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The House Committee on Energy Resources has published their Interim Report to the 84th Legislature.  See below for interim charges assigned to the committee and recommendations related to those charges:
 
Charge 1 – Study the impact of the expanding oil and gas exploration and production occurring across the state. Included in the study should be both the positive impacts of the exploration and production as well as the new challenges they are presenting. The study should encompass a review of the following issues:

  • The effect on the state budget and the Economic Stabilization Fund;
  • The overall impact on the state economy;
  • The impact on property values and local taxes;
  • The effect on roads;
  • The impact on local school districts;
  • The complex relationship between land owners, royalty owners, and operators;
  • The impact on the environment, including emissions and injection wells;
  • Projected water needs and how those fit with our state water plan; and
  • The housing issues created by the number of workers needed in areas of shale plays.

 
Recommendations:

  • The 84th Legislature should engage in continued dialog with the oil and gas industry to ensure the state has proper infrastructure to assist with the creation of a robust oil and gas economy.
  • The 84th Legislature should insist that the Railroad Commission of Texas and the Texas Commission on Environmental Quality work together to address the issue of flaring. This includes ensuring that the RRC notifies TCEQ in a timely manner when flaring permits are granted or extended. The committee also recommends a more thorough vetting by the RRC for these types of permits to ensure proper practices are being followed. Additionally, flaring permits and the status of those permits should be published in county by county searchable format on the RRC website for transparency.
  • The 84th Legislature should consider non-punitive ways to encourage the use of recycled and brackish water by the oil and gas industry, including consideration of a severance tax exemption.
  • The high cost of living in shale play areas has affected many state agencies. Many of the state agencies have been preemptive and implemented strategies to help alleviate the cost but many still need additional help and in many cases funds. The committee would recommend to the 84th Legislature to address the high cost of living in shale play areas be address and additional funding be given to the effected state agencies.

 
Charge 2 – Study the P5 permitting process at the Railroad Commission to determine whether the process is efficient and effective and whether there are actions that can be taken to improve the process.
 
Recommendations:

  • The committee will continue to monitor the P5 permitting process and work with the Railroad Commission to ensure the permitting process continues to work efficiently.

 
Charge 3 – Study and review the appropriation of general revenue dollars allocated to the Railroad Commission for improvements in IT systems to ensure those funds are being utilized to streamline the permitting process and to allow access to information for all parties that conduct business at the Commission.
 
Recommendations:

  • The committee believes that the Railroad Commission must function to the highest level of efficiency and to do so it must have all the necessary tools to bring their antiquated information technology systems into the new century. At this time, the committee would recommend the continued monitoring of the implementation to ensure that the necessary upgrades are completed in a timely manner and within the budget allotted for this transition. The committee would also recommend that the 84th Legislature monitor ongoing technology upgrades and reach out to industry representatives to ensure that the technology improvements at the Commission are user-friendly.

 
Charge 4 – Review the application of Texas Business & Commerce Code, Section 9.343, to determine the legal rights of unperfected security interests of oil and gas producers with respect to subsequent purchasers, specifically in the context of a bankruptcy proceeding such as Arrow Oil & Gas, Inc. v. SemCrude, L.P. and subsequent cases.
 
Recommendations:
No recommendations.
 
Charge 5 – Monitor the implementation of HB 2982 (83R) to ensure that the required rulemaking is completed efficiently and in a timely manner and SB 1747 (83R) to ensure effective implementation in keeping with legislative intent.
 
Recommendations:

  • The committee will continue to monitor the Railroad Commission Pipeline Safety Division and pipeline operators to ensure the intent of the bill is delivered. The committee would recommend that the 84th Legislature monitor the Railroad Commission to ensure a rule is purposed and adopted and in the event that a rule is not proposed legislative action be taken.
  • The committee believes SB 1747 was a one-time grant program to help address the critical conditions of county roads. The committee would recommend that the 84th Legislature study and implement a long term funding solution.

 
Charge 6 – Examine the impact on Texas’ economy and businesses of the recent expansion of oil and gas production in Northern Mexico. Assess opportunities for economic growth in Texas and collaboration between Texas businesses and Mexico resulting from Mexico’s energy reform, including Mexico’s efforts to recover shale gas from the Eagle Ford Shale.
 
Recommendations:

  • The committee would recommend continued monitoring of the Mexican oil and gas reforms and provide any advice they may need.

 
Charge 7 – Study the current conditions surrounding the increased seismic activity in the Barnett Shale and other areas of the State. Specifically, review the possibility that increased exploration and disposal well activity could impact seismic activity. The committee shall review active oil and gas activity and injection wells in areas experiencing increased seismic activity.
 
Recommendations:

  • The Subcommittee on Seismic Activity was pleased at the determination and hard work of all involved with this difficult issue. The Subcommittee would like to commend Mayors Alan Brundrett and Lynda Stokes for their commitment to public service and would further commend Railroad Commissioners Barry Smitherman, David Porter, and Christi Craddick for taking swift action to address the issue of increased seismic activity in Texas.
  • The Subcommittee finds no evidence to support a causal link between the process of oil and gas extraction known as “hydraulic fracturing” and increased seismic activity.
  • The Subcommittee supports the disposal well rules enacted by the Railroad Commission on October 28, 2014, and recommends that the 84th Legislature give the rules time to take effect before taking further legislative action regarding disposal wells or injection well permitting.
  • The Subcommittee recommends that the 84th Legislature examine all sources of revenue to increase funding for seismic monitoring in Texas, either through direct appropriations to the Railroad Commission, or through appropriations to an academic institution with expertise in Texas geology and that is capable of working with the Texas Railroad Commission and the United States Geological Survey, to increase the level and quality of seismic monitoring in Texas.

 
Charge 8 – Conduct legislative oversight and monitoring of the agencies and programs under the committee’s jurisdiction and the implementation of relevant legislation passed by the 83rd Legislature. In conducting this oversight, the committee should:

  • consider any reforms to state agencies to make them more responsive to Texas taxpayers and citizens;
  • identify issues regarding the agency or its governance that may be appropriate to investigate, improve, remedy, or eliminate;
  • determine whether an agency is operating in a transparent and efficient manner; and
  • identify opportunities to streamline programs and services while maintaining the mission of the agency and its programs.

 
Recommendation:

  • The current policy of the Railroad Commission relating to the media is concerning and lacks transparency. During the interim, the Commission received criticism about this policy from many outside parties, including media, the general public, industry and interest groups. As a response to this criticism, the Commission hired a Director of Communications who started in November. While the committee appreciates this action taken by the Commission, we are still concerned about the Commission's ongoing policy of disallowing media access to any division head or technical staff member other than the Executive Director or Director of Communications.