On Jan. 10, 2017, the 85th regular session of the Texas Legislature convened in Austin, and already several bills are on the table that, if adopted, could impact the oil and gas industry in Texas.
State Sen. Van Taylor, R-Plano, has introduced the Oil and Gas Majority Rights Protection Act for Secondary and Tertiary Recovery Operations (SB 177). If enacted, the bill would make it easier for Texas oil and gas companies to conduct secondary recovery operations with the consent of a supermajority (70 percent) of working and royalty interest owners in a field. Texas law currently requires the unanimous approval and agreement of all working and royalty interest owners in order for secondary recovery operations to commence in a field.
Senator Taylor argues that the bill will be a boon to energy production in the state, claiming that geologists estimate that an additional “10 to 20 billion barrels of oil worth over $1 trillion will come out of the ground” if the bill is passed. Critics argue that the bill will give oil and gas companies power to compel dissenting, and generally smaller, interest owners to allow secondary recovery operations on their private property.
State Rep. Tom Craddick, R-Midland, has introduced House Bill 129 to require an operator to first obtain the consent of a royalty interest owner before relying on a document other than a check stub, an attachment to a payment form or another remittance advice to list information about production, sales price, deductions and ownership interests required by Section 91.502 of the Texas Natural Resources Code. Currently, an operator may simply rely on its customary monthly billing practices to convey the information required by Section 91.502, with or without the royalty owner’s consent.
State Rep. Richard Peña Raymond, D-Laredo, has introduced legislation to increase penalties for bypassing permitting requirements for oil and gas production and transportation. If passed, House Bill 891 would make it a felony to recklessly possess, remove, deliver, accept, purchase, sell, or physically move or transport oil, gas or condensate as part of any transaction that requires a permit or approval or authorization of the Railroad Commission if the commission has not issued such a permit and no permit is pending. This provision would essentially make it a felony to drill or complete an oil or gas well without a permit pending with the Railroad Commission. Only pipeline operators or gatherers authorized to operate by the Railroad Commission are exempt from this criminal penalty.
Other legislators also have introduced bills and constitutional amendments to address a variety of topics, including (1) changing the name and the name and governance of the Railroad Commission of Texas, the state’s energy regulator, to some variation of the Texas Energy (or Energy Resources) Commission (HB 237, HB 642, and HJR 47); (2) requiring the Railroad Commission to post on its website comprehensive enforcement information, including inspections, violations, amounts of penalties assessed and statistical data (HB 247); (3) altering the value of mineral interests exempt from taxation from $500 to $2,000 (HB 302); and (4) exempting mineral interests owned by certain charitable nonprofit corporations (HB 845 and HJR 51).
More information about these bills can be found on the Texas Legislature’s website at http://www.capitol.state.tx.us/.