4 issues to watch as Texas looks to shake up energy sector

By Shelby Webb, Jason Plautz | 01/28/2025 06:51 AM EST

Legislators are poised to tackle renewables and other matters that could echo across the U.S. in the months ahead.

A Texas pumpjack, Texas Capitol building and Texas wind turbines

AP, Getty

Renewable energy, abandoned oil and gas wells and grid reliability are on the agenda as the nation’s largest energy-producing state heads into a closely watched legislative session.

The red state’s approach to a changing energy mix will be scrutinized as President Donald Trump looks to bolster fossil fuels nationally while also reining in renewable energy. Texas lawmakers opened their 2025 session on Jan. 14, clearing the way for nearly five months of policymaking.

The past two regular Texas legislative sessions have seen lawmakers tackle structural reforms tied to the state’s electric grid following 2021’s deadly Winter Storm Uri that led to widespread blackouts. Concerns haven’t disappeared, and projections now suggest the grid managed by the Electric Reliability Council of Texas (ERCOT) may need to double its power generation capacity by 2030.

Advertisement

Texas Lt. Gov. Dan Patrick, a Republican, who leads the state Senate, said in September that building more power plants had to be a top issue for the next legislative session. He pointed to concerns about having enough energy to support Texas’ much-touted economy.

“If you can’t turn the lights on, you’re out of business,” Patrick said. “We can’t turn the lights on, companies start leaving. If companies start leaving and stop coming, then the Texas miracle is gone.”

At the same time, state regulatory agencies are wrestling with issues emerging from the state’s enormous oil and gas industry, which provided about 43 percent of the nation’s oil and 27 percent of U.S. natural gas in 2023.

Toxic geysers linked to oil production have also sprouted in West Texas, along with sinkholes and earthquakes that have been tied to the industry. Unplanned releases of briny and potentially poisonous water have raised concerns.

Texas Republican Gov. Greg Abbott has also highlighted water as being a key issue in this year’s Texas legislative session. Abbott, Patrick and House Speaker Dustin Burrows — who is also a Republican — did not respond to requests for comment about their energy priorities.

Meanwhile, observers are watching for a bill that could touch on everything from infrastructure like pipelines that help move water around the state to reusing water that is a byproduct of oil and gas production.

Here are four other energy issues to watch in the Texas Legislature this year.

Renewable energy

Texas is a top market for both wind and solar power, but Republican lawmakers have teed up bills that would make it harder to build renewable energy in the state.

That includes a proposal to impose new permitting requirements. A similar proposal passed the state Senate last session but failed in the House.

The bill would require that developers of new wind and solar projects conduct an environmental impact study, hold a public hearing and pay fees for a facility cleanup fund before the project is approved for a permit. It would also require that projects be certain distances from property lines.

Other bills would place new restrictions on offshore wind projects that could disturb shipping, tourism or wildlife patterns or place new requirements to mitigate light pollution. S.B. 388  would require that power providers on the state’s main grid produce at least 50 percent of their power from dispatchable sources — a designation that means gas plants — or pay a fee.

And S.B. 714 from Republican state Sen. Kevin Sparks would require that the state adopt rules to eliminate what the legislation calls “distortion” in electricity pricing because of federal subsidies for wind and solar power. Those rules would likely raise costs on renewable energy projects.

At a town hall last fall, Sparks described ERCOT’s share of wind and solar power as a “problem” and called for investing in “dispatchable power like gas-fired plants to ensure grid reliability,” according to the Amarillo Globe-News.

Wind and solar accounted for more than a third of the generation on the state’s main grid last year and on some days exceeded half of the state’s generation, according to state data.

“We’re concerned about the impact these bills could have given that we need more electricity and we at the Sierra Club want more electricity that doesn’t create air and water pollution,” said Cyrus Reed, conservation director at the Sierra Club’s Lone Star Chapter.

Some legislation would specifically target battery storage systems as developers rapidly add them to the grid. The systems are designed to dispatch wind and solar power during times of need, especially in the evenings when demand is high but the sun has gone down. But some lawmakers have said that the battery sites need more safety measures attached to them because they could pose a fire risk.

H.B. 1343 would establish new permitting requirements for battery systems, including imposing distance requirements from other buildings. Another bill, H.B. 1378, would allow counties or municipalities to set even more stringent rules.

Such requirements could make it harder to build battery storage, but advocates say they are open to working on safety measures.

Matthew Boms, executive director of the Texas Advanced Energy Business Alliance, said industry standards are making battery storage safer and that he’s encouraging lawmakers to recognize the role batteries have played in keeping the lights on.

“The winter weather we’ve had [recently] in Texas would have been a problem, but battery storage is really saving the grid,” said Boms. “It just shows how some of these advanced energy technologies are adding resilience and protecting consumers.”

Orphaned wells

Orphaned wells — abandoned wells that remain unplugged and sometimes leak — have become a huge issue for oil and gas producers, people who live near them and the state Railroad Commission.

The commission, which oversees Texas’ oil and gas industry, asked the Texas Legislature in an October letter for an infusion of $100 million to help plug and remediate “emergency wells,” or orphaned wells that are actively leaking to the surface.

Danny Sorrells, the commission’s executive director, wrote that the initial $234 million appropriations request the agency made in August for well plugging and remediation efforts for the fiscal years 2026 and 2027 is “insufficient to protect groundwater and the environment.”

Several high-profile leaks and environmental issues have brought the issue of orphaned wells to the forefront for the Railroad Commission, environmental groups and even the most powerful oil lobby in the state. That includes a lawsuit against the Railroad Commission related to an orphaned well that has spewed noxious water, creating a 60-acre wide lake in West Texas.

In a media call this month, Texas Oil & Gas Association President Todd Staples said his group recognizes that orphaned wells are a challenge, saying “we will work with the Texas Legislature to develop viable solutions.”

Luke Metzger, executive director of Environment Texas, said he expects state lawmakers to approve the additional funds for the Railroad Commission’s plugging efforts. Orphaned wells, he said, create a risk of contaminating groundwater and often leak methane — a greenhouse gas 80 times more potent than carbon dioxide over a 20-year time frame.

The Railroad Commission has estimated there are nearly 7,400 orphaned wells in the state, though observers say that may be an undercount.

One way to potentially lessen the number of future orphaned wells: changing rules around bonds.

The Sierra Club’s Reed said rules related to bonding and surety requirements have not been updated since 1989. And it remains to be seen if lawmakers will seriously look at changing them this year.

Surety bonds are money oil and gas companies give to the state before digging a well, effectively as insurance in case they go bankrupt and either can’t or won’t pay to plug wells they’ve abandoned. As of now, a company can put up a blanket bond of $250,000 to cover an operator that produces from more than 100 wells in the state.

The average cost of plugging a well in Texas is between $30,000 and $35,000 each, according to the Railroad Commission. The Texas Sunset Advisory Commission found in a 2017 report that the bond funds collected to plug abandoned wells only covered about 15.9 percent of the plugging cost in fiscal year 2015.

Methane emissions

Another point of contention between the oil and gas and its critics: methane flaring and federal rules that aim to limit it.

Operators burn off — or flare — excess natural gas, releasing carbon dioxide. Flaring happens for a number of reasons, such as preventing larger explosions and sometimes when it is uneconomical for oil and gas companies to transport the natural gas elsewhere.

The Biden administration implemented several rules around methane leaks and flaring within oil and gas production, including one rule that will require oil and gas operators to replace old equipment prone to leaking methane to newer equipment less prone to leaks.

States have been tasked with writing their own rules for how they would implement that EPA-created methane rule.

One lawmaker last session introduced a bill that would require state agencies to not implement federal rules regarding oil and gas unless they’re also Texas state rules. That bill was eventually watered down and passed to allow state agencies to implement federal requirements, Metzger said, but lawmakers could again try to have state agencies stop implementing federal environmental rules.

Texas Railroad Commissioner Wayne Christian asked in a letter this month to the Texas Commission on Environmental Quality — which is in charge of writing the state’s rules — that officials stop working on Texas’ plan. He said the incoming Trump administration could undo the rule, and that TCEQ should “wait for the cavalry to arrive before surrendering.”

TCEQ did not respond to a request for comment.

However, experts say it may take an act of Congress to do away with the methane rule.

“Elections have consequences, and the American people decided that the Biden administration’s energy and environmental agenda aren’t in their best interest,” Christian said in a statement.

The industry has also defended its flaring practices. Staples with the Texas Oil & Gas Association said methane emissions from oil and natural gas production in the Permian Basin of Texas and New Mexico decreased by 26 percent from 2022 to 2023.

“Operators are working to eliminate routine planning entirely by 2030 with many companies ahead of schedule,” Staples said.

Some lawmakers want to get that pledge to end routine flaring on the books, but it’s not clear that proposals backed by Democrats — including H.B. 459 and H.B. 1190 have a path to move forward.

“If the oil and gas industry is against a bill, it is very, very hard to pass it,” Reed said. “Bills around monitoring or incentives to help industry clean up the problems are a more likely solution that could pass.”

Texas Energy Fund

Lawmakers are also expected to consider expanding the Texas Energy Fund, which was established in 2023 to offer state-backed, low-interest loans to developers of new gas-fueled power plants.

Voters and lawmakers approved $5 billion to fund gas plants, but an initial round of applications attracted demand for $39 billion in loans. Abbott and Patrick have said that they want to grow the program to $10 billion to build new plants “as soon as possible.”

“Texas is currently the fastest state to approve and build new plants and transmission lines because of our low regulations and pro-business policies, but we must move quickly,” they said in a joint statement last July.

As of Monday, no legislation had been introduced to expand the energy fund.

“While it is still too early in the process to comment on any specific legislation, we will generally continue to support policies that make the grid more reliable and resilient through competitive markets,” said Michele Richmond, executive director of the Texas Competitive Power Association, which represents power generators and marketers. “Meanwhile, we will keep working diligently on implementing the extensive market reforms still in development from the last two sessions.”

The Texas Energy Fund also includes smaller pools of loans for improvements to power infrastructure outside of the ERCOT region and for backup power sources, which could include microgrids or battery storage. Applications for those funding sources have not yet opened.

Lawmakers may also seek to mirror the gas program for nuclear energy, following the recommendations of a state working group that said Texas could become a “flagship” for advanced nuclear technology.

A November report from the working group called on legislators to create a new Texas Nuclear Energy Fund to add advanced nuclear reactor projects to the grid by 2035.

No bills creating that fund had been introduced as of Monday.