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LEGISLATIVE UPDATE
Next Thursday, April 21, marks the third reading deadline for bills in the opposite house. Bills which do not advance will be dormant.
In industry related legislation, the Senate passed HB 3158 (Hickman/Justice) this week on a vote of 42 to 0, and sent the bill to the Governor. The bill affirms the jurisdiction, power and authority of the Corporation Commission and authorizes the Commission to take certain emergency action in emergency situations. The State Budget Office contacted OKOGA for input on the bill for the Governor’s consideration. OKOGA expressed support for the bill due to the need for clarification for the industry to operate in the current challenging environment.
OKOGA, many of its midstream members and others opposed a re-appearance of HB 2276 (Denney/Halligan) in the form of a proposed floor amendment to SB 361 (Dahm/Echols), that was filed by Speaker Pro Tempore Lee Denney to revive her bill that would change eminent domain laws to allow for judicial location of pipelines and utilities. (Rep. Echols had relinquished authorship of SB 361 to Speaker Pro Tempore Denney to allow her amendment.) HB 2276 was not heard in Senate Energy by the deadline last week, therefore is now dormant. The proposed floor amendment to SB 361 that contained the same language that OKOGA previously opposed failed to be adopted by a vote of 18 to 61. After the amendment failed, the House proceeded to pass SB 361 by a vote of 61 to 26. The bill removes the compensation amount due appraisers of properties subject to the right of eminent domain. SB 361 now awaits the Governor’s action.
Twice on Wednesday, Rep. Morrissette attempted to amend two different Title 47 bills with a repeal of SB 809, a law OKOGA and others worked to pass last year, which reaffirms the Oklahoma Corporation Commission (OCC) as the primary regulator of oil and gas drilling in Oklahoma. SB 809 ensures the state has uniform standards for oil and gas operations across the state and allows cities to continue to regulate reasonable restrictions to address public health and safety issues including setbacks, noise, traffic issues and fencing related to oil and gas operations within their jurisdiction, but prohibits ordinances that effectively ban oil and gas development in Oklahoma. First, Rep. Morrissette attempted to amend SB 1059 (Stanislawski/Osborn) with his untimely filed amendment to repeal SB 809. The motion to suspend the rules to allow for the untimely amendment failed by a vote of 19 to 53, along party lines as most procedural votes occur. Next, Rep. Morrissette attempted the same effort to amend SB 1318 (Stanislawski/Osborn), again the motion failed by a vote of 22 to 45.
Budget Issues
Sen. Mike Mazzei, chairman of the Senate Finance Committee, and Rep. Earl Sears, chairman of the House Appropriations and Budget Committee, confirmed this week they have a series of proposals to put into legislation that would amend various tax incentive programs to eliminate or reduce tax credits to help fill the $1.3 billion budget deficit for FY-17. Among the proposals is capping the gross production tax rebate paid on economically at-risk wells at $25 million per year. The Oklahoma Tax Commission estimates the $25 million cap would save $105 million a year. The proposals also cap the clean-burning fuel equipment (aka CNG) credit at $5 million annually and the investment/new jobs credit at $25 million. (NewsOK reports) OKOGA is signing onto a fact sheet to help educate legislators on the economic return of CNG investment in the state.
Later the same day this report was released, Gov. Mary Fallin held a press conference to share with lawmakers some suggestions for balancing this year’s budget. The suggestions range from ending state appropriations to the Oklahoma Attorney General’s Office, the State Treasurer’s Office and the Insurance Department, to eliminating some sales tax exemptions and switching the funding for about $500 million worth of road projects to bonds from current general appropriations. Her proposed ideas also call for ending the personal income tax double-deduction. Sen. Mazzei said that while his caucus appreciates the list of ideas from the Governor, one area of concern is the very large amount of borrowed money it proposes from one-time cash generation to manage the budget deficit. “It is financially unwise to borrow our way out of this huge deficit and add financing costs on top of that for the taxpayers,” Mazzei said. Details of the Governor’s proposals can be found here, with a revised agency FY-17 appropriations plan linked here. (Tulsa World reports)
On Thursday to Friday, Democrats began attacking Oklahoma’s successful Quality Jobs program, which allows the state to compete with economic development programs in other states. Rep. Mike Brown, D-Tahlequah, was quoted on a KFOR report as opposing the ‘big breaks existing Oklahoma companies’ receive for job expansion. On Friday, David Walters chimed in on Twitter, saying he believes the Quality Jobs program has outlived its usefulness and it should be eliminated.
Cole Hargrave Snodgrass & Associates released their latest Sooner Survey newsletter examining voter attitudes about budget cuts and options for new state revenue. Key findings in the February poll include: 74 percent of voters support increasing the tobacco tax as a way to address the budget shortfall; Oklahomans favor collecting sales tax on Internet purchases by an 18-point margin (55% favor vs. 37% oppose); support for accepting available funds for Medicaid expansion doubles the opposition (57% favor vs. 29% oppose); and overall tax sensitivity is at an historic low with 41 percent saying taxes are too high.
ELECTION UPDATE
This week began the candidate filing period for legislative seats and other elective office, including county officials. Candidate filing opened on Wednesday and will end on Friday. All of the House of Representatives seats are up for election and 25 seats in the Senate. Half of the Senate is up for election every two years This year the odd number districts are up for election, plus President Pro Tempore Brian Bingman’s Senate District 12, due to his split service in the House. U.S. Senator James Lankford and all five of Oklahoma’s U.S. House representatives are also up for election, and one seat at the Corporation Commission, currently held by Corporation Commissioner Dana Murphy.
In the House, 19 members are term-limited and 9 other members have said they will not run for reelection, including: Rep. Mike Christian (who filed for Oklahoma County Sheriff this week), Rep. David Derby (whose father filed for his House seat), Rep. Randy Grau, Rep. Charles Joyner, Rep. James Leewright (filed for Senate District 12), Rep. James Lockhart (who though previously announced his intention not to run again, suffered a concussion last weekend and has not returned as of the end of this week), Rep. Mark McCullough, Rep. Jason Nelson (whose daughter was diagnosed with a rare form of cancer during the 2014 election cycle), and Rep. Justin Wood. Ten Senators are term limited, and Sen. James Halligan, has said he will not run for reelection.
The budget, education funding, and teacher salary issues this year have inspired a huge push for educators to file for election. By the end of the second day of filing on Thursday, 320 candidates had filed for office. This is more than the total number of candidates in most recent presidential years, only exceeded by 412 candidates in 2004. On Wednesday, almost 30 candidates appeared en masse that filed as education supporters. A pro-education group, Parents and Educators for Public Education, was formed in Edmond to encourage teachers to run for office and a separate PAC will be raising money to support education issues. Rep. Scott Inman told the Journal Record, “this is the easiest [candidate] recruitment cycle he’s seen as leader of the House Democrats.” (Tulsa World, NewsOK report)
As previously announced, Rep. Richard Morrissette, who is term-limited, filed for Corporation Commissioner this week and issued a formal announcement. Commissioner Dana Murphy filed for re-election for Corporation Commission on Wednesday as well. Commissioner Murphy launched her re-election campaign with $550k in her campaign fund. First quarter campaign finance reports for 2016 candidates are due no later than April 30 for funds raised or expended January 1 through March 31 of this year.
Every Oklahoma congressman has a primary opponent, including Congressman Jim Bridenstine, R-Tulsa, who is the lone Oklahoma congressional official who did not vote to lift the ban on oil exports. One of Bridenstine’s primary opponents is Tom Atkinson, a project manager for The Williams Companies. (Tulsa World, Journal Record (sub req’d) report)
The full candidate listing can be found here and will be updated throughout filing, which ends at 5:00 p.m. on Friday, April 15.
Legislative Leadership Elections
A new candidate emerged in the thus far, quiet race for leader of the Senate. Sen. Ralph Shortey announced to the majority, Republican caucus on Monday of his intent announced to the majority, Republican caucus on Monday of his intent to run for Senate president pro tempore, the top leadership position in the Senate behind the lieutenant governor, and has day-to-day authority. Shortey, R-Oklahoma City, will face Sen. Mike Schulz, R-Altus, when the Senate Republican caucus elects its next leader in a closed-door meeting on April 27. Thus far, Schulz has not been formally opposed and was expected to succeed President Pro Tempore Brian Bingman, who is term-limited. Schulz has been in the Senate for 10 years and is the Senate floor leader, one of the most powerful positions in the Senate. Shortey has served since 2010.
State Sen. John Sparks, D-Norman, will lead the Democratic caucus next year. As mentioned last week, two candidates for speaker of the House are Reps. Earl Sears of Bartlesville and Charles McCall of Atoka. House Republicans are expected to hold their closed door caucus meeting to select the next Speaker within the next two weeks. (Journal Record (sub req’d) reports)
ECONOMIC UPDATE
There was a slight positive note in Oklahoma economic news this week. For the first time since July of 2015, general revenue fund collections for March exceeded the state’s estimate, according to the Oklahoma Office of Management and Enterprise Services. Preston Doerflinger, Secretary of Finance, Administration and Information Technology, said the total March general revenue fund collections for March were $394.2 million or 0.8 percent above the official estimate, but 7.1 percent below the prior year collections. The uptick may be attributed in part to severance pay given to the thousands of oil industry employees who have lost their jobs, said John Estus, a spokesman for the Office of Management and Enterprise Services. However, gross production tax collections on oil and gas totaled only $6.7 million, meaning they were $11.4 million or 63.1 percent below the estimate. They were also $6.7 million or 49.9 percent below the prior year collections. “We were due a decent month after so many months of missing the estimate,” Doerflinger wrote in a statement announcing the figures. “No one should get too excited because we are by no means out of the woods, but this is certainly a welcome development.” (NewsOK, OK Energy Today, Journal Record (sub req’d))
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SEISMIC ACTIVITY
809 / Earth “Quake” Day Rally at the Capitol
As we reported last week, a loose coalition of groups, hosted by Rep. Richard Morrissette, staged a rally at the capitol on Tuesday, protesting last year’s passage of SB 809. About 50 people attended the event, including those of us present to observe but not protest. The protesters expressed concerns about the impact of various industries on Oklahoma's environment and continued earthquake activity. (FOX25, Tulsa World, KOCO, and News9 also report) See also OKOGA in the News.
Also on Tuesday, attorneys for Public Justice filed an amended lawsuit, adding another Oklahoma energy company as a defendant accused of causing earthquakes in Oklahoma. According to OK Energy Today, included in the amended lawsuit is the addition of the recent earthquake report issued by the U.S. Geological Survey which concluded that the extensive use of injection wells throughout Oklahoma will only increase the risk of much larger earthquakes. “Even if all the injection wells in Oklahoma ceased operating immediately, it would take a long period of time for the earthquake risk to return to natural background,” stated the new suit. It quoted Daniel McNamara, a seismologist at the USGS Geologic Hazards Science Center who estimated that the injection that has already occurred, could generate earthquakes for hundreds of years. “The USGS report really confirmed what we already concluded that there is a significant risk of a damaging earthquake right now and will be ongoing for some time,” added Richard Webster, an attorney with Public Justice. His law group apparently is the first to take advantage of the USGS report and use it in corroboration of allegations in the lawsuit. “I think we’re probably the first to allege in a complaint but I’m assuming in the other cases, lawyers will use that report as evidence and certainly a causation—- that the injection is causing these earthquakes,” said Webster.
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 will meet on Thursday, May 5.
Legal Committee
OKOGA Legal Committee Chairman Mark Christiansen has written a Memo to the Legal Committee regarding the new Federal District Court decision on McKnight v. Linn Operating, Inc., which denied class certification. It is the first Oklahoma Federal District Court ruling on class certification in royalty owner cases since the 10th Circuit issued its key rulings in two XTO Energy cases. If you are an OKOGA member and would like to see the summary, please contact Lisa Hendrick.
Also, a representative from the U.S. Department of Labor, with the Wage & Hour Division has offered to come to Oklahoma City for a presentation for OKOGA members, regarding the Fair Labor Standard Act’s overtime provisions, as well as other wage and hour issues, to assist oil and gas companies with compliance. Would you or the appropriate representative from your company be willing to attend a presentation on labor law at the OKOGA office, in Oklahoma City, at a future date and time to be determined? Please email Lisa Hendrick.
OKOGA IN THE NEWS
This week there was a rally at the Capitol concerning earthquakes and SB 809. The event was sponsored and led by Rep. Richard Morrissette, D-Oklahoma City. Chad Warmington, president of the Oklahoma Oil and Gas Association, said Tuesday that the energy industry is working with regulators and researchers to address the earthquake swarm. “Everyone is working together to find answers to this very complex situation,” Warmington said. “Continued funding for research and continuing collaboration among regulators and oil and gas companies are crucial to finding solutions to these events and keeping the oil and gas industry a vital part of Oklahoma's economy.” (News9 (1), and News9 (2), KFOR also report, OKOGA press release)
FEDERAL REGISTER
National Pollutant Discharge Elimination System General Permits: Stormwater Discharges from Construction Activities. The EPA is seeking public comment on the draft 2017 National Pollutant Discharge Elimination System (NPDES) general permit for stormwater discharges from construction activities. The draft permit, once finalized, will replace the existing general permit covering stormwater discharges from construction activities that will expire on February 16, 2017. EPA seeks comment on the draft permit and on the accompanying fact sheet, which contains supporting documentation. Comments on the draft permit must be received on or before May 26, 2016.
Environmental Impact Statements, Availability, etc.: Osage County, OK. The Bureau of Indian Affairs (BIA) will be revising the Draft Environmental Impact Statement for the Osage County Oil and Gas program. The BIA will work with cooperating agencies and others to gather additional information and work to prepare an Environmental Impact Statement (EIS). Written comments on the scope and implementation of the proposal must arrive by Friday, May 8, 2016. A public scoping meeting will be held at the Wah Zha Zhi Cultural Center, 1449 Main Street, Pawhuska, Oklahoma, from 3 p.m. to 6 p.m. on April 28, 2016.
ARTICLES OF INTEREST
NewsOK: Oklahoma State University study could bring new uses for oil-field wastewater
Newsweek: As Man-made earthquakes thunder through Oklahoma, residents get innovative with the law
The Oklahoman: Homebuilders explore easing customer’s earthquake fears
The Oklahoman (Editorial): Overreaction can lead to bad energy, environmental policy
Tulsa World: N.Y. or bust: Governor, Tulsa leaders heading to New York to try to keep Williams in Tulsa
EIA: U.S. natural gas production reaches record high in 2015
The Oklahoman: Oklahoma's Sen. Inhofe helps win approval for drone amendment
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