With the opening of the 84th Session of the Texas Legislature on January 13, 2015, two of the more closely watched bills in the energy arena will be House Bill 539 (HB539) and House Bill 540 (HB540).

HB539, filed on December 17, 2014, by Representative Phil King (R) of Weatherford, relates to “the procedural requirements for the adoption of a municipal regulation, limitation, or prohibition on the production, storage, or transportation of oil or natural gas.” The bill proposes to require any municipality seeking to enact an “oil and gas measure,” which the bill defines as “a municipal ordinance or other municipal measure … to regulate, limit, or prohibit the production, storage, or transportation of oil or gas,” to prepare a Fiscal Note and an Equalized Education Funding Impact Statement.

The Fiscal Note must state the fiscal implications of the potential oil and gas measure for the state and local governments; the probable cost to the state that will result from the measure, including potential lost tax revenue, lost fees, lost royalty income, and diverted state funds; and the amount of money the municipality adopting the measure will be required to annually remit to the state as reimbursement for the cost to the state resulting from the oil and gas measure.

The Equalized Education Funding Impact Statement focuses on the difference in funding between the “anticipated total cost of attendance credits” for a school district covered by the oil and gas measure and the total cost of attendance credits that would result if the school district’s maintenance and operations tax revenue were not reduced due to the oil and gas measure.

HB539 also provides that if a municipality adopts an oil and gas measure, the municipality must reimburse the state for the cost to the state for a five-year period resulting from the measure as determined by the Fiscal Note.

HB540, also filed on December 17, 2014, by Rep. King, concerns “the submission to the attorney general of a measure proposing the enactment or repeal of a municipal ordinance.” HB540 applies only to a municipality whose charter provides for the proposal by petition of a measure to enact a new ordinance or repeal an existing ordinance. The bill provides that before ordering an election on a proposed new ordinance, the municipality must submit the proposed measure to the attorney general. Within 90 days of the municipality’s submission, the attorney general must determine whether any portion of the proposed measure would violate any constitutional, statutory, or regulatory provisions, or whether the proposed measure would cause governmental taking of private property requiring that just compensation be paid to the property owner.

HB540 would prohibit a municipality from holding an election on the proposed measure if the attorney general determined that any portion of the proposed measure would violate the Texas or federal constitution or a state statute or rule or would cause governmental taking of private property.

No action has been taken on either bill thus far.