Was the 86th Texas Legislature Good to the Oil Business?

Gray Reed
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Gray Reed & McGraw

The answer depends on what part of “the oil business” you care about. The 86th Legislature produced a few, but not many, changes in laws affecting the business, (most going into effect on September 1). Here are some that passed and some that failed:

WINNERS

Mineral Interest Pooling Act

HB 3266 updates the automatic dissolution provision of the MIPA (the closest Texas comes to forced pooling). The old provision required dissolution of a unit pooled under the MIPA after one year if no drilling or production “have been had” on the unit. The new language extends the period to two years after the unit’s effective date if no drilling or production has been had “on the unit or surface location for the unit.” The new period harmonizes MIPA with two-year drilling permit period.

The amendment also expands where unit-maintaining production or operations can take place beyond the unit itself, to surface locations for the unit. The change will make life easier for horizontal well operators, whose wells often have production from a reservoir with pipelines having an entry point not on the unitized lands, but on an offsite tract.

Removal of Cap on Oil and Gas Regulation and Cleanup Fund

HB 2675 repeals provisions of the Natural Resources Code that essentially capped the fund’s size to around $30 million.  Whenever the fund reached that amount, the RRC could no longer collect oilfield cleanup fees. Removal will enhance the RRC’s ability to finance projects.

Ownership of fluid oil and gas waste

HB 3246 clarifies that an entity producing and using fluid oil and gas waste, such as produced water, owns that waste if it took “possession of that waste for the purpose of treating the waste for subsequent beneficial use.” A landowner or other interest owner who desires possession of the produced water will have to negotiate for it in the lease, surface use agreement, or other legally binding agreement. As produced water becomes more valuable, this bill settles a previously ambiguous legal area.

Texas Citizens Participation Act 

This well-intentioned but flawed law was amended. More on that in a later post (maybe). This one was spearheaded by Gray Reed’s Jeff Leach, R-Allen, chair of the House Judiciary and Civil Jurisprudence Committee.

This just in – freedom from persecution!

Local authorities are stripped of their power to shut down kiddie’s lemonade stands.

FAILURES TO LAMENT OR CELEBRATE 

Here is an assortment of bills that didn’t pass:

Eminent Domain

SB 421 was meant to protect landowners who don’t want their land taken for pipeline construction. Would have

  • instituted specific timelines, negotiation procedures, and in some cases, public meetings
  • set a market-value-based minimum initial offer in negotiations between companies and landowners, and
  • required surface damage restoration on condemned property. None of the 11 eminent domain-related bills passed.

“Bill of rights” for solar homeowners

SB 2066/HB 2860 would have prohibited many kinds of local restrictions on homeowner solar installation.

Non-competition

HB 1522 would have rendered unenforceable non-compete covenants between upstream, midstream, and downstream operating entities and independent contractors.

Tax credits

HB 2545 would have provided tax credits for desalination facilities treating lower-quality water such as produced water.

Groundwater impact contingency planning

HB 3324 would have given the TCEQ authority to require an oil and gas pipeline operator to submit “a site-specific contingency plan” describing “measures to be taken to control, contain, and collect any discharge of fluids from the pipeline to minimize impacts to groundwater”.

PUC pipeline permits

HB 4001 would have required a pipeline transporting gas or petroleum and operated or managed by a gas corporation or a common carrier to receive a PUC permit authorizing the pipeline route before construction could begin. In the permit granting process, the PUC would have had to consider the pipeline’s potential negative effects on landowners including community values, recreational and park areas, historical and aesthetic values, and environmental integrity.

Oil and Gas Emergency Alert System

SB 185 would have

  • required operators to give immediate notice of a fire, leak, spill, or break at a well to the RRC;
  • created a “well blowout emergency alert system” requiring the RRC and TCEQ to give public notice of dangerous releases;
  • “prevented an operator from obtaining a permit for a well adjacent to a well blowout site if the applicant violated a statute or commission rule, or was currently under investigation by a state or federal agency for an alleged violation.”

Royalty owner suits

Closely watched by attentive royalty owners, HB 3372 would have amended Natural Resources Code § 91.402 to deny payees a common law cause of action against payors for withholding payments.

This week, dead piano players you should listen to

Memphis Slim

James Booker

Professor Longhair

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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