American Oil and Gas Reporter - October 2016 - 108

TAEP Issues Update

RRC Sunset Review Remains A Priority
By Danny Boyd
Special Correspondent
WICHITA FALLS, TX.-With the 85th
Texas Legislature set to convene in January, the Texas Alliance of Energy Producers is urging lawmakers to pass a noncontroversial bill reauthorizing the Texas
Railroad Commission after six years of delay and debate over the agency's role and
future.
As it prepares for its fall board meeting, Nov. 14-15 at the Fort Worth Historic
Hilton, the Alliance continues to grapple
with a litany of federal regulatory moves,
but hopes divisive issues that have sidelined RRC reauthorization as a part of
Texas' sunset review process can be taken up separately after legislators approve
the agency for another dozen years, says
Alliance President Alex Mills.
"We are urging the legislature to pass
what we call a noncontroversial bill," Mills
affirms. "Let us stay away from proposals about a possible name change, changing the number of commissioners, or any
proposal about whether commissioners are
elected or appointed. Debate over these issues and others has derailed previous attempts to get the commission approved in
the sunset process. We would like to see
those things addressed in separate legislation."
On the name change, the Alliance
Board of Directors has voted to keep the
current name, although the RRC no longer
regulates railroads and the Sunset Advisory Commission staff has recommended
the agency be renamed the Texas Energy
Resources Commission.
"The (argument for) a name change is
that the current name no longer is representative of the true function of the organization, but everybody knows the Railroad
Commission has been the regulatory
agency for oil and gas in Texas, and in
some respects the nation, for years," Mills
says. "But the name change is not one of
those issues about which we feel strongly enough to fall on our sword over."
The Alliance also continues to favor
statewide election of commissioners, and
wants to maintain the current structure of
three commissioners, Mills continues.
Sunset Review
The Sunset Advisory Commission,
which consists of five state senators, five
House members, and two citizens appointed by the House speaker and lieutenant
governor, conducted a public hearing

Aug. 22 on recommendations offered by
the Sunset Commission staff, relates Alliance Chief Lobbyist Bill Stevens.
The RRC's fortunes should be aided by
the familiarity of Sunset Advisory Commission Chairman Larry Gonzalez, a Republican state representative from Round
Rock, Tx., with the agency, Stevens says.
Gonzalez has chaired the Natural Resources Subcommittee of the state House
Appropriations Committee, and is well
aware of the potential impact of proposed
changes, Stevens says. "It is his goal to
have a clean bill that continues the agency
for another 12 years, and that is our goal,
too," Stevens says.
He says several relatively noncontentious issues, including new pipeline fees
that are unopposed by the state's pipeline
association, could be included in a bill to
continue the agency's functions.
"Whether members of industry or environmental groups, we are urging interested parties with specific Railroad Commission issues they want addressed to go
through the normal legislative process of
committee hearings in both chambers. We
can debate issues in committee or on the
respective floors in the process of working to pass a bill," Stevens says.
Mills says the Alliance strongly opposes Sunset Commission staff recommendations to increase bonding requirements and
to move natural gas rate hearings from the
RRC to the State Office of Administrative
Hearings.
"Hearings at the RRC involve very
technical issues and are very involved in
energy law," he emphasizes. "We need experts in these areas, and the commission
provides experts in oil and gas issues.
"The reason we oppose the bonding
proposal is that it would make bonding
more expensive, and this is not a good time
to be doing that," he adds. "Our members
have had two very rough years."
A proposal to address what the Sunset
Commission staff views as insufficient and
inequitable statutory bonding requirements that contribute to a backlog of abandoned wells would increase bond amounts
for midsized producers by as much as 50200 percent, Stevens points out.
Tier structures proposed by the staff
range from requiring a $22,500 blanket
bond for 10 or fewer wells to requiring a
$213,000 blanket bond for operators with
61-99 wells, according to an Alliance
overview.
"We don't want that in the sunset bill,
and we will fight it before the legislature,"

108 THE AMERICAN OIL & GAS REPORTER

Stevens vows.
At the initial hearing in August, at least
one Sunset Advisory Commission member
questioned why the staff appeared to be mad
at the RRC, he notes. "His position was
don't fix it if it isn't broke," Stevens relates.
Since that August hearing, the Alliance has continued to meet with the advisory commission team, lawmakers and
regulators as the Sunset Commission prepares for a November vote on recommendations to the entire legislature, he says.
Anticipated Legislation
Other legislation the Alliance anticipates in the coming session relates to induced seismicity and disposal wells in response to tremors felt in the Barnett
Shale region, Stevens says. He notes that
earlier this year, Governor Greg Abbott appointed a seismicity technical advisory
committee created by HB 2, which was
passed in 2015.
"I think there will be legislation attempted," Stevens assesses. "The Railroad
Commission has done a judicious job in
looking at this. It hasn't overreacted. We
have not had any quakes that were very
damaging, and they certainly haven't
been of the magnitude seen in places such
as Oklahoma and Kansas. But I assume
we will have legislation that will require
curtailing disposal or making it harder to
permit a disposal well."
Legislation to impose additional
groundwater protections could be offered
as well, although Stevens contends Texas
has adequate groundwater protections in
place already.
"At the same time, we are cognizant
that there can be mistakes and a localized
problem, but companies are working to
guard against any type of pollution of a
major aquifer or water source," he assures.
Other issues the Alliance is following
include the possibility of a well allocation
bill that would enable operators to obtain
permits to drill horizontal wells across
lease lines if no pooling arrangement existed with all mineral holders, Mills says.
"It's a controversial issue, but some
companies think we need a law to clarify what the state's legal position on this
should be," he says.
There also could be legislation to
strengthen flaring rules, Stevens offers. The
Alliance continues to support the Railroad
Commission as the agency asserts its authority to regulate oil and gas in Texas, despite attempts by the U.S. Army Corps of
Engineers to ban drilling within 4,000 feet

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