Texas Railroad Commission

Published on: September 29, 2021

Texas Senators Grill Railroad Commission Executive Director Wei Wang About Natural Gas Industry Winterization

According to an article in The Texas Tribune, senators on the Senate Business and Commerce Committee were frustrated that the Railroad Commission had not done more to require natural gas producers, processors and pipelines to winterize their systems. In a committee hearing on Tuesday, they castigated Commission Executive Director Wei Wang for not moving faster. They did not seem to realize that the Commission was following the timeline set out in Senate Bill 3, passed in the last regular session to address the power loss across the state last February.

As I’ve posted, the Commission has proposed a rule requiring the gas producers, processors and pipelines to designate whether they are critical infrastructure, but the statute allows the industry to opt out of that category if they want to, a loophole that seemed to surprise and frustrate the senators. Wang pointed out that the Commission’s proposed rule mirrors the language of Senate Bill 3, which seemed not to mollify the senators, who demanded immediate action from the Commission.

The statute provides that a committee will map out the state’s energy infrastructure by September 2022, after which the Commission will have 180 days to finalize weatherization rules, a timeline the senators also criticized. As the Texas Tribune reported, “Energy experts said lawmakers have themselves to blame if they wanted the state’s natural gas infrastructure, which sends fuel to many of Texas’ largest power plants, to be weatherized quickly — or at all. ‘The Legislature left this loophole open,’ said Doug Lewin, an Austin-based energy and climate consultant.”

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Published on: September 27, 2021

Report Out on Christi Craddick Conflicts of Interest at Texas Railroad Commission

By John McFarland

Commission Shift, a non-profit advocacy organization formed “to hold the Railroad Commission of Texas accountable to its mission,” has issued a detailed report on conflicts of interest policies at the Texas Railroad Commission and the need for reform. The report examines Commissioner Christi Craddick’s ties to the industry regulated by the RRC. Future reports will focus on the other Commissioners.

Commission Shift previously issued a critique of the RRC’s annual monitoring and enforcement plan for FY 2022, and a report on the growing orphan well problem in Texas, “Unplugged and Abandoned.” House Bill 3973, passed in the last regular legislative session, created a committee to study abandoned wells.

Published on: September 17, 2021

Railroad Commission Issues Proposed Rule to Address Gas Supply Critical Infrastructure in the Wake of Winter Storm Uri

By John McFarland

After the Texas freeze last February that resulted in loss of electric service to millions of Texans, the Texas Legislature passed laws requiring the Texas Railroad Commission and the Public Utility Commission of Texas to address the issues raised by the systems’ failures. One of those issues was the failure of natural gas supply to electric generators. Senate Bill 3 and House Bill 3648 require the RRC to collaborate with the PUC “to adopt rules to establish a process to designate certain natural gas facilities and entities associated with providing natural gas in this state as critical customers or critical gas suppliers during energy emergencies.” In response, the RRC has proposed a new rule, 16 TAC Section 3.65. The purpose of the new law is to let the PUC know what gas infrastructure is critical to continued delivery of gas to electric utilities during an electric supply crisis so that gas supply won’t be disrupted because gas suppliers don’t have the electricity necessary to operate their systems.

As explained in the RRC’s explanation of its proposed rule, the RRC proposes to designate all gas infrastructure as “critical.” The proposed rule therefor designates as critical gas suppliers and critical customers all wells producing gas and casinghead gas, gas processing plants, gas pipelines and facilities, compressor stations, local distribution company pipelines and facilities, gas storage facilities, natural gas liquids transportation and storage facilities, saltwater disposal facilities and pipelines, and “other facilities under the jurisdiction of the Commission the operation of which is necessary to operate any of the facilities” listed above. In its comments to the proposed rule the RRC explains that all of these facilities are “necessarily critical customers of electric entities during an energy emergency.”

The Commission chooses to include these facility types, located up and down the entire natural gas supply chain, because the statistics from Winter Storm Uri reveal that during the storm, every molecule of natural gas was important. … Each piece of the supply chain included in [the list of critical customers] contributes to the delivery of gas downstream. If one piece of the supply chain cannot operate, then the gas cannot be delivered for electric generation or other important uses. Further, daily gas production alone many not be adequate for peak demand during a weather emergency, which makes gas storage an important source of natural gas. Thus, natural gas storage facilities are included ….

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Published on: July 19, 2021

Christi Craddick and the February Freeze

By John McFarland

In a recent article, reporter Chris Tomlinson of the Houston Chronicle castigates Railroad Commission Chair Christi Craddick for testifying before a state legislative committee in March that the State’s oil and gas industry had no responsibility for the February power blackouts in Texas. Craddick testified:

Some media outlets would have you believe that natural gas producers and frozen transmission pipes caused the power shortage across the state, but I sit before you today to state that these operators were not the problem – the oil and gas industry was the solution. Any issues of frozen equipment or delays in process restoration could have been avoided had the production facilities not been shut down by power outages.

A recent report by twelve University of Texas at Austin faculty members, funded by the Public Utility Commission, contradicts Craddick:

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Published on: July 8, 2021

Bills Addressing Flaring in Texas Legislature

By John McFarland

The recently completed session of the Texas Legislature several bills were filed addressing flaring from oil and gas wells — none of which passed. The number and variety of bills does, however, indicate the increased level of interest and concern about unwarranted flaring of natural gas.

HB 1377: Revises the Tax Code to eliminate the exemption from severance tax for gas “produced from oil wells with oil and lawfully vented or flared.

SB 1293 and HB 1494: Revises the Tax Code to impose a severance tax of 25% on flared gas.

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Published on: May 12, 2021

Travis County Court Holds Railroad Commission Has No Authority to Issue Permits for Allocation and Production Sharing Wells

By John McFarland

Today a district court in Travis County held that the Texas Railroad Commission violated the Administrative Procedure Act by informally adopting rules for issuance of allocation and production sharing well permits without following the rule-making procedures of the Act. The Court ruled in an appeal by a mineral owner of the Commission’s order granting a well permit to Magnolia Oil & Gas Operating for a well in Karnes County.

The case is Opiela v. Railroad Commission of Texas, No. D-1-GN-20-000099, in the 53rd District Court of Travis County. Judge Karin Crump’s order can be viewed here. Opiela v. RRC Final Judgment (003) Our firm represents the Opielas in the case.

Magnolia’s well, the Audioslave 1H, was originally permitted by Enervest as an allocation well. The Opielas protested the permit, and while the protest was pending the Commission issued the permit and Enervest drilled the well. Magnolia then took over operation of the well and filed an application for an amended permit for the well as a production-sharing well. That permit was also granted over the Opielas’ protest, and Magnolia fracked and completed the well.

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Published on: May 4, 2020

Sitton Drops Motion to Prorate

By John McFarland

Texas Railroad Commissioner Ryan Sitton announced today that he would withdraw his motion to prorate Texas oil production prior to the Commission hearing tomorrow, saying “proration is now dead.” Commissioner Christian had previously announced his opposition; Commissioner Craddick is evidently also opposed.

Published on: April 30, 2020

Texas Railroad Commission: Commissioner Sitton’s proposed proration order to be considered May 5; Commissioner Christian opposed

By John McFarland

Commissioner Ryan Sitton has published his proposed conditional order imposing proration on oil production in Texas, to be considered at the Commission’s hearing on May 5.

Commissioner Wayne Christian, in an op ed in the Houston Chronicle, has come out against the proposal.

Sitton’s proposed order is attached to the Commission’s May 5 hearing agenda. His proposal follows the recommendation he described at the Commission’s prior open meeting on April 14. The Commission received 888 comments prior to that meeting, and more than 50 individuals presented live comments during the meeting.

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Published on: April 21, 2020

Proration at the Railroad Commission: Sitton’s motion to conditionally order Texas operators to reduce their oil production by 20% is tabled.

By John McFarland

The Texas Railroad Commission at open meeting today considered Pioneer and Parsley’s petition asking the Commission to institute oil proration. Commissioner Sitton moved to institute proration, conditioned on other states and countries committing to a total of 4 mm bbls/day additional reduction in oil production by June 1. Sitton’s motion provided that each Texas operator would be required to reduce its production by 20% effective June 1, amounting to 1 mm bbls/day of Texas production, but exempting operators producing less than 1,000 bbls/day. Sitton got no second on the motion.

Commissioner Christian announced he has appointed a blue-ribbon panel to study the issue. He named only associations – TxOGA, TIPRO, Panhandle PRA,O and Permian Basin PA, and Pipeline Association — and not individuals, to be on that panel.

Commissioner Craddick said she wanted staff to present “all options” for how to institute proration and wanted guidance from the Texas Attorney General as to what was legal before taking any action, commenting that any action by the Commission is bound to end up in litigation.

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Published on: April 15, 2020

To Prorate or Not to Prorate?

By John McFarland

The Texas Railroad Commission heard comments yesterday in a virtual open meeting on the proposal from Pioneer and Parsley that the Commission re-institute proration of Texas oil wells in response to the drastic reduction of world oil demand. Unsurprisingly, those providing comments did not agree.

In general, the division was between majors and independents – though not totally.

Marathon, Ovintiv, and Diamondback opposed proration, as did TxOGA, Texas Alliance of Energy Producers, the American Petroleum Institute, Texas Pipeline Association, Plains All American Pipeline, and Enterprise Products Partners. Parsley and Pioneer testified in favor of proration, as did Latigo Petroleum, Discovery Operating, Elevation Resources, and former Railroad Commissioner and Congressman Kent Hance. Surprisingly, Quantum Energy, a major independent, testified in favor. In addition, the following provided written comments in favor of proration: Continental Resources, CrownQuest, Hibernia Resources, Texas American Resources, the Panhandle Producers and Royalty Owners Association, and Permian Basin Petroleum Association. Those submitting written comments opposing proration included Chevron, Cimarex, Concho, ConocoPhillips, EOG, Occidental, TXO, and former Commissioner Michael Williams. Written comments can be viewed on the Commission website, here.

Arguments against proration included: Continue reading →