American Oil and Gas Reporter - August 2016 - 97

ConventionSection: Texas Independent Producers & Royalty Owners

RRC's Sunset Remains
Top Priority In Texas
By Danny Boyd
Special Correspondent
AUSTIN, TX.-Members of the Texas
Independent Producers & Royalty Owners
Association hope the third time is a charm
when it comes to the Texas Legislature's
sunset review of the Texas Railroad Commission. As TIPRO prepares for the association's summer conference, scheduled
for Aug. 17-18 at the Hyatt Hill Country
Resort in San Antonio, staff and members
continue to assess strategy for the state
legislative session that begins in January.
Yet again, sunset review is the industry's
front-and-center issue.
"Sunset review has been a cornerstone
issue and, frankly, I don't think the parties
within the industry are that far misaligned
on their views of sunset proposals," assesses TIPRO Chairman Allen Gilmer,
chief executive officer of Drillinginfo
Inc. in Austin. "We all understand what
it should look like going forward. We
have to get it done this session."
On April 29, the Sunset Advisory
Commission-created by lawmakers in
1977 to review state agencies and recommend improvements-released its latest
RRC sunset proposals, observes TIPRO
President Ed Longanecker.
Previous legislative sessions saw sunset
review become bogged down in political
issues, including whether incumbent commissioners should be forced to resign
their seats to seek another public office,
Longanecker recalls. "We are not dealing
with those same issues for this sunset review process, but certainly there are a
number of staff recommendations that
concern us, and we are weighing in on
them," he assures.
TIPRO's Takes
TIPRO is neutral on an Advisory Commission recommendation to change the
RRC's name, Longanecker says. "We
have members on both sides of that issue,"
he comments. "Some believe a name that
better reflects the industry it regulates
would be helpful. Others believe that our
industry, global business partners and additional stakeholders fully understand

who regulates oil and natural gas development in Texas. At the very least, we
are asking if the name change is a priority,
it should be filed as separate legislation
and not as part of the sunset review bills.
Otherwise, it could hinder progress."
However, TIPRO opposes the Advisory
Commission's recommendation to have
the State Office of Administrative Hearings
(SOAH) consider gas utility cases and
hear all other contested cases instead of
the RRC, Longanecker indicates. The association also opposes a similar recommendation to have gas utility regulation
shifted to the state Public Utility Commission.
The RRC already has a well-established
process for handling hearings through
the agency's Docket Services and Hearings
Division, and a previous transition of gas
utility cases to the SOAH provided no
benefits, Longanecker describes. TIPRO
believes the RRC has a proven record of
handling gas utility regulation, and sees
no benefit from transferring regulation
to the PUC, he adds.
TIPRO takes no position on an Advisory Commission call for the RRC to
improve oil and gas monitoring and enforcement, but opposes a rule for issuing
expedited penalties for minor violations,
details the association. The RRC's process
for tracking and resolving minor violations
works well to achieve compliance, and
most minor violations are resolved expeditiously by e-mail or phone, Longanecker
suggests. According to TIPRO, the annual
tracking and reporting proposal is redundant of procedures the commission already
has in place.
The Advisory Commission report also
calls on lawmakers to require the RRC
to develop a definition of repeat violations
in rule, and to report the number of repeat
violations on its website, but TIPRO has
expressed concern about the proposal's
wording and maintains such treatment
for repeat violations should involve major
violations only.
TIPRO does express support for a recommendation to direct the RRC to audit
a sample of oil and gas production and
transportation reports, but the group op-

poses a call for increasing tiers of the financial assurances that are required of
operators, says Lindsey Miller, TIPRO's
director of government and regulatory
affairs.
The Advisory Commission report states
that insufficient and inequitable bonding
requirements contribute to a backlog of
abandoned wells, and calls for amending
blanket bond requirements to better reflect
risk and increase equitability.
"More or less, this recommendation
would generate an additional $1.3 million
in bond revenue for the commission annually, but it would cost operators within
the new tier categories about $106 million
collectively," Miller warns.
Creating additional tiers would put
undue pressure on smaller producers who
might not be able to access the additional
bonds, Longanecker says. Despite reports
that the state faces a potential expense of
$160 million to plug almost 9,372 orphaned wells, the industry plugs 92 percent
of those orphaned wells, he points out.
"The RRC has access to funds made
available previously through statute to
plug orphaned wells," Longanecker observes. "It's more an education issue with
regard to the agency."
The actual number of orphaned wells
falls far short of the state tally because
wells categorized as orphaned can become
assets as operators update required reporting, Miller explains. She adds that it
also is important to note that plugging
costs incurred by the commission are
covered by fees and surcharges imposed
on the industry. With the cost being met
by industry fees, there is no scenario in
which it falls back on the individual taxpayer, she emphasizes.
TIPRO indicates the association has
no position on Advisory Commission
recommendations to improve RRC oversight of pipeline infrastructure and contracting procedures, and allow the Oil
and Gas Regulation and Cleanup Fund
Advisory Committee to expire, but it is
supporting a recommendation to continue
to require the RRC to submit its legislative
report on the Oil and Gas Regulation and
Cleanup Fund.
AUGUST 2016 97

American Oil and Gas Reporter - August 2016

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