Both Texas and Oklahoma reached the end of their legislative sessions for 2019 last week.
The 86th regular legislative session in Texas ended on the 140th day with school finance and property taxes dominating the session. However, several bills were passed that impact the oil and gas industry.
Regulatory Agency Funding
The Texas Railroad Commission, the agency that regulates the industry, received $26.9 million in funding to update computer systems with a goal of increasing permit efficiency.
Road Repairs and Maintenance
SB 500 and HB 1 allocated $250 million for county roads impacted by oil and gas activities. HB 4280 will allow that money to be distributed to counties in a more efficient manner, with greater focus for energy-impacted areas.
HB 3246 was passed to allow the industry to more clearly operate and promote the produced water recycling industry. The act, which takes effect September 1, specifically amends the Natural Resources Code to identify who has possession of the water emitted from a producing well and through the recycling and reuse process.
HB 3557, the Critical Infrastructure Protection Act, strengthens protections of Texas’ critical infrastructure facilities, including electric power and water treatment plants, chemical plants, ports and telecommunication transmission facilities from those who trespass with the intent to damage or interrupt operations. The bill protects these services while maintaining current laws and statutes that allow for free speech and the right to protest. The bill criminalizes damage to facilities – including oil and gas locations that are under construction – with a third-degree felony which carries a penalty of up to 10 years in prison.
Legislators made an effort to reform eminent domain in this session, but no compromise language was agreed upon. Although hundreds of hours were spent in negotiation, legislators were unable to find common ground. SB 421 sought to better protect property owners when private companies condemn their land. The bill was severely altered in a House committee and could not make it out of a joint House-Senate conference committee.
Several bills attempting to overturn local ordinances requiring private employers to provide paid sick leave also didn’t pass this session. This requirement has been appearing in cities across the state, but the legislation got bogged down in a debate over protecting nondiscrimination ordinances, and a key late-session deadline was missed.
Governor Greg Abbott has until June 16 to sign or veto the bills that pass. However, no piece of legislation requires the signature to become law. In Texas, the governor may choose to file a bill without a signature, allowing it to become law, but without his expressed endorsement.
This year’s session saw significantly less debate regarding the oil and natural gas industry compared to the last two years, when the gross production tax took center stage.
Governor Kevin Stitt and legislative leaders finalized a budget that includes $157.5 million increase in common education appropriations and $200 million to be put in the Revenue Stabilization Fund to offset revenue swings as oil and natural gas prices move up and down. Oklahoma’s first-term governor inherited a rainy day fund of $400 million and has made an administrative priority of setting more cash aside. With a $600 million budget surplus, due in part to continual increases in gross production tax receipts, Stitt’s stance put him at odds with some legislative leaders who wanted to use more of the excess funds to offset years of budget cuts. Stitt has set a goal of reaching $1 billion in savings this year and $2 billion by the end of his first term.
Industry-supported bills that were signed by Gov. Stitt include:
- HB 2097, the Underground Facilities Damage Prevention Act, improves Oklahoma pipeline safety by requiring excavators who are not licensed to notify the One-Call System if they are excavating in public or private easements or rights-of-way to ensure no underground facilities are present before earth-moving equipment can be used. Changes were also made to allow for more time to mark, locate or otherwise provide the appropriate location of the underground facilities once notice has been received.
- HB 2612 created the Oklahoma Medical Marijuana and Patient Protection Act, fine-tuning the state’s medical marijuana law and including increased employer protections.
- HB 2676 allocated an extra $30 million to the county bridges and roads improvement fund.
- HB 2095 extends the one-time tax credit for investments in qualified clean-burning motor vehicles and equipment to December 31, 2027. The bill provides the credit for natural gas-powered vehicles will be based on the gross vehicle weight of the qualified vehicle. It also provides the credit for fuel delivery equipment will be 45% of the cost of the qualified clean-burning motor vehicle.
- SB 1003 creates the Oklahoma Environmental, Health and Safety Audit Privilege Act, allowing companies to enter into agreements to conduct their own audits of their regulatory compliance. Those audits would be submitted to state agencies but in most cases would be exempt from open records law.
Bills opposed by the industry that did not pass include HB 1404, which would have allowed for a county-by-county aggregate tax. SB 517 would have required written consent and compensation in the use of temporary pipelines. This has been a contentious issue in the STACK and is sure to be seen again during next year’s session. HB 1992 and SB 471 would have allowed for increase ad valorem taxes on the industry by allowing municipalities to create public safety districts and raise taxes to fund said districts. Industry leaders should be prepared to see this issue again in 2020.