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Texas Legislative Session Could Be Light on Oil/Gas

Texas oil and gas interests begin a new legislative session on Tuesday following a year that saw growing resistance to fracking in some corners of the state and heightened citizen awareness of drilling and pipelines. But industry efforts to assuage citizen concerns -- not to mention much-weakened commodity prices -- could give oil and gas a relatively easy time of it in Austin this time around.

"Personally -- and I'm an optimist -- I don't believe that the legislative load will be as heavy as we've seen in years past," Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO), told NGI's Shale Daily.

Longanecker noted that there have been numerous changes among the players in government and elsewhere. Texas has elected a new governor, lieutenant governor and comptroller, he said. There's also a new land commissioner and agriculture commissioner, eight new freshmen state senators and even more new members in the House. That's not to mention one new commissioner on the Railroad Commission of Texas (RRC) (see Daily GPIJan. 5).

"This is going to be a rebuilding year, I think, a rebuilding session with the number of newly elected officials we have from the top down...I don't think that there will be an extensive list of onerous bills filed against the oil and gas industry," he said. "I think especially now with oil prices depressed, hopefully there's going to be more support for than opposition to drilling."

That said, though, there are bills right out of the gate that have TIPRO eyes on them. Two of them, HB 539 and 540, were filed late last year by Rep. Phil King (R-Weatherford) with the intent of preventing any more Texas cities from enacting bans on hydraulic fracturing (fracking), as the Barnett Shale town Denton did last year (see Shale DailyDec. 18, 2014Dec. 5, 2014Nov. 5, 2014). TIPRO is supporting both bills.

Longanecker also mentioned similar actions in other states, such as in New York, which has banned fracking (see Shale DailyDec. 17, 2014). He said many believed Denton voters would not approve a fracking ban, but they did.

"Local control and efforts by municipalities and/or activists to stall or ban exploration and production activities are going to continue," Longanecker said. "In the state there are a variety of cities and municipalities that are considering moratoriums. In most cases they're simply looking to update their drilling ordinances, some of which haven't been updated for 30, 40 or 50 years, to catch up with the increase in production.

"We think that home rule cities like Denton obviously have the right to regulate some aspects of exploration and drilling, including setbacks, but we think that obviously they don't have the legal authority to enact ordinances that outlaw conduct like hydraulic fracturing that's already been approved by agencies like the Railroad Commission."

HB 539 and 540, if they pass, along with pending state and industry legal challenges to the fracking ban in Denton should "...make cities and grassroots groups think twice before moving forward with similar efforts like we saw in Denton," Longanecker said.

He said the circumstances leading up to the Denton ban were unique: a company drilling on grandfathered leases in locations that did not honor subsequently enacted municipal setback requirements. "Certainly in any industry you're going to have a bad actor or two, but that's not reflective of the industry as a whole," Longanecker said. "I think that to date, home rule cities have been effective in regulating what they are able to regulate from an E&P perspective.

"We may see changes. We may see legislation. We may see efforts from a regulatory standpoint to limit even setbacks and control by home rule cities and perhaps putting something related to that in statute so it's regulated from the Railroad Commission. I think that's a long shot."

Longanecker said he's spoken with city leaders elsewhere in Texas, and they don't want what happened in Denton to happen in their towns. "They don't want the legal challenges. They don't want the fight. They have other priorities and they have coexisted with oil and gas effectively and will continue to do so."

During the last legislative session, TIPRO ended up tracking 450 bills of interest to the industry. This time around, besides local control issues, other areas that TIPRO will be watching are roads and infrastructure investment; water use and conservation; and endangered species conservation reform. Additionally, TIPRO will be working to preserve the gas severance tax reduction that producers currently enjoy for high-cost wells (see Shale DailyNov. 13, 2014).

Given increased attention being paid to associated natural gas flaring in the Eagle Ford Shale, something could come up in the legislature with the intent of curtailing the practice, Longanecker said. However, he said he expects any further regulation of flaring to come out of the RRC.

The legislature meets in regular session every other year. Regular sessions are limited to 140 days.

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