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LEGISLATIVE UPDATE
This week was the deadline for bills to be reported out of committee in the opposite house. Those bills which did not advance from committee will be dormant. Preliminary reports show approximately 200 bills did not meet the deadline.
For OKOGA priority bills receiving action this week, the House Energy & Natural Resources passed SB 1139 (Marlatt/Watson), which extends the sunset date of the OCC Plugging Fund from 2016 to 2021. The title was restored and the bill was unanimously approved by the committee members.
Though SB 1283 is not an OKOGA priority, a priority last year to prevent local bans on oil and gas activity was attempted to be repealed via amendment to this bill. On Tuesday, Rep. Richard Morrissette, R-Oklahoma City, tried unsuccessfully to amend SB 1283 (Fields/Pfeiffer) in the House Appropriations & Budget Committee. The full House amendment would have repealed SB 809, the bill passed last year affirming the Oklahoma Corporation Commission as the primary regulator of oil and gas drilling in Oklahoma. Oklahoma Oil & Gas Association opposed the amendment. SB 1283 eliminates the sunset date on certain revolving funds and modifies the appropriations of the gross production tax within Community Water Infrastructure Development Revolving Fund. Rep. Morrissette said his amendment would bring back local control to communities. Rep. Pam Peterson, R-Tulsa, questioned the germaneness of the amendment. Sears ruled that the amendment was not germane, though Morrissette challenged the ruling of the Chair. By a vote of 18 to 4, the decision of the chair to rule the amendment non-germane was upheld and the bill passed out of committee without the Morrissette amendment. (eCap reports)
The Senate Energy Committee met on Thursday morning and passed six bills with little to no discussion. Among them were:
- HB 1549 (Hickman/Sears (House author expected to change)) was amended by a committee substitute to increase the time notice is required for construction of a wind energy facility from 30 to 180 days; and
- HB 1951 (Watson/Griffin) which removes municipal exemptions for statewide one-call notification center (OKOGA supports).
Another OKOGA priority bill advanced this week. The Senate Public Safety Committee passed HB 2599 (Wood/Sharp), which prohibits operation of unmanned aircraft over a critical infrastructure facility. Despite OKOGA member and other requests to keep the bill intact in committee, the committee struck title on the bill, by a vote of 4-3 (Yays: Brooks, Ford, Holt and Matthews; Nays: Barrington, Brecheen, Shaw). After the title was stricken, Sens. Holt, Brooks, Matthews and Sharp spoke in favor of the bill and it passed unanimously.
The House Administrative Rules Committee had heated discussions this week over SB 1130 (Dahm/Brumbaugh) which would change state agencies' rulemaking authority. It eventually passed after the title was stricken by a vote of 5-2. Rep. David Brumbaugh, R-Broken Arrow, said the bill was a way to "return balance and authority to the Legislature. We have a right and responsibility to designate the method of rule promulgation," he told committee members. "We have given that (authority) to the agencies but we want to bring some of that balance back to the Legislature."
The bill's title was stricken by the committee chairman. Rep. George Faught, R-Muskogee, said this way the bill can remain alive and be sent to conference. A bill also seeking sweeping changes to the administrative rules process is currently in the Senate and title has been stricken from that bill, he noted.
Rep. Mike Shelton expressed concerns that with this bill the Legislature would be injecting itself in the details of every agency rule and amend on a whim. "We are not experts in all things. I'd be extremely concerned about opening the ability to do that," said Shelton, D-Oklahoma City. “This building is not an expert," he said. "This building, although we have some talented people in this building, I can point to Oklahoma's economy today and say this building is not an expert." (eCap reports)
SB 308 (Dahm/Faught), also allowing the legislature to amend administrative rules, was not heard in committee. Other administrative rules bills that are advancing include, SB 912 (Loveless/Faught) requires agencies to include the gist of the rule in submission to the legislature has been sent back to the Senate to accept or reject the House changes; SB 1236 (Floyd/Faught) returns the legislative approval/disapproval process to the procedure utilized before the omnibus rules bill was implemented, and is on the House Floor Agenda available to be heard; and HJR 1072 (Faught) is the omnibus rule approval/disapproval bill for 2016, passed out of the House Administrative Rules Committee this week with a number of amendments to disapprove various agency rule proposals – none of which impact the industry.
Senate Announces GCCA Members
With the deadline for bills to be heard and passed out of committee in their opposite houses this week, that means the end of session is getting closer. Per recent tradition, President Pro Tempore Bingman announced the Senate General Conference Committee on Appropriations (GCCA) would include all Senate members with the exception of Senate President Pro Tempore Brian Bingman and Senate Floor Leader Mike Schulz. Unlike the Senate Joint Committee on Appropriations (JCAB) that handles appropriations bills, GCCA typically handles substantive bills that will have a fiscal impact. Like Senate JCAB but unlike most other Senate conference committees, the panel does hold open public meetings to discuss the bills assigned to it. (eCap reports)
ELECTION UPDATE
Next week is candidate filing for the 2016 election cycle. Candidate filing for state candidates is April 13-15, from 8 am to 5 pm, at the State Capitol. The number of open legislative seats, knowing those who are term limited and have announced not to run again, increased this week with the announcement of Rep. Jason Nelson (R-Oklahoma City) who announced that he will not run for reelection for House District 87 this year. Nelson is not term-limited until 2020, but he wants to spend more time with his family. His daughter recently completed cancer treatments for a rare pediatric cancer. Rep. Nelson announced his decision on the floor of the House, where he was congratulated by former fellow Governor Keating staffer, Lt. Gov. Todd Lamb, and Republican and Democratic House members.
With the top two legislative leaders, President Pro Tempore Brian Bingman and Speaker of the House Jeffrey Hickman, being impacted by term limits, another election is impacting legislative activity this year. The majority, Republican caucuses will elect their leaders before this session adjourns, as leaders are also expected to help with caucus activity during the election cycle in fundraising for legislative party candidates. In the Senate, it is anticipated Sen. Mike Schulz (R-Altus) will be selected by his caucus to serve as the next President Pro Tem. In the House, a tight race has developed between two-term legislator, Rep. Charles McCall (R-Atoka) and five-term member, Rep. Earl Sears (R-Bartlesville). Elections for both leadership positions will be held in private Republican caucus meetings before the Legislature adjourns in May, and other candidates for leadership positions are likely. Those selected will serve as leader-elect until the new legislators are sworn into office following the November elections and then additional caucus meetings are held to name the leader-designates. The official election by the full House and Senate occurs on organizational day in January. This election is typically a formality, expecting the vote to fall along partisan lines. (Tulsa World reports)
The Oklahoma Ethics Commission Executive Director Lee Slater is resigning, effective at the end of June. The Oklahoma Ethics Commission is the regulator of Oklahoma’s campaign finance laws and lobbying activities. Slater has been the executive director for 3 years. Before taking the post, Slater had a legal practice focusing on ethics law and campaign finance reporting and was a longtime secretary of the state Election Board and state Senate. He has helped revise and streamline ethics rules and improve the online system where the public can review campaign filings and lobbyist reporting. At the monthly Ethics Commission meeting on Friday, Slater recommended current Deputy Director Ashley Kemp be named as director. The Commission affirmed the recommendation. Kemp will succeed Slater beginning July 1.
ECONOMIC UPDATE
State Treasurer Ken Miller announced this week that March Gross Receipts to the Treasury are the lowest March total in four years. It marked an 11th consecutive month of falling collections. “This month’s numbers show the economic contraction is ongoing and will likely continue in the near term,” Miller said. “However, we’ve seen this cycle before and know Oklahoma will recover – hopefully having learned lessons on how to better weather the storm the next time.” Monthly collections from oil and natural gas production taxes have been lower than the same month of the prior year for 15 consecutive months. March gross production collections are more than 40 percent lower than last March. Monthly receipts are based on oil field activity from January when the average price of benchmark West Texas Intermediate crude oil was $31.68 per barrel. Average oil prices were below that level in February, but recovered slightly in March.
A new report from a Washington, D.C.-based publication called State Policy Reports ranked Oklahoma’s economy 47th in the nation and area states were not much better. Kansas was 46th while Nebraska ranked 42nd. The rankings were based on personal income growth, employment growth and population growth. (OK Energy Today reports)
Despite the downturn in prices, Oklahoma energy companies are continuing to drill and complete wells. OK Energy Today reports that energy companies continue to explore for new oil and gas finds in northern Oklahoma. Chesapeake, Midstates Petroleum and American Energy-Woodford have recently completed wells and report production. Though with the downturn in commodity prices, drilling activity has slowed and it is apparent, the state’s rural areas are hardest hit. This is part of OKOGA’s message in continuing to find ways to advance legislation that would allow for long lateral, multi-units in non-shale areas of the state – the one thing the legislature can do to encourage drilling activity without costing the state money is to update state laws to meet today’s technology.
State budget discussions continue with legislative leaders and appropriators. As we have mentioned, one of the items being targeted for savings by legislators are various tax incentive programs, in the Bartlesville Examiner-Enterprise this week, Rep. Earl Sears (R-Bartlesville) says, “Just yesterday (Thursday), I put together a finalized package of tax credits that totals about $260 million (for elimination), We need to do that. It has to happen, but you need to know that it is easier said than done. We are going to repealing a lot of those tax credits, but I think we will repeal the majority of them.” Credits being examined include the incentive for CNG vehicles and infrastructure. One legislative idea is to cap the total credits at $5 million annually. The industry would prefer to discuss a reduction in the already 75 percent credit (most tax credits are a 100 percent credit). Another incentive eyed is the economically at-risk well incentive. The Tax Commission estimated impact of this credit keeps increasing, now predicting next year it will cost the state $158 million. It has been suggested to cap this at $25 million, though some in the industry are suggesting other changes to limit the impact to the state.
Governor Mary Fallin discussed how the election year is playing a role in delaying serious budget decisions. "I think there are some members who are waiting to see if they draw an opponent during filing in April," Fallin said when asked about ongoing negotiations with the House and Senate on the budget. "They're slow playing things."
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SEISMIC ACTIVITY
809 Rally at the Capitol
A rally to bring attention to Oklahoma’s increase in earthquakes and opposing the passage of SB 809 in 2015, which ensured the Oklahoma Corporation Commission is the sole regulator of oil and gas operations by preventing local bans on industry activity via local ordinances, is being held on Tuesday, April 12. The rally is being hosted by Rep. Morrissette, the Sierra Club, the Oklahoma Conference of Churches, Stop Fracking Payne County, and Oklahoma Interfaith Power and Light. The rally is similar to one held last year as the legislature debated SB 809 before the bill became law. This year’s rally will be held on what the groups call “Earth (Quake) Day” on April 12 beginning at 8:09 a.m. and continuing until noon. They call it a gathering to speak out about the right to transparency in government and the need for stewardship.
For insight to the messaging expected at the rally, the online reporter, The Gayly, recently shared the full text of a letter from the Oklahoma Democratic Party Chair discussing party messages, which includes: 3) Local control/earthquakes: Any legislation which would consolidate power in the Governor or which take away local control should be the subject of a media release unless sponsored by a Democrat- then check with the House/Senate leadership. We can bring up past actions by the Republicans including taking about local control over vacant/abandoned property, drilling and injection activities, smoking and fair wages in the community. Bills to restore these rights should be the subject of a supportive release which rejects Republic[an*] efforts to take away local control. 6) Earthquakes: Apart from supporting local control, oppose allowing injection fluids/water to be brought in from out-of-state. Otherwise, take no position regarding regulatory changes/solutions. Our leadership is letting this position evolve.
This week, the head of the U.S. Geological Survey appeared before the U.S. Senate Committee on Energy and Natural Resources to discuss the recently released USGS report that shows increased risk of damage from seismic activity in areas including Oklahoma City. Director Suzette Kimball told the senators that USGS would work with federal regulators on developing new rules around oil and gas activity tied to increased earthquakes in Oklahoma, Texas and other states. (FuelFix reports)
OKOGA COMMITTEES
Committee on Environment
The Oklahoma Department of Environmental Quality, Air Quality Division, has issued a new Draft Minor Source General Permit for Oil and Gas Facilities. The background memorandum is out for public comment. The ODEQ has asked for comments on this draft guidance (linked above), and they are due by April 25. OKOGA would like to consolidate comments from member companies and submit in addition to comments that you make directly to the ODEQ. Please send Bud Ground copies of your comments by Monday, April 18.
As a reminder, the Committee on Environment will meet on Tuesday, April 19, rescheduled to the morning.
Health & Safety Committee
The Health & Safety Committee meeting scheduled for April 7, was rescheduled for Thursday, May 5.
Regulatory Practices Committee
The Oklahoma Corporation Commission has posted the rules adopted at the March 22 en banc hearing for Chapter 5 and Chapter 10. The full agency rule reports for Chapter 5 and Chapter 10 have been posted. These are the official, final version that will be submitted to the legislature. Also posted is the Fee Notice and Confirmation for Chapter 5. These can be found on the OCC proposed rule page.
PHMSA
Pipeline Safety: Safety of Gas Transmission and Gathering Pipelines. The Pipeline Hazardous Materials Safety Administration published a Notice of Proposed Rulemaking (NRPM) to revise the Pipeline Safety Regulations applicable to the safety of onshore gas transmission and gathering pipelines. The proposed changes within this rule cover many different aspects of the safety of these pipelines. Comments must be submitted by June 7, 2016.
ESA
Citing climate change, US regulations expand protection for the critical habitats of ESA-listed species. National Law Review. On March 14, 2016, two new federal rules went into effect that could change the way in which the Endangered Species Act (ESA) is implemented throughout the United States. The U.S. Fish & Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) finalized these rules to update the regulatory provisions on which the agencies rely when fulfilling their duties to carry out the ESA. However, some commenters, such as the Independent Petroleum Association of America, have expressed worry about the burden of this rule, especially regarding activities conducted on federal land.
FEDERAL REGISTER
Rights-of-Way on Indian Land. The Bureau of Indian Affairs published a final rule on November 19, 2015, governing rights-of way on Indian land, which stated that procedural provisions of the final rule would apply (with certain exceptions) to rights-of-way granted or submitted to BIA prior to the effective date of the final rule. This document provides guidance on what provisions the Department considers to be ‘‘procedural provisions’’ that are applicable to rights of-way granted or submitted prior to the effective date of the final rule. This guidance is effective on April 6, 2016.
Endangered and Threatened Wildlife and Plants: 12-Month Findings on Petitions to List Island Marble Butterfly, San Bernardino Flying Squirrel, Spotless Crake, and Sprague's Pipit as Endangered or Threatened Species. The U.S. Fish and Wildlife Service announced 12- month findings on petitions to list the island marble butterfly, the San Bernardino flying squirrel, the American Samoa population of the spotless crake, and the Sprague’s pipit as endangered species or threatened species under the Endangered Species Act of 1973, as amended (Act). The Sprague’s pipit, which is found to winter in Oklahoma is not warranted at this time.
ARTICLES OF INTEREST
Journal Record: Cities make due with less in energy royalty money (sub req’d)
Reuters: Oil glut up close: How Cushing copes with full crude tanks
Journal Record: Alaska lawmakers looking at oil, gas tax credit changes (sub req’d)
Denver Post: Bill to give local governments more control over fracking dies in Colorado House
KOCO (Channel 5 OKC): Oklahoma earthquake problem causing insurance headaches (Video)
KTRE (News 9 Pollok, TX): USGS removes Timpson from its latest earthquake hazard map
State Impact OK: Fight Over Sardis Lake Entangled in Ancient History, Indian Culture and Sacred Water
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