HBA-KDB S.B. 310 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 310 By: Harris Energy Resources 4/23/2001 Engrossed BACKGROUND AND PURPOSE The Railroad Commission of Texas (commission), created under constitutional authority by the legislature in 1891, protects the state's natural resources, the environment, and public safety through regulation of the oil and natural gas industry, pipeline transporters, natural gas utilities, rail safety initiatives, and surface mining operations. The commission is subject to the Texas Sunset Act and will be abolished on September 1, 2001, unless continued by the legislature. The Sunset Advisory Commission determined that current state law does not effectively ensure the financial assurance of oil and gas operators, potentially leaving the state liable for pollution and abandoned wells. The Sunset Advisory Commission's recommendations would increase the cap for the oil-field cleanup fund, authorizing the commission to set higher fees to fund environmental well-plugging and remediation efforts. The commission would be able to create a voluntary cleanup program, thereby releasing nonresponsible parties from future liability. Other Sunset Advisory Commission recommendations would enhance pipeline safety regulation by focusing oversight on pipeline integrity, conserve natural resources through mandatory unitization, and provide assistance to low-income gas utility customers. Senate Bill 310 continues the commission until September 1, 2013. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Railroad Commission of Texas in SECTION 2 (Art. 6447n, VTCS), SECTION 3 (Section 81.0531, Natural Resources Code), SECTION 11 (Sections 91.1041 and 91.1042, Natural Resources Code), SECTION 15 (Sections 91.1131 and 91.1132, Natural Resources Code), SECTION 19 (Section 113.082, Natural Resources Code), SECTION 21 (Section 113.087, Natural Resources Code), SECTION 37 (Section 116.016, Natural Resources Code), SECTION 38 (Section 116.032, Natural Resources Code), SECTION 44 (Sections 118.001-118.003, Natural Resources Code), and SECTION 46 (Section 121.206, Utilities Code) of this bill. ANALYSIS Senate Bill 310 provides for the continuation of the Railroad Commission of Texas (commission) until September 1, 2013, and sets forth standard Sunset Advisory Commission recommendations regarding the development of an equal employment policy, conflicts of interest, the maintaining of written complaints, policy implementation by the commission, public testimony, and the state employee incentive program. The bill authorizes the commission to adopt rules necessary to implement provisions regarding methods of making payments to the commission (Art. 6447n, V.T.C.S.).. S.B. 310 amends the Natural Resources Code to require the commission, through the legislative appropriations request process, to establish specific performance goals for the oil-field cleanup fund (fund), including goals for well plugging and site remediation. The bill raises the cap on the fund from $10 million to $20 million with a $10 million, rather than $6 million, floor and provides for fee increases for drilling permits and well plugging extensions, modifies the composition of the fund, and creates a fee for filing an organizational report and for requesting a density exception or spacing review (Secs. 85.2021, 91.111, and 91.142). The bill increases from $50 to $150 the fee for application for exception to commission rule and requires two-thirds of the proceeds from this fee, including any penalties collected in connection with the fee, to be deposited to the fund (Sec. 81.0521). The bill provides that an oil-field cleanup regulatory fee is imposed on crude petroleum produced in this state in the amount of five-eights, rather than five-sixteenths of one cent on each barrel of 42 standard gallons (Sec. 81.116). The bill requires the commission to maintain detailed expenditure reports for the fund and to make such reports available to the public (Sec. 91.112). The bill authorizes the commission by rule to establish reasonable fees for each category of license and removes the license fee cap (Sec. 116.032). The bill authorizes the commission to apply for, register, secure, hold, and protect a patent, copyright, trademark, or other evidence of protection or exclusivity issued for an idea, publication, or other original innovation fixed in a tangible medium (Sec. 113.243). The bill increases from $100 to $1,000 the amount the commission may permit a person with good compliance history to pay in lieu of filing a bond and removes the option of giving a first lien on property associated with oil and gas production in lieu of bonding. The bill increases the annual fee that a person may file in lieu of a bond from three percent to 12.5 percent of the bond that otherwise would be required until September 1, 2004. After that date, bonding is the only option for well permittees (Secs. 91.103, 91.104, and 91.107). The bill authorizes the commission by rule to increase individual and blanket bond amounts for bay and offshore wells (Secs. 91.1041 and 91.1042). The bill requires the commission by rule to establish a voluntary cleanup program, which releases a nonresponsible party from liability upon certified cleanup of a contaminated site, and provides for the application and fee process (Sec. 91.1132). The bill requires the commission by rule to establish risk assessment as a guide to remediation efforts. The bill requires the commission to develop by rule specified systems, including a system to periodically test high-risk wells (Sec. 91.1131). The bill deletes provisions regarding the liquified petroleum gas division of the commission (LPG division) and requires the commission to administer and enforce the laws of this state and the rules and standards of the commission relating to liquified petroleum gas (LPG) (Secs. 113.011, 113.098, 113.099, 113.161, and 113.233). The bill requires the commission by rule to establish fees for the licensing of each category of LPG activity (Sec. 113.082). The bill sets forth limitations on the commission's rulemaking authority for restricting advertising or competitive bidding in relation to compressed natural gas (Sec. 116.016). The bill modifies and sets forth provisions relating to the application, renewal procedures, examination, and seminar requirements for the licensing of LPG and compressed natural gas activities (Secs. 113.093, 116.033, and 116.034). The bill authorizes the commission to waive any prerequisite to obtaining a license or registration under certain circumstances and sets forth provisions relating to provisional licensing or registration of LPG and compressed natural gas activities (Secs. 113.096, 116.0345, and 116.0346). The bill requires the commission to revoke, suspend, or refuse to renew the license or registration, or to reprimand the licensee or registrant, if the commission finds that the licensee or registrant has violated or failed to comply with or is violating or failing to comply with provisions relating to LPG or compressed natural gas or a rule adopted under such provisions. The bill authorizes the commission to place on probation a person whose license or registration is suspended. If a license or registration suspension is probated, the bill authorizes the commission to require the person to report regularly to the commission on matters that are the basis of the probation, to limit practice to the areas prescribed by the commission, or to continue or review professional education until the person attains a degree of skill satisfactory to the commission in those areas that are the basis of the probation (Secs. 113.163 and 116.037). S.B. 310 amends the Natural Resources and Utilities codes to require the commission by rule to adopt guidelines to be used in determining the amount of a penalty for a violation of provisions regarding oil and gas, including pipeline safety violations (Sec. 81.0531, Natural Resources Code, and Sec. 121.206, Utilities Code). The bill authorizes the commission by rule to require certain pipeline operators to file for commission approval a pipeline assessment or testing plan. The bill sets forth provisions regarding pipelines for which a plan may be required, the type of information required in such a plan, approval of the plan, and the consequences of the plan's approval (Secs. 118.001-118.005, Natural Resources Code). S.B. 310 amends the Government Code to require the utility division of the State Office of Administrative Hearings (utility division) to conduct contested case hearings and to authorize the utility division to make final decisions and issue findings of fact, conclusions of law, and other necessary orders in other proceedings on behalf of the commission (Sec. 2003.0491, Government Code). S.B. 310 amends the Utilities Code to set forth provisions regarding the extension of a commission ordered suspension of the operation of a schedule for each day the actual hearing on the merits of the case exceeds 15 days (Sec. 104.107, Utilities Code). The bill repeals provisions relating to Texas experimental research and recovery activity, the LPG division, the alternative fuels research and education fund, and the required adoption of rules by the commission and agreements with other states (SECTION 48). EFFECTIVE DATE September 1, 2001.