HBA-KDB H.B. 3018 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3018 By: Chisum Energy Resources 4/17/2001 Introduced 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 non-responsible 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. House Bill 3018 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 3 (Section 81.0531, Natural Resources Code), SECTION 4 (Section 81.116, Natural Resources Code), SECTION 5 (Section 81.117, Natural Resources Code), SECTION 6 (Section 85.2021, Natural Resources Code), SECTION 10 (Sections 91.1041 and 91.1042, Natural Resources Code), SECTION 14 (Sections 91.1131 and 91.1132, Natural Resources Code), SECTION 15 (Section 91.142, Natural Resources Code), SECTION 16 (Section 101.019, Natural Resources Code), SECTION 23 (Section 116.016, Natural Resources Code), SECTION 29 (Sections 118.001-118.004, Natural Resources Code), SECTION 30 (Section 102.006, Utilities Code), SECTION 31 (Section 104.009, Utilities Code), SECTION 33 (Section 121.206, Utilities Code) and SECTION 35 of this bill. ANALYSIS House Bill 3018 amends law to continue the Railroad Commission of Texas (commission) until September 1, 2013, and set forth standard Sunset Advisory Committee 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. H.B. 3018 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 in drilling permits and well plugging extensions and creates a fee for filing an organizational report (Secs. 85.2021, 91.111, and 91.142). 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 repeals the $100 annual plugging-extension fee for persons with good compliance history and the option of giving a first lien on property associated with oil and gas production in lieu of bonding. The bill maintains a person's option to file a three percent annual fee in lieu of a bond 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 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 (Sec. 91.1132). The bill provides for the application and fee process (Sec. 91.132). The bill requires the agency to establish a riskbased assessment rule to guide remediation efforts (Sec. 91.1132). The bill requires the commission to develop a rule which prioritizes testing of high-risk abandoned wells under the commission's jurisdiction (Sec. 91.1131). The bill sets forth limitations on the commission's rulemaking authority in relation to liquified petroleum gas (LPG) and compressed natural gas (Secs. 113.0511 and 116.016). The bill modifies provisions relating to the application, renewal procedures, examination, and seminar requirements for the licensing of LPG and compressed natural gas activities (Secs. 113.0511, 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). H.B. 3018 amends the Natural Resources and Utilities codes to require the commission to include certain standard elements in its penalty structure for safety and pollution violations 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). H.B. 3018 amends the Government and Utilities codes to provide that contested gas utility rate cases, not conducted by a commission member, be transferred to the State Office of Administrative Hearings (SOAH) and sets forth provisions regarding contested case hearings. The bill requires the commission to define the procedure under which the commission is authorized to delegate final decision-making authority to SOAH for uncontested cases. Any cases filed before September 1, 2001 are subject to the commission's current contested case hearing process (Sec. 102.006, Utilities Code, and Sec. 2003.0491, Government Code). The bill sets 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 cases exceeds 15 days (Sec. 104.107, Utilities Code). H.B. 3018 amends the Utilities Code to require the commission by rule to establish a program to provide assistance to low-income gas utility customers in paying for gas utility service. Such a program is financed by a user fee based on the amount of gas consumed. The fee is deposited into the gas utility service assistance fund (trust fund) administered by the comptroller of public accounts. The bill requires the commission, as the trustee, to reimburse a gas utility from the trust fund for the difference between the reduced rate and the rate that would otherwise be applicable (Sec. 104.009). H.B. 3018 amends the Natural Resources Code to require the commission to adopt rules authorizing mandatory unitization for oil and gas production no later than January 1, 2002. The bill requires the commission to consider oil and gas unitization policies in other states during rule adoption (Sec. 101.019 and SECTION 35). EFFECTIVE DATE September 1, 2001.