The Texas Legislature has passed two bills that would provide producers with an informal complaint process to resolve disputes over lost or unaccounted for natural gas, as well as give Texas regulators the ability to assess penalties of up to $5,000 a day for violations of agency regulations.

The state Senate passed the two measures (HB 1920 and HB 3273) on Wednesday, while the Texas House of Representatives approved the bills earlier in the month. The bills have the wide support of the state's oil and natural gas industry, said Ben Sebree, vice president for governmental affairs for the Texas Oil and Gas Association, which represents a cross-section of companies that account for 92% of oil and gas production in the state. The popular measures are expected to be signed into law by Gov. Rick Perry, sources said.

But Perry's office would not confirm this. "The bills haven't been sent to our office yet. The governor will give [them] careful consideration" when he receives them, said spokeswoman Krista Moody. "It's close to the end of the [legislative] session, and there are lots of bills on our plate."

The original HB 1920 measure was the "most contentious" of the two, Sebree said. It initially allowed pipelines to claim up to 5% of a producer's volume being transported as lost or accounted for natural gas. "All sides of industry negotiated for a better approach," which is included in the final bill, he noted.

The final HB 1920 gives producers the right to file an informal complaint with Texas regulators if gatherers and/or pipelines aren't able to properly account for a producer's lost or unaccounted for gas. In addition, a producer is entitled to conduct an annual audit of the books and records of gatherers and pipelines to verify volumes related to lost or unaccounted for natural gas. The measure applies to contracts that are entered into or renewed on or after Sept. 1.

HB 3273 gives the Texas Railroad Commission the authority to assess penalties of up to $5,000 a day against a "purchaser, transporter, gatherer, shipper or seller of natural gas" for violating agency standards or code of conduct, discriminating against a shipper or gas seller, and for failing to participate in an informal complaint proceeding to which it is a party.

The measure was based on recommendations made by a blue-ribbon panel that was appointed by the Texas regulatory commission, Sebree said.

The two bills follow months of growing discontent among Texas producers and royalty owners with some of the business practices of the midstream sector of the industry. Generally, they have lamented a lack of transparency in contracts (see Daily GPI, Nov. 15, 2006; Nov. 1, 2006).

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