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The committee met to discuss interim charges involving oil field theft and clean air attainment.
 
Interim Charge #6
Study and make recommendations for solving the oil field theft problems facing Texas, including identifying the proper mechanisms for increasing enforcement effectiveness.
 
Senator Judith Zaffirini

  • Worked very hard to pass a bill that died in process, have continued to work with all stakeholders to try and resolve differences and bill is in process for next session

 
Robert Ream, Energy Security Council

  • ESC is for security professionals and law enforcement involved with energy
  • Mechanism for information sharing between private industry and law enforcement
  • Fully supports legislative effort to give members and law enforcement the tools to deal with specific crimes
  • In 2013, theft rate was 1-3%, loss of 700 million to industry and resulting tax revenue
  • Oil field crime includes not only oil produced, but also byproduct
  • ESC is working with law enforcement to raise awareness, but current processes are insufficient to meet the needs of industry in Texas
  • Changes to law will help investigate and prosecute these crimes
  • Senator Chuy Hinojosa comments that committee knows the issue, but is looking for suggestions to solve the problem
    • New technology is making the crimes more difficult, but a lot of the legal tools included in last session’s oil theft bill would be helpful, HB 3291
  • Sen. Hinojosa commented that HB 3291 was vetoed as too broad, one of the challenges is narrowing the legal framework to fit the crime
    • Problem with this is that the crimes are very broad, involves product, byproduct, and even wastewater
    • Penalty severity in last session’s bill was in line with severity of crime
  • Senator Eddie Lucio Jr. asks what recommendations ESC would have at this point
    • ESC believes that HB 3291 met expectations well
  • Sen. Zaffirini also asks for specific recommendations in the face of Governor’s veto
    • Unfamiliar with Governor’s specific vetoes
  • Sen. Zaffirini asks how legislature can prevent innocent persons from being targeted such as truck drivers
    • Bill of lading, paper trail etc. tend to protect innocent actors, truck drivers with illegal loads will not have the same paperwork
    • As such, administrative processes are in place that will protect legal actors
  • Sen. Zaffirini asks after his familiarity with the problem
    • Also closely involved with oil industry and has an ownership interest in producing wells
  • Sen. Zaffirini asks how theft occurs
    • In his specific experience, a remote location was chosen and oil was stolen from the tank battery
  • Sen. Zaffirini asks how HB 3291 would’ve helped his experience
    • Bill would have highlighted oil sold into the market without the proper documentation
  • Sen. Zaffirini asks after involvement of RRC with this issue
    • RRC has a lot of data concerning the theft of oil and byproducts, as specific as skim oil produced from oil production
  • Sen. Zaffirini if ESC has any recommended changes for HB 3291
    • Not at this time
  • Senator Robert Nichols asks that testimony focuses not on knowledge of the problem, but more on how to cure the Governor’s objection to HB 3291
    • Sen. Zaffirini comments that work has already begun
    • Chair Fraser comments that the comingling of oil is the most challenging area to track
  • Sen. Hinojosa comments that punishment phase should be studied, many were very harsh and wonders why they were necessary
    • Sen. Zaffirini comments that HB 3291 as filed would have increased punishment from third degree to second degree felony
  • Sen. Hinojosa comments that bill would’ve made felonies committed by contracted employees a first degree felony
    • This was made to target the “insider” effect

 
Mike Peters, Lewis Energy

  • Two real world condensate thefts occurred on Lewis Energy fields in the last sixth months
  • In one, law enforcement helped arrest the truck driver and the FBI oil theft task force assisted
  • Chair Fraser asks if they were in a water truck
    • The thieves were in a water hauling truck without proper papers
  • In the second, thief was in an appropriate oil hauling truck from a proper
  • Without national resource code in place, law enforcement is hamstrung, without direct evidence neither of these actors would’ve been arrested
  • Asset forfeiture is not part of current legal framework, thus tanker trucks used will likely be used in further thefts
  • Sen. Zaffirini asks if changing the word “recklessly” in the bill to “intentionally or knowingly” would address Governor’s concerns
    • Seems like it would, this language is currently in statute
  • Sen. Zaffirini asks if Lewis Energy likes the bill
    • Yes, the bill addresses many issues, having second degree felony tool would help negotiate with arrested actors to follow the trail to his superiors
  • Sen. Hinojosa comments that the forfeiture point is very good
  • Sen. Kel Seliger comments that making penalties more severe is only part of the question, is stricken by the fact that it is “so easy” to steal oil and asks what industry is doing
    • Proper surveillance is what allowed Lewis Energy to target bad actors in both of these instances

 
Chris Clark, Texas Rangers
Resource witness

  • Sen. Zaffirini asks is he has any suggestions
    • Anything that helps law enforcement do its job is good

 
Sheila Weigand, Oil Theft Investigations, RRC

  • Has investigated oil theft for 30 years and assisted law enforcement in their efforts
  • RRC has broad permission to investigate all aspects of production, transportation, and storage of oil and gas
  • Sen. Zaffirini asks how RRC’s process would be changed if HB 3291 had been enacted
    • Probably very little, RRC’s records are public information and the majority of RRC’s assistance is records based
    • If HB 3291 had passed, likely many more people would be relying on RRC’s records
  • Sen. Zaffirini comments that many people would be concerned about increased costs, asks if it is RRC’s testimony that RRC already conducts the activity people worried would increase costs
    • Yes
  • Sen. Zaffirini is “very happy” for that testimony

 
Robert Butler, Attorney General’s Office
Resource Witness

  • Chair Fraser asks if state has the mechanisms to prosecute and investigate cases where oil is comingled, concerned thieves will get smarter with time
    • Issue with current laws is that thieves must actively be caught with stolen property and producers have no method to track product itself, comingling destroys any method of matching
    • Some criminals used sealed or low producing wells to “launder” oil and cover theft volumes
    • HB 3291 would allow prosecutions in cases where physical theft is not apparent, would allow law enforcement to track paper trail and ancillary activities which point to theft (using low producing wells, using salt disposal site volume etc.)
    • AG usually uses federal arena to charge crimes such as wire fraud when they cannot charge based on oil theft directly
  • Sen. Zaffirini asks for a specific example of a crime that would have been prosecuted more successfully
    • Individual that took barrels from Lewis Energy via trailer truck would be easier to prosecute
  • Sen. Zaffirini asks if “recklessly” language change to “intentionally or knowingly” would affect AG process
    • Not to his knowledge
  • Chair Fraser comments that AG has a lot of responsibility to cure the Governor’s veto
  • Senator Carlos Uresti asks after a better picture of the stolen oil
    • Consumer is generally the “Gatherer,” that is the person who collects oil and puts it into the oil pipeline
    • Gatherer’s are not responsible for checking source of product
  • Sen. Uresti comments that there should be some responsibility on the buyer to check source of oil
    • You would think so, would need to be a system in place where they could check
  • Sen. Lucio asks what is in the books now and what is in HB 3291 that would hold the party buying stolen oil more responsible, does state need more accountability legislation
    • Sheila Weigand comments that “Gatherers” are typically filing forms with RRC tracking how much oil and condensate is picked up and from whom
  • Sen. Lucio asks if there are any accountability measures, fees or audits etc.
    • RRC has rules, but it is hard for RRC to know what is not reported and manpower doesn’t exist to audit so thoroughly
  • Sen. Hinojosa comments that perhaps everyone should focus on defining the crime that needs to address
  • Senator Kelly Hancock asks if it would be difficult to track based upon volume and temperature etc.
    • Sheila Weigand comments that the difference shouldn’t be that large
  • Sen. Hancock a 1% difference in large volumes can be very large
    • Sheila Weigand comments that the problem seems to be more one of accountability
  • Sen. Hancock states formulating regulations and guidelines that damage companies acting legally doesn’t help very much
    • This is accurate, but rules already require reporting of oil and condensate sources
  • Chair Fraser asks why RRC agency does not establish requirement for registered carriers, wonders if statute is necessary and why “Gatherers” are not helping state with the problem
    • Many metrics are required to be reported including provenance of oil carrier etc.
  • Chair Fraser asks what the penalty is for not reporting
    • Unsure
  • Chair Fraser asks that RRC looks into this as it would solve a piece of the problem
  • Sen. Hancock comments that District Attorney already has tracking process for some goods for licensed purchases, would not be a new addition if applied to oil

 
Interim Charge #2
Study and make recommendations regarding the use of Texas Emission Reduction Plan (TERP) funds, including reducing air emissions from mobile sources in response to changes in ozone standards.
 
David Brymer, TCEQ

  • EPA lowered ozone standard earlier this year, regulations for attainment of standard will be made by the EPA
  • State’s recommendations will be based upon 2013, 2014, and 2015, while EPA’s standard will be formulated from 2014, 2015, and 2016 data
  • Compliance could be required as early as 2020, EPA attainment recommendations are expected on June 2017
  • Chair Fraser asks what would happen if state does not submit a SIP
    • Federal government could possibly sanction or implement a plan for Texas
  • Sen. Lucio wonders how TCEQ plans to address cross-border issues
    • Most areas along the border are lower than the 70 part per billion standard, only exception is El Paso
    • Is Texas can prove that El Paso would attain standard but for a foreign country’s status, Texas can make this argument to the EPA
  • Sen. Lucio is concerned over major population centers in Texas
  • Sen. Hinojosa asks what is needed to comply with EPA standards
    • Those areas that are above the standard would need to study contributing emissions, future projections, and potential controls and submit this to the EPA
    • TERP has supported this very well
  • Sen. Hinojosa comments that TERP has over $1 billion in funds, would increasing resources help
    • Most emission issues are from local sources, so TERP does help
  • Sen. Hinojosa comments that Texas is not spending the amount it collects, but the problem still persists and wonders why, should maybe increase funds available to local entities
  • Sen. Nichols comments that TERP funding is very strange, dates and expirations constantly change, and large shifts are made from TERP to Texas Mobility Fund, at the same time the State Highway Fund reimburses TERP
  • Sen. Nichols asks if EPA has approved congestion mitigation plans for other states as an approved emissions reduction plan
    • Unsure, can find out
  • Chair Fraser asks if TERP is collected from non-attainment areas only
    • No, some of it comes from areas well within attainment limits
  • Chair Fraser asks where funds are allowed to be spent, if these funds are spent in non-attainment areas
    • Mostly, but some projects are statewide
  • Sen. Hinojosa comments statute should be rewritten, areas within attainment standards should not necessarily pay into the fund
  • Sen. Nichols comments that state is responsible for formulating list of appropriate projects, state needs to know if other plans have been approved in other states
  • Sen. Hancock comments that Texas has continually lowered emissions, asks if EPA’s response is typically to lower the standard as Texas has approached attainment
    • Typically this is the reaction yes, EPA is required to improve every 5 years
  • Sen. Hancock comments that Texas has actually reached some of the original EPA standards, EPA gives some amount of credit for these standards
    • Mobility projects have sometimes not been funded as they are not cost-effective
  • Senator Craig Estes asks after the state plan and its contents
    • State plan is what reductions can be made
  • Sen. Estes asks why the standard is constantly changed
    • There are “hundreds” of pages to justify changes, EPA could very well lower in the future
  • Chair Fraser asks if TERP funding has been used for industry or electric emissions
    • Some overlap exists, New Technology Implementation Grant program is focused on energy storage etc. (batteries amongst other things)
  • Sen. Hancock asks if this is the only program
    • This is the primary, can be used for clean power plants and other things
  • Chair Fraser asks after scrubbers
    • Scrubbers do not fall under any program, per Texas rule
  • EPA makes the determination on counties affected, Texas knows which counties have regulatory monitors
  • Sen. Uresti asks if there is an idea why San Antonio is near non-attainment
    • San Antonio is currently still within attainment
    • Majority of emissions are from road sources in San Antonio
    • TCEQ has been working with the city to discuss viable options
  • Sen. Uresti asks after Volkswagen fraud reveal, wonders if there is a way to qunaitfy that and if TCEQ will be looking at this
    • TCEQ can quantify to some extent, but not enough data to make determinations
    • Will be looking at this with the AG’s office

 
Hector Rivera, Texas Chemical Council

  • Speaking in support of TERP
  • Reduction by point sources alone would not be able to meet EPA standards
  • States only have regulatory authority over point sources, which make up a small fraction, but not automotive and other sources
  • TERP is the strongest tool Texas has to reduce emissions
  • Industry has made massive emissions gains, but these reductions have hardly made a dent in overall emissions
  • TERP reductions have been very effective and are substantially more cost effective at reducing emissions compared to point sources
  • New EPA standards will double non-attainment areas in the state and potentially expand non-attainment areas
  • New standards will have a very large detrimental economic impact on industry in Texas
  • TERP is currently limited by resources available to implement the fund, FTEs etc.
  • Important to support and maintain full funding of TERP

 
Cyrus Reed, Sierra Club

  • Overall message is to extend, expand, and spend the TERP money
  • 4 new areas will likely not meet the new standard, Dallas, Houston, San Antonio, and El Paso
  • Even if standard is met, does not mean air quality is always good, issue is that people’s health can be dramatically affected
  • TERP programs have been very cost effective, especially the main diesel reduction plan
  • At the beginning of next session TERP fund will have $1.2 billion, time to spend the money is within the next 4-6 years, most compliance dates are in 2020 to 2023
  • HB 14 would have extended most of the programs to 2023 and important new additions such as looking at old equipment being used in oil fields
  • TCEQ will need the staff, Energy Systems Lab also plays an important role in assessing emissions projects and also deserves support
  • Worth looking at other programs that TERP could cover if they are cost-effective, important to fund what works (diesel program especially)
  • State should look to spend money effectively so that state gets the credit for effective programs

 
Kevin Bruce, America’s Natural Gas Alliance

  • TERP is a major success in the state’s efforts to protect and maintain air quality
  • Clean transportation triangle as supported by TERP has been a major economic gain for Texas, as Texas increases its production of natural gas and lowers its reliance on outside energy sources, there are now 148 natural gas refueling stations in Texas
  • TERP will become a more important tool moving forward as more areas move close to non-attainment
  • Sen. Nichols asks for the timeline on expansion of natural gas fueling stations
    • Within a 1 to 2 year period
  • Sen. Nichols comments that it appears large fueling stations have entered into contracts with long-haul fleets to upgrade stations and fleets to natural gas, asks if this is the same nationwide
    • Seems to be occurring
  • Sen. Nichols comments he was surprised at the benefits and logistics of this program

 
Dennis Foose, Nat G CNG Solutions

  • Vehicle outfitter and station builder based in Houston, with facilities in San Antonio and Shreveport
  • The 148 refueling stations in Texas are roughly half private and half open to the public, roughly 10% are located outside the transportation triangle
  • Natural gas increases reduce the number of harmful fumes from diesel and gasoline
  • Challenge exists in that gas prices are a disincentive to fleets to move to natural gas, some fleets have pulled back from their plans
  • Potential problems exists in that base load may not exist to support the refueling stations
  • Bills should be worked on for the next session that focus on natural gas development and EPA attainment
  • Old industry equipment issue should be addressed soon, legislative intent is apparent in Senate and House agreement on HB 14
  • Time to look at issues is now, not when oil prices inevitably rise again

 
Danny Smith, UPS

  • UPS is very supportive of alternative fuel sources and the infrastructure to support them
  • UPS is exploring many different fuel sources, and holds many alternative fuel vehicles, many of them using forms of natural gas
  • Chair Fraser wonders if the vehicles are converted
    • No, UPS is working with manufacturers
  • UPS has worked with Clean Energy to construct refueling stations
  • Most of this technology was passed with clean fleet legislation (SB 1759, 83rd) and TERP funding

 
No hearing planned currently, Chair Fraser does not expect to meet before first quarter of 2016.