By Mike Ellerd Editor-In-Chief Petroleum News Bakken | Posted: Tuesday, February 3, 2015 4:18 pm
After serving a combined 14 years in the Montana House of Representatives and Senate, term limits put Sen. Debby Barrett in her last session, and she is ending her legislative tenure on a high note serving as president of the Senate. That distinction makes her the first woman ever elected as the leader of either chamber in the state’s 126-year legislative history.
As a rancher in Beaverhead County in far southwestern Montana, Barrett’s home is a long way from the current epicenter of Montana’s oil and gas activity in far eastern Montana, but in no way does that diminish her knowledge of and involvement in legislation that could affect the industry.
Barrett sat down with Petroleum News Bakken on Jan. 23 in her capitol office in Helena and shared her views on some of the more important oil and gas-related legislation facing Montana lawmakers in the state’s 64th legislative session.
Petroleum News Bakken: Gov. Bullock is proposing $391 million in infrastructure spending in House Bill 5, also known as the “Build Montana” bill, of which $45 million is earmarked for oil-impacted communities in eastern Montana. Under the bill, the spending would be funded through a combination of cash and bonds. How do you feel about the need for infrastructure spending in those impacted communities as well as the funding method the governor proposes?
Barrett: You asked first about infra- structure. The Legislature has for decades and decades had infrastructure funding in a series of house bills that are introduced each year. We have House Bill 6, renew- able resource grants; House Bill 7, reclamation and development grants; House Bill 8, renewable resource bonds and grants; and HB 11, the Treasure State Endowment. And we’ve passed those every session.
So the Legislature has a track record, decades long, of taking care of infrastructure. It’s steady, it’s sustainable and we have done that forever. What the governor did this year — after requesting that each of these bills be drafted — he swept them all into one bill, House Bill 5, and he added his bonding wishes on top of that, and he’s calling that the “Build Montana” but it looks more like the “Buy Montana” to me.
Petroleum News Bakken: This obviously would be a question for the governor, but what do you think was the impetus behind combining the bills?
Barrett: I think it’s political. You know in Montana we don’t have ear- marks — what’s in a bill has to be in the title of the bill. But we do have “log rolling, ” and that’s where you put a little bit of something for each community, for each school, for everybody, in this huge funding bill and then you think it will pass the Legislature because there’s something for everyone.
But I think that’s not the way you should do things — we should prioritize. There are some projects in HB 5 that are probably necessary at this time and should be funded and that’s why we have the Legislature so you can prioritize these projects.
Petroleum News Bakken: Do you think that might be a likely prospect that HB 5 gets split into a number of separate bills?
Barrett: I hope so. And as I said, it’s worked for decades and I think we should do that.
Petroleum News Bakken: Back to the $45 million for oil-impacted communities, regardless in what bill that funding ends up, is it safe to assume that there is consensus on both sides of the aisle that those communities need that money?
Barrett: We know there is an impact there and those counties do need to be taken care of. And there are impacts in other counties. If there are impacts across Montana then I think we need to look at those — not just focus on eastern Montana but all communities that are really in need and we should address those and if they fall under the right criteria we should take care of them.
Petroleum News Bakken: On funding, the governor proposes to use a combination of cash and bonds and argues that interest rates are low and Montana has a high rating and he would argue to take advantage of that.
Barrett: I have seen several times this year where the governor has said we have some money out there that’s drawing 17 percent interest. Well we do and that’s our retirement funds and they are in the stock market and that isn’t the money that we can use for bonding for infra- structure. The cash we have on hand is drawing, the last I looked and this was a couple of weeks ago, 0.14 percent. And he says it’s better to borrow it at 3 or 4 percent than spend our cash — I don’t agree with that. Yea, the rates are low compared to the past, but they’re still more than for the cash we have on hand.
Greater sage grouse
Petroleum News Bakken: Another proposal by the governor is funding of the sage grouse conservation plan for which approximately $10 million is earmarked in HB 2. The plan is modeled after a similar plan in Wyoming and is intended to leave management of the species to the state and avoid a threatened and endangered listing. And the plan has the sup- port of industry. What level of importance do you put on the sage grouse management plan and how the governor proposes to deal with it?
Barrett: We have no choice — we’re between a rock and a hard place when it comes to endangered species and especially the lawsuits behind sage grouse that brought the governor’s executive order at the end of last session that Montana had to have a sage grouse plan focused on habitat, not the species. The species is alive and well in Montana, it’s thriving. But it’s the abuse of the Endangered Species Act that connected us with 10 other states — there are now 11 states that all have to come up with plans focused on habitat.
The Wyoming plan might not be the best plan for Montana. Their core habitat areas are on public lands, and in Montana our core habitats are found on private lands. So there’s a vast difference. And Wyoming also has a wildlife fund that they have put money into for years, but in Montana we don’t have a wildlife fund — our funding is coming out of the general fund. The Endangered Species Act is supposed to be a federal mandate and a federal act and they should pay for it. They paid for wolf management until the wolves were delisted, and they should do the same with sage grouse.
Petroleum News Bakken: A bill draft, LC1619 (which may or may not be introduced), would propose to eliminate the state’s drilling tax incentive for oil and gas wells and would retroactively apply to wells drilled on or after Jan. 1, 2015. The money generated by the state through the elimination of the drilling incentive would be placed in the state’s highway revenue account. How do you feel about the idea of eliminating the drilling incentive?
Barrett: When we get back to the taxes and incentives in Montana, it always amazes me — a couple times a year we see statistics from across the states showing how good Montana is doing, but mostly what that is based on is we do not have a sales tax. So they say it’s easy to do business in Montana, tax-wise, because there’s no sales tax, but we have a business equipment tax and these companies have a lot of equipment. They have to pay that every year but with the sales tax they wouldn’t — once they pay it, it’s done.
So Montana doesn’t have a business-friendly tax climate as far as I’m concerned and that’s why there is the need for these incentives. I would not like them to go away and I’ve always supported them.
Petroleum News Bakken: There are a number of bills and bill drafts (identified as LC) that increase the level of regulation on oil and gas operations. SB 177 establishes 1,000-foot well setbacks from surface water bodies; HB 243 requires disclosure of fracturing fluids along with property owner notification requirements; LC977 would establish entirely new standards for oil field waste disposal; and HB 253 prohibits the use of reserve pits. What are your views on such bills and do you think additional regulation is necessary in the state?
Barrett: We have the Board of Oil and Gas (Conservation) and they are out there and they are active and they are doing their job. If they see a need and bring for- ward a bill for further setbacks or to protect water in the state, I would take a serious look at that. But these bills and LC numbers, I think they’re just coming from people who are just are anti-resource development. And it’s certainly over-regulation and just trying to stop development all together.
If it comes from the right source — if there’s a problem out there — we deal with it. Montana has great environmental laws. We have NEPA (National Environmental Protection Act) and MEPA (Montana Environmental Protection Act). So our environmental laws aren’t the problem. And I think they (the environmental laws) have taken care of the types of issues that are in these bills.
Petroleum News Bakken: SB 173 sets reclamation bonds at $20,000 to $60,000 and $250,000 for multi-well pads. Is reclamation bonding an issue with legislators and in these amounts are they reasonable?
Barrett: I don’t think they’re an issue now, I don’t think they’re needed and I don’t think they’re reasonable. I think again it comes from people who are anti- resource development and they’re trying to stop it by any means possible.
Petroleum News Bakken: From an oil and gas news perspective, reclamation and reclamation bonding have not been a problem in Montana, so when bonding emerges it draws attention.
Barrett: I have not seen these (reclamation) problems. If they come to committee and show us there is a problem somewhere in the state that would be one thing, but if we’re just passing things needlessly for more and more regulations. I don’t favor that.
Petroleum News Bakken: Does the Board of Oil and Gas Conservation have a good relationship with the Legislature in terms of bringing issues forward?
Barrett. Yes. Yes. We have the Environmental Quality Council that meets in the interim and they look at all of these issues with all of the boards and all of the development, and if there’s a problem it comes forward and I have not seen any of these proposed bills as problems that have come forward.
Petroleum News Bakken: Another bill draft, LC551, sets a flaring limit of 35,000 cubic feet per day. While flaring has been an important issue in North Dakota, and that state is working hard to reduce flaring, natural gas flaring has not generally been viewed as problematic in Montana, which produces a fraction of the oil and gas produced in North Dakota. What do you think about legislation restricting flaring?
Barrett: I think it would be premature and counterproductive to look at another state that might have a problem and then bring in a bill in Montana to prevent something that may or may not ever hap- pen. It would just be focused on stopping development and I can’t support it and don’t think my caucus could either.
Oil and gas trust fund
Petroleum News Bakken: Another bill that’s been drafted but not yet introduced is LC1157, which proposes to put a constitutional amendment before the voters on Montana calling for the establishment of a permanent oil and gas trust fund similar to the state’s coal severance trust fund. What are your thoughts on such a trust fund?
Barrett: I don’t think we need this trust fund. I think it was a detriment to coal production in the state of Montana and I would hate to do the same to oil and gas.
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