allow for “targeted low-income energy efficiency program[s]” as part of energy efficiency goals.
HB 225: appears to broaden the rules for air quality permits issued by the Texas Commission on Environmental Quality (TCEQ) and require deeper analysis of permits, while also tasking the TCEQ with a report by Jan, 1, 2020, (on which it may collaborate with the Railroad Commission) about improved regulatory approaches to “preventing air emissions from oil and gas equipment,” including compressors.
HB 42 and House Joint Resolution 13 are both aimed at “allocating a portion of oil and gas production tax revenue to the counties from which the oil and gas originated and to the use of that revenue.” A severance tax trust fund would also be set up for each county, administered by the state comptroller, with each county’s share equal to the oil and gas production borne by each county, with money to be used for road and bridge construction and maintenance where “impacted by oil and gas exploration and production activities.” HB 42 is to be administered if a constitutional amendment to do so is enacted by the 86th Legislature (see below).
HJR 13 is a proposed amendment to the Texas Constitution which would authorize HB 42 and add the following language: The legislature by general law may allocate a portion of oil and gas production tax revenue not otherwise allocated by this constitution to the counties from which the oil and gas originated to be used solely for the purpose of supplementing construction and maintenance of county roads and bridges that are impacted by oil and gas exploration and production activities.
How You Can Help
“PBPA members have already been a tremendous help to the PBPA staff and leadership in preparation for both sessions in Texas and New Mexico,” Shepperd shared. “As the sessions continue, we will continue to keep our membership and board up to date on issues that could impact the Permian Basin through our newsletters, other emails, and our membership luncheons.”
As far as further help, PBPA members will have the opportunity to come to Austin and Santa Fe to meet with House and Senate members, and as specific bills are filed and testimony is scheduled, the PBPA will ask members to come testify in committee.
“Our staff frequently testifies before multiple House and Senate committees, giving a much-needed voice to our members’ interests, and in doing so keeps our state lawmakers informed on the effects their legislation would have on our industry,” said Shepperd. “Members of the Legislature appreciate hearing from industry experts on proposed legislation.”
In addition, the PBPA will be hosting its annual PBPA Day in March; the exact date will be set as the Texas session progresses.
Those who are unable to make the trip to the Capitols can still play a valuable role in the legislative process by keeping apprised of emerging issues and communicating industry concerns and perspective to senators and representatives.