A Landmark January Legislative
Session Forecasted for Texas Oil and Gas Industry
Weather analysts expect another chilly January in Austin. But the climate in the Texas capital dome just may be the hottest on record for those of us in the E & P industry. State legislators and local government officials are feeling pressure from constituents to increase oversight on oil and gas production. Federal agencies are also on notice to rethink controls governing the industry. And no matter which party dominates Washington, upcoming debates on national energy legislation will most likely turn up the heat evenmore on our legislators in Austin.
Our prediction? January’s legislative session will be one for the oil and gas history books. Here are our top six hot topics to look for in the coming session:
1) A Margins Tax Overhaul – Many see this 2006 change to the Texas franchise tax as a big underperformer. Critics cite shortfalls in tax revenues, confusing rules, extra compliance costs and unfairness to small business as reasons for reworking this piece of legislation.
2) Pipelines and Eminent Domain – A number of recent court cases filed by landowners have raised key questions on the legal right of a city, county or state to claim private land for interstate pipelines.
3) Water Issues – Citizens, communities and others are challenging Texas to strengthen its policies on public and private water supplies, with an emphasis on water related to the hydraulic fracturing process.
4) Texas Railroad Commission – The state's oldest regulatory agency now has an annual budget of $79 million and primarily sets monthly production allocations for oil, gas, mining, propane, and pipelines. It’s up for renewal or retirement this year as part of the Sunset process, a periodical review done on all Texas agencies.
5) Road safety, repair, new construction and right-of-way – As gas drilling spreads across populated areas in the Eagle Ford Shale and the Barnett Shale, it raises new concerns about roads in and around shale boom areas.
6) Environmental Impacts of Oil and Gas Production – The increase in urban and near urban oil and gas drilling operations have groups calling for more stringent laws to govern these operations.
The Texas Business Climate:
Internal and External Steps to Insulate Your E & P Operation
These are, of course, still predictions. In any event, there’s months of cooling off time before a Hot Topic becomes an enforceable law. We encourage you to use that time to prepare for the new business climate and get involved in helping to limit the negative or unintended effects of new legislation on the E & P industry.
Here’s what you can do in the next 12 to 24 months:
Perform an Internal Analysis.
• Analyze how each of these issues could impact your business.
• Determine which specific areas may be vulnerable to the new legislation.
• Make adjustments to your operation now to limit negative effects.
• Fine-tune your business model to reflect these changes.
Conduct External Education.
• Make contact with pro industry legislators before legislation is drafted.
• Be available to the pro oil and gas leadership as their personal educational source.
• Educate energy proponents on any negative impacts to the industry.
• Encourage all legislators to make an informed vote on the issues.
--Gary Compton, Thompson & Knight LLP
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