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New year brings new legislation
by Mella McEwen
Midland Reporter-Telegram
From Santa Fe to D.C., oil industry will be watching legislative filings
By Mella McEwen
Oil Editor
A new year brings new legislative sessions. This particular new year will also bring a new presidential administration. With Barack Obama assuming the presidency and in the aftermath of record high crude oil prices, the oil and gas industry will be watching legislatures from Santa Fe to Washington, D.C.
"It's going to be a very busy springtime," predicted Ben Shepperd, executive vice president of the Permian Basin Petroleum Association. He recently attended a gathering of industry groups meeting to discuss potential legislative initiatives and discussed what could happen in Santa Fe, Austin and Washington.
New Mexico
The New Mexico legislature will open its 60-day session the same day Obama is inaugurated as the nation's 44th president and its governor, Bill Richardson, has been nominated to be the next Secretary of Commerce. "He insists he's still governor until he's confirmed as secretary, and he's said he wants to implement his agenda," noted Shepperd, who said he expects the session in Santa Fe to be "real contentious," especially with Democrats making gains in both the state senate and house.
He continued, "We are preparing to deal with legislation regulating greenhouse gases." New Mexico, he said, is part of the Western Climate Initiative" that includes Arizona, California, Montana, Oregon, Utah and Washington State and the Canadian provinces of British Columbia and Quebec and formed last year to implement their own greenhouse gas initiatives, including cap-and-trade systems. Those initiatives, he said, could affect electric generation facilities, transportation, "even residences."
In addition, the state is facing a $500 million budget deficit, Shepperd said, so it's rumored a tax increase is under consideration.
"On the other hand, there a number of legislators sympathetic to the plight of the oil and gas industry and recognize that the governor's initiatives hurt oil and gas, which cuts tax revenues," Shepperd said. "Some of them are trying to enact initiatives to reign in agencies like the Oil Conservation Division. They recognize that regulators' policies and antagonistic attitudes have harmed the industry and tax revenues. So, on the one hand we may face more taxes, but also efforts to tighten OCD's budget and reign it in."
Texas
Thanks to a thriving oil and gas industry, Texas was one of the few states enjoying a budget surplus, though falling oil and natural gas prices and the weak national economy have whittled away at the amount. "Everyone is modifying their thinking from this summer when thought we'd be so flush," Shepperd said, "so we probably won't see many new programs this session."
When the Texas Legislature convenes January 13, Shepperd predicted that a bruising battle for Speaker of the House will dominate the initial days of the session. "Here we are about two weeks before the session and there's not a lot of bills," he said, noting only 860 have been filed to date and only eight pertain to oil and natural gas. "I think everyone's taking a wait-and-see attitude given the rough fight expected for speaker. After that's decided I expect we'll see a flood of bills."
Once legislators elect a speaker and get down to business, the PBPA will join other groups in presenting recommendations from the Inactive Well Study Group, Shepperd said. "The last session there were two bills we opposed, one increasing bonding requirements and another on surface equipment removal. We've worked with other associations, legislators and land owners on the issue. The nexus of the problem is surface owner complaints of junk left on site or inactive wells. We've looked at what we can do to encourage operators to bring inactive wells back online or plug them, or at other ways to ensure the future economic usefulness of those wellbores."
For those wells deemed to have no future economic usefulness, he said operators are encouraged to clean up the site for the landowners "so we don't face attempts to craft surface owner protection acts like we've seen in New Mexico and elsewhere."
Such legislation, he explained, could give surface owners additional, "and we feel unreasonable" rights over mineral rights owners, which dominate under Texas law. While Texas offers an encouraging business climate and promotes the development of its natural resources, Shepperd pointed out that operators still need to clean up their mess afterwards.
Texas could see different pieces of legislation regarding carbon dioxide (CO2) treatment, from sequestration to storage. "One bill I know we'll see is an effort by the Texas Commission on Environmental Quality and Railroad Commission to regulate CO2," he said. "CO2 and all air emissions are regulated by TCEQ. The question is, who regulates it when it's in storage? We feel the Railroad Commission should while TCEQ commissioners say they should. We feel the body of law and regulation is in place at the Railroad Commission to oversee storage."
Shepperd is also fairly certain, he said, a unitization bill will also be introduced. Past efforts have divided the industry and surface owners, he said, and the PBPA is not taking a stand on the issue.
Another issue that could be addresses legislatively results from high levels of activity in the Barnett Shale play around Fort Worth. That activity has increased awareness and anxiety among communities in the Metroplex, Shepperd said, catching the attention of legislators representing those areas.
"Residents have been protesting all permits at the Railroad Commission, whether it's drilling permits or permits for disposal wells," he said. "Those protests have caught the eye of legislators. I suspect we'll see legislation to give those communities more rights to regulate oil and gas development. The Railroad Commission regulates all oil and gas activity, but given the activity level and awareness in the Barnett Shale, I expect we'll have that fight. We need to look at those areas, but the trouble is legislation crafted to address the Metroplex will have an impact on a state level."
Expect, he added. Efforts to help promote alternative energy development in the Lone Star State.
Washington, D.C.
One battle the oil and gas industry doesn't expect to fight in 2009 is against a windfall profits tax. President-elect Obama himself has taken the issue off the table, noted Shepperd.
"It's interesting, given the issues using us today, beating up the oil industry has taken a back seat," he observed, eliminating what was shaping up this last summer, with $150 oil, to be what he called an ugly Congress for the industry.
Plans are, he said, to undertake an aggressive and massive educational program, telling members of Congress about the industry and the positive contributions it makes to the nation. The program will begin with a week in March when the PBPA and representatives from over 20 other industry associations from producing states across the nation will arrive in Washington, armed with comprehensive briefing materials to present elected officials.
"This is the first time, to my knowledge, all the states have collaborated," he said. "We've made similar efforts, but on a smaller scale, in the past."
If there is a silver lining to the economic crisis, he said, it's that the industry now has time to get in front of Congress and regulators and tell its story.
Although increased oil industry taxes are off the table for now, Shepperd expects the industry to feel the impact of Obama's promise to develop alternative energy sources and make the nation energy independent. Shepperd called Obama's nominee for Energy Secretary, Stephen Chu, a highly educated man and hopes Chu will bring a scientific approach to energy policy. He hopes policy initiatives such as cap-and-trade or greenhouse gas emission control will be based on science and not emotion, he said. But he expects a hard fight during the upcoming Congress.
"There's a Democratic majority across the board in Washington and we've not faced anything like this in a long time," he said. "Environmentalists feel they had a hand in electing Democrats and they feel they're owed a debt."
With the Obama administration taking charge, he said, "there will be a huge emphasis on developing all sources of energy and making ourselves energy independent. We recognize that, in today's world there is a need for all forms of energy, solar, wind, hydro, geothermal. But in our lifetime we won't replace oil and gas as a transportation fuel or in the development of products like plastics or chemicals. We in the industry recognize the need to develop all alternative forms of energy, in a sensible manner, but not in a way that penalizes oil and gas. Oil and gas will continue to be a major component of our energy portfolio."
Mella McEwen can be reached at casell@mrt.com.
By Mella McEwen
Oil Editor
A new year brings new legislative sessions. This particular new year will also bring a new presidential administration. With Barack Obama assuming the presidency and in the aftermath of record high crude oil prices, the oil and gas industry will be watching legislatures from Santa Fe to Washington, D.C.
"It's going to be a very busy springtime," predicted Ben Shepperd, executive vice president of the Permian Basin Petroleum Association. He recently attended a gathering of industry groups meeting to discuss potential legislative initiatives and discussed what could happen in Santa Fe, Austin and Washington.
New Mexico
The New Mexico legislature will open its 60-day session the same day Obama is inaugurated as the nation's 44th president and its governor, Bill Richardson, has been nominated to be the next Secretary of Commerce. "He insists he's still governor until he's confirmed as secretary, and he's said he wants to implement his agenda," noted Shepperd, who said he expects the session in Santa Fe to be "real contentious," especially with Democrats making gains in both the state senate and house.
He continued, "We are preparing to deal with legislation regulating greenhouse gases." New Mexico, he said, is part of the Western Climate Initiative" that includes Arizona, California, Montana, Oregon, Utah and Washington State and the Canadian provinces of British Columbia and Quebec and formed last year to implement their own greenhouse gas initiatives, including cap-and-trade systems. Those initiatives, he said, could affect electric generation facilities, transportation, "even residences."
In addition, the state is facing a $500 million budget deficit, Shepperd said, so it's rumored a tax increase is under consideration.
"On the other hand, there a number of legislators sympathetic to the plight of the oil and gas industry and recognize that the governor's initiatives hurt oil and gas, which cuts tax revenues," Shepperd said. "Some of them are trying to enact initiatives to reign in agencies like the Oil Conservation Division. They recognize that regulators' policies and antagonistic attitudes have harmed the industry and tax revenues. So, on the one hand we may face more taxes, but also efforts to tighten OCD's budget and reign it in."
Texas
Thanks to a thriving oil and gas industry, Texas was one of the few states enjoying a budget surplus, though falling oil and natural gas prices and the weak national economy have whittled away at the amount. "Everyone is modifying their thinking from this summer when thought we'd be so flush," Shepperd said, "so we probably won't see many new programs this session."
When the Texas Legislature convenes January 13, Shepperd predicted that a bruising battle for Speaker of the House will dominate the initial days of the session. "Here we are about two weeks before the session and there's not a lot of bills," he said, noting only 860 have been filed to date and only eight pertain to oil and natural gas. "I think everyone's taking a wait-and-see attitude given the rough fight expected for speaker. After that's decided I expect we'll see a flood of bills."
Once legislators elect a speaker and get down to business, the PBPA will join other groups in presenting recommendations from the Inactive Well Study Group, Shepperd said. "The last session there were two bills we opposed, one increasing bonding requirements and another on surface equipment removal. We've worked with other associations, legislators and land owners on the issue. The nexus of the problem is surface owner complaints of junk left on site or inactive wells. We've looked at what we can do to encourage operators to bring inactive wells back online or plug them, or at other ways to ensure the future economic usefulness of those wellbores."
For those wells deemed to have no future economic usefulness, he said operators are encouraged to clean up the site for the landowners "so we don't face attempts to craft surface owner protection acts like we've seen in New Mexico and elsewhere."
Such legislation, he explained, could give surface owners additional, "and we feel unreasonable" rights over mineral rights owners, which dominate under Texas law. While Texas offers an encouraging business climate and promotes the development of its natural resources, Shepperd pointed out that operators still need to clean up their mess afterwards.
Texas could see different pieces of legislation regarding carbon dioxide (CO2) treatment, from sequestration to storage. "One bill I know we'll see is an effort by the Texas Commission on Environmental Quality and Railroad Commission to regulate CO2," he said. "CO2 and all air emissions are regulated by TCEQ. The question is, who regulates it when it's in storage? We feel the Railroad Commission should while TCEQ commissioners say they should. We feel the body of law and regulation is in place at the Railroad Commission to oversee storage."
Shepperd is also fairly certain, he said, a unitization bill will also be introduced. Past efforts have divided the industry and surface owners, he said, and the PBPA is not taking a stand on the issue.
Another issue that could be addresses legislatively results from high levels of activity in the Barnett Shale play around Fort Worth. That activity has increased awareness and anxiety among communities in the Metroplex, Shepperd said, catching the attention of legislators representing those areas.
"Residents have been protesting all permits at the Railroad Commission, whether it's drilling permits or permits for disposal wells," he said. "Those protests have caught the eye of legislators. I suspect we'll see legislation to give those communities more rights to regulate oil and gas development. The Railroad Commission regulates all oil and gas activity, but given the activity level and awareness in the Barnett Shale, I expect we'll have that fight. We need to look at those areas, but the trouble is legislation crafted to address the Metroplex will have an impact on a state level."
Expect, he added. Efforts to help promote alternative energy development in the Lone Star State.
Washington, D.C.
One battle the oil and gas industry doesn't expect to fight in 2009 is against a windfall profits tax. President-elect Obama himself has taken the issue off the table, noted Shepperd.
"It's interesting, given the issues using us today, beating up the oil industry has taken a back seat," he observed, eliminating what was shaping up this last summer, with $150 oil, to be what he called an ugly Congress for the industry.
Plans are, he said, to undertake an aggressive and massive educational program, telling members of Congress about the industry and the positive contributions it makes to the nation. The program will begin with a week in March when the PBPA and representatives from over 20 other industry associations from producing states across the nation will arrive in Washington, armed with comprehensive briefing materials to present elected officials.
"This is the first time, to my knowledge, all the states have collaborated," he said. "We've made similar efforts, but on a smaller scale, in the past."
If there is a silver lining to the economic crisis, he said, it's that the industry now has time to get in front of Congress and regulators and tell its story.
Although increased oil industry taxes are off the table for now, Shepperd expects the industry to feel the impact of Obama's promise to develop alternative energy sources and make the nation energy independent. Shepperd called Obama's nominee for Energy Secretary, Stephen Chu, a highly educated man and hopes Chu will bring a scientific approach to energy policy. He hopes policy initiatives such as cap-and-trade or greenhouse gas emission control will be based on science and not emotion, he said. But he expects a hard fight during the upcoming Congress.
"There's a Democratic majority across the board in Washington and we've not faced anything like this in a long time," he said. "Environmentalists feel they had a hand in electing Democrats and they feel they're owed a debt."
With the Obama administration taking charge, he said, "there will be a huge emphasis on developing all sources of energy and making ourselves energy independent. We recognize that, in today's world there is a need for all forms of energy, solar, wind, hydro, geothermal. But in our lifetime we won't replace oil and gas as a transportation fuel or in the development of products like plastics or chemicals. We in the industry recognize the need to develop all alternative forms of energy, in a sensible manner, but not in a way that penalizes oil and gas. Oil and gas will continue to be a major component of our energy portfolio."
Mella McEwen can be reached at casell@mrt.com.
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