Senate Natural Resources & Economic Development met on March 1 to hear adopt committee rules and meet for an organizational hearing with invited testimony pertaining to committee oversight.

 

This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Opening Comments

  • Committee rules are adopted; members introduce their staff
  • Chair Birdwell – Have invited agencies under the committee’s purview; have asked them to provide an overview of their agency and a status report

 

Railroad Commission

Christi Craddick, Chair RRC

  • 4.4m barrels of oil per day, down from 2020; 40.8 Bcf per day of natural gas up from 2020
  • 758k barrels of condensate per day
  • Have 379 active rigs, 160k active producing oil wells
  • SB 3 has been a big project to implement; have implemented two rules 3.65 and 3.66
  • 3.65 requests critical operators to file with CID division and mapped electricity supply chain map
    • Adjusted critical infrastructure definition after feedback; carved out marginal wells
  • 3.66 requires operators to weatherize critical infrastructure; created a penalty structure for noncompliance
  • Inspections began in the fall; seen successful outcomes from operators
  • HB 2973 created a committee to study abandoned oil and gas wells; completed and sent to legislature December 2022
  • Bill passed last session for RRC to seek primacy from EPA on Class 6 wells
  • Application was officially submitted to the EPA December 2022
  • Zaffirini – Progress on reliability of the grid?
    • Tasked with the natural gas piece; made good progress
    • Are all communicating and power is staying on
  • Zaffirini – Weatherizing versus winterizing?
    • Need to prepare for both hot/cold here; not just wrapping pipes for example, but also unwrapping
  • Zaffirini – Plugging abandoned wells?
    • 8k on our books; legislature gave us ability to plug 1k a year
    • Received federal funds to plug additional wells; about $23m went straight into well plugging program
  • Zaffirini – Strings with federal funds?
    • Have proposed guidelines for additional $300m we could receive; have sent comments and expect response before the end of March
  • Hancock – How many states established weatherization standards?
    • Are the first
  • Hancock – On carbon capture/sequestration; federal government will only provide credit only if you sequester, not if you re-use?
    • Wei Wang, Executive Director – Correct
  • Hancock – Notes there are helpful ways to re-use what we capture
  • Blanco – RRC’s response to seismic activity?
    • Are taking it seriously and have been a number of events; are working with UTEP
    • Put a rule in place for saltwater disposal that requires operators in a seismic area to give us more information
    • Three weeks ago issued a notice that RRC will request additional information
  • Miles – Was critical of industry after the winter storm; thanks Craddick for her work
  • Miles – Feel confident things have been put in place and the body has given appropriate resources to prevent the grid from going down again?
    • Natural gas part of the grid has improved; oil/gas more electrified than we used to be
    • Have added 2 more Bcf in natural gas today than two years ago
    • Industry has created more storage without requirements to do so
  • Chair Birdwell – 18% of total gas production is being delivered to thermal generation?
    • More like 8% – overall natural gas market is national
  • Chair Birdwell – Developed critical infrastructure chart; will be updated continuously?
    • Yes; believe legislative requirement to map critical infrastructure is ongoing
    • Will update before summer and before winter
  • Chair Birdwell – Concerned amount of wells need plugging has not been going down; is there mechanisms in place that does add new wells to the stock?
  • Chair Birdwell – Looking for a system where we can get to zero abandoned wells
    • Have plugged 40k since the program has been in place; 8k is a small number
    • If federal plugging dollars come through, can plug a vast majority of that 8k
    • Agency is charged with protecting the environment/wells
  • Chair Birdwell – Concerned about attachments to federal dollars; will report back to the legislature before session is over to report so we can vote on those attachments?
    • Yes; share your concerns
  • Zaffirini – Asks about flaring methane; have not seen as much flaring
    • Have made a lot of progress; prefer flaring over venting
    • Are under 1% of the volume of gas we are flaring in the state; additional pipeline construction helps as well
  • Sparks – Can achieve reliable supply for emergency use and focus weatherization more on that?
    • Are continuing to refine process and maps moving forward

 

Industry Panel

Todd Staples, President Texas Oil & Gas Association

  • Membership produces 90% crude oil and natural gas
  • In 2022 industry paid historic $24.7b in state and local taxes/royalties; these funds contribute to public education and veterans’ programs
  • Producers are delivering at a robust rate in oil/gas production
  • Is global demand; ports all have or are adding major facilities for oil, refine products, etc.
  • Overviews export statistics 2.9m barrels per day in beginning of 2022
  • Numbers are expected to continue to grow
  • Could push natural gas market to triple in size; L&G exports biggest driver of demand growth
  • Texans deserve energy choice and fuel freedom; notes cities are banning tools constituents use every day SB 1017 (Birdwell) and HB 2374 (Landgraf) address this
  • Are too reliant on other national for production and other everyday items
  • Temporary property tax abatements are needed to attract businesses to Texas; hope the Senate will take up a new plan for this
  • Carbon capture/storage is a trillion-dollar industry; do not want Texas to miss out on this
  • Support funding for the RRC, TCEQ, and UT Bureau of Economic Geology
  • Important to not have policies to interfere with investment decisions

 

Jason Modglin, President Texas Alliance of Energy Producers

  • Has been a challenge this interim to work with producers on weatherization, find ways to increase production, etc.
  • 200k in upstream of oil/gas are small businesses
  • Since last session, have produced record amounts of oil and natural gas while reducing emissions
  • Notes a single L&G tanker keeps 1m Europeans warm in their homes for one month

 

Thure Cannon, President Texas Pipeline Association

  • Represent the intra-state pipeline market
  • Amount of intra state pipeline alone can wrap around the globe 17 times
  • Need to build more infrastructure to meet the future needs of the state
  • Have seen the market and pipeline industry respond to free market policies by expanding capacity; ask legislature to continue to lead in this aspect
  • Industry has been expanding storage and will continue to be important part moving forward
  • 2020 study showed economic impact of intra pipeline alone $48b in economic output and $2.7b in state and local taxes

 

Panel Questions

  • Zaffirini – Asks about flaring; reason for reduction?
    • Cannon – Member are building more infrastructure to prevent flaring
    • Modglin – New technologies, more storage, etc.
  • Zaffirini – Model for the future grid?
    • Staples – Took great steps last session to designate critical infrastructure; people are not worried about weatherization, are worried about amount of supply
    • Staples – PUC needs to consider how to secure contracts and firm fuel supply service
  • Zaffirini – Assessment on Russia’s impact on your industry?
    • Staples – Has disrupted entire supply chain; pre-invasion they were responsible for 7m barrels per day; as long as this is occurring natural gas prices will be low and disruption will continue
  • Zaffirini – Peak demand scenario?
    • Staples – Demand for energy is high and will continue to increase; oil and natural gas production/demand will continue as well
  • Zaffirini – Take away capacity?
    • Staples – Difficult infrastructure consideration; is a highly coordinated effort; the more firm contracts we have, the more commitments will be made
  • Blanco – Have recommendations on incentivizing operators to adopt orphan wells?
    • Staples – RRC has extremely strict rules on abandoning wells
    • Modglin – Inactive well statue passed by the legislature is a good incentive now; can look to marginal wells and find ways to incentive higher levels of productions for those
    • Modglin – May want to focus on shale wells or horizontal wells; related house legislation has been filed
    • Modglin – Guillen’s bill on the Orphan Well Reduction Program will be filed soon
  • Blanco – How many pipelines exclusive exports to foreign countries?
  • Blanco – Are designated as a public gas utility and have eminent domain authority; what is the public benefits for these pipelines that are shipping natural gas to another country?
    • Cannon – Are getting revenues/taxes
    • Cannon – Do not know of any that exclusively export product to other molecules
  • Alvarado – Thanks for TCEQ for rulemaking on above ground storage
  • Alvarado – Current sustainability and emission reduction initiatives?
    • Staples – Is a high priority for industry; highlights initiatives including flaring reduction; will be legislation filed this session for carbon storage to create policy framework
    • Staples – Is a demand from companies for a carbon storage framework
    • Staples – Notes the state lost out on an additional L&G facility due to sustainability concerns
  • Chair Birdwell – Biggest threat to current circumstance? Federal government? Global instability?
    • Staples – Targeting of oil and gas investments
  • Chair Birdwell – Notes are movements to make decisions on individual portfolio members what Blackrock is doing
    • Modglin – Federal regulation uncertainty (non-attainment designation) and inflation
    • Cannon – Have concerns with federal policy

 

Texas Commission on Environmental Quality

Jon Niermann, Chair TCEQ

  • Highlights TCEQ’s responsibilities and organization
  • Need to maintain delegation for permitting/enforcement; cannot lose out to the federal government
  • Agency has diminished personnel and increased in turnovers while demand for its services are increasing; need the legislature’s help with a course correction
  • Sunset review; do not have concerns with substantive recommendations other than resource concerns
  • Chair Birdwell – LAR trying to handle staffing issues?
    • Past requests have been too modest; current request is exactly what we need
  • Chair Birdwell – Would rather Texans decide as it relates to non-attainment; freedom to maneuver is more valuable
  • Chair Birdwell – In district are concerns about regulatory environment around solar; fear in rural areas that solar farms will take over the state
  • Chair Birdwell – Abandoned wells and rights of the property owners and surrounding due to the degradation of those rare earth minerals; Perry has a bill for you to study and look at that
    • Is always potential for neighboring properties to not appreciate certain activities; do not have land-use authority
    • Are things/safety to consider related to the solar life cycle, regulatory barriers to recycling, battery re-use recycling barriers
  • Chair Birdwell – Interested in TCEQ making recommendations next session after studying impacts of batteries/solar
  • Sparks and Niermann discuss the TCEQ’s office of complaints
  • Sparks – Asks about permitting renewals
    • Some are on a cycle and some have no expiration date
  • Sparks – If you get nuisance calls, comes into consideration during permit renewals?
    • Compliance history is relevant when they come in to update permit; will speak to you later if you have specific questions

 

Texas Workforce Commission

Bryan Daniel, Chair TWC

  • Set 14 records on number of payroll jobs last year; total 13.7m payroll jobs in Texas highest
  • Unemployment rate around 4.0% still have opportunities to grow the workforce
  • In 2022 saw 750k UI claims which is around 2017 numbers
  • Positions with most vacancies include healthcare, customer service, retail, truck drivers, computer programmers
  • Does not mean there are not enough people to do the work; people do not have the skills to do the work these jobs require
  • Skills gap problematic in the middle skills area; represents 52% of the jobs in the state
  • TWC has a role to play in upskilling and reskilling; have ongoing efforts to address this
  • Jobs and Education for Texans program; lab equipment program
  • Skills Development Fund reskilling/upskilling
  • Apprenticeship programs continue to grow in the state; have a request in appropriations to put more funds here
  • Overviews Tri Agency efforts on work-based training programs
  • Chair Birdwell – Have fixed certain licensing issues in plumbing through Sunset; concerned about plumbers and truck drivers; is Texas facing California-level issues with licensing?
    • Have not reached anything near California; do see regional and seasonal shortages and production capabilities
    • Have several boards who prioritize CDLs
  • Chair Birdwell – You noted unemployment and jobs are better than federal rates; is the pandemic is functionally over?
    • From an economic and numerical perspective effects are limited to certain areas; see lingering effects of some industries
  • Miles and Birdwell thank Daniel for TWC’s work

 

Closing Comments

  • Chair Birdwell – Notes moving forward in the busier parts of the session there will be a lot of voting bills out at the desks on the floor due to committee conflicts