The Texas Legislature convened for the first time since 2009 this week amid one of the worst state budget crises in a decade.
The $15 billion budget hole, along with once-a-decade reviews of key state environmental agencies, has both green groups and much of the energy industry on edge in the nation's biggest greenhouse gas-emitting state.
Considering that Texas produces as much carbon dioxide as the No. 2 and No. 3 states combined, California and Pennsylvania, the repercussions of any energy actions from the biennial Legislature could be significant.
"The Legislature is extremely important with energy," said Harvey Tucker, a professor of political science at Texas A&M University. "They can decide what is taxed and what is incentivized."
There are concerns about rollbacks of energy incentives and calls for taxation of the state's lucrative oil and gas industry. At the same time, some say they see opportunity to introduce deficit-neutral bills on energy and climate change that could add to state revenue in the long run.
For his part, Gov. Rick Perry (R) told the Legislature that government would have to find a way to plug the gap without tax increases. He, along with the House speaker and lieutenant governor, directed agencies to find 10 percent savings for the 2012-2013 period.
The state comptroller released numbers on the Legislature's opening day showing the $15 billion shortfall, raising the prospect the state would not have enough money for schools and other basic services. The Center for Public Policy Priorities placed the deficit number for the two-year budget near $30 billion when accounting for population growth.
CO2 reduction possibilities
The cash problem raises the specter that administrative staff could get cut at agencies already behind on environmental inspections of industry, said Andy Wilson in the Texas office of the advocacy group Public Citizen.
Even so, several green groups said they see rare opportunity in this legislative session because of a recently released global warming report and a required "sunset" review of environmental agencies such as the Texas Commission on Environmental Quality, or TCEQ.
The mandatory review of the agencies, which typically occurs every 12 years under the Texas Sunset Act, provides a chance to attach amendments to must-do bills that put the governor in a difficult veto position, they say.
The amendments are passed by majority vote, rather than the often-required two-thirds threshold for bills. The state Sunset Advisory Commission -- consisting of legislators -- holds hearings on agency renewals before submitting recommendations to the Legislature.
The governor then must approve resulting legislative bills, with amendments, or the agencies have to be shut down unless a special legislative session is called. This year, TCEQ, the state public utility commission and the Electric Reliability Council of Texas (ERCOT) are all up for this mandatory reauthorization.
"This works in our favor," said Jim Marston in the Texas office of the Environmental Defense Fund. "With the sunset route process, you have a chance to get reforms that can't be blocked. They cannot hold things up in committee or run the clock out on you."
Can energy efficiency help pay the bills?
The governor would have to veto approval of an entire agency if he doesn't like one part of the bill reauthorizing agencies, according to Marston.
His and other groups plan to push recommendations from the state report released in December outlining ways Texas could cut greenhouse gases and save money simultaneously. Authorized by a state bill in the last legislative session, the analysis sprang from work groups of industry, green group and academic members, with the Texas Comptroller of Public Accounts compiling their conclusions. The report outlines how much carbon dioxide can be reduced through everything from retrofitting homes to increasing use of energy-efficient tires.
The groups found, for example, that energy efficiency standards for lighting and appliances would save the state $977 million.
"We'll be arguing these provisions don't cost anything, reduce the deficit and make reductions in greenhouse gases at the same time," Marston said. Many of the suggestions could be added as amendments to sunset bills, he said.
Any bill has a chance to move as long as it labeled "pro-business" and does not have climate change attached to it, according to political science professor Tucker. The Texas Legislature is filled with climate skeptics who don't want a pro-global warming bill but are glad to help renewable energy companies, he said.
Looming battle over solar incentives
Another top priority for environmentalists is new solar incentives, either through rebates or new mandates within the state renewable standard.
The current standard, which is credited with making the state the nation's biggest wind installer, calls for 5,880 megawatts of alternative energy by 2015 but does not have a carve-out for solar. The governor does not have a position on solar incentives yet, said Catherine Frazier, the governor's spokeswoman.
Environmentalists say they have a potential friend in Republican state Sen. Troy Fraser, the new head of the Senate Committee on Natural Resources. He sponsored a bill providing solar rebates in 2009 -- funded by fees on electricity customers -- that made it through one chamber of the Legislature.
Fraser plans to bring the bill up again this session, said his chief of staff, Janice McCoy. However, he wants to see it move alone, rather than attached to a sunset bill, she said. The bill would raise $100 million annually for solar installations on businesses and homes.
Some are skeptical about the prospects for solar legislation. The laggard economy is going to be foremost in the minds of new lawmakers, said Mario Loyola, an energy analyst at the Texas Public Policy Foundation, a group promoting free enterprise.
"Subsidizing an energy source that has no prospect of becoming economically competitive anytime soon is just a distorting waste of money," said Loyola about solar incentives.
There is a stronger "less government" mentality in the Legislature than usual, making it difficult to pass anything that can be labeled as a tax, said one Republican aide.
The Texas Legislature meets every two years for 140 days, and this year it has to tackle redistricting in addition to regular business.
A symbolic resolution to state's fight with EPA?
Republicans made huge gains in the last election amid a tea party surge. In the House, for example, Republicans now hold a 101-49 majority, up from a 76-74 majority in the last session. It is a Legislature that is "younger and more conservative," said Loyola.
Meanwhile, the oil and gas industry, which is experiencing a boom because of new natural gas finds in the state, is watching the Legislature for any proposals to change the regulatory status quo.
With the state's money problem, there is a concern that legislators could try and impose additional taxes on the industry, said Ben Sebree of the Texas Oil and Gas Association. It is an idea "under discussion" with some legislators, he said. Natural gas and coal currently are in a fight for dominating the state fuel mix, with each firing about 38 percent of state electricity.
"It's going to be a tougher session for us because the Legislature will be in legitimate need of revenue for legitimate services," he said.
After meeting with state officials, Perry tried to put a bold face on the matter. "Texans understand the realities of these tight budgetary times, and just like Texas families and employers have been doing, we will tighten our belts in order to balance the budget," he said. The third-term governor is in an ongoing court feud with U.S. EPA over its current regulation of greenhouse gases (Greenwire, Jan. 12).
Perry won't comment on legislative priorities further until his state of the state address in February, said his spokeswoman, Frazier. At the same time, she said the EPA disagreement would be the top energy focus of the governor.
While much of the EPA climate feud remains in the courts, Tucker said he foresaw a "symbolic" resolution by the Republican-controlled Legislature against the federal agency. "They'll say, 'Leave us alone,'" he said.