Despite Early Momentum, Energy Legislation Flames Out at End of Session

When it came to energy policy during the 84th legislative session, Lt. Gov. Dan Patrick's biggest goal was to expand the market for natural gas-powered vehicles.

Patrick had argued that it only made sense to use natural gas — which is plentiful in Texas — to power the millions of vehicles that contribute to air pollution struggles in parts of the state. 

“I want to make Texas No. 1 for natural gas vehicles. Expand the market, beginning with government vehicles,” the Republican told reporters in January. “Why? It’s clean, it’s cheap, it’s here and it will create jobs.”

And the upper chamber followed Patrick's lead in bipartisan fashion, passing Democratic Sen. Carlos Uresti's Senate Bill 12, which would have incentivized state agencies, counties and cities to convert their oil-guzzling fleets to those that run on natural gas or other alternative fuels.

As the Senate focused on natural gas incentives, House Speaker Joe Straus prioritized improving the efficiency of the 14-year-old Texas Emissions Reduction Plan (TERP), a landmark air quality initiative funded by motorists' fees that incentivizes upgrades from older vehicles and equipment. The chamber's initial proposal drew no public opposition. 

But neither the House nor the Senate proposal is headed to the governor's desk. As SB 12 stalled, its backers tried to attach its provisions to the House's TERP measure, House Bill 14. But that bill died at the end of the session amid disagreement over the natural gas incentives.

In a legislative system that can be more apt at killing bills than passing them, the death of two bills might not be a shock. But not all bills drown in a saga that evokes the names of billionaire T. Boone Pickens and Koch industries.

Lawmakers involved in the negotiations expressed frustration that squabbling between the chambers kept the popular legislation from passing the finish line.

“Anyone that is shocked that there is this type of politics getting played at the Legislature would also be shocked that there’s gambling at Rick’s Café in Casablanca,” said Sen. Kirk Watson, D-Austin, who supported HB 14. “But it’s very disappointing that a bill that we want and need would get pulled down in this way.”

Looking to Grow a Market

Natural gas has struggled to gain a toehold in an auto industry. For years, it and other alternative fuels have faced a number of barriers in an oil-dominated market, including a lack of fueling stations and the relatively high upfront of natural gas vehicles.

More recently, the Texas market has been growing, but slowly.

Changing economics (cheap natural gas plus improving technology) and state grants and incentives – much of them funneled through the Texas Emissions Reduction Plan — are contributing in part to that growth. The emissions program has doled out nearly $1 billion over the years in counties that struggle to meet federal air quality regulations. 

Through the program, the state has built fueling stations and equipment that stores and compresses natural gas, while incentivizing Texans to switch to alternatively fueled vehicles. 

Still, nearly $1 billion in TERP funds have sat unspent, with the Legislature occasionally using it to artificially balance the state’s budget. This session, lawmakers in both chambers sought ways to use that money as intended. 

SB 12 would have tapped $30 million of that funding each year to help local and state governments convert their fleets to natural gas or other fuels, such as those powered by electricity, hydrogen or propane. It would have required state agencies with more than 15 vehicles to overhaul their fleets and expanded grants for fueling stations. 

Patrick asked Uresti to take up the bill. Uresti, whose sprawling district touches the Eagle Ford Shale and Permian Basin, gladly accepted.

“It would have been a shot in the arm for the economy, and it would have continued to build on the infrastructure,” Uresti told The Texas Tribune. Patrick's office didn't respond to multiple requests to comment for this article.

Oil and gas producers backed the legislation. So did electric utilities, auto companies and pipeline companies and some environmentalists. By early April, the bill easily cleared the Senate.

A month passed before the House Committee on Energy Resources advanced the measure, sending it to the Calendars Committee to schedule a debate on the House floor. That day never came.

Meanwhile, the House's bill was working its way through the Legislature. Rep. Geanie Morrison’s HB 14 aimed to extend the emissions plan until 2023, expand some of its programs, increase certain incentives and make more counties eligible for grants to improve air quality. 

So why did both bills fail?

Koch Industries Raises Concerns 

Several of SB 12’s backers pointed to Koch Industries, the hulking conglomerate of manufacturers, petrochemical producers and investment companies. As one of few parties that testified against the bill – and by far the most powerful – the company argued that SB 12 would give natural gas an unfair leg up over oil. 

Natural gas prices could rise if Texas drastically expanded demand for the fuel. That could be bad news for Koch’s large refiners, which run on the fuel.

“Koch Industries was among a number of businesses that opposed the legislation on the basis that it would have introduced another subsidy paid for by Texas taxpayers," Ken Spain, a Koch spokesman, said in an email to the Tribune. "Koch companies support open and free markets and have consistently opposed any and all subsidies, even those we currently benefit from.”

From 2008 to 2014, the company’s political action committee contributed more than $26,000 to state Rep. Todd Hunter, chairman of the powerful Calendars Committee, which sets the agenda on the House floor. And in his days as a lobbyist, Hunter, R-Corpus Christi, represented Koch and Flint Hills Resources, a subsidiary.

Koch PAC was also the third-biggest contributor to Morrison, R-Victoria, chipping in $15,500 from 2003 to 2014.  

“The only common denominator in all this is Koch industries,” said Kirk Edwards, president of Latigo Petroleum, who was among those pushing SB 12. “You’ve got to give it to them — they know the system better than most people.”

Hunter refutes the suggestion that Koch tampered with his committee's business. He said he didn’t know much about the bill and had little to do with its demise.

“I’m the Calendars chairman, and I get blamed for everything. That’s the nature of my job,” he said in an interview. “I don’t know who was involved in committee. Whoever testified for or against, I would not know.”

A few lawmakers and others visited with him about the bill, Hunter said, and he heard more opposition than support. He said he was charged with keeping those conversations confidential.

“Other than maybe three members, I don’t remember anybody talking about this bill in favor of it,” he said. 

Several lawmakers and others involved in the legislation said there were concerns that SB 12 was picking natural gas as a winner against oil, flouting free-market principles.

It had an “initial reputation as only a natural gas bill,” said Rep. Jason Isaac, R-Dripping Springs, who was watching the legislation. 

Questions About Pickens

But another issue stirred resentment in the House as it debated SB 12, lawmakers and other officials said: the perception that T. Boone Pickens, a champion of finding new ways to use natural gas in the auto sector and elsewhere, was largely behind the legislation.

Last year, Pickens contributed $136,000 to Patrick’s campaign, and Patrick later named the billionaire to his 55-member "Advisory Boards of Private Citizens.” Pickens, who leads the hedge fund BP Capital, has an array of business interests and is on the board of directors for a company that builds natural gas fueling stations. 

Jay Rosser, a Pickens spokesman, downplayed his boss' role in the process. 

“Boone has long championed the expanded use of natural gas in transportation to help address the national security and economic threat posed by America’s reliance on OPEC oil,” Rosser said in a statement, adding that the recommendations behind SB 12 came from “representatives with diverse oil and gas industry experience.”

Uresti said no one — neither lawmakers nor refiners — brought any worries directly to him, and that he never heard from Pickens.

“It wasn’t a perfect bill, but I had not heard any strong opposition,” he said. “I would have tried to address any of their concerns.”

Near the end of May, HB 14 easily cleared the House and Senate. But each chamber backed different versions that they would never reconcile. 

The sticking point was Patrick's natural gas proposal. 

Though Watson voted against SB 12, he allowed his chamber to tack the bill's provisions as an amendment to HB 14, as part of a deal with Patrick that involved a different piece of legislation, the Democrat said.

“That was something I needed to do at least to give it an opportunity to survive” in the Senate, Watson said. 

But Morrison refused to play along. Her conference committee wanted to strip Patrick’s proposal from HB 14, and Patrick did not appoint a Senate conference committee — officially killing both efforts.

Uresti said he was disappointed with the result, but it taught him not to let his guard down in the session’s waning days.

“It’s never done until you score,” he said. “The lobby is influential, especially late in the game.” 

Neena Satija contributed to this report. 

Disclosure: T. Boone Pickens has been a major donor to The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.