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Senate Natural Resources & Economic Development met on March 29 to discuss a number of bills. This report covers discussions on the following bills: SB 1057 (Whitmire), SB 1158 (Whitmire), SB 1397 (Schwertner), SB 2107 (Nichols), SB 558 (Hughes), SB 785 (Birdwell | et al.), and SB 786 (Birdwell | et al.). The notice for the hearing can be found here. Part one of the hearing can be found here. Part two of the hearing can be found here.

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.

 

Vote Outs

  • SB 501 (Hughes) Relating to a cause of action for the bad faith washout of an overriding royalty interest in an oil and gas lease
    • (5-0) to local and uncontested
  • SB 502 (Hughes) Relating to the treatment, recycling for beneficial use, or disposal of drill cuttings.
    • (5-0) to local and uncontested
  • CSSB 604 (King) Relating to land services performed by a landman.
    • (5-0) to local and uncontested
  • SB 667 (West) Relating to establishing a state historical marker program to honor African Americans who served in the Texas Legislature during Reconstruction.
    • (5-0) to local and uncontested
  • CSSCR 13 (West) Recognizing the Texas Black Reconstruction Legislators Recognition Act.
    • (5-0) to local and uncontested
  • CSSB 1167 (Birdwell) Relating to the authority of certain municipalities to receive certain tax revenue derived from a hotel and convention center project and to pledge certain tax revenue for the payment of obligations related to the project.
    • Birdwell – CS has the same language as the previous substitute
    • Adds a requirement the Comptroller has to notify a city if they are subject to the clawback payments in the bill
    • City will start making clawback payments within 30 days of that notice from any lawfully available funds as long as the same amount of the hotel occupancy tax revenue collected by the city for the qualified hotel project
    • Gives munis flexibility to prevent potential bond issues
    • (6-0) to local and uncontested
  • CSSB 1420 (Birdwell) Relating to municipal and county hotel occupancy taxes.
    • Birdwell – New CS is same as previous substitute with minor changes
    • Adds a requirement the Comptroller has to notify a city if they are subject to the clawback payments in the bill
    • City will start making clawback payments within 30 days of that notice
    • Clarifies biennial qualified hotel project report includes information about the new revenue the state revives through the rebate period
    • Clawback payments can be made from any lawfully available funds as long as the same amount of the hotel occupancy tax revenue collected by the city for the qualified hotel project
    • (6-0) to local and uncontested
  • Chair Birdwell – SBs 1114 and 784 will be voted out at the desk tomorrow

 

Today’s Agenda

SB 1057 (Whitmire) Relating to the authority of certain municipalities and local government corporations to use certain tax revenue for certain qualified projects and project-associated infrastructure.

  • Whitmire – Have a CS; adds the bracketing language that the City of Houston can use the tax under section 351.1015 of the tax code; Dallas and Fort Worth have this statute
  • Birdwell – Thank you for the cooperation on this bill and for reassuring this bill will not become a Christmas tree

 

Michael Heckman, Houston First – For

  • Want to continue to be a Tier I city and be able to invest in facilities that will help us hose
  • Bill will help us modernize and expand our convention center; will help bring talent/resources/economic development

 

SB 1057 left pending

 

SB 1158 (Whitmire) Relating to single event classification for eligibility under the major events reimbursement program.

  • Whitmire – Have two cities Dallas and Houston hosting World Cup; clarifies more than one entity state can submit MERP application for the same event given they are separate events held in different market areas
  • Birdwell – Bill just allows the World Cup to operate at two sites
    • Correct

 

Athena Kosich, Harris County Houston Sports Authority – For

  • Worked in collaboration with Dallas to bring World Cup games to Texas
  • Each match expected to have a Super Bowl impact
  • Bill will allow each local sponsor will be able to apply independently

 

Jimmy Smith, FC Dallas – For

  • This bill is the legislative fix to create authority for both Dallas and Houston to host matches for the FIFA World Cup
  • In Dallas estimated $400m economic impact per game; hoping to host 6-8 matches

 

SB 1158 left pending

 

SB 874 (West) Relating to the eligibility of the certain cricket events for funding under the Major Events Reimbursement Program.

  • West – Similar to Whitmire’s bill, but for cricket; popularity of game has grown and the state has its own professional team, the Texas Super Kings

 

Marty Wieder, City of Grand Prairie – For

  • Cricket is the second most popular sport in the world
  • Will be hosting a cricket tournament this summer and hope to host another next summer
  • Sparks – Have a season?
    • Primary season in the summer
  • Birdwell – MERP is for the culminating event of cricket? Last session had to work to ensure regular seasonal games will be hosted
    • Correct

 

SB 874 left pending

 

SB 1397 (Schwertner) Relating to the continuation and functions of the Texas Commission on Environmental Quality.

  • Schwertner – Have a CS; this is the TCEQ Sunset bill; hope the legislature arms TCEQ with the funding it needs to meet the things we have tasked it with
  • Bill continues agency for 12 years; bill is necessary for continuation of agency
  • Bill includes recommendations for decision-making, transparency, efficiency, opportunities for public input, dissemination of public information and updating TCEQ’s enforcement
  • Requires a public comment period for air permit applications to be open 36 hours after a public meeting on the permit
  • TCEQ required to post all permit applications and related materials on their website once it is administratively complete
  • Authorizes virtual public meetings and virtual postings; must accommodate with those lacking internet access
  • Must adhere to federal requirements concerning fiscal notices and in-person meetings
  • Changes on violation classification in terms of repeat offenders
  • Increase maximum administrative fines from $25k to $40k per day for the worst violations
  • Create an enforcement diversion program for small businesses/local govs
  • Entities with temporary or open-ended permits to annually confirm their operation status
  • Creates permit for temporary concrete batch plant operations supporting a public works project
  • Requires legislative Environmental Flows Advisory Group to adopt a biannual statewide workplan to update environmental flow standards
  • CS fixed drafting errors and reflects stakeholder input on the confusion concerning temp concrete batch plant public works permit; operate only to support a public works project without a one size fits all time restriction
  • CS defines a small business of one with less than 100 employees
  • CS incorporates feedback on fines to prevent cross the board increase without respect to type/level of violation
  • Miles – How does bill address cumbersome TCEQ meeting requirements?
    • Public comment period to remain open 36 hours after meeting and post applications on websites, allows virtual public meetings; notice of meeting electronically
  • Miles – Is there any outreach in the bill for TCEQ to notify the public? Do not see any
    • Bill has notification requirements
  • Miles – Concrete batch plants are a big health problem in my district; do anything to improve the permitting process?
    • Modifies the rules regarding those temporary concrete batch plants
    • SB 1398 requires certain standards like land reclamation, public nuisance complaints
    • SB 1399 protection review and changes permitting renewals from 10 years to 6 years
  • Miles – Have several bills that address this as well, want to work with you on that
  • Miles – Enhances TCEQ’s ability to punish violators?
    • Increases overall fine structure; enhances penalty matrix

 

Erin Chancellor, Interim Executive Director TCEQ

Elizabeth S Coke, TCEQ Sunset Lesion

  • Alvarado – Have had a lot of issues with concrete batch plant protests; difference between public comment period and ability to request contested case hearing?
    • Is a confusing difference; request needs to be held within a 30-day period
    • Consolidated notice under management action and bill includes a statutory change to extend public comment period
  • Alvarado – This was confusing for your own staff; will this bill remedy the confusion?
    • Hope so
  • Alvarado – How will section change current process?
    • 36-hour public comment; now are 30 days from the point of notice past the public comment meeting
  • Alvarado – Need to ensure clarity on the public participation piece; want to move along with this
  • Miles – Out of all these changes, have we put anything in place to do active community outreach for these hearings?
    • Nothing in the bill specifies this, but can do on our own; overviews current outreach
    • Dedicated to continuing working with the public
  • Miles – Schwertner would you be receptive to friendly amend
  • Birdwell – Amendments for a Sunset bill can only occur during a hearing
  • Birdwell – If you have those amendments, get them to us speedily
  • Hancock – Steps that promote public hearings already within statute?
    • Are some statutory and regulatory requirements that vary based on application
  • Hancock – Companies themselves have to post?
    • Correct
  • Blanco – Have filed bills related to language access in the public participation progress with TCEQ; applaud you for your work; certain permits language access rules don’t apply to?
    • Do not have that answer today

 

Shea Pearson, Texas Chemical Council – Neutral

  • Support actions taken by Sunset to increase transparency, enforcement diversion program
  • Have concerns with the bill as filed particularly with the administrative penalty cap increase
  • Would support a reasonable cap increase prescriptively applied to major violations
  • Concerned about the repeat violation enhancements

 

Cyrus Reed, Sierra Club – For

  • CS clarifies $40k increase is for major fines
  • Bill helps with permitting transparency; whole permit and associated docs
  • 36 hours also for contested case hearings
  • Some issues raised during the sunset hearing are not in this bill
  • Believe TCEQ does not follow federal law concerning cumulative impacts or how we figure out who is an effected person
  • Have specific issues concerning water quality which someone else will speak to
  • Would support Parks and Wildlife can opine and get involved in determination of wildland-urban interface area; Zaffirini has a bill like this
  • We want TCEQ to do their hob and ensure those who violate the law are held accountable

 

Myron Hess, National Wildlife Foundation – For

  • Current law allows for TCEQ to review/revise flow protections generally at a 10-year cycle
    • Statute is not specific enough on this
  • Regional stakeholder committees are a pivotal part of the process and status of groups are unclear; no replacements have been made
  • Terms of those groups should be continued until a successor is named
  • Have provided the language to the author’s office

 

Mark Vickery, Texas Association of Manufacturers – Neutral

  • Support continuation of the agency and provisions of transparency and public notice/meetings
  • Recommend requiring notice when a regulated activity has ceased operation
  • temporary and indefinite permits
  • Support enforcement diversion program
  • Seek to not just apply $40k across the board; sounds like the CS addresses this issue

 

Dr. Brian Shaw, Texas Oil and Gas Association – Neutral

  • Would support ensuring bad actors are a focus of the raise penalty cap; want to ensure there are no unintended consequences
  • Want TCEQ to be able to continue to evaluate their penalty process

 

Adrian Shelley, Public Citizen – For

  • TCEQ is in need of major reform, and bill does not do that, but supportive of what it does
  • Recommend contested case deadline aligning with public comment deadline
  • Speaks to the sections in the bill they support including the transparency of permit applications and public hearings

 

Luke Metzger, Environment Texas – For

  • Are a multitude of companies who routinely violate their clean air permits
  • Raising maximum penalty and allowing for public comment
  • Significant work could be done on this bill
  • EPA investigating TCEQ on if they are following federal law concerning effected person and cumulative impacts
  • Need strong law enforcement for these companies who routinely break the law; support Miles’ end affirmative defense loophole in the law

 

Craig Nazor, Sierra Club – For

  • Notes cumulative effects are not considered for ethane cracker plants or desalination plants
  • Understand we need to do desalination, but need to do it right
  • Need a strong TCEQ and support the bill, but it could go further as it does not address cumulative effects or effected persons

 

Alex Ortiz, Sierra Club – For

  • Impaired water list TCEQ manages; agency and this bill does not address the waters on this list
  • TCEQ has not created any numeric salinity safety standards

 

Eric Aleman, Granbury – For

  • Support the bill, but does note address other issues including TCEQ’s nonadherence to federal law including shifting the burden of proof on protestants

 

SB 1397 left pending

 

SB 2107 (Nichols) Relating to the ownership of the pore space underlying the surface of land and to the use of that space for the geologic storage of carbon dioxide

  • Nichols – 12 states have passed legislation to facilitate this estimated multi-trillion-dollar industry; Texas is uniquely positioned to participate in this industry
  • Bill establishes a regulatory framework
  • Bill clarifies pore space ownership as part of the surface estate
  • Addresses long-term responsibility for carbon storage products; allowing for post-closure transfer to the state of stored CO2
  • Requires operators wishing to transfer a title to the state pay a fee to be transferred into a CO2 storage trust fund that is established by the bill and held by the RRC
  • Trust fund would pay for any damages or liabilities occurring when the state assumes the title
  • Provides an operator must seek an integration order from the RRC to integrate any effected tracts into the pore space once it has reached an agreement with 60% or more of the owners
  • Bill is a work in progress and are still working with stakeholders
  • Plan to put the following concepts into a CS:
  • Updates threshold of integration to 67%; based on the super-majority we use in the legislature
  • Specifies a fair/reasonable offer determination shall be made in integration commitments reached with landowners
  • State integration order may only include one stratum
  • Extends timeline for notice/hearing
  • Requires application include sample agreement terms in order and details regarding other landowner agreements
  • Limits surface area development for non-consenting landowners; for example cannot put an injection unit on top of the land surface of someone who had to be integrated
  • Specifics statute liability provision do not preempt contractual liability agreed to among parties
  • Provides an operator maintains the liability for any damages exceeding the amount available in the trust fund
  • Specifies the CO2 trust fund is outside the treasury
  • Gives notice to all landowners within half a mile from the pore space boundary as part of an integration order application
  • Requires an effort to find any unknown landowners
  • Allows parties to bring evidence on equitable compensation
  • Allows RRC to be funded from the fund for remediation of environmental issues
  • Provides any increase cost of a mineral owner to access minerals due to CO2 storage will be borne by the operator
  • Fully expect to make additional changes to this bill before it is voted on; has implications to private property rights
  • Want to balance landowner rights and protection of the environment/economic development
  • Zaffirini – How would private property rights be protected in this CS?
    • Louisiana, Mississippi, Alabama decided to allow eminent domain; we would not carry a bill like that
    • One state has a 51% threshold on private property rights; we have 67%
  • Zaffirini – Received list of organizations who are against this including Texas Cattle Raisers, Royalty Owners, and Texas Land & Mineral Owners
    • Working with all of them as well as the General Land Office, Chemical Council and TXOGA, among others
  • Alvarado – Talk about the 67%
    • Bill originally had 60% and looked at what we do here in terms of voting is a supermajority is 2/3
  • Alvarado – What takes place in the integration process
    • Witnesses would be able to answer this
  • Birdwell – Is a difficult bill; whether this moves at all, conversation is important
    • Agree this is a very difficult issue, but is important as it will not go away
    • Important to listen to private property owners, but also industry as this would provide a lot of jobs
  • Hancock – Asks about what the 67% pertains to
    • Would be the percentage of the surface, not just the number of people involved
  • Hancock – Federal government says we cannot use carbon we have captured, that is has to be trash; this is an industry entirely put in place by the federal government
    • Have injection wells out there and is being stored and no pore space leases by adjacent property owners
    • Bill establishes for the first time that the surface owner owns the pore space and share income

 

David Alders, Texas Forestry Association – Against

  • Concerns about this bill like surface property ownership and what that percentage applies to
  • Interested in economic development but worried about the permanency of this injection of carbon in the pore space
  • Support that pore space belongs to the landowner
  • Zaffirini – Concerns about permanency?
    • One-time transaction effects the property owner and whoever owns that property in perpetuity; tremendous infringement of small property owner rights

 

Wade Caldwell, National Association of Royalty Owners

  • Average owner receives about $800 a year on minerals and royalties
  • Will work with Nichols on language for this bill; right now is a mass expansion of forced pooling
  • CS needs clear that we cannot shut in existing wells to prevent future oil and gas development and other minerals
  • Bill needs to be crafted thoughtfully; do not want to be in a carbon sequestration trap especially due to possible federal regulations
  • Zaffirini – Your handout says this bill is the most extreme pooling bill in the country and many royalty owners cannot fight against this?
    • Average mineral/royalty owners do not have the means to hire experts necessary to object to these permits
    • Texas has extremely limited forced pooling and that has made Texas thrive
    • Don’t have the right to receive an offer if there is an injection in their hydrocarbon formation
  • Zaffirini – Your handout says there are no good faith efforts to find owners, etc. would be able to work through this in the CS?
    • Yes

 

Charles Maley, South Texans’ Property Rights Association – Against

  • This bill would line the pockets of a few; numerous operators already have freely negotiated contracts
  • Marginal operators end up going broke and leaving everyone else to clean up the mess
  • Bill pits neighbors against each other; is eminent domain by neighbor
  • The companion bill HB 4557 says this expressly
  • Zaffirini – Believe we can address concerns of owners in the CS?
    • Can mitigate some, cannot eliminate entirely because forced pooling is essentially eminent domain
    • If the state cares about it entirely, then they should just use eminent domain; are at least protections in there for property owners
  • Birdwell – Speak to possible federal entanglements and issues with the state taking the burden
    • Will be in oil/gas sector as they have the most experience; when you incentivize something you incentive those who are not successful in a free market transaction
    • Will have issues with leaking facilities; no other industry can they offload liability long-term to the state after making millions/billions
    • Notes the amount put into the fund for saltwater injection wells was not sufficient
    • Engagement is accepting the feds’ story that CO2 is a pollutant

 

Ben Sheppard, Permian Basin Petroleum Association – For

  • Carbon capture is an important development for the future of this state; bill is a critical framework for this burgeoning industry
  • Encouraged to hear the discussions about a potential substitute
  • Have been capturing carbon for decades
  • Permian basin provides 5.5m barrels per day and numbers are expected to grow; will be a potential major player in the CO2 storage
  • Wyoming and North Dakota and Louisiana have been the leaders in CO2 capture
  • Technologies here also expand markets for natural gas; if we want to export more to Europe, they have a critical eye on this process
  • Hancock – Get a larger credit of disposing carbon rather than using it
    • Get potentially more of a tax benefit; could result in increased production
  • Hancock – Feds want you to make it not useful; Texas has been using it for the benefit of our economy
    • Industry sees that differently; agree Texas has been using it
  • Zaffirini – What makes Texas attractive for CO2 storage
    • Already have the established industry including pipeline; subsurface geology of Gulf Coast in particular is very attractive
  • Zaffirini – How bill would affect the Permian Basin?
    • Number of operators who are interested; Texas should be a leader in this
  • Sparks – Overall concern is this will have broad-reaching effects for years to come; is a manipulated market by the federal government
  • Sparks – Concerned about all the small parcels in West Texas

 

Virginia Palacios, Commission Shift – Against

  • No reason why Class 2 or Class 6 wells should have any different liability than any other permit within RRC; cannot rely on RRC to
  • RRC voted to disregard soil testing results in a specific case
  • No reason to believe fees with the CO2 storage trust fund will be enough; can be used to pau for commission’s permitting expenses

 

Sarah Constantine, Self – Against

  • Have seen injection of fluids have unintended consequences
  • Who owns it after the lease ends; is no answer
  • Absolving companies of all responsibility and leaving it up to the state is not the answer, which is what the bill does

 

Bruce Gates, Ageron Energy – Against

  • This will not be a harmless activity; provides an example of CO2 eating through drill pipes/wells
  • This has to be carefully considered; mineral rights owners are not well represented in this bill
  • Should not be hasty to implement something for a fledging industry that is not even here yet

 

Bob Harvey, Greater Houston Partnership – For

  • Texas is one of the few energy production states without comprehensive carbon storage bills
  • If we continue to lag, Texas will miss the chance to lead in this trillion-dollar industry
  • Would result in 18k construction jobs, 9k operation jobs, and $60b in private investment
  • Zaffirini – Would be a big money maker?
    • Yes
  • Zaffirini – Needed to meet ESG standards?
    • Not tied to ESG, but customers/other countries look at the carbon footprint of those who supply them energy
  • Zaffirini – New technology or existing?
    • Existing technology taken to a scale it hasn’t been to before; more economic
  • Zaffirini – Long term studies of the impact of carbon storage? Water tables or plugged wells
    • Natural Petroleum Council study from 2019; putting CO2 into the ground needs to be thoughtfully done
  • Sparks – How do we protect mineral rights?
    • Defer to experts in that arena

 

Tony Bennet, Texas Association of Manufactures – For

  • Will help Texas maintain businesses and jobs; industries need to show customers environmentally friendly products addressing CO2
  • Steady increase of carbon requirements in markets such as in the EU; need to show a low carbon profile to maintain a global market share
  • Sparks – Can you give me examples of other places around the world that are producing more responsibly than the United States?
    • Not an expert, some of our companies have told us that if we don’t get this taken care of, we may very well see other states that are ahead of us with sequestering carbon and showing a better track record, those products will go to other markets
  • Sparks – Is it possible that Texas is slow because Texas has a better idea of all the possible pitfalls that go along with the issue of this magnitude?
    • Its very possible, but I don’t know the real answer to that
  • Birdwell – What are the other states that are better?
    • don’t have that list but know that Louisiana, Mississippi, Alabama
  • Birdwell – Are they regionally aligned or are they all around the US?
    • Nichols – The 12 states are, Louisiana, Mississippi, Alabama, Indiana, Kentucky, Montana, Nebraska, North Dakota, Utah, West Virginia, Wyoming

 

Tim Meckel, Port Arthur Chamber of Commerce – For

  • Speaking on behalf of Pat Avery; home to key geographic areas for carbon storage
  • Will serve as a national/global leader in this space; field is Texas’ to lose

 

Scott Anderson, Environmental Defense Fund – Against

  • Registered opposed to this bill; would be easy to imagine amendments we would support
  • Concerned about special liability exemptions for CCS storage operators; need a commercial legal framework
  • CCS is a critical climate tool and Texas could achieve benefits form this
  • Concerned reliability exemptions diverging from EPA rules
  • Broad liability exemptions are not necessary to incent investment
  • Zaffirini – Asks about liability
    • No changes to liability; if legislature does decide to do so, vital to have exclusions designed so there are no legal problems getting primacy with the EPA
    • preservation of contract authority Nichols said would go into the bill
    • Support Nichols’ proposal to keep the operator liable

 

John McFarland, Texas Land and Mineral Owners Association – Against

  • Thank Nichols for the proposed changes as a response to our expressed concerns
  • Mostly concerned about forced pooling/integration and long-term reliability relief for the industry
  • Could support the bill with changes, but are a far way off from supporting it
  • Zaffirini – Integration important for this bill?
    • Do not think integration is necessary; oil/gas successful without it
    • Is different than oil/gas in that you’re extracting something from the ground and there are well established legal principles; whereas there could be a situation which a small owner of a tract could prevent a project from going forwarded if he refused to include his tract in the unit because his tract is necessarily going to be occupied by CO2 and that would be a trespass under Texas law
  • Birdwell – Is there any other example of a force pulling for injections?
    • Not in Texas, I’m not aware of any state that has that

 

Ashley Watt, Self – Against

  • Does not believe it’s a good bill because the transfer of liability to the state is concerning
  • Injection wells are the good example; things will go wrong but we have a legal system that addresses that
  • with the number of carbon projects already underway in the state, don’t believe that they’re not going to happen if you don’t do this bill
  • These are simply made-up tax credits that have an artificial market; there’s real consequences to this carbon on the ground
  • Zaffirini – Is there any reason that carbon sequestration couldn’t occur in Texas by working out agreements instead of force pooling and negotiating for landowners to use the space under their land?
    • To my knowledge, that’s what’s happening right now.
  • Zaffirini – Do you have any information about its success?
    • Probably one of the carbon folks, but I believe there’s operating projects now.
  • Zaffirini – So you think there is a way that property owners wouldn’t have to be compelled to accept emissions under their land?
    • Oil and gas don’t have force pooling, is there’s no oil and gas in Texas?
  • Birdwell – do you have you said this is these contracts are already ongoing being discussed?
    • If this bill is passed, we’re going to call off negotiations and probably not sign a deal

 

Rebecca Grande, Texas Association of Business – For

  • Texas is the number one energy provider in the United States
  • Carbon capture and storage is $1T industry that is booming
  • CCS projects, increase economic development opportunities, create long lasting jobs, and reduce carbon emissions; investment in these projects will lead to permanent, well-paying jobs
  • Bill provides this support through regulatory framework necessary to execute these projects
  • Zaffirini – Isn’t there already a voluntary program other than what Ms. Watts just mentioned to do this and to allow landowners to negotiate for and having them compensated for the use of space under their land?
    • I’m not fully aware; defer to my industry colleagues that would have more information on that

 

Billy Murphy, University Lands – Neutral

  • Zaffirini – How would this bill impact UT lands and GLO?
    • Can’t speak on behalf of GLO, there are concerns by university lands related to the integration; there’s a lot of concerns there related to our mission and in what’s been set aside with regard to those lands
    • Beyond that have additional concerns about if lands are integrated now what that does to the mineral interests underneath any pooled or integrated location
  • Zaffirini – In your opinion would this bill interfere with the region’s control and stewardship over UT lands?
    • Yes, as it’s written right now, I do believe so
  • Zaffirini – Are there other ways that this bill in general or force pooling in particular would impact UT lands that you haven’t told us about?
    • it’s very challenging to determine what economic impact this could have if there was a bill that allowed forced integration of permanent university fund lands
  • Zaffirini – Do you have any information about how this would impact A&M, if at all?
    • I think it would be the same as the UT system
  • Sparks – Do you believe, with your understanding that you do lands could negotiate their own deals without this legislation and achieve potential carbon sequestration projects?
    • Yes, sir

 

Ken Mills, GLO – Neutral

  • Zaffirini – How would this bill enforce pooling impact GLO?
    • That’s unknowable, we currently have a CO2 sequestered option lease in effect; our lessee is still attempting to get its class 6 permit, so there’s no injection going on but we have a lease and we also have 13 submerged tracts in the Gulf of Mexico out as subjects of request for proposals; don’t know whether any of those will turn into leases, but that that opportunity has been put out in the world for operators to respond to
  • Zaffirini – would state lands be carved out of this bill, or could they be?
    • They are not currently, but they could; would be up to the legislature

 

Lee Parsley, Texans for Lawsuit Reform – For

  • Space X is a good example of when the state decided it was going to create some liability protection in order to encourage an industry in Texas
  • Six other states are doing what this bill does in order to encourage carbon capturing
  • Think that liability protection is often an element of encouraging an industry; if the legislature determines it’s time to encourage an industry

 

Anson Howard, Texas Wildlife Association – Against

  • TWA supports the portion of Senate Bill 2107 that codifies well-established Texas court decisions such as Leighton vs Anadarko, Myers Woodward vs Underground Storage Service, is a mark that the pool space is owned by the surface owners
  • The rest of Senate Bill 2107 is a solution in search of a problem
  • Bill will destroy private property rights, saddle the citizens of Texas with tremendous environmental oversight and liability
  • The limiting factor of the leasing is that neither the RR Commission nor TCEQ have assumed primacy from the EPA for the Class 6 wells necessary to inject carbon
  • Bill will create three problems, first, integration forced pooling is not analogous to oil and gas, this is a surface right that you are now establishing this precedent for
  • Zaffirini – You said you had three reasons for opposing the bill, what were they?
    • Unnecessary burden on the taxpayers, and the precedent that this establishes with the forced pooling integration

 

Mike Howard, Howard Energy Partners – For

  • Believe the midstream industry is going to be a major contributor to the energy evolution of Texas to have a lower carbon footprint for our energy production
  • Think gathering carbon and sequestering it is a natural extension of the business we’re already in
  • Agree with the establishment of the Carbon Dioxide storage trust fund; key component to ensure that the state has the funding to take on new responsibilities and ensure that they are undertaken by responsibly, properly capitalized developers; agree with section 6 giving optionality to transfer liability to state to the state; agree with section 7, which establishes the surface owner as the owner of the force base
  • Zaffirini – How does this project benefit your company and how is it good for Texas?
    • It attracts capital to the state, it increases the amount of business we’re going to be able to do
  • Zaffirini – This is your own business, correct?
    • This is one of our business lines
  • Zaffirini – Is this your initiative or are your investors asking you to do this?
    • The market is telling us what to do, the market is asking for lower carbon footprints of energy production, we are responding to the market
  • Zaffirini – Could you add some information about the differences and challenges regarding doing these projects, either offshore or onshore, and compare their expenses?
    • Offshore is going to be traditionally more expensive; you’re going to deal with a different regulatory framework, possibly if it’s in federal waters

 

Todd Staples, Texas Oil and Gas Association – For

  • This bill does not stop the injection of CO2; injection of carbon dioxide has been occurring in Texas for at least 50 years, and it’s been occurring very safely
  • Bill would expand the carbon dioxide storage trust fund already established in legislation today
  • Forced pooling is an inaccurate description, Texas already has a Mineral Interest Pooling Act where small slivers and fragmented interests of ownership can be inserted into a bigger operation so they can force their way in
  • On the terms of liability, there’s a lot of statutory and rules that are required to ensure that are there, whatever minimal risk there is, it will not be imposed on landowners
  • Hancock – Where we are, what the full capacity would be and how many years based on existing contracts do we have to work on this issue?
    • Last session HB 2084 established that the RR Commission is the agency for the Class 6 well program; we believe this is phase two, Senator Nichols has a constitutional standard before this could ever go forward, and that’s at 67%; there’s precedent to make certain that landowners can mutually coexist
  • Zaffirini – What makes Texas so attractive with carbon storage?
    • Texas is the energy capital of the world and we’re the manufacturing capital of the United States as well; and if Texas can use this technology, it can have access to foreign markets; there’s requirements in the legislation that requires all landowners to be treated fairly and equitably
  • Zaffirini – Can eminent domain be to acquire land to store carbon either under this bill or Texas law? Do you know of any other states that are doing it?
    • It can be used in Louisiana and Alabama to store carbon dioxide; those are some of our biggest competitors in Texas; so eminent domain is not used and should not be in our opinion
  • Zaffirini – Why is integration necessary and how is indistinguishable from eminent domain?
    • Eminent domain grants the power to an entity if their agreements cannot be reached, that they go through a condemnation process to determine what the fair market value is
  • Zaffirini – The introduced bill had a 60% threshold for integration at the committee substitute, I believe, raised it to 67. What is your opinion about that particular threshold? Could you tell us your opinion about it and what do other states do?
    • The average is 54 and the most predominant is 60 moving from 60 to 67; I think it doesn’t make us as competitive as what other states are, but we understand that the legislature here wants to ensure that as we make certain that reasonable accommodations are made, that it’s fair and treat all parties fairly
  • Zaffirini – Why would the state want to accept long term liability?
    • The funding will be provided by industry; this liability program is very well-defined in statute because EPA is the holder of the ability to issue classic’s permits; I think there’s some really good safeguards that would help the industry get moving faster, and it’s voluntary
  • Sparks – You’ve been around Texas government a long time and you seem to have a lot of optimism that collecting all of these things within the state of Texas will be managed well over the next 30 to 50 years?
    • I do, and the reason is because I think there’s a there’s an amendment that would require the fund to be placed outside the Treasury where it can’t be swept, and so that those funds will be there forever
  • Alvarado – You may have covered this when I was out of the room, but is there an appeal process for determining the fair market value?
    • As between the operator and the landowner that’ll be subject to negotiation

 

Arthur Uhl & Dan Gattis, Texas Southwest Cattle Raisers – Against

  • If you don’t pass this bill, it is not going to stop the injection of CO2 in the state of Texas
  • This bill has three things in it, it defines what CO2 is to include other things which are not defined
  • The second thing it does is it forces me into the deal
  • The other thing it does is liability shifting, don’t see any reason why we ought to liability shift
  • This bill is for economic development and basically creates condemnation of other lands in a worse state than condemnation is

 

SB 2107 left pending

 

SB 558 (Hughes) Relating to parkland dedication for property development by certain municipalities; authorizing a fee.

  • Hughes -This bill would put some guardrails in place and add certainty so that folks can continue to develop property and homes for Texans
  • Bill places a cap on the percentage of land City can mandate the developer to donate for Parkland at 10%
  • Bill also establishes a formula for determining the fee calculation, so we don’t see the astronomical increases we’ve seen
  • Bill gives an earlier opportunity for the developer to obtain a determination of just what the requirements are so they can plan accordingly, be more efficient, hopefully develop more housing
  • Bill improves due process by giving an appeals process that developers can pursue if they disagree with the city’s parkland dedication requirements and it makes clear the city has the authority to determine whether a developer has to donate space or pay a fee
  • In the CS there is a clear exclusion made for single family houses, single family residential units; applies to multifamily only; also clarifies that the city has discretion on whether to allow a landowner to choose to pay a Parkland fee, dedicate land for parkland or a combination
  • CS modifies requirement that the city, upon written request for the landowner, provide a timely determination of Parkland education requirements
  • CS allows the city to request additional information this public is publicly available
  • CS gives an incentive for affordable housing by excluding affordable dwelling units from the fee calculation required by the bill those are excluded from the calculation also for those municipalities that are currently charging a low fee, are not subject to the limitations in the bill
  • CS removes a section that lets the city spend parkland funds on maintenance and operation of current parks
  • Bill makes it clear that if you pay a fee in lieu of that, it should be for new Parkland
  • Hancock – Your bill would not prohibit a developer from donating so they are not paying property taxes on undevelopable land, correct?
    • It would not prohibit that; this is about land that their developing and building on

 

John Kroll, HMWK – For

  • Bill does not prevent a community from requiring a parkland dedication from multifamily projects
  • Bill put guidelines and consistency for the developers
  • Allows landowner to know what they are getting into
  • Allows developers and cities to move forward in providing good well-maintained parks for all the residence

 

Rocky Estrada, City of San Antonio – Opposed

  • Bill would require city council to designate all territory in 1 of 3 tiers, must share with Bexar County appraisal district; concerned there isn’t sufficient time to coordinate designation efforts by the effective date
  • Density factor is also concerning

 

Kayla Reese, Austin Parks Foundation – Opposed

  • Bill would make fewer green spaces accessible to people
  • Texas is already dealing park deficiencies
  • Bill makes no provision for the cost of transition bare land into a functioning park
  • Bill reduces the existing parkland requirements greatly

 

Joel McElhany, City of Fort Worth – Opposed

  • Since 1977 Ft. Worth has had a park dedication policy
  • Support the CS that removes single family units; still opposed to multifamily
  • Concerns with Multifamily is, land value appraisal method, and the cap on acers per unit

 

Thomas Rowlinson, City of Austin – Opposed

  • Bill will lower the level of service at parks, prevent new residents from accessing parks, and worsen quality of life outcomes for the community
  • Using the formulas, would not be able to provide parkland to new residents
  • Bill is so limiting that cities would be required to pay developers in most cases where land is required in urban and CBD areas
  • Bill would result in deficit of approximately 100 acres of parkland by 2030

 

Erika Lopez, City of Austin – Opposed

  • Even without state legislation a cities authority to require the dedication of parkland is limited by the US and Texas constitution
  • The cities purchasing power with this bill will be limited; cities will never be able to purchase the same amount of parkland for all the new residents

 

Jeff Achee, Texas Recreation of Parks Society – Opposed

  • Gave background of TRPS function
  • Parkland dedication serves as legal established form of public funding
  • If city’s ability to funding parkland is hindered, they will see harmful economic consequences

 

Jennifer Ostlind, City of Huston – Opposed

  • The CS may prevent city from working with development community to update the fee to one that is low but may be above the 2% median income
  • The process for determining the land is complicated
  • Concerned about the comprehensive planning process, Huston does not do that

 

Craig Nazor, Sierra Club – Opposed

  • Commercial development benefits from nearby parkland, gave examples like Zachary theatre
  • Greater density does not equal greater affordability
  • Increased density usually required increased nearby parkland
  • Parkland benefits neighborhood health and development

 

George Cofer, Self – Opposed

  • Worked on Parks for 36 years, there when the current equation used was written
  • Hamstring major cities to provided dedicated parkland
  • Shifts burden to the taxpayer
  • Parkland dedication fund allows for cities to provided matching funds

 

Janna Melton, Self – For

  • No testimony

 

SB 558 left pending

 

CS SB 785 (Birdwell | et al.) Relating to the ownership by a landowner of the geothermal energy and associated resources below the surface of the landowner’s land.

  • Birdwell – Bill clarifies that landowner owns the geothermal energy and associated resources below their land; and the landowner, landowner’s lessee, heir, or assignee are entitled to drill for or produce those resources
  • Bridwell sends up CS; CS amends the definition of geothermal energy and associated resources to clarify that no mineral including any oil, gas, or product of oil or gas is included in the definition of geothermal energy and associated resources, because it is geologically possible for oil, gas, and other minerals to be found within a geothermal formation
  • CS also clarifies that ownership standard clarified in this bill does not affect any deed, conveyance, reservation, exception, limitation, lease, contract or other legally biding document expressly provided to the contrary
  • Nothing in this bill prohibits landowner from dividing or conveying their land as they see fit
  • Reason for CS is because GLO put fiscal note on the bill based on assuming geothermal energy is a mineral, but it is not
  • Ask for favorable consideration

 

Barry Smitherman, Geothermal Energy Alliance – For

  • Important for members to clarify that heat is owned by the surface estate

 

Ben Sebree, Oil and Gas Lawyer – For

  • Heat, energy, steam, hot water, hot brines, and geopressured water are not minerals under Texas law; heat and energy are intangible qualities of the earth, the other things are ground water; Heat and energy are not minerals, ground water is not a mineral, therefore geothermal energy is not a mineral
  • In 1975 legislature passed a sentence in the geothermal resources act that says “geothermal energy is to be treated and produced as a mineral” but it doesn’t say that it is a mineral
  • Geothermal energy shouldn’t have been considered a mineral this bill clarifies that it is not

 

Malcolm Ross, Self – Neutral

  • Referenced hobby school of public affairs report by U of H; states that Texas is enthusiastic for geothermal energy
  • DOD is doing two projects in geothermal energy, Ellington field and joint base of SA

 

Ken Mills, GLO – Neutral

  • Birdwell – What would need to clarify to ensure GLO pulls this fiscal note?
    • The operating assumption of the GLO up until this point was that it is to be treated as a mineral, so that how we’ve treated it
  • Birdwell – Processed as a mineral not but not defined as a mineral.
    • The one clarification that GLO might ask for, on the associated resources part the hot brine and byproducts, to the extent that it includes dissolved minerals, is the production of hot water hot brine including part of the school funds mineral state dissolved in that water
  • Birdwell – Mr. Seabree can you speak to that?
    • Seabree – other parties brought that concern to us, the fix is in the CS; it clarifies that no mineral which might be found in a geothermal formation is not part of the definition of geothermal energy

 

SB 785 is left pending

 

SB 786 (Birdwell | et al.) Relating to the regulation by the Railroad Commission of Texas of closed-loop geothermal injection wells.

  • Birdwell – There is conflict in Texas law regarding the wells associated with geothermal energy, the Texas RR commission and TCEQ are both required to regulate these wells
  • Bill would remove closed loop geothermal injection well from the regulatory of the TCEQ and place them under the RR commission; as well as transfer any related duties for these wells from the TCEQ to the RR Commission
  • This clarification would provide certainty to potential operators seeking to produce geothermal energy
  • Open loop injection well not used for geothermal production would still be under the authority of TCEQ; the remaining class 5 injection wells are unaffected by this legislation
  • The fiscal note that RR placed on it is being corrected by them

 

Barry Smitherman, Texas Geothermal Energy Alliance – For

  • Bill will enable producers to run water through a closed loop to make electricity, that technology is at TCEQ, all the other geothermal jurisdictions is at the RR Commission
  • Support moving this technology to the RR Commission which has all the other jurisdiction
  • Spoke with RR Commission they informed me that the fiscal note is now $0

 

Malcolm Ross, Self – Neutral

  • Happy to answer questions on closed loop

 

SB 786 left pending

 

Closing Remarks

  • Chair Birdwell – Have two bills to vote out at the desk tomorrow