As the Jan. 20 deadline passed for requesting general bills and resolutions in Montana’s 64th legislative session, a clearer picture begins to emerge as to what oil and gas-related issues lawmakers will be addressing throughout the 90-working day session, the last day of which is scheduled for April 29.
As of the deadline, a total of 475 bills had been introduced with another 1,875 bill drafts which may or may not be introduced. In the 2013 session, 1,201 bills were introduced and another 1,017 drafts were requested but were never introduced.
Of all the introduced and unintroduced bills, Petroleum News Bakken has identified nine Senate bills, eight House bills, and eight bill drafts which, if passed, could directly or indirectly impact the state’s oil and gas exploration and production sector.
Infrastructure spending
In what has become known as the “Build Montana” bill, Gov. Steve Bullock is proposing to spend $391 million on the state’s infrastructure in House Bill 5, with some $45 million of that going directly to oil-impacted communities in the Bakken in eastern Montana.
HB 5 would be funded through a combination of bonding and cash from the state coffers, which appears to be contentious because Republicans generally oppose borrowing any of the money while Democrats feel it is a good time to borrow money with low interest rates coupled with the state’s high credit rating.
Hearings on the bill began in the Joint Appropriations Subcommittee on Long-Range Planning on Jan. 13 and continued through the week of Jan. 19.
Bullock vetoed legislation in the 2013 session that would have provided some $35 million in infrastructure spending to oil-impacted communities because it would have left an ending fund balance of less than $300 million, a balance the Governor is insistent upon.
Greater sage grouse
Another important industry-related issue in the current session is the governor’s sage grouse conservation plan. That plan is modeled after Wyoming’s plan and is designed to leave management of the Greater Sage Grouse to the state and potentially avoid a threatened and endangered species listing.
Included in HB 2 - the state’s overall funding bill for the 2015-17 biennium - is $10 million in funding for the conservation plan. The plan would be administered by the state’s Department of Fish, Wildlife and Parks. Included in the bill are seven new positions within that department.
Hearings on the bill began on Jan. 8 and continued through the week of Jan. 19 in numerous joint House-Senate appropriation subcommittees.
The environment
Among other bills lawmakers will consider in the session are several related to environmental quality and protection.
Under Senate Bill 102, the Department of Environmental Quality as well as local air quality programs would be allowed to collect registration fees for air quality permits and use the fees to administer the permitting programs.
SB 136 formally defines “remediation waste” generated during cleanup operations under Title 75 (Environmental Protection) of the Montana Code Annotated, MCA. The bill also sets a maximum registration fee for hazardous waste generators at $25,000.
SB 159 amends Title 75 by specifying that certain water quality standards for tributaries of the Tongue, Powder and Little Powder rivers as well Rosebud Creek, all in southeast Montana, not be set at levels lower than natural background conditions. A companion bill, SB 160, also amends Title 75 by specifying that if effluent standards in certain discharge permits for state waters do not exceed natural background conditions in the receiving stream, then anyone challenging the permit is required to prove that the determination or classification of the receiving stream’s natural condition was “arbitrary and capricious.”
SB 172 addresses water quality standards related to oil and gas extraction and establishes pre-drilling and post-closure water testing requirements. The bill also sets reporting requirements of test results by the Board of Oil and Gas Conservation to both the public and to mineral owners within a one-mile radius of the well in question.
Taxes, bonds and revenue
HB 156 would provide property tax exemptions for air and water pollution control equipment as well as carbon sequestration equipment. Under HB 213 exemptions would increase on a class of business equipment that includes equipment used for oil and gas extraction. Two similar bills were passed in the 2013 legislative session but were vetoed by Gov. Bullock.
SB 145 revises MCA Title 15 (Taxation) by revising the distribution of oil and gas production revenues for funding oil and gas impact projects. The bill also defines oil and gas impact projects and establishes priorities for projects from local communities that are administered by the state Department of Commerce.
SB 156 removes provisions in the state’s taxation code allowing jurisdictions to access portions of protested taxes on industrial properties or those centrally assessed prior to resolution of the protest.
SB 173 revises MCA Title 82 (Minerals, Oil, and Gas) by setting oil and gas well bonds. For individual exploration wells less than 2,000 feet deep, the minimum bond would be $20,000 and $60,000 for all other exploratory wells. For multiple wells the bond would have a minimum of $250,000. Other provisions in the bill establish requirements for escrow deposits for inactive wells.
HB 41 would revise tax appeal laws under MCA Title 15 (Taxation) by allowing appeals by certain property taxpayers as long as the state’s tax appeal board reviews such tax appeals on a “de novo” or start from the beginning basis.
HB 67 is a housekeeping bill requested by the Department of Revenue and assigned to the House Taxation Committee and simply removes from the taxation code a provision that the Wall Street Journal no longer be the source of crude oil pricing for certain taxation purposes, allowing the department to use other sources of crude oil pricing.
Surface lands
SB 177 would establish a 1,000-foot well setback from surface water, water wells and “inhabitable” property under amendments to Title 82 (Minerals, Oil, and Gas).
HB 62 would have amended MCA Title 77 (State Lands) by providing clarification on liability for unauthorized use of state lands, including roads, pipelines, ditches, utilities, fences, buildings or other facilities, and increases the fine for unauthorized use. However, the bill was tabled by House Natural Resource Committee on Jan. 20.
Oil and gas operations
HB 243 adds a definition of “fracturing” to Title 82 and requires public disclosure of the complete composition of fluids used in hydraulic fracturing as well as details of fracturing operations including proposed rates or concentrations, operating pressures and estimated fracture lengths and heights. The bill also requires that the Board of Oil and Gas Conservation post such information on its website and further requires operators to provide notice of fracturing operations to property owners with a water supply well located within 3,000 feet of the well to be fractured at least 45 days in advance of commencement of fracturing operations.
HB 226 would also amend Title 82 to increase the upper limit on the amount of money allocated by the state’s board of investments to the state’s resource indemnity trust fund from $50,000 to $650,000. The bill also removes requirements that the Department of Natural Resources and Conservation prioritize grant requests up to $600,000 for oil and gas projects from the Board of Oil and Gas Conservation.
Bill drafts
Among the unintroduced bill drafts, which are identified as “LC” for Legislative Council, is LC551 which would limit flaring of natural gas from any given well in the state to 35,000 cubic feet per day.
LC552 would prohibit the use of reserve pits and instead a closed-loop system that recycles drilling mud would be required.
LC997 significantly revises MCA Title 69 (Public Utilities and Carriers) by creating an entirely new standard for oil and gas wastes. The draft establishes a unique class of “oil and gas exploration and production wastes” along with strict requirements for licensing of disposal facilities for such wastes. Under the draft, oil and gas exploration and production wastes are defined as “wastes uniquely associated with and intrinsic to oil and gas exploration, development, or production operations, including primary field operations.”
Under LC1000, monitoring, evaluation and reporting requirements would be established for casing cement of hydraulically fractured wells.
LC1157 would put before the voters a constitutional amendment creating a permanent oil and gas trust fund. Funding would begin in 2018 financed with 5 percent of the extraction, severance and production oil and gas taxes. That funding would then increase by 5 percent each year from 2019 reaching a maximum of 30 percent in 2023. The measure requires a two-thirds majority vote of all 150 members of the Legislature.
LC1619 would revise MCA Title 15 (Taxation) by eliminating Montana’s drilling tax incentive for oil and gas wells completed on or after Jan. 1, 2015, and would direct the revenue generated from additional taxes to the state’s highway revenue account.
Under LC1663, the classification of air and water pollution control equipment would be changed from Class 5 to Class 8. Because the tax code is complicated, exactly what effect this bill would have on the oil and gas industry are not clear, but it appears that the upstream sector would not be affected although midstream and downstream might be. Those details will be clarified if the draft is formally introduced.
LC2014 would direct the Montana Department of Environmental Quality to modify nutrient limits in discharge permits and include in the permits a schedule for compliance in the event the U.S. Environmental Protection Agency vetoes or objects to a discharge permit because of nutrient standards as provided for in MCA Title 75 (Environmental Protection).
