HBA-KDB C.S.S.B. 310 77(R) HBA-KDB C.S.S.B. 310 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 310 By: Harris Energy Resources 5/4/2001 Committee Report (Substituted) 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. In addition, the commission would be able to create a voluntary cleanup program, thereby releasing nonresponsible parties from future liability. C.S.S.B. 310 provides for the continuation of the commission until September 1, 2013 and for the recommended modifications. 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, V.T.C.S.), SECTION 5 (Section 81.0531, Natural Resources Code), SECTION 6 (Section 81.055, Natural Resources Code), SECTION 18 (Sections 91.1041 and 91.1042, Natural Resources Code), SECTION 22 (Section 91.1131, Natural Resources Code), SECTION 25 (Section 91.660, Natural Resources Code), SECTION 26 (Section 113.082, Natural Resources Code), SECTION 28 (Section 113.087, Natural Resources Code), SECTION 45 (Section 116.016, Natural Resources Code), SECTION 46 (Section 116.032, Natural Resources Code), SECTION 52 (Section 117.012, Natural Resources Code), SECTION 53 (Sections 118.001-118.003, Natural Resources Code), SECTION 57 (Section 102.006, Utilities Code), and SECTION 65 (Section 121.206, Utilities Code) of this bill. ANALYSIS C.S.S.B. 310 amends law to provide 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 (Arts. 6445a, 6447b, 6447c, 6447h, 6447k, 6447l, and 6447m, V.T.C.S.). 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.). The bill provides that the members of the commission are subject to provisions relating to personal financial disclosure, standards of conduct, and conflicts of interest that apply to state officers. The bill deletes provisions prohibiting a commission member from being interested in any railroad, or in any stock, bond, mortgage, security, or earnings of any railroad, from holding another office while such a member, and from engaging in any occupation or business inconsistent with the member's duties (Art. 6447, V.T.C.S.). 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). The bill raises the cap on the fund from $10 million to $20 million with a $10 million, rather than $6 million, floor, provides for fee increases for drilling permits and well plugging extensions, modifies the composition of the fund, and creates a fee for filing an organization 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 an application for exception to a commission rule and requires two-thirds of the proceeds from this fee to be deposited to the fund (Sec. 81.0521). The bill doubles the oil-field cleanup regulatory fees that are imposed on crude petroleum and gas produced in this state (Secs. 81.116 and 81.117). The bill provides that money in the fund may be used for implementing the voluntary cleanup program. The bill requires the commission to maintain detailed expenditure reports for the fund that include the number of sites successfully remediated under the voluntary cleanup program 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 establishes the oil-field cleanup fund advisory committee (committee) and sets forth the membership, duties, and reporting requirements of the committee (Sec. 91.1135). The bill removes the $50 cap on the natural gas policy act application fee (application fee) and requires the commission to set the application fee in an amount necessary to cover the cost of the commission's well category determination program but not to exceed $150 (Sec. 81.0522). The bill requires the commission, not later than March 1, 2002, to study the desirability of requiring an owner, operator, or manager of a pipeline system to obtain liability insurance coverage, a bond, or other evidence of financial responsibility to protect the public from the costs resulting from a discharge from the pipeline system and to report its findings to the legislature and make the report available to the public. The bill authorizes the commission by rule to require an owner, operator, or manager of a pipeline system to obtain evidence of financial responsibility (Sec. 81.055). The bill requires the notice sent by the commission regarding a delinquent inactive well to state that the commission is authorized to foreclose its statutory lien on equipment and to state that if the commission forecloses its statutory lien, rather than plugs the well, all well-site equipment will be presumed to have been abandoned and the commission is authorized to dispose of the equipment and hydrocarbons from the well. The bill also requires the notice to state that such a lien is foreclosed by operation of law if the commission does not receive a valid and timely request for a hearing before the 15th day after the date the notice is mailed (Sec. 89.043). The bill increases from $100 to $1,000 the amount of a nonrefundable annual fee that the commission may permit a person with good compliance history to pay in lieu of filing a bond or letter of credit and removes the option of giving a first lien on property associated with oil and gas production. The bill increases the annual fee that a person may file in lieu of a bond or letter of credit from 3 percent to 12.5 percent of the bond or letter of credit that otherwise would be required and requires a person who chooses to file a form of financial security other than a bond or letter of credit to also submit a fee of $300, rather than $100, for each application to extend the time to plug a well until September 1, 2004. After that date, filing a bond or a letter of credit are the only options 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 or offshore wells (Secs. 91.1041 and 91.1042). The bill establishes the railroad commission voluntary cleanup program (program) and sets forth provisions relating to eligibility for the program, application to participate in the program, rejection of an application, entering into a voluntary cleanup agreement, termination of such an agreement and cost recovery, voluntary cleanup work plans and reports, certificates of completion, and persons released from liability (Secs. 91.651 - 91.659). The bill requires the commission by rule to require that the person conducting a voluntary cleanup comply with any federal or state standard, requirement, criterion, or limitation to which the remedial action would otherwise be subject if a permit were required (Sec. 91.660). 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 LPG. The bill also deletes provisions regarding the LPG examination fund (Secs. 113.011, 113.015, 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). The bill sets forth provisions relating to the testing of LPG systems in school facilities and requires each school district to perform pressure tests for leakage in each school district facility at least biennially (Secs. 113.351 - 113.357). C.S.S.B. 310 amends the Natural Resources and the Utilities codes to require the commission to require operators of hazardous liquid or carbon dioxide pipeline facilities to communicate and conduct liaison activities with public emergency response officials. The bill requires the commission by rule to require the owner or operator of each interstate or intrastate hazardous liquid or carbon dioxide pipeline facility any part of which is located within 1,000 feet of a public school to develop an emergency response plan and to present the plan at the first annual budget meeting of the board of trustees of the school district in which the school is located and at subsequent annual budget meetings on the request of the board of trustees (Sec. 117.012, Natural Resources Code and Sec. 121.2015, Utilities Code). The bill requires the commission by rule to adopt guidelines to be used in determining the amount of a penalty for a violation of safety provisions regarding an oil or gas pipeline (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). C.S.S.B. 310 amends the Government and Utilities codes 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. The bill requires the commission by rule to define the procedures by which it delegates final decision-making authority to the utility division (Sec. 2003.0491, Government Code, and Sec. 102.006, Utilities Code). C.S.S.B. 310 amends the Utilities Code to provide that gas utilities may be, rather than are by definition, monopolies in the areas they serve (Sec. 101.002, Utilities Code). The bill authorizes the chief executive of the Office of Public Utility Counsel to be grouped with any other party representing residential customers, rather than prohibiting such grouping (Sec. 101.052, Utilities Code). The bill provides that the commission has exclusive original jurisdiction over rates, operations, and services of a gas utility that distributes natural gas or synthetic natural gas in areas inside a municipality that surrenders its jurisdiction to the commission (Secs. 102.001, 103.001, and 103.003, Utilities Code). The bill provides that a capital cost or gas purchase expense is just and reasonable if the capital cost or gas purchase expense is within the range of costs and expenses that would be incurred by a prudent manager at the time and under the circumstances existing at the time the decision to incur the capital cost or gas purchase expense was made (Sec. 104.003, Utilities Code). The bill extends a commission ordered suspension of the operation of a schedule two days for each day the actual hearing on the merits of the case exceeds 15 days (Sec. 104.107, Utilities Code). The bill authorizes a gas utility or municipally owned utility to transmit the utility's bill for services through the Internet or by other electronic means on the request of a customer (Sec. 104.2551, Utilities Code). A gas utility that provides gas to a customer does not have an obligation to serve the customer or to maintain the gas supply or physical capacity to serve the customer if the customer is a commercial customer. The bill provides that a gas utility that has provided gas to such a customer is obligated to serve that customer if the gas utility has a sufficient gas supply and physical capacity to do so without reducing service to its other customers (Sec. 121.103, 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 67). EFFECTIVE DATE September 1, 2001. Provisions regarding testing of LPG systems in school facilities apply beginning with the 2001- 2002 school year. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 310 modifies the original bill by providing that the members of the Railroad Commission of Texas (commission) are subject to provisions relating to personal financial disclosure, standards of conduct, and conflicts of interest that apply to state officers. The substitute deletes provisions prohibiting a commission member from being interested in any railroad, or in any stock, bond, mortgage, security, or earnings of any railroad, from holding another office while a member, and from engaging in any occupation or business inconsistent with the member's duties (Art. 6447, V.T.C.S.). The substitute provides that money in the oilfield cleanup fund (fund) may be used by the commission or its employees or agents to implement the voluntary cleanup program and requires the detailed expenditure report for the fund to include the number of sites successfully remediated under the voluntary cleanup program (Sec. 91.112, Natural Resources Code). The substitute sets forth provisions regarding the oil-field cleanup fund advisory committee (Sec. 91.1135, Natural Resources Code). The substitute modifies provisions regarding the natural gas policy act application fee (Sec. 81.0522, Natural Resources Code). The substitute sets forth provisions relating to the study of the desirability of requiring an owner, operator, or manager of a pipeline system to obtain liability insurance coverage, a bond, or other evidence of financial responsibility (Sec. 81.055, Natural Resources Code). The substitute sets forth provisions regarding statutory liens for delinquent inactive wells (Secs. 89.043, 89.083, 89.085, and 89.086, Natural Resources Code and SECTION 68). The substitute removes from the original bill provisions regarding the voluntary cleanup program and sets forth provisions regarding the railroad commission voluntary cleanup program and specifies that fees and recovered costs associated with the program are deposited to the fund (Secs. 91.111, 91.112, and 91.651-91.660, Natural Resources Code) . The substitute sets forth provisions relating to the testing of LPG systems in school facilities (Secs. 113.351-113.357, Natural Resources Code). The substitute sets forth provisions regarding operators of hazardous liquid or carbon dioxide pipeline facilities communicating and conducting liaison activities with public emergency response officials (Sec. 117.012, Natural Resources Code and Sec. 121.2015, Utilities Code). The substitute requires the commission by rule to define the procedures by which it delegates final decisionmaking authority to the utility division of the State Office of Administrative Hearings (Sec. 102.006, Utilities Code). The substitute provides that gas utilities may be, rather than are by definition, monopolies in the areas they serve (Sec. 101.002, Utilities Code). The substitute authorizes the chief executive of the Office of Public Utility Counsel to be grouped with any other party representing residential customers (Sec. 101.052, Utilities Code). The substitute provides that the commission has exclusive jurisdiction over rates, operations, and services of a gas utility that distributes natural gas or synthetic natural gas in areas inside a municipality that surrenders its jurisdiction to the commission (Secs. 102.001, 103.001, and 103.003, Utilities Code). The substitute provides that a capital cost or gas purchase expense is just and reasonable if the capital cost or gas purchase expense is within the range of costs and expenses that would be incurred by a prudent manager at the time and under the circumstances existing at the time the decision to incur the capital cost or gas purchase expense was made (Sec. 104.003, Utilities Code). The substitute authorizes a gas utility or municipally owned utility to transmit the utility's bill for services through the Internet or by other electronic means (Sec. 104.2551, Utilities Code). The substitute specifies that a gas utility that provides gas to a customer does not have an obligation to serve the customer or to maintain the gas supply or physical capacity to serve the customer if the customer is a commercial customer. The substitute provides that such a gas utility is obligated to serve the commercial customer if the gas utility has a sufficient gas supply and physical capacity to do so without reducing service to its other customers (Sec. 121.103, Utilities Code). The substitute adds letters of credit to provisions regarding financial security for well operators (Secs. 89.002, 91.103, 91.104, and 91.107, Natural Resources Code).