As of last Tuesday, certain fees paid by producers to the Railroad Commission of Texas (RRC) have increased by 150% in order to fund the Oil and Gas Regulation and Cleanup Fund, which was created by Senate Bill 1, passed by state lawmakers last year.

The fees paid to the RRC's Oil & Gas Division are increasing due to changes to Statewide Rule 78 to include surcharges intended to fund implementation of SB 1. The RRC's final rule to implement the surcharge was published in the Texas Register on Feb. 24.

For example, among the largest of the affected fees charged by the RRC is one for a voluntary cleanup application, $1,000. The 150% surcharge now brings that fee to $2,500. The majority of the affected fees, however, range from $100-300. With the addition of the surcharge these will now run $250 to $750.

Funds collected are to cover the RRC's costs for activities such as oil and gas monitoring and inspections, oil and gas remediation, oil and gas well plugging, public information and services related to those activities, and administrative costs and state benefits for personnel involved in those activities.

The RRC said it identified fees on which surcharges would be imposed based on statutory requirements. "Comparing the revenue generated by those fees with the costs associated with the functional areas specified in the statute, the commission determined that a surcharge of 150% of the respective fees would be needed," the RRC said in a notice.

Surcharges are being imposed on fees associated with the filing of drilling permits, organization reports, voluntary cleanup program applications, inactive wells (plugging extensions), rule exception requests, reconnection fees following cancellation of P-4 certificates of compliance, waste disposal facilities and waste hauler permits (excluding disposal wells permitted under Rule 9), surface discharge permits, injection well permits and hydrocarbon storage permits.

SB 1 amended the Texas Natural Resources Code to address funding issues raised by the Texas Sunset Advisory Commission in its analysis of the RRC. With the creation of the Oil and Gas Regulation and Cleanup Fund as a General Revenue-Dedicated account and the imposition of fee surcharges, SB 1 implemented the Sunset Advisory Commission's recommendation that funding from general revenue for regulatory functions and staff, including benefits, be offset by fees or other collections from the regulated industry (see Daily GPI, April 6, 2011; Jan. 31, 2011).

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