Recently in Texas Railroad Commission Category

December 8, 2014

New Texas Railroad Commission Rules on Pipeline Permits

The Texas Railroad Commission has adopted amendments to its pipeline permits rule, 16 TAC Sec. 3.70. The amendments require pipeline companies to submit documentation to support their claim that they will operate the line as a common carrier or gas utility.

In Texas, pipelines have the right to condemn pipeline easements for lines that are common-carrier or gas-utility lines. Until the Supreme Court's decision in Texas Rice Land Partners v. Denbury in 2011, pipelines assumed that all they had to do in order to exercise the right of eminent domain was file a form at the RRC - a Form T-4 - stating that the proposed line would act as a common carrier or gas utility. In Denbury, the court said that filing the form is not enough.

The court in Denbury first held that a pipeline does not acquire condemnation authority merely by obtaining a permit from the Railroad Commission and subjecting itself to that agency's jurisdiction as a common carrier. The court then held that in order for a pipeline to have condemnation power it must serve a public purpose, and to serve a public purpose, "a reasonable probability must exist, at or before the time common-carrier status is challenged, that the pipeline will serve the public by transporting gas for customers who will either retain ownership of their gas or sell it to parties other than the carrier." Once a landowner challenges its right to exercise eminent domain, "the burden falls upon the pipeline company to establish its common-carrier bona fides if it wishes to exercise the power of eminent domain."  The court said that the question of whether the pipeline is dedicated to a "public use" is ultimately a judicial question.

The rule amendments adopted by the RRC last week were proposed by the pipeline industry and were apparently an attempt to address the problems created for them by the Denbury decision. If a pipeline company wants to classify a proposed new line as a common-carrier or gas-utility line, it must include in its permit application a sworn statement "providing the operator's factual basis supporting the classification and purpose being sought for the pipeline," and "documentation to provide support for the classification and purpose being sought for the pipeline ...."

The RRC received many comments to the proposed rule, and its discussion of those comments reveals much about the RRC's intent in adopting the rule amendments. The RRC's discussion makes clear that it does not intend to get involved in the Denbury debate:

A T-4 Permit to Operate an intrastate pipeline in Texas is literally and specifically a permit to operate a pipeline. It is not a permit to construct a pipeline, nor is it authorization for a pipeline operator to exercise eminent domain in the acquisition of pipeline right-of-way.

The permitting process does not determine property rights. ... Litigation over the rights of a property owner or a pipeline's easement is not a Commission matter; it is a courthouse matter.

The Commission disagrees with assertions made by [Texas Southern Cattle Raisers Association] and other commenters that the Court in Denbury suggested the Commission should expand its processing of applications for T-4 permits to encompass investigation and adversarial testing of, particularly, the common carrier assertions made by T-4 applicants. In fact, the Court stated, "the parties point to no regulation or enabling legislation directing the Commission to investigate and determine whether a pipeline will in fact serve the public."

The new permitting process requires a pipeline operator to substantiate the basis for the classification sought. ... Property owners will know the basis on which a pipeline operator claims common carrier status much earlier in the permitting process.

The rule amendments, and the RRC's responses to comments, can be found here:

adopt-amend-3-70-common-carrier-120214-SIG.pdf

Denbury has given landowners the ability to challenge pipeline companies' assertions of eminent domain authority. That has slowed the process of pipeline right-of-way acquisition and made the process more expensive for pipelines. If pipeline companies intended these rule amendments to address those issues, I'm not sure they succeeded.

 

 

 

September 29, 2014

Texas' New Seismologist

Michael Brick has written an excellent article in the Houston Chronicle about the Texas Railroad Commission's new seismologist, David Craig Pearson. The article, "Vexed by Earthquakes, Texas Calls In a Scientist," relates the events leading up to his hiring, his background, and the RRC's initial foray into addressing the issue by proposing new rules on injection well operators.

Dr. Pearson grew up in McCamey, worked in the oil fields, studied at SMU, and worked at Los Alamos National Laboratory in New Mexico for 13 years. He left in 2006, returning to West Texas and ranching. He inherited some mineral rights in Upton County. When the RRC advertised for a seismologist, he applied and was hired.

So far, Dr. Pearson has published no conclusions, but the RRC has been praised for its new proposed rules. Pearson testified in August before the House Energy Resources Subcommittee on Seismic Activity that he wants to wait for reports from SMU's study of seismic and injection activity around the town of Azle, in the Barnett Shale, before drawing any conclusions. 

September 23, 2014

EPA Praises RRC

In a letter to the Texas Railroad Commission commenting on the RRC's proposed rules on curbing earthquakes caused by high-pressure injection of waste fluids, the Environmental Protection Agency "applauded the RRC's efforts to ensure it has sufficient regulatory authority to respond to any event of the type where concerns may arise." Maybe the agencies will kiss and make up? Not likely. But the EPA agrees with proposed rules published by the RRC that would require applicants for disposal well permits to submit information about the area's risk for earthquakes as part of their application. The rules also strengthen the RRC's authority to limit or halt injection from existing wells where earthquake events occur.

Initially the RRC was slow to respond to complaints about earthquakes. At one point, citizens from the town of Azle, particularly affected by earthquakes, staged a protest before the RRC at which Azle citizens serenaded the commission with their own composition based on Elvis Presley's All Shook Up.  The RRC has now hired its own seismologist, and although Commissioners are cautious about connecting earthquakes to oil and gas activity, the proposed rules are a step in the right direction.

Texas now has more than 3,600 active commercial injection wells; it granted 668 permits last year alone. Earthquakes strong enough to damage homes have occurred in the Barnett Shale region. Similar problems have occurred in Oklahoma and other regions. 

The proposed rule can be found here.  Other comments on the proposed rule can be found here. Texas Tribune article on the proposed rules is here. SMU is conducting a study of the quakes around Azle and has installed seismic stations in the area to monitor seismic activity.

August 26, 2014

Flaring in the Eagle Ford

With increasing frequency, my landowner clients have complained about gas flaring, especially in the Eagle Ford Shale.  Landowners are beginning to insist that their leases require royalty payments on flared gas. Landowners also complain of the odors and noise from gas flares.

The San Antonio Express News has recently published a four-part series, Up in Flames,  on flaring in the Eagle Ford, after a year-long investigation. Among its findings:

  • Since 2009, flaring and venting of natural gas in Texas has surged by 400 percent to 33 billion cubic feet in 2012. Nearly 2/3 of the gas flared in 2012 came from the Eagle Ford.
  • Gas flared in the Eagle Ford resulted in more than 15,000 tons of volatile organic compounds and other contaminants into the atmosphere in 2012 -- more than was emitted by the six oil refineries in Corpus Christi.

Part Three of the Express News report focuses on the role played by the Texas Railroad Commission in regulation of gas flaring. Under RRC regulations, a company can flare gas for 10 days after a well is completed; after that, the company must apply for a permit if it flares more than 50,000 cubic feet of gas per day from the lease.  The Express News asked the RRC for records showing the 20 leases in the Eagle Ford with the most gas flared and vented in 2012, and for the permits allowing those companies to flare that gas. It turned out that seven of the 20 leases lacked the necessary flaring permits -- a fact that the RRC apparently had not noticed until the newspaper asked for the information.

The RRC's lack of enforcement of its own rules was a subject of criticism of the agency in the last Sunset Commission review of the RRC. The Sunset Commission report said that the RRC "pursues enforcement action in a very small percentage of the thousands of violations its inspectors identify each year.  Part of the reason for the large number of violations is that the commission's enforcement process is not structured to deter repeat violations. The commission also struggles to present a clear picture of its enforcement activities, frustrating the public."

RRC rules provide for a fine of up to $10,000 per day for flaring without a permit. After the Express News pointed out that seven of the 20 highest flaring leases in the Eagle Ford had no flaring permit, the RRC fined two of the companies more than $60,000 and is considering action against the others.

According to the report, the RRC could not point to a single instance when it denied a permit to flare gas -- sometimes for more than 180 days.

Most of the Eagle Ford production is oil -- some natural gas is produced with the oil, but with high oil prices and low gas prices, companies don't want to shut in wells until pipelines can be laid to gather the relatively small amounts of gas produced with the oil. So, the companies flare the gas. Burning the gas produces carbon dioxide, a greenhouse gas. If the gas is not burned completely, or if it is vented, methane and volatile organic compounds are released into the atmosphere.

Last year the RRC appointed an Eagle Ford Shale Task Force to identify and make recommendations to address issues resulting from exploration and production activities in the Eagle Ford play. One of its recommendations was to modernize state regulations, reduce waste of natural gas, and make flaring an "option of last resort." One of the commissioners, David Porter, said that he had "directed commission staff to apply a higher level of scrutiny to applications for flaring and venting operations and to shorten time frames for compliance when violations are reported."  No word yet from the Commission on how that "higher level of scrutiny" has affected flaring in the Eagle Ford.

Bottom line: operators will continue to flare gas as long as it is to their economic benefit to do so. The Railroad Commission will not deny permits to flare the gas. If landowners are able to require royalty payments on flared gas, the lessee's economic incentive to flare the gas will be reduced. Eventually, gas prices will rise, gathering lines will be installed, and flaring will decrease. Until then, flares continue to light up the night sky in South Texas.

July 29, 2014

Jimmy McAllen's Judgment Against Forest Oil Affirmed

Jimmy McAllen's battle against Forest Oil has moved one step closer to conclusion. Last week the Corpus Christi Court of Appeals affirmed an arbitration award of more than $20 million against Forest Oil for environmental and other damages to the McAllen Ranch and personal injuries to Mr. McAllen.

The fight began in 2004, when McAllen sued Forest. He claimed that Forest had buried mercury-contaminated iron sponge wood chips on the 27,000-acre McAllen Ranch. The wood chips are waste from Forest's gas plant on the Ranch. He also claimed that he had contracted cancer from pipe containing naturally occurring radioactive material (NORM) that Forest had given him to build pens on his Santillana Ranch.  The pens were built to house endangered rhinoceroses.  McAllen contracted cancer that required amputation of his leg.

Forest responded that McAllen was bound by a prior settlement agreement that required him to arbitrate any claims arising out of Forest's operations on his ranch.  McAllen opposed arbitration. The trial court denied Forest's motion to require arbitration, and the Corpus Christi Court of Appeals affirmed. Forest appealed to the Texas Supreme Court, which held that McAllen was bound by the arbitration agreement. Forest Oil v. McAllen, 268 S.W.3d 51 (Tex. 2008).

So the parties arbitrated McAllen's claims before three arbitrators, one chosen by McAllen, one by Forest, and the third chosen by the other two.  Forest chose Daryl Bristow, McAllen chose Donato Ramos, and the third arbitrator was Clayton Hoover. The arbitration hearing lasted for 17 days.  The arbitrators issued a split decision, with Bristow dissenting. The arbitration award gave $15 million to McAllen for the reduced value of the McAllen Ranch resulting from Forest's contamination of the ranch, and $500,000 to Jimmy McAllen for his personal injuries. The panel also awarded $500,000 in exemplary damages and $5 million in attorneys' fees. Bristow dissented, based on his conclusion that the award interfered with the Texas Railroad Commission's jurisdiction to regulate remediation of hazardous waste associated with oil and gas production.

McAllen filed a motion in the trial court to confirm the arbitration award, which the trial court granted. Forest then appealed to the Court of Appeals in Corpus Christi.

Texas courts favor arbitration of disputes, so it is difficult to overturn an arbitration award. A court's review of arbitration awards is very limited.

The Court of Appeals first held that the award did not interfere with the Railroad Commission's jurisdiction over oil field contamination. The court made reference to sections 85.321 and 322 of Texas Natural Resources Code, the first of which expressly grants a private cause of action for damages for violation of Texas conservation laws, and the second of which provides that nothing in the law governing Railroad Commission jurisdiction "shall impair or abridge or delay a cause of action for damages or other relief that an owner of land .... may have or assert against any party violating any rule or order of the commission or any judgment under this chapter."

Forest also argued that the award should be vacated because of the "evident partiality" of Donato Ramos, the arbitrator chosen by McAllen. An arbitration award may be overturned if an arbitrator fails to disclose to the parties known facts that "might, to an objective observer, create a reasonable impression of the arbitrator's partiality." In other words, it is not the partiality per se that is objectionable, but the arbitrator's failure to disclose facts that might show his partiality. Forest said that Ramos failed to disclose that McAllen had proposed Ramos as a mediator in another suit brought by McAllen against Chevron. Evidence in the case indicated that Ramos was never told that he had been proposed as a mediator in that other litigation.  Because there was evidence that Ramos never knew he was being proposed as a mediator, the Court of Appeals held that Forest had not shown grounds for overturning the arbitration -- Ramos could not fail to disclose something that he never knew. The Court of Appeals distinguished a recent Texas Supreme Court case that did overturn an arbitration award on the same grounds, Tenaska Energy v. Ponderosa Pine Energy,  2014 WL 2139215. In that case, the arbitrator failed to disclose the full extent of his business relationship with a party's attorneys in the case.

There is some irony in Forest's complaints about the arbitration award in light of its insistence that McAllen's claims had to be resolved by arbitration. One of Forest's arguments for overturning the award was that McAllen's expert-testimony evidence of damages to the ranch would not have been admissible testimony in a trial court. The Court of Appeals cited the Texas Supreme Court's conclusion that an arbitration award need not be based on admissible evidence. "For efficiency's sake, arbitration proceedings are often informal; procedural rules are relaxed, rules of evidence are not followed, and no record is made." Nafta Traders v. Quinn, 339 S.W.3d 84, 101 (Texas 2011).

Forest is sure to seek review by the Texas Supreme Court. So Jimmy McAllen's ten-year fight with Forest is not quite over yet. 

July 23, 2014

Texas Railroad Commission Proposes New Rule on Authority of Pipelines to Condemn Private Property

The Texas Railroad Commission has published a proposed rule that will change how pipelines are classified as "common carriers" and "gas utilities." That classification determines whether pipelines can exercise the power of eminent domain -- the power to condemn rights-of-way for pipelines.

In 2011, the Texas Supreme Court held in Texas Rice Land Partners v. Denbury Green Pipeline-Texas, LLC that the Railroad Commission's method of classifying pipelines as common carriers and gas utilities was not sufficient to grant them eminent domain authority. The court held that, in order for a pipeline to have condemnation powers, it must serve a "public purpose," and that in order for a pipeline to serve a public purpose, "a reasonable probability must exist, at or before the time common-carrier status is challenged, that the pipeline will serve the public by transporting gas for customers who will either retain ownership of their gas or sell it to parties other than the carrier." Once a landowner challenges its status as a common carrier, "the burden falls upon the pipeline company to establish its common-carrier bona fides if it wishes to exercise the power of eminent domain." The court held that the RRC's policy of classifying pipelines as common carriers or gas utilities based solely on the pipelines' checking of a box on a form filed with the RRC was not sufficient to establish the public purpose of the line. 

Since Denbury, the pipeline industry has struggled to find a way to efficiently establish pipelines' common-carrier status without having to litigate the issue with every landowner it wants to cross over. Initially the industry sought legislation authorizing the RRC to have one hearing to establish that a proposed new line will in fact qualify for common-carrier status. Under the bill, that determination would then be binding on all landowners whose property will be crossed by the pipeline. Those landowners would be given the opportunity to participate in the hearings; notice of the hearings would be given by publication in local newspapers. The Texas Farm Bureau, the forestry industry, and other landowner groups opposed the bill. Most major oil and gas associations favored the bill. The bill never made it out of committee.

The RRC's proposed rule essentially proposes to do the same thing that the failed bill did, with one big difference. Under the proposed rule, whenever a pipeline wants to build a new line it must file an application for a permit with the RRC. In that application, the pipeline must submit "a sworn statement from the pipeline applicant providing the operator's factual basis supporting the classification [as a common carrier or gas utility] and purpose being sought for the pipeline," and "documentation to provide support for the classification and purpose being sought for the pipeline." Once the application is complete, the RRC has 30 days to grant or deny the permit. If the permit is granted and the requested classification is approved, presumably the pipeline will have established its right to condemn right-of-way. At least that is what the pipeline industry is hoping.

The difference between the failed bill and the proposed rule is that no public notice of the permit application is given. Without public notice, there is no opportunity for those affected by the proposed pipeline to question the evidence submitted by the pipeline for the "public purpose" of the proposed line.

Comments on the rule must be submitted by August 25 to Rules Coordinator, Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967.

July 2, 2014

Texas Railroad Commission's New GIS Viewer Up and Running

In the last legislative session, the Texas Legislature gave the Texas Railroad Commission money to upgrade its website. The RRC's new GIS Viewer is now available for use.  http://wwwgisp.rrc.state.tx.us/GISViewer2/  This map-based access to RRC information on wells, pipelines and records makes it much easier for the public to access RRC records.

One of its tasks that the RRC does well is provide easy access to its records. It has always been one of the most open and accessible regulatory agencies in the state, and it goes to great lengths to make its records easily available to the public. Its new GIS Viewer greatly enhances this capability.

There is as yet no tutorial on how to use the new Viewer, but if you play with it for a while, you will see how easy it is to use.  When you open it, you see a map of the State, with the RRC' district boundaries shown.

Viewer 1.JPG

You can select a county from the menu at the top of the page to zoom in on that county.

Viewer 2.JPG

 

Then use your mouse to navigate within the county and find the area you are interested in. When you zoom in far enough, you will see symbols for wells.

Viewer 3.JPG

 

Click on one of the well symbols, and you can access the information available for that well, including permits, completion reports, and well production, and images of all of the filings for that well.

Viewer 4.JPG

 

You can also use a well's API number to find the well. A well's API number is a unique number assigned to every oil and gas well in the U.S. A complete API number for the well identified above is 42-177-32136. On the Viewer, the first two numbers are not used, and the dash between 177 and 32136 is not used. To search for this well using its API number, type 17732136 in the search box in the upper right-hand corner of the Viewer.

Viewer 5.JPG

Press enter, and the map zooms to the well.

The map has different layers that can be turned on and off to view particular items. For example, below are the layers showing pipelines and land survey boundaries.

Viewer 6.JPG

 

Hover over a pipeline and you will see its operator and what commodity the pipeline is carrying.

The Viewer is still being enhanced, and additional data will be included.

The Commission is to be congratulated on its work in providing this valuable tool.

 

June 19, 2014

Concerns Continue of Water Well Contamination from Hydraulic Fracturing

Investigations continue in response to complaints of alleged contamination of water wells from drilling activity in the Barnett Shale.

In May, the Texas Railroad Commission issued a report of its investigation of complaints of well contamination by methane in Parker County. It concluded that "the evidence is insufficient to conclude that Barnett Shale production activities have caused or contributed to methane contamination in the aquifer beneath the neighborhood."

But Parker County resident Steve Lipsky, who's complaint at the RRC caused it to conduct its new study, continues his battle with Range Resources, arguing that its wells are responsible for the methane in his water well.  Two other scientists who have reviewed the RRC test data concluded that the gas in Lipsky's water is definitely the result of fracking operations.

Lipsky's battle with Range continues in the Texas Supreme Court, where Lipsky and Range have both filed petitions for writs of mandamus. Lipsky has asked the court to dismiss Range's claims against Lipsky for defamation and business disparagement. Range accused Lipsky and his expert Alisa Rich of fabricating evidence in Lipsky's suit for damages for contaminating his well.  Range asks the court to reinstate its claims that Lipsky and his wife and Rich conspired to fabricate evidence to defame the company. The court has not yet ruled on the petitions.

Meanwhile, the University of Texas at Arlington, along with UT's Bureau of Economic Geology, are conducting a study of 550 water wells in North and West Texas, including baseline testing of wells in Nolan County using samples taken before commencement of drilling in that county, to investigate the impact of drilling and disposal operations over time. Some states, including Pennsylvania -- but not Texas -- require drillers to test nearby water wells before drilling to provide baseline data on groundwater.

April 14, 2014

Earthquakes in Ohio Linked to Hydraulic Fracturing Activity

The Ohio Department of Natural Resources has imposed rules on exploration companies requiring seismic monitoring around new well sites near fault lines and quake epicenters in the Utica Shale.  According to the Columbus Dispatch, the rules require monitors at new drill sites located within 3 miles of known fault lines or areas that have experienced an earthquake greater than magnitude 2.0. Monitors cost about $20,000 each, and as many as five are needed at each well. "ODNR officials said if monitors at drilling sites detect even a magnitude 1.0 quake, fracking will immediately stop and an investigation will start. If fracking is blamed, a moratorium would be instituted 3 miles around the epicenter," according to the article. Earlier earthquake activity near Youngstown, Ohio was attributed to an injection well, which was shut down by Ohio DNR.

Earthquakes in Oklahoma and North Texas in the Barnett Shale, and more recently in the Eagle Ford in South Texas, have been linked to injection wells, but not to hydraulic fracturing. The Texas Railroad Commission has hired a seismologist to study the matter but has not imposed any new regulations on injection wells.

October 15, 2013

Motion for Rehearing filed in Klotzman v. EOG Allocation Well Permit Dispute

For those of you following the Klotzman proceeding at the Texas Railroad Commission, you can read the Klotzman Motion for rehearing here.  #02-0278952 Klotzman Motion for Rehearing.PDF
October 14, 2013

Texas PACs Giving in Energy Sector

Texans for Public Justice, www.tpj.org, issued its report on 2012 Election Cycle Spending by Texas political action committees.  You can see it here. Some highlights:

Of the $70 million spent by Texas business PACs in 2011-12, $11.9 million, or 9%, was spent by PACs devoted to energy and natural resources issues/candidates. Here are the top spenders:

Energy PACs.JPG

The above figures represent spending by these PACs both in-state and out-of-state.

Energy Future Holdings is the successor to TXU Corp., acquired by EFH in a $45 billion leveraged buyout. EFH, now threatened with bankruptcy, is one of the state's largest electricity generators. The five EFH PACs spent more than $750,000. 

Valero Energy's PAC spent $729,000 of its $2 million in Texas and was a larger supporter of Senator Ted Cruz. ConocoPhillips' PAC spent $221,000 in Texas and gave large sums to Texas Railroad Commissioners.

Lawyer and lobbyist PACs were also big spenders:

Lawyer PACs.JPG

In 2010, Public Citizen issued a report on political contributions to Texas Railroad Commissioners. It found that total funds raised by commissioners increased from $511,000 in 2000 to $3.5 million in 2007-2008. Industry donors increased from $230,000 in 2000 to more than $2.1 million in 2008:

RRC contributions.JPG

Contributions to sitting commissioners increased substantially in 2006 and 2008 election cycles:

contributions to sitting commissioners.JPG

Public Citizens' conclusions:

  • Most of the increase in funding of commission races is driven by industry and those who have an economic interest in the decisions made by the commission.
  • Increased spending by large donors is likely putting pressure on smaller, independent operators to contribute.
  • Fundraising rarely ceases, except just after an election.

The Railroad Commission has been up for review by the Texas Sunset Commission in the last two sessions of the Texas Legislature, and both times the legislature failed to enact any of the recommendations of the Sunset Commission --- save one. In 2012, the legislature passed a bill requiring commissioners to resign if they decide to run for another elective office.  Governor Rick Perry vetoed that bill.  Among the Sunset Commission's recommendations was that the commission should levy more fines for violation of commission rules.  In the first quarter of 2013, the commission issued almost 14,000 notices of violations; it collected less than $200,000 in fines.

July 18, 2013

Final Report of Sunset Advisory Commission on Results of Recommendations on Texas Railroad Commission

The Sunset Commission's final report on the results of its recommendations for reform of the Texas Railroad Commission can be found here. The report's summary:

Summary of Final Results

S.B. 212 Nichols (D. Bonnen) -- Not Enacted

For the second consecutive legislative session the Railroad Commission's Sunset bill failed passage. Initially reviewed in 2011, the Railroad Commission's Sunset bill did not pass and the 82nd Legislature continued the Railroad Commission under Sunset review for another two years.1 In 2013, the Sunset Commission again found a need for the functions of the Railroad Commission. However, with the significant and ongoing boom in oil and gas production, the Sunset Commission concluded having a more transparent and objective regulator was more important than ever. To address these concerns, the Sunset Commission recommended changing the agency's name, limiting when Commissioners could solicit and receive campaign contributions, and requiring the automatic resignation of a Commissioner running for another elected office. The Sunset Commission also recommended several funding changes, including eliminating the statutory cap on the Oil and Gas Regulation and Cleanup Fund and creating a new pipeline permit fee to help support the agency's pipeline safety program.

The Sunset recommendations were incorporated into Senate Bill 212. The Senate passed this bill intact, but ultimately the bill was left pending in the House Energy Resources Committee.

Although the agency's Sunset bill failed passage for a second time, the 83rd Legislature did address a key Sunset Commission concern in other legislation by increasing, rather than eliminating, the cap on the Oil and Gas Regulation and Cleanup Fund. The Legislature also continued the agency for four years, subject to Sunset review again in 2017. One provision -- requiring the automatic resignation of a Commissioner running for another elected office -- was adopted by the Legislature in S.B. 219, the Ethics Commission Sunset bill, that was later vetoed by the Governor.

The following material summarizes Sunset recommendations adopted in other legislation and management actions directed to the agency that do not require statutory changes.

Continues the Railroad Commission for four years until 2017; requires the Sunset review to include an assessment of other state agencies that are able to perform the Railroad Commission's functions; and requires the Railroad Commission to pay all costs of the review. (H.B. 1675)

Ethics

Directs the Commission to review its recusal policy, and revise as necessary to ensure
Commissioner's awareness of, and compliance with, these requirements. (management action- non statutory)

Funding Cap

Increases the statutory cap on the Oil and Gas Regulation and Cleanup Fund from $20 million to $30 million, and increases the Fund's floor from $10 million to $25 million. (H.B. 3309)

Mineral and Land Owner Rights

Directs the Commission to study the use and development of telecommunication technology designed to increase the transparency of, and the public's participation in, agency hearing processes and better protect the rights of mineral owners and land owners in the state of Texas. (management action - nonstatutory)

Directs the Commission to develop a fee schedule for increased charges associated with re-filing previously withdrawn applications for forced pooling or field spacing exceptions. (management action - nonstatutory)

 

Once again, almost all of the Sunset Commission's recommendations were not adopted, even though comments received were almost uniformly favorable. The only significant legislation that did pass was a requirement that commissioners resign to run for another office - a bill vetoed by the Governor.

July 1, 2013

Inside Story on Failure of Pipeline Bills in Texas Legislature

Colleen Schreiber has written an excellent article in the June 13 edition of Livestock Weekly, "Landowners Hold Off Oil and Gas Lobby on Common Carrier Bills," describing the blow-by-blow negotiations and lobbying in the pipeline industry's efforts to "solve" the problems created by the Texas Supreme Court's decision in Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d 192, 198 (Tex. 2012).

Lined up on one side:  pipeline lobbyists supporting bills by Rep. Tryon Lewis, R. Odessa, in the House, and Robert Duncan, R. Lubbock, in the Senate, including the powerful Koch brothers, owners of Koch Enterprises.

On the other side:  Texas and Southwestern Cattle Raisers Association, Texas Farm Bureau, Texas Land and Mineral Owners' Association, the Bass family, and plaintiffs' lawyers.

Ultimately, all bills failed. The pipeline industry asked the Governor to add their issue to the special session but, so far at least, pipelines have been overshadowed by abortion bills and financing of higher education projects.

In Denbury, the Supreme Court surprised the pipeline industry by holding that they actually have to prove their proposed line will be a "common carrier" before they can use the power of eminent domain to condemn right-of-way. This left the pipelines, in their view, subject to interminable delays and suits by landowners unhappy with the pipeline routes, the terms of their proposed easements and the compensation being offered.

To "fix" the problem, the pipelines proposed that a pipeline's common-carrier status be determined once for each pipeline, at a hearing held before the Texas Railroad Commission. Landowner lobbyists agreed to negotiate and agreed to consider the concept of a single hearing that would determine common-carrier status for a pipeline; but they wanted the hearing to be before the State Office of Administrative Hearings (SOAH), rather than the RRC; they wanted to be sure all landowners likely to be affected got notice of the hearing; and they wanted strict standards to determine whether a pipeline qualifies as a common carrier. In the end, the biggest sticking point was whether the hearings would be before the RRC or SOAH. Pipelines obviously favored the RRC; the landowners, believing that the RRC would not protect their interests, favored SOAH.  (Most administrative hearings related to state agencies in Texas are held before administrative judges at SOAH. The RRC is one of the few agencies that has kept the right to have hearings before its own administrative judges, called hearings examiners.)

A bill might have been hammered out, but late in the game plaintiffs' lawyers, led by Wayne Reaud, a lawyer who made a fortune suing tobacco companies, weighed in and refused to compromise. Reaud at the time was fighting a condemnation action brought by CrossTex for a pipeline that would cross lands he owns in Jefferson County. Reaud claimed that CrossTex should not have the right to survey on his land until it proved that it is a common carrier. He sought and obtained a temporary injunction to keep CrossTex off his property. CrossTex appealed that injunction to the 9th Court of Appeals in Beaumont, and the appeal was pending when the pipeline bills were being considered. (The Beaumont court has since issued its opinion affirming the trial court's decision to grant the injunction. The opinion can be viewed here.) The end result was that the pipeline bills died in committee and never came up for a vote in either the Senate or the House.

Underlying the debate over the pipeline legislation is the perception by those representing landowners' interests that the RRC is not the place to have hearings on the qualifications of pipelines to exercise eminent domain, and the insistence by the pipeline interests that the RRC be the judge. The RRC has jurisdiction to enforce other laws affecting landowners' interests, and their experience has been that the RRC is not an agency friendly to landowners' complaints.

June 17, 2013

Energy Lobbyists Big Spenders in Texas Legislature

Terrence Henry, a writer for StateImpact Texas, has written a recent article, "Why Oil and Gas Lobbyists Were Big Spenders in Texas." He analyzes two reports on spending on lobbyists and campaigns compiled by Texans for Public Justice. Lobbyists for energy and natural resources companies spent between $31.4 million and $62.5 million on lobbyists during the most recent legislative session, according to the report, 19% of the total of between $155 million and $328 million spent on the session. Incredible numbers. There are no limits on such spending in Texas.

Texas Railroad Commissioners were big beneficiaries of both campaign contributions and lobbying by oil and gas interests. Sunset-recommended reforms of the Commission, opposed by the Commissioners, failed to pass once again. The only RRC-related reform that did pass (but which the Governor has vetoed) was a requirement that a commissioner resign if he/she decides to run for another office.  Andrew Wheat, a researcher at Texans for Public Justice, says that's because the oil and gas industry supported that measure:  "The [oil and gas industry] is interested in paying their bills while they're commissioners. But they don't want to pony up huge amounts of money every time one of these people wants to run for higher office."

One important bill supported by the energy industry did not pass. It would have limited public participation in hearings at the Texas Commission on Environmental Quality in applications for emissions permits. The bill was opposed by communities and environmental groups. And pipeline companies' bills to make it easier for them to exercise the power of eminent domain to condemn pipeline easements also failed to pass.

 

June 3, 2013

Railroad Commission Skates Sunset Review - Again

The session is over, and the Texas legislature has failed once again to pass sunset legislation for the Texas Railroad Commission. The legislature instead authorized continuation of the RRC for another four years, with sunset review to be repeated in the 2017 legislative session.

Under Texas sunset act, every state agency must go through a comprehensive review of its functions and performance every twelve years by the Sunset Advisory Commission, a 12-member commission appointed by the Lieutenant Governor and the Speaker of the House. The RRC underwent sunset review in 2010; the report of the Sunset Advisory Commission at that time criticized the agency for failing to vigorously enforce its rules and assess penalties for rule violations, and recommended structural reforms of the agency, including replacement of the three elected commissioners with a single appointed commissioner.  But the legislature failed to pass any legislation recommended by the Commission, instead requiring that sunset review be repeated for its 2013 session.

The 2012 Sunset Commission report no longer recommended replacing the three elected commissioners with an appointed commissioner. Instead, it recommended ethics reforms, including limiting the time when commissioners could solicit campaign contributions and prohibiting commissioners from accepting contributions from any company with a contested case pending before the RRC. It also required a commissioner running for a different elective office to resign from the RRC. The commissioners vigorously opposed these recommendations and the legislation introduced to enact the reforms.

The legislation continuing the RRC does provide that the next sunset review of the RRC must consider how to dismantle the agency and assign its responsibilities to other state agencies if sunset legislation fails to pass again in four years.

Rep. Dennis Bonnen, R-Angleton, author of the interim legislation continuing the RRC, expressed his frustration at the failure of the process: "I don't see how they can go through a third time -- through sunset and no bill passes -- and we continue that agency. You just can't keep doing that. We need to have the opportunity to have a strategic, orderly plan to dismantle the agency if that's the choice they make. It's the obvious thing to do." Bonnen blamed the agency's commissioners for the failure. "I'll be candid. All of he commissioners were against any changes for ethics. I think that's one of our biggest obstacles. The industry's afraid to agree with the legislators on any policy changes we're making because they don't want to offend the Railroad Commissioners. It's a very bad situation."

Rep. Bonnen claims that Commissioner Barry Smitherman plans to run for Attorney General in 2014, a claim that Smitherman does not deny or confirm. But Smitherman expressed his relief that the RRC won't have to go through sunset review for another four years.

Meanwhile, the RRC finally passed its overhaul of oil and gas well construction rules, Statewide Rule 13, a rulemaking that has been in the works for many months. Industry and environmental advocates -- in particular the Environmental Defense Fund -- worked together on the rule changes, and both expressed satisfication with the result.  Scott Anderson, senior policy advisor at EDF, said that "the rule marks a huge turning point in state regulation of the safety and environmental integrity of oil and gas wells. Texas has moved back into the leadership position on regulation of oil and gas well construction. Agencies around the country, including the federal Bureau of Land Management, are likely to learn a lot from studying these rules as well as similar rules adopted last year in Ohio." But Anderson cautioned that one big improvement is still ndeed. "For reasons we don't understand, the commission is allowing operators to leave less space around the pipes in the lower parts of wells than experts recommend. Having enough space around these pipes is important in order to get adequate cement jobs, which are needed both for economic reasons and in order to protect the environment. EDF hopes the commission will revisit this issue in the future."

The new rules don't become effective until January 1, 2014.