Energy & Water

ERCOT released a report that said the EPA’s Clean Power will cost Texans more and harm reliability in the grid. [Texas Tribune] We all want our A/C’s to function properly in August, which makes reliability a our electric grid a big deal.

A Forbes contributor writes that ERCOT got a couple things wrong, including:

• under-estimating solar power
• not including wind and energy storage
• the ability to avoid rolling blackouts with demand response systems
• improving efficiency   [Forbes]

BBVA Economist released a new report. OPEC is worried. Texas is not. Texas economy is more diverse than it was in the 1980s. A quote from the economist: 

“Today there are striking differences with the 1980s – when Texas suffered one of the worst recessions ever – which suggest that the downside risks are relatively contained…For example, greater economic diversification, increased trade openness, regional and national bank financing, and absence of a real estate bubble, to name a few.”

[Dallas Morning News BizBeat]

Houston’s South Texas College of Law is opening the region’s first oil and gas law institute.

Start brewing coffee, new oil and gas law publications await. [Houston Chronicle]

A newly released U.S. Geological Survey water use report, analyzing water use across the country, has reached its lowest recorded level in nearly 45 years. 

Texas specific statistics from the report:

• Texas accounted for about 7 percent of total withdrawals for all categories, predominantly for  thermoelectric power, irrigation and public supply. 
• Oklahoma and Texas accounted for about 70 percent of the total saline groundwater withdrawals in the nation, mostly for mining.  [Water World]

San Antonio Water System approved a deal to allow two private companies to build the $3.4 billion Vista Ridge pipeline project. The private companies involved are:

• Austin-based BlueWater Systems, which holds groundwater rights in Burleson County and will pump the water, and
• Abengoa, a Spanish company, which will build the 142-mile pipeline  [Texas Tribune]

An oil company executive penned a piece illuminating how the passage of the Denton fracking ban highlights the divide between the oil, gas and energy companies and citizens. 

It’s an opportunity for oil interests and citizens to work together for Texas growth. Lest not forget that when we work together, we catch more flies with honey than vinegar. [Mark Plummer, Chestnut Exploration]

The fracking ban is heading to court for the age old juggling act- How does Texas grow, allow  businesses to economically thrive, and protect private land use? It’s been a week. The issue keeps gaining traction worldwide. 

Denton’s Fracking Ban Numbers:

• 1 week since the ban passed
• 2 lawsuits filed to stop the ban from taking effect
• 58% of Denton voters supported a localized fracking ban
• 137 media clips

What’s being written and said about the ban?

• Courts Will Take Up Case of Fracking v. Drilling [Texas Tribune]
• Faulkner: Spending big bucks was the wrong strategy to defeat Denton frack ban [Dallas Business Journal]
• Texas Messes with Denton [Aljazeera America]
• Denton Fracking Ban Passes in Landslide [Dallas Morning News]
• After Banning Fracking, Denton Braces for Backlash from Drillers, a Bush and its Own Lawyer [Dallas Observer]
• Courts Will Take Up Case of Fracking v. Drilling [My High Plans]
• Texas Oil Regulator Says It Will Not Honor Town’s Vote To Ban Fracking [Think Progress via the Minted]
• Railroad Commission head talks Denton frack ban, what agency did wrong [San Antonio Business Journal]
• Railroad Commission head talks Denton frack ban, what agency did wrong [Houston Business Journal]
• Fracking Has Amazing Benfits. Why did this Texas Town Just Ban it? [The Daily Signal]
• In Denton, Texas, voters approve ‘unprecedented’ fracking ban   [LA Times]
• What Oklahoma Can Learn From A Municipal Ban On Fracking In Texas [KGOU]
• Voters in Texas city OK ban on hydraulic fracturing expansion [Penn Energy]

A Florida city wanted to protect seagrasses. So, it prohibited docks to promote seagrass growth. Property owners, with riparian rights, wanted to build docks to access the water.  The conflict ended up in court.

Landowners went to state court seeking property right protections for their riparian rights. The city moved the suit to federal courts. The 11th Circuit held that riparian rights, state based property rights, are not protected by the US Constitution. Litigants await word from the US Supreme Court. [Owner’s Counsel] [US Supreme Court Docket] 

“The data from JPMorgan Chase & Co. (NYSE: JPM) and the Greater Houston Partnership in their “Houston Skills Gap Report” indicates that a lot more Houstonians need a high school diploma, or equivalent, and some additional community or technical college training — but not a university degree — in order to adequately fill the jobs void. 

Chemical companies have committed to spending more than $100 billion in expansion projects from 2010 to 2023, most of which are in southeastern Texas and along the Gulf Coast.” [Houston Business Journal]

U.S. Energy Information Administration says last year Texas added 19,000 private sector energy jobs. For those who like to keep score- that’s more than any other state & 6 times more than the #2 state.

The EIA’s count is only jobs that are boots on the ground, and doesn’t count the many corporate headquarters jobs that have also been created. [Fuel Fix] 

Forbes digs into why a fracking ban emerged in the heart of fracking’s home turf? Appears as though people were concerned about their private property and roads. Texans like their land, driving their trucks, and owning their guns. Forbes doesn’t mention guns, but looks at how fracking got too close for comfort.

There are 272 active wells in Denton city limits. It wasn’t the usual environmental concerns driving the fracking ban. It was wells too close to homes and a park and increased traffic congestion. 

The citizens of Denton by all appearances wanted their land, parks and roads respected. There are always bad actors that trounce respect. The backlash in a community is directly proportional to how bad these bad guys are.  

Denton’s backlash was solid but not overwhelming. Denton passed the fracking prohibition with 59% of its voters supporting it. Lawsuits have been filed and legislation is imminent. [Forbes| Loren Steffy]

Junior high biology taught us all that plants need water. Texas needs water too. Balancing these two interests is a goal of the annual meeting of  Texas Association of Plant Protections.

Texas plant and agricultural producers need water to support their industry. Water management and innovation is here to stay. [Byran-College Station Eagle]

After soliciting statewide public comment and holding public hearings throughout the state, the Texas Water Deverlopment Board’s rules for water funding are official.

TWDB released a series of documents to help applicants navigate the new funding rules:

• SWIFT Prioritization Criteria
• SWIFT Application Timeline
• Water Supply Demand Projections
• TWDB Financial Assistance Programs

   [Midland Reporter Telegram] [TWDB Press Release]

This week the US Supreme Court appointed a Special Master to move the Texas-New Mexico water case along.

The Special Master is A. Gregory Grimsal of New Orleans. [US Supreme Court Orders 11.3.14]

California passd a bond proposal to inject $7.5 billion into California’s water infrastructure. The bonod package breaks down like this:

• 1/3 will be for water storage
• $800 million for regional water infrastructure projects
• $500 million for drinking water and wastewater treatment in small communities
• $800 million to clean up contaminated groundwater
• $725 million for recycling and reusing existing water or desalination
• $395 million for flood protection
• $1.5 billion for environmental projects around the state
•  $100 million for groundwater management plans. [Sacramento Bee]

2: The number of lawsuits filed to prohibit implementation of the Denton fracking ban. TXOGA and the Texas General Lawsuit both filed suit.

4: The number of days before bill filing begins to legislatively stop the fracking ban.

2: The number of days since 59% of the Denton voters approved the fracking ban. [Texas Tribune via Governing]

Voters in Denton, along with other commuities in the US, passed a ban on fracking. This land use campaign trend will become a legal trend as the fracking ban quickly gets booted to the courts to resolve.

An opinion piece in the Dallas Morning News sums up the fracking ban as Denton residents’ desire to protect private property rights and assert local control. It also raises the possibility of legislation to overturn Denton’s vote.  [Opinion | Dallas Morning News]

A federal court in Utah gave a win for energy permitting and for private land use. The court found the federal prohibition, preventing the taking of a threatened species, to be an overreach by the federal government.

Judge Dee Benson sums up his rational in People for the Ethical Treatment of Property Owners v. U.S. Fish & Wildlife Service:

Although the Commerce Clause authorizes Congress to do many things, it does not authorize Congress to regulate takes of a purely intrastate species that has no substantial effect on interstate commerce. Congress similarly lacks authority through the Necessary and Proper Clause because the regulation of takes of Utah prairie dogs is not essential or necessary to the ESA’s economic scheme.

[Washington Post | Volokh Conspiracy]

58.64% of Denton voters approve the ban on fracking. Next stop for the fracking ban- the courthouse. [NPR]

Bragg v. Edwards Aquifer is a story about a pecan farmer who wanted to water his pecan orchards. His request for water was denied. He went to court. The trial court and the appellate court agreed with the pecan farmer, the denial of the water permit was a taking of his private property rights and he deserved compensation.  

We’re now at the Texas Supreme Court. The landowner has won twice. The response brief is due December 22nd. Time will tell whether denying a water permit is a compensable taking of private property in Texas. [Bragg v. Edwards Aquifer]

BBA Compass economic analysis supports economic benefit for Texas from the deregulation of energy in Mexico. Mexico’s energy deregulation will “add 217,000 jobs, about $3.5 billion in state revenue, and $45 billion in gross domestic product to the economy in Texas.”

It’ll take private companies to enter the market. But, since when have private companies shied away from capitalistic opportunities? [Eaglefordtexas.com]

Usually when you think eminent domain, you think a governmental entity is trying to acquire land. The Mountain Water Company is facing eminent domain by Missoula, MT.

By all accounts, Mountain Water Company is privately owned and operated. [Missoula Independent]  Legal fees in this eminent domain case for Missoula are $750,000 and there remains 6 months before trial. Public support favors eminent domain. [Missoulian]

The ordeal raises an interesting question, can a private utility company be acquired by eminent domain?

A new report from the Texas A&M Institute of Renewable Natural Resources links Texas’ economic boom to the loss of privately owned ranches and farms. Researchers say open spaces are vital to Texas water supply. [The Atlantic’s City Lab] [Texas A&M Institute of Renewable Natural Resources]

Commisser Porter wants increased protection for inspectors and pipelines. [KVUE Austin]

Refreshing our recollection, the Houston Chronicle reported that cartels illegally tap pipelines in Mexico, transport the oil and gas to the U.S. and sell it for refining. The original Information Intelligence Post from September 25th:

Mexico recently de-regulated its energy market, creating a plethora of opportunities for enterprising companies. It’s a energy business’ dream to enter the nascent and booming markets south of the border. Businessman will find themselves with some new challenges such as illegal pipeline taps. The cartels are also enterprising businesses. Cartels discovered they can tap Mexico’s existing oil pipeline system and have been syphoning off what could amount to billions. Figures show that nearly 2500 illegal oil taps have been drilled in 2014 alone. [Houston Chronicle] 

Eagle Ford Shale area hopes some of the $1 Billion in transportation funding will help their roads. Roads and bridges in shale areas experience higher use rates from heavy truck traffic which transports the oil and gas equipment into and out of the area.    [San Antonio Express News]

Denton is not alone in asking voters to vote on whether to ban fracking. This year, the following locations have fracking ban propositions:

• Four Ohio towns;
• Santa Barbara, San Benito and Mendocino counties in California; and 
• Denton, TX.     [Think Progress]

Bill Riley is the new water utility director for San Angelo. He talks about the New Hickeory Aquifer, recapture, and the economic viability of the water department. [Go San Angelo]

Oil prices are falling, oil production is up, rig counts are up, but where is the business growth? The Houston Businss Journal points to midstream companies which have growth that is outperforming all others in the energy sector. [Houston Business Journal]

In 2013, the Texas Legidlature Passed SB 1756. The goal is to make the permitting process at TCEQ move more swiftly. Permittees that qualify will pay a surcharge to move the process more quickly. [TCEQ Executive Summary] 

Wildlife advocates are trying to solve a water problem that has been killing whooping cranes in the Aransas National Wildlife Refuge. They’ve tried to take a page from cattlemen to use drinking water wells, but have hit brackish water that the cranes can’t drink.  One successful solar powered well has been drilled.

Crane supports received $750,000 in grant money from the Texas Water Development Board to help their cause. An alternative source of funding is a pending lawsuit under the Endangerd Species Act.

The suit is pending a rehearing at the 5th Circuit Court of Appeals. Crane supporters claim the state took too much water out of the San Antonio and Guadalupe rivers, which resulted in the death of whooping cranes. [Victoria Advocate]

A Brookings Institute study shows that areas that have the most scarce water supply do not have the highest water rates.

The study also notes that the highest water users are not residential users, but residential water rates are most often measured. This leads to a disconnect in policy discussions about water useage and rates. Should residential customers pay more for their water than large entities that use far more water?  [New Republic] 

Crowdfunding is trendy financial avenue for business. The Texas Securities Commissioner approved rules for crowd source funding which will go into effect in November. Experts agree that the sectors that will benefit the most for this new funding avenue will be energy and real estate. Crowdfunding is perfect for Texas’ entreprenurial spirit. [Austin Business Journal]

Fascinating poll reveals differing views of energy based on age. The highlights:

• 41%under age 35 say the U.S. should permit export of natural gas 
• 22%  age 65 and older support exporting natural gas
• 68% under age 35 say they would be more likely to vote for candidates who support steps to reduce carbon emissions
•  50% of those age 65 and older would be more likely to support candidates who support  reduction of carbon emissions
• 72% of younger consumers strongly support subsidies for renewable energy
• 58% age 65 and older strongly support renewable energy subsidies.

[UT]

Unprecendented spending from environmental groups is occuring this election cycle. The campaign spending is anchored by billionaire Tom Steyer. NextGen Climate has itself spent over $50 million this election cycle. [Washington Post]

The Weekly Standard sums the AEI Report up: “Without the energy-driven economic stimulus from the fracking revolution, and without the gusher of jobs in the state of Texas, there’s no question that the Great Recession would have been much worse and lasted much longer, and the jobs picture today would be much bleaker. ” [Weekly Standard]  [AEI]

$700 million are at stake in a huge royalties lawsuit that begins in Bexar County this week. Mineral Rights Owners in the South Texas Syndicate Trust are upset by the trustee, JP Morgan Chase Bank.

The bank entered into agreements on behalf of the mineral rights owners in the trust. Some of the agreements were made with other clients of JP Morgan Chase. the trial is expected to take 5 to 6 weeks.  [San Antonio Express News]

Baker Hughes Inc. announced 8 new rigs in Texas. Rigs are primarily in the Permian Basin and Eagle Ford. The new rigs are also targeting higher production fields. [Longview News Journal]

Americans for Tax Reform say the Clean Power Plan is economically irresponsible, because it disproportionately impacts the household economics of young families and the elderly. [Americans for Tax Reform]

Mexico recently loosened government control of its energy sector. This week Mexico’s Deputy Secretary for Energy Planning said that 500,000 direct and indirect jobs will be created from Mexico’s energy market expansion.  

U.S. and Texas experts say that the infrastructure for Mexico’s energy expansion rests largely with Texas. Its safe to say the economic benefits will be felt North of the border. [Rio Grande Guardian]

U.S. Energy Secretary Moniz, speaking to the American Energy and Manufacturing Competitiveness Summit today, said that the energy boom has also yielded a boom in increasing innovation and eficiency. Together these booms strengthen the economy, job creation, and the environment. [Breaking Government]

Fuel Fix’s long list of how the energy sector supports Texas’ economy:

• Texas overtaking Russia and Saudia Arabia in crude production
• 7 of the 15 fastest growing cities are in Texas (US Census Bureau)
• Energy is respsonsible for 12% of Texas jobs
• Texas has gained manufacturing jobs for 3 consecutive years [Fuel Fix]

In 2013, the Legislative Budget Board Government Effectiveness and Efficiency Report recommended modifying the natural gas tax incentives. LBB offered the following 3 recommendations:

1Amend statute to use mean drilling and completion costs instead of median drilling and completion costs in the calculation of the high-cost gas tax benefit.

[2013 LBB GEER Report]

Every tax system has tax breaks. There are deductions, exemptions, and credits that impact every tax payer. Tax breaks for wind energy and natural gas has caught the eye of Texas Comptroller Combs.

Comptroller Combs has called on the wind sector needing to stand on its own feet and will soon highlight the tax breaks and will call for a review of natural gas tax incentives.    [Comptroller Combs Wind Energy Report] [Texas Tribune]  

Refreshing Recollection: 2013 LBB GEER recommendation included modifying the natural gas tax incentives. LBB offered the following 3 recommendations:

[2013 LBB GEER Report]

538, the Nate Silver brainchild, looks at whether basic economic principles, like supply and demand laws, apply to the oil market. Due to OPEC control of the oil market, 538 declares the oil economy not a normal market.

The takeaway: increased U.S. oil production is affecting global markets.

538 prepared several graphs on oil production and prices. [538]

Merrill Matthews writes that the proposition to ban fracking within the city limits of Denton has broader implications. The ban would fuel a public relations campaign for environmentalists. The ban would also give rise to inverse condemnation claims for property owners to argue that the ban denied them full use of their property to earn royalties. It’s a sticky situation. [Dallas Morning News]

A barrel of oil is selling at $85. That’s the lowest point in 4 years. Oil revenue is a substantial portion of the Texas economy. Oil prices are falling, but oil production is climbling. A Rice economist suggests the two offset each other.

Other economic reasons impact the lower oil prices including a strong dollar, speculators betting on lower prices, and stalled international economic growth. [KUT]

Briefing is underway for a controversial groundwater case before the Texas Supreme Court. A pecan farmer was denied permits to water his pecan trees by the Edwards Aquifer. The pecan farmer argues the denial of the permit was a taking of his property. For all you land use lawyers, yes, the land owner is claiming an inverse condemnation. [Bragg v. Edwards Aquifer Authority]

The Railroad Commission is in the midst of controversial rule making about which entities qualify as common carriers, because of last session’s HB 2748.

Texas needs to move its rich oil and gas resources around the state and country. Moving oil and gas to and fro requires traversing land. Land is owned by private individuals who love their private property rights, which makes getting access to build pipelines complicated. In 2013, a bill tried to address this issue. But,many private property right activists viewed HB 2748 as harming private property rights.  HB 2748 was killed on a very elegant point of order and never re-emerged again. 

The author of HB 2748 has retired from the Legislature, but the issue will be back for round 2 in 2015. Private property rights activists are engaged now more than ever before. Hold onto your hats it will be a bumpy ride.  [HB 2748 (2013)]

In 2013 the Legislature passed SJR 1 and HB 4 which created new funding mechanisms for funding the statewide water plan. Part of this new funding structure included $2 billion from the Texas Rainy Day Fund. [HB 4 (2013)]  [SJR 1(2013)]

The Texas Water Development Board has a plethora of materials on its website about the legislation and the rule making that followed. [TWDB]  There are a number of other resources as well; such as the Texas A&M Water Resources Institute that publishes the Texas Water Journal. 

In August the State Auditor Office issued a report on the Brazos River Authority. The Big Picture:       

• The Authority substantially complied with state requirements and Authority policies and procedures for financial management.
• The Authority has implemented processes to ensure that its compensation decisions and pay actions are supported and authorized.
• The Authority has implemented processes for funding and managing capital projects.
• The Authority had sufficient documentation supporting its decision to shut down and decommission its hydroelectric facility at Possum Kingdom Lake.
• The Authority should strengthen some of its information technology controls.

[SAO]

A Nebraska judge today ruled that it’s too early for the State of Nebraska to challenge the EPA’s new carbon limits for new power plants. When the judge dismissed Nebraska’s challenge, he stated:  ” The state cannot sue in federal court to challenge a rule that the EPA has not yet actually made.” 

Timing is everything, in life and in court. [The Hill]

The State Auditor selected 12 groundwater districts to review. They’re generally doing a really good job. What’s key about this SAO report is that it breaks down the statutes and rules that groundwater districts should be following. It’s a clear and concise primer on groundwater districts. [SAO Groundwater District Audit] 

P.S. California just enacted groundwater statutes for the very first time. California has a big, bad drought too which led to groundwater regulation. [Sacramento Bee] 

TPPF tells us groundwater is the answer to our future water needs. Groundwater is privately owned, minimally regulated, and abundant. Math has the golden ratio, TPPF has white papers with golden conservative nuggets.

October’s TPPF golden white papers include:     
To read Water Rights Amendments: Changing Times, Changing Uses, visit: http://txpo.li/water-rights-amendments
 
To read Groundwater Conservation Districts: Opportunities for Reform, visit: http://txpo.li/groundwater-conservation-reform

 [TPPF]  

Blue Spike is being called a patent troll. Filing 45 patent infringement claims in two weeks raises red flags. Especailly after June US Supreme Court rulings requiring greater specificty in patent infringement claims.

The texas Legislature is looking to state solutions for businesses that were targetted by trolls. Solutions include state legal claims against the trolls. 

[EFF on the US Supreme Court Rulings] [Above the Law] [TX House Committee on Techonology Interim Charge]

Trash has to be sent somewhere. But, no one wants a trash pit in their neck of the woods. Even less popular than trash is drilling waste.  

Where to dispose of drilling waste? Not in Nordheim, TX, population 315. The arguments against it are the same as they would be in Austin or Dallas. The waste facility will affect land use & will negatively impact property values.  

The Railroad Commission apears inclined to approve the permit. The commission looks at the impact on groundwater. The citizens of Nordheim want their concerns heard.  [Texas Tribune] [Learn about Nordheim]

The Delta smelt lives in California waterways. The Endangered Species Act protects it. California has a drought. The fish dies if water is re-routed. The Pacific Legal Foundation is asking the US Supreme Court to protect it.

Why are delta smelts and spotted salamanders getting so much US Supreme Court time? In 1978 the US Supreme Court decided TVA v. Hill which is what allows endangered species to trump everything. [PLF]

Vinsons and Elkins lured an energy deal maker away from Bracewell & Giuliani. The WallStreet Journal wrote  “Mr. (Michael) Telle specializes in energy deals including mergers and acquisitions, initial public offerings and tender offers.”  [WSJ]

It takes a lot of human capital to run oil fields. Those humans need to sleep somewhere. A Houston based company that provides accommodations for oil field works discovered the tax implications of booming business. The company considered converting to a REIT, but hot summer days led to a better conclusion- move to Canada. Not only does Canada offer cooler summers but is also offers a lower tax rate for this C-Corp. The 25-26% tax rate in Canada is roughly 4% lower than the US tax rate on the C-corp’s income.  [Financial Post]

NM Supreme Court ruled that parties cannot contractually eliminate interest on royalties held in a suspense account. Preventing the accural of interest on these royalty payments amounted to a violation of a clear public policy and was thus unenforceable. 

Words matter. Words matter in contracts. Words matter in bills. Words matter in statutes. 

Mexico recently de-regulated its energy market, creating a plethora of opportunities for enterprising companies. It’s a energy business’ dream to enter the nascent and booming markets south of the border. Businessman will find themselves with some new challenges such as illegal pipeline taps. The cartels are also enterprising businesses. Cartels discovered they can tap Mexico’s existing oil pipeline system and have been syphoning off what could amount to billions. Figures show that nearly 2500 illegal oil taps have been drilled in 2014 alone. [Houston Chronicle] 

New Mexico farmers have the right to pump underground water during time of drought. they got this right through an agreement and a desire to not be litigated out of business. Its a compact that has worked for more than 100 years, but an aspiring politician wants to stop these farmers from accessing water. [NM Politics.net]

Tempers have flared. A Well owner claims contamination. A drilling company claims defamation. No one is happy. 

The water well owner claims 2011 tort reform protects his free speech to claim contamination.  Lawyers wants to clarification. Courts around Texas have not been applying the 2011 SLAPP reforms uniformly. Everyone wants to know the rules fo the game. [NYT]                     

A Pipeline “ticked off” a cattleman. Said cattleman is President of the Texas & Southwestern Cattle Raisers Association.  Messing with Texans isn’t wise, messing with Texas cattlemen far less than wise.    [TSCRA] [Star Telegram]

A landowner seeking to route a pipeline around his property has contributed more than $235,000 to certain water board members. A handful of related lawsuits ensued.  [Ft. Worth Star Telegram]

Naturally, everyone should look to Texas when trying to solve problems.  Aljazeera did while forecasting how Pennsylvania will handle pipeline common carrier use of eminent domain. In the last few years, the Texas Supreme Court has been rolling back the power of eminent domain in favor of stronger private property rights. The effects of the Tea Party are pervasive, and private property rights are de rigueur.  [Aljazeera America]

Houston Business Journal names land rights, a top legal issue in energy.  

Drought is Gaelic for “Must move water to needed areas.” Tea Party is modern English for “We love private property. We detest eminent domain.” What happens when drought and Tea Party meet? Is it love at first sight? No. Its a water infrastructure quagmire. [National Eminent Domain Blog (Quoting the Ft. Worth Star Telegram)]