Oil and Gas Lawyer Blog
The Texas Railroad Commission this week approved publication of proposed rules establishing guidelines for admistrative penalties for violations of Commission rules related to pipeline safety, LP gas, CNG and LNG safety, oil and gas operations, and underground damage prevention. The proposed rules will be published February 10, and the comment period ends at noon on Monday, March 12. I encourage anyone who is interested in how the Commission enforces its rules to submit comments. To submit comments online, go to
http://www.rrc.state.tx.us/rules/proposed.php
and look for proposed rule 3.107.
The RRC was reviewed by the Sunset Commission in the last legislative session. The Sunset Commission report criticized the RRC for not assessing enough fines. Among the Sunset Commission’s findings:
– RRC inspectors conducted more than 128,000 inspections in FY 2009, finding more than 80,000 violations. The field staff forwarded less than 4 percent of those violations to the central office for enforcement action. (In contrast, the TCEQ forwarded about 20 percent of its more than 11,000 violations for enforcement action in the same year.) The RRC issued 379 penalties, assessing more than $2 million in fines.
– In FY 2009, the RRC found more than 18,000 water protection violations. it took enforcement action on less than 1 percent of those violations, about 150.
– The RRC received 681 complaints related to oil and gas production in FY 2009, and found 1,997 violations based on those complaints. But those complaints resulted in only 91 enforcement actions.
The report concludes that the RRC does not make enough use of penalties for violations: “The efficient and fair use of penalties plays a key role in deterring and punishing violators, and thus increases compliance. The Commission and its field staff go to great lengths to ensure complaince through monitoring and inspections; however, the Commission takes relatively few enforcement actions, resulting in a lack of deterrence for future non-compliance.”
The report notes that complaints of limited enforcement action taken by the RRC are not new. The issue was raised in the 2001 Sunset review of the RRC. The report notes that oil and gas drilling has moved into urban areas and is having greater potential impact on underground water resources, which will result in greater scrutiny for the industry and RRC enforcement. “A lack of consistent enforcement can contribute to a public perception that the Commission is not willing to take strong enforcement action.”
The report also criticized the RRC for not adequately tracking violations, so that it is unable to determine when repeat violators deserve harsher penalties.
To force the RRC to increase its enforcement activities, the report recommended that
- The RRC be required to develop, by rule, an enforcement policy to guide staff in evaluating and ranking violations.
- The RRC be required to deveop and adopt a rule establishing penalty guidelines, assigning penalties to different violations based on their risk and severity.
- Hearings on enforcement actions should be conducted before the State’s independent State Office of Admistrative Hearings, rather than before administrative law judges that are employees of the RRC.
- The RRC be directed to establish a method of tracking violations and enforcement actions and develop a clear and consistent method for analyzing violation data and trends.
- The RRC be directed to publish additional complaint and enforcement data on its website.
The Legislature did not act on any of the Sunset Commission’s recommendations; instead, it postponed any action on the recommendations to the next legislative session.
The proposed rules now being published are in response to the Sunset Commission’s proposals. Notwithstanding the Sunset Commission’s criticism that the RRC does not make enough use of penalties as a deterrent to violations, however, the proposed rules provide that the RRC Commision’s policy on violations is unchanged. It says that the proposed guidelines are
a formal restatement of the penalty guidlines that have been used for many years. Significantly, the rule expressly states that the Commission favors a compliance-based approach to enforcement, with safety and environmental protection being the favored outcomes of any enforcement action. Encouraging operators to take appropriate voluntary corrective and future protective actions once a violation has occurred is an effective component of the enforcement process. Deterrence of violations through penalty assessments is also a necessary and effective component of the enforcement process.
The RRC’s “compliance-based approach to enforcement” in practice means that the RRC does not fine an operator when a violation has occurred, as long as the operator cooperates in correcting the violation. In my experience, this means that operators don’t have to worry about being fined because the RRC will simply notify them of the violation and they can then fix the problem. The proposed rules ignore the Sunset Commission’s recommendation that the RRC increase its use of penalty assessments as a deterrent to violations, thus increasing compliance.