POLICY
2021 Texas Legislative Session a Success for Oil and Gas By: Jason Modglin, President of the Texas Alliance of Energy Producers
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he 87th Texas Legislature has concluded its regular session. It started slowly with many members and their staff not even coming to the Capitol due to the COVID pandemic. SHALE Magazine reported on the top issues leading into session and lawmakers despite the slow start. It largely addressed all those issues: eminent domain reform, expansion of gun rights, prohibiting the defunding of police and passing a budget without raising taxes. On the latter, lawmakers were greeted by positive news from Comptroller Glenn Hegar that tax revenues exceeded last summer’s expectations and would not result in a budget shortfall. Avoiding another potential flashpoint, lawmakers were also informed that national census data would be delayed until after they adjourned, preventing them from taking up a partisan redistricting fight in the regular session. For the first several weeks of the session, the legislature’s business moved at a lackadaisical pace, giving the appearance that little would be accomplished. Then came a Valentine’s Day storm that brought devastation across Texas. The cold was deadly, and the failures of the electric grid and subsequent interruptions of water utilities across the state created untold misery for millions of Texans. Loss of life, property damage and the failure of the energy capital of the world required action. Governor Greg Abbott immediately called for the legislature to investigate the grid failures and ensure Texans never again experience power outages on the same scale. Both the House and Senate swung into action with multi-day hearings and an all-hands on deck approach by combining multiple committees of jurisdiction over electricity, natural gas and emergency response to find solutions to prevent the complex failure of our electric system. Committee hearings went on for days, hearing testimony from the energy regulatory bodies including the Public Utility Commission, the Railroad Commission and the Electric Reliability Council of Texas (ERCOT), electricity companies of all types, oil and gas companies and industrial energy users, among hosts of others. Despite a few calls from environmentalists who have hoped to shut down natural gas production in Texas before and after the storm, lawmakers agree natural gas was essential to heat, power and recovery and that increasing the amount of natural gas to customers that need it should be a top priority. During the storm, natural gas surged 450% to meet the power needs of this state while the gas utilities reported they were on maximum withdrawal of their reserves to keep 99.95% of the 4.3 million residential gas meters in the state supplied with gas. For the more than 13 million Texans in homes behind those meters, that gas made the difference in providing life-saving heat when the electricity was shut off. Contrary to the media narrative, natural gas met the moment, and more should be done to ensure Texas does not become overly dependent on the sun shining and the wind blowing. Those energy sources are unreliable in high heat or extreme cold.
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SHALE MAGAZINE JULY/AUG 2021
Shortly after the storm, Lieutenant Governor Dan Patrick named his priorities for session, and House Speaker Dade Phelan unveiled his priorities for electricity reform. With this, the Legislature kicked into high gear and, within a couple of weeks, had filed thousands of bills. It quickly became one of the more consequential legislative sessions for the energy sector in decades. After the storm, the session took on a whole new feel and was at a frenetic pace through the finish of session on May 31st. The Legislature passed several key bills in response to the storm to reorganize how the state manages the power grid. Legislation required regulators to adopt rules on electricity providers to prevent lengthy rolling blackouts, potentially issue fines to utilities that are not prepared for severe weather events and create a statewide power outage alert system so that Texans can react to potential outages. Reform of the Public Utility Commission membership and the ERCOT governing board also became key priorities to expand membership, requiring they live in-state, all with the goal of attracting top talent invested in the performance of the state’s grid. Consumer protection was also a top priority by banning wholesale indexed pricing plans whose customers were met with astronomical bills and providing a funding mechanism to winterization to reduce consumers’ bills and keep gas prices level. Finally, mapping the Electricity Supply Chain and mandating redundancy and improvements to that system, including the protection of the natural gas pipe system will bring greater coordination between the two sectors. These bills will lead to months and months of studies and rulemakings at multiple state agencies. Already this summer, ERCOT has issued multiple alerts when electricity supplies are tight due to expected high demand and interruption or disruption by electricity producers. The fast growth of the state will necessitate lawmakers continue to find solutions to incoming residents needing roads, water and power. For the better part of a decade, lawmakers have tapped collections from severance taxes raised by the oil and gas industry to address these growth needs without raising taxes on the general population. These are wise and prudent investments that the energy industry has supported and advocated for. Overall, this legislative session was beneficial for the oil and gas industry. Industry advocates, associations and our allies were able to successfully work with the legislators working on the storm response legislation to take a measured approach to intervention in oil and gas operations. Initial proposals would have resulted in less gas production, and these were changed to prioritize reliability without harming marginal wells, forcing tens of thousands of wells to shut in or plug due to uneconomical mandates. Outside of the storm, some important bills passed that will advance the industry and the overall positive business climate in Texas.
