The Texas Railroad Commission Must Be Reauthorized

When the Texas Legislature meets in January 2017, it will, for the third time in four sessions, take up the Sunset review process for the Texas Railroad Commission (RRC).

For those unfamiliar with the Sunset system, the government of Texas is managed by a set of commissions that are authorized by the legislature for 12-year terms. At the end of 12 years, the legislature must review each commission’s functionality and determine whether to reauthorize it for another term or “sunset” it and assign its functions to other state commissions.

For the RRC, 2011 was originally going to be the session during which its 12-year future would be decided. But that session saw a big controversy erupt over whether to continue the RRC’s current structure of three commissioners elected to staggered six-year terms or change it to a single elected commissioner — the so-called “three-to-one” proposal. The House and Senate were unable to reach an agreement prior to the end of the session that year; and, working with Gov. Perry, a decision was reached to kick the can down the road by reauthorizing the RRC, but only for two years.

Two years later, everyone agreed to leave the whole three-to-one thing on the sidelines, but the 2013 session of the legislature was again left at an impasse over several other proposed changes to the RRC’s functionality that were offered by various sponsors. Again, a decision was reached at the end of the session to reauthorize, this time for four years.

So here we are again, with the prospect of Sunset looming over the state agency where the vast majority of the state government’s knowledge about the oil and gas industry is housed. When one considers that the Texas oil and gas industry produces (per the Energy Information Administration) roughly 30 percent of all the oil and 27 percent of all the natural gas produced in the entire country, the importance of the RRC’s regulatory activities becomes obvious.

This time around looks more promising, though a couple of points of potential controversy remain, thanks to recommendations made by representatives of the Texas Sunset Commission in August.
The first is a proposal that would transfer the RRC’s responsibility to conduct contested case hearings to the State Office of Administrative Hearings (SOAH). The other is a proposal to change the RRC’s name to one that is more descriptive of what it actually does.

Both ideas — which were also proposed in 2011 and 2013 — are bad ideas. I’ll explain why. First, the SOAH proposal. There is nothing wrong with the SOAH. It is a fine agency populated by fine people who work hard for the state of Texas and generally make good decisions. So nothing I write here should in any way be taken as a disparaging remark on the agency or its employees.
That being said, there isn’t a shred of oil and gas-related knowledge within the offices of the SOAH. Oil and gas is a very arcane, very intricate, very unique area of knowledge, and no two cases that are considered by the hearings officers at the RRC are the same.

Look at it this way: I’ve had a 37-year career in and around the oil and gas industry, and I learn something new about the business each and every day. It is an industry in which technology constantly advances. One with constantly evolving contractual arrangements; thousands of operators, pipeline companies, midstream companies and refiners as participants; and hundreds of thousands of landowners and millions of royalty owners, every one of whom can be affected by the decisions made in almost any case that comes before the RRC.

Because of all of these factors, it is absolutely critical that the officials who hear contested cases related to this complex and massive industry possess a highly specialized knowledge of it. The thought that responsibility for hearing and deciding such cases can simply be passed off to hearings officers who are also responsible for awarding doctor’s and beautician’s licenses is so bizarre that it is really hard to see why and how it keeps coming up as a Sunset Commission recommendation.

As mentioned previously, the great preponderance of the specialized oil and gas knowledge in Texas state government is housed at the Texas Railroad Commission, and that is where these hearings need to continue to be conducted.

Then there’s the name change, a proposal that at least makes sense from a logical standpoint, if not from a practical one. It makes logical sense because the Railroad Commission does not regulate railroads in Texas, and it hasn’t for a very long time now. It also makes logical sense because so many Texans simply do not understand that the Railroad Commission regulates the oil and gas industry. Thus, when a citizen has a complaint about something happening on their property related to oil and gas development, they often have no idea who to call about it. Voters often go into the voting booth thinking that when they vote for Joe Blow to be their next Railroad Commissioner, they do so in the belief that he will do a bang-up job of regulating the railroads for the next six years.

But there are a couple of reasons why making this name change at this particular time makes no sense at all from a practical standpoint.

First is the cost: The estimate from the Legislative Budget Board is that changing the name of the RRC would cost something in the range of $700,000. This estimate is low — absurdly low, in my opinion. Now this is just my opinion, but it’s a highly educated one.

For starters, the cost of changing letterhead, other stationery and business cards alone would have to come to six figures. Then you’d have the cost of changing all the signage in Austin and at all RRC offices around the state. You’d also have the cost of changing legal documents.

Finally, you’d have the cost — no doubt spread over many years — of changing the name of every single Railroad Commission sign that must be posted at every well site, drill site, compressor station, natural gas processing station, refinery and other oilfield-related site in the entire state of Texas, which, in case no one has told you, is a very big place. There are not just thousands, not just tens of thousands, but well over 100,000 such signs posted in thousands of locations around the state.

The cost of changing out those posted signs alone would be quite large. And if you’re not planning on changing out each and every one of those signs, then isn’t that going to defeat the entire purpose of changing the name in the first place? After all, if you leave thousands of “Texas Railroad Commission” signs posted at thousands of locations all over God’s country (that would be Texas), then isn’t confusion still going to reign?

It’s time for the Sunset Commission — and the Texas Legislature — to get serious and do the responsible thing here. It’s time to reject these senseless proposals and reauthorize the Texas Railroad Commission to regulate the state oil and gas industry for another 12 years. Nothing else makes any sense at all.

About the author: David Blackmon is Associate Editor for Oil and Gas for SHALE Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles, the last 22 years engaged in public policy issues at the state and national levels. Contact David Blackmon at david.blackmon@shalemag.com.

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