American Oil and Gas Reporter - September 2015 - 143

ConventionCoverage: Texas Independent Producers & Royalty Owners
legislators remain worried about the fiscal
impact of a Texas Supreme Court decision
regarding how the state funds public
schools. Craymer noted more than 600
school districts sued the state in 2011
after the Texas Legislature sought to
cover a budget shortfall with an education
funding cut that exceeded several billion
dollars. The districts argued Texas was
failing to meet its constitutional obligations
on educating its citizens.
Craymer reported the decision was
expected later this year or in early 2016,
with many analysts predicting victory
for the plaintiffs.
"I have read the state's brief responding
to the plaintiff's filings, and the state has
made some pretty compelling points,"
he said. "I would not take it for granted
that the state is going to lose this case,
but if it does, it ultimately may cost the
state a couple billion dollars to bring the
school finance system into compliance."
Craymer said a two-year discussion
his group had been having with the Texas
comptroller's office on its sales tax assessment methods for natural gas compressors was complete. Historically, many
of those units were exempt because the
state considered them part of the gas processing process, but in 2013, some state

Dale Craymer, president and chief
spokesman for the Texas Taxpayers and
Research Association, warns the Texas
Independent Producers & Royalty Owners
Association that a Texas Supreme Court
decision on state funding of schools remains a concern. More than 600 public
school districts sued the state, asserting
it was not meeting its constitutional obligations. Craymer told TIPRO a decision
was expected late in 2015 or early next
year, with many analysts predicting a
decision favoring the schools.

auditors decided that the compressors
were transportation equipment and therefore subject to taxation. A review by the
comptroller has revived the compressors'
traditional processing exemption, he stated.
Operators now may have to worry
about how the state assesses taxes on
trailer-mounted hydraulic fracturing equipment, Craymer warned. Depending on
how the equipment is used, it may either
be taxed under the general sales tax as
specialized moveable equipment, triggering additional local taxes, or the state
motor vehicle sales tax, as a motor vehicle,
he described. Craymer added taxation as
a motor vehicle also might allow an exemption if the equipment was used in
multiple states. The comptroller's office
has issued new rules trying to limit the
ability of taxpayers to classify the equipment as a motor vehicle, which may limit
the equipment's ability to qualify for increased tax benefits, he said.
"You who have not been moving this
equipment across state lines probably are
paying sales tax on it, and this will not
affect you," he said. "But if you have
fracturing equipment that you have been
using in multiple states, this ultimately
could impact you."

Pre-Emption Bill
Although the state committed to increase spending on transportation needs,
it failed to act on new water needs,
asserted Senator Judith Zaffirini, DLaredo, whose district encompasses much
of the Eagle Ford Shale production area.
Water projects were a focus of the 2013
legislative session, and received an extra
$2.0 billion then, but new efforts for
funding were rejected in 2015, she said.
In addition to transportation, the budget
process allocated more funding for energy
projects, Zaffirini reported. Legislators
approved a $2.8 million increase in the
RRC's base budget, along with an extra
$2.0 million to increase the number of
safety inspections and more money to
hire 20 full-time employees. The Texas
Commission on Environmental Quality
received another $2.0 million to expedite
permitting, she said.
While the 2015 session saw 20 percent
of all bills survive the legislative process
and win approval, Zaffirini said 14 of
the 24 bills TIPRO supported were signed
into law. "You truly are to be congratulated
that 58 percent of the bills you supported
passed," she said.

Texas legislators approved $2.0 billion
for water projects in the 2013 session,
but Senator Judith Zaffirini, D-Laredo,
tells the Texas Independent Producers
& Royalty Owners Association summer
conference that new attempts for funding
failed to advance in 2015.

TIPRO's priority, HB 40, passed because the oil and gas industry worked
with municipalities to address concerns
from both sides, Zaffirini stated. The preemption bill gives local governments a
degree of authority, allowing them to
pass ordinances on noise, light control,
and other nuisance measures, while keeping regulation of oil and gas activities at
the state level.
One of the major disappointments in
the 2015 session was Governor Gregg
Abbott's decision not to sign SB 1393,
an anti-theft bill sponsored by Zaffirini,
she related.
Zaffirini's bill sought to change the
state's penal code to increase penalties
for stealing pipeline or oil and gas equipment, or oil or natural gas. She said SB
1393 also would have stiffened the penalty
for an oil field theft if the defendant was
in a contractual or employment relationship
with the owner of the commodity or
equipment, and made it a crime to purchase
or sell oil, gas or condensate without
first obtaining permits from the state.
"Dealing with the governor's office,
we worked very hard with the industry
to collaborate and compromise on the issues and the language, and make very,
very clear that this was a critical problem.
In the Permian Basin, they are reporting
thefts of between $400,000 and $800,000
a month," she said. "Yet the bill was vetoed. I am not happy, but we are already
working on another bill for 2017."
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American Oil and Gas Reporter - September 2015

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