Oil and Gas Lawyer Blog
The Texas Railroad Commission has submitted its “Self-Evaluation Report” to the Texas Sunset Commission, in anticipation of Sunset Commission review of the RRC in the next legislative session in 2017.
Under Texas’ sunset law, every Texas agency must periodically undergo review by the Sunset Commission and be re-authorized by legislative action. The Sunset Commission reviews and recommends changes to legislation governing the agency – or may recommend abolishment of the agency.
Initially reviewed in 2011, the Railroad Commission’s Sunset bill did not pass in the 2011 legislative session. Instead, the 82nd Legislature continued the Railroad Commission under Sunset review for another two years. In 2013, the Sunset Commission again reviewed the RRC and recommended significant changes, including changing the agency’s name, limiting when Commissioners could solicit and receive campaign contributions, and requiring the automatic resignation of a Commissioner running for another elected office. The Sunset Commission also recommended several funding changes, including eliminating the statutory cap on the Oil and Gas Regulation and Cleanup Fund and creating a new pipeline permit fee to help support the agency’s pipeline safety program.
The Sunset recommendations were incorporated into Senate Bill 212. The Senate passed this bill in 2013, but ultimately the bill was left pending in the House Energy Resources Committee. The only significant legislation that did pass was a requirement that commissioners resign to run for another office – a bill vetoed by the Governor. The legislature required the RRC to undergo sunset review again in 2017.
The RRC’s Self-Evaluation Report, required by the Sunset Commission, can be found here. Largely self-laudatory, it does contain lots of data about RRC activities. Excerpts:
One of the criticisms of the agency is that its mission includes promotion of development of the state’s energy resources and also enforcing environmental laws covering the same industries.
“We support the development of the state’s energy resources while protecting public health and the environment through an effective regulatory program.” “The Commission serves the state through stewardship of natural resources and the environment while supporting enhanced development and economic vitality for the benefit of Texans.”
“The RRC regulates 272,370 active oil and gas wells, 116,742 inactive wells, and approximately 43,248 injection, disposal and other service wells. … The RRC also regulates allied oil and gas activities, including 6,216 waste haulers, 84 reclamation plants, 2,376 gas processing plants and compressor stations, 131 gasoline plants, and 243 transporters.”
The RRC has 113 field inspectors. In FY 2014, the RRC conducted 130,812 inspections of oil and gas facilities, and identified 62,385 rule violations. It initiated 29,503 lease severances as a result of those violations (sealing the wells so that they could not produce); severance orders were issued for 11,541 of those violations, and the RRC referred 360 of those violations for legal action. The RRC collected $2,364,805 in administrative penalties as a result of violations.
“The RRC is currently deploying a new automated inspection system, which is referred to as the Inspection, Compliance, and Enforcement (ICE) system. The ICE system will streamline the inspection process and assist the field inspectors in filing reports. It will provide field inspectors updated well and compliance information associated with a property being inspected. In addition, it will allow other program personnel to retrieve and inspection report from the system as soon as the field inspector has entered it.”
(Perhaps the RRC will make such inspection reports available online to the public as well.)
One of the criticisms the Sunset Commission voiced of the RRC’s compliance programs was that it did not make sufficient use of fines to enforce compliance. Instead, the RRC continues to follow its “voluntary compliance” policy.
“When a violation is noted, the RRC issues a notice of violation. The notice gives the operator a specific time period within which to correct the violation. If the operator fails to correct the violation within the time period, the RRC takes further enforcement action, such as issuing a pipeline severance or a seal order.”
But if the operator does correct the violation, no fine or other consequence is imposed on the operator. The RRC’s report to the Sunset Commission appears to say that this policy will continue.
One law that passed in the last legislative session was House Bill 40, which limited the ability of cities to regulate oil and gas activities within their boundaries. Historically, the RRC has not considered land use, noise, odors, or other urban environmental concerns in issuing permits for oil and gas wells in urban environments, and in fact considers that it has no authority to do so. The RRC’s sunset report says:
“The expansion of oilfield activities into urban areas has underscored new safety concerns. In particular, the development of the vast Barnett Shale gas resources in the metopolitan Fort Worth area posed a new safety challenge for the RRC. This development presents a unique opportunity to assure that this important natural resource is adequately developed while maintaining the safety and quality of life for the residents in the developing areas. The RRC has assumed a proactive role in addressing community concerns through the Barnett Shale region, including opening an office and adding inspectors in the region, as well as attending numerous meetings with local government officials. The Eagleford Shale in south Texas has qualities similar to the Barnett Shale. As development of the trend expands, the RRC is directing additional resources to this area of the state.”
There are 110,808 inactive wells in the state. Forty-one percent of active well operators have more than 25% of their wells in inactive status.
The RRC is responsible for plugging inactive wells that are “orphaned” – where there is no responsible operator to plug the well. As of August 31, 2014, there were 9,349 orphaned wells in Texas. In FY 2014, the RRC plugged 563 orphaned wells with state funds, at a cost of $9.2 million.
The RRC is responsible for supervising clean-up or remediation of oil and gas sites that have contaminated the environment, and identifying and cleaning up abandoned sites for which no responsible party can be identified. In FY 2014, the RRC cleaned up 238 such sites with state funds, and identified 2,014 such sites for remediation. The RRC is supervising more than 600 such sites for which there are responsible operators.
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