HBA-TYH S.B. 1152 76(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 1152
By: Bivins
State Affairs
4/30/1999
Engrossed



BACKGROUND AND PURPOSE 

Under the current Utilities Code, natural gas and oil royalties may be
taken in kind and marketed by the state.  The Natural Resources Code
requires oil or gas leases from certain state entities or from the owner of
the soil on Relinquishment Act land (Subchapter F, Chapter 52, Natural
Resources Code) to include a provision granting these parties the right to
take their respective royalty in kind and give the commissioner of the
General Land Office (commissioner) and others the right to negotiate and
execute contracts for sale, transport, or storage.  It also grants the
right to enter into insurance contracts or other agreements to secure or to
guarantee payment of the in kind sales and authorizes the parties to
negotiate and execute contracts for disposing of royalty in kind.   

S.B. 1152 expands the scope of the program to convert natural gas into
electricity, giving the commissioner the authority to market electricity to
wholesale and public retail customers, the potential to take royalties in
kind on all state owned land, including university lands, the ability to
purchase or enhance these in kind volumes with additional volumes, and the
flexibility to either sell the commodity as is or to convert it to other
forms of energy.  This bill enables the commissioner to convert in kind
natural gas to electricity and gives the state the opportunity to increase
the revenues generated from state lands for the benefit of public and
higher education. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 31.002(1), Utilities Code, to provide that the
term "electric utility" does not include this state or an agency of this
state.  Makes conforming changes. 

SECTION 2.   Amends Chapter 35, Utilities Code, by adding Subchapter D, as
follows: 

SUBCHAPTER D.  STATE AUTHORITY TO SELL OR CONVEY POWER
 
Sec. 35.101.  DEFINITIONS.  Defines "commissioner" and "public retail
customer." 

Sec. 35.102.  STATE AUTHORITY TO SELL OR CONVEY POWER.  Authorizes the
commissioner of the General Land Office (commissioner) to sell or otherwise
convey power generated from royalties taken in kind as provided by Sections
52.133(f) (Payment of Royalty in Kind), 53.026 (In Kind Royalty), and
53.077 (In Kind Royalty), Natural Resources Code, directly to a public
retail customer regardless of whether the public retail customer is also a
wholesale customer.  

Sec. 35.103.  ACCESS TO TRANSMISSION AND DISTRIBUTION SYSTEMS; RATES. (a)
Provides that except as provided in Section 35.104, the state is entitled
to have access to all transmission and distribution systems of all electric
utilities, municipally owned utilities, and electric cooperative
corporations that serve public retail customers.  

(b)  Requires an entity described by Subsection (a) to provide any utility
service, including  transmission, distribution, and other services to the
state at the lowest applicable rate charged for similar service to other
customers.  
 
Sec. 35.104.  RETAIL TRANSACTION LIMIT.  Provides that Sections 35.102 and
35.103 do not apply to the rates, retail service area, facilities, or
public retail customers of a municipally owned electric utility or an
electric cooperative that has not adopted retail competition.  Prohibits
the state, in a certificated service area of an electric utility that is
not an electric cooperative, from engaging in retail transactions that
exceed two and one-half percent of a retail electric utility's total retail
load. 
 
Sec. 35.105.  COSTS OF SERVING STATE AGENCY.  Requires an entity described
by Section 35.103(a) to provide any utility service, including
transmission, distribution, and other services, which must include any
stranded costs associated with providing service, to the state at the
lowest applicable rate charged for similar service to other customers.   
 
Sec. 35.106.  WHOLESALE CUSTOMERS.  Provides that this subchapter does not
prevent the commissioner, acting on behalf of this state, from registering
as a power marketer.  

Sec. 35.207.  ACCESS TO POWER GENERATION.  Prohibits a gas utility or a
municipally owned utility, if pipeline capacity is available on an existing
facility of a gas utility or municipally owned utility, from refusing to
provide gas service to an electric utility generating facility, if the
purpose of the service is to generate power for public retail customers by
the state or an agency of this state. 

SECTION 3.  Amends Sections 52.133,  Natural Resources Code, by amending
Subsections (a), (c), and (d) and adding Subsection (f), as follows: 

(a)  Deletes the exception of the Board for Lease of University Lands from
a list of boards required to include a provision granting land to various
entities and the commissioner the authority to take their royalty in kind. 

(c)  Authorizes the commissioner to negotiate and execute contracts, at the
direction of the Board for Lease of University Lands and other specified
boards, that are necessary to dispose of their portion of the royalty taken
in kind, including contracts for sale, marketing, transportation, including
purchase and exchange agreements necessary to transport gas, and storage
and including other contracts or agreements, to secure or guarantee
payment.  Makes nonsubstantive changes. 

(d)  Authorizes the commissioner, the owner of the soil under Subchapter F
(Relinquishment), or the commissioner acting on behalf of and at the
direction of an owner of the soil under Subchapter F, the school land
board, or a board  for lease, to negotiate and execute contracts or any
other instruments or agreements necessary to convert that portion of the
royalty taken in kind into other forms of energy, including electricity.   

(f)  Provides that for the purpose of this section, royalty taken in kind
includes oil or gas sold or marketed by the commissioner that has been
produced on state mineral lands or from the first three miles of federal
waters adjacent to the state boundaries, also known as the 8g zone.
Deletes text stating that this section is not applicable to the Board for
Lease of University Lands. 

SECTION 4.  Amends Section 53.026, Natural Resources Code, as follows:

(a)   Authorizes the commissioner or the commissioner acting on behalf of
and at the direction of the board or a board  for lease to negotiate and
execute contracts or any other instruments or agreements necessary to
dispose of or convert the portion of the royalty taken in kind into other
forms of energy, including electricity.   

(b)  Authorizes the commissioner or the commissioner acting on behalf of
and at the  direction of the board or a board for lease to negotiate and
execute a contract or any other instrument or agreement necessary to
convert that portion of the royalty taken in kind to other forms of energy,
including electricity. 

(c)  Created from existing text. 

SECTION 5.  Amends Section 53.077, Natural Resources Code, as follows:

(a)  Makes a conforming change.

(b)  Authorizes the commissioner, each owner of the soil under this
subchapter, or the commissioner acting on behalf of and at the direction of
the owner of the soil under this subchapter to negotiate and execute a
contract or any other instrument or agreement necessary to convert that
portion of the royalty taken in kind to other forms of energy, including
electricity.  

(c)  Created from existing text.

SECTION 6.  Provides that to the extent of any conflict between this Act
and S.B. No. 7, Acts of the 76th Legislature, Regular Session, 1999, S.B.
No. 7 controls, regardless of the date of enactment. 

SECTION 7.Effective date: September 1, 1999.

SECTION 8.Emergency clause.