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Downturn Raises Funding Concern at Texas Railroad Commission

The Texas oil and natural gas boom might have turned to a bust for now, but that hasn't slackened work at the Railroad Commission of Texas (RRC). Staff has shifted attention from permitting new wells to the need to plug nearly 10,000 abandoned wells. Meanwhile, revenues have dropped because of permitting fee and production tax declines.

"I am deeply concerned current price and activity levels in the energy industry could hurt the long-term sustainability of the commission under our current funding structure," Chairman David Porter told state lawmakers on the House Energy Resources Committee Monday.

"We must have a serious conversation with the Legislature about how the Railroad Commission is going to be funded moving forward if we're going to continue to have the financial resources we need to do our job here in Texas and not let the federal government takeover by default."

Porter has frequently sounded the alarm about what he deems to be federal government overreach into the Texas oil and natural gas industry, particularly when it comes to the U.S. Environmental Protection Agency.

The mostly self-funded RRC is authorized for about 820 full-time employees, but current staffing is only about 725, according to testimony during the hearing Monday. Austerity measures have been in effect as hirings have been postponed.

Commissioner Christi Craddick said working within the agency's budget is the biggest challenge facing the RRC today. There are more abandoned wells on the commission's books, about 9,500; however, this is not unexpected and has been seen during previous industry downturns, she said.

The RRC has upgraded its systems to track well inspections and has improved efficiencies, Craddick told lawmakers. Enforcement and inspections are being prioritized as permitting has declined due to the oil/gas price bust.

When it comes to plugging the state's abandoned wells, progress has been made. The current total of about 9,500 wells is a steep decline from the roughly 19,000 there were in 2003, Craddick said.

Commissioner Ryan Sitton added that commission staff is targeting the highest-risk abandoned wells first. He said the average cost to remediate an abandoned well in need of attention is about $15,000 per well.

"A downturn in the industry does not necessarily equate to a downturn in activities at the agency," said recently hired Executive Director Kimberly Corley. While work shifts -- from permitting to enforcement, for instance -- it does not decrease. Now is the time to invest in the agency, she said, adding that she is seeing workers from the industry in the marketplace who are increasingly interested in the "relative stability of a state government job."

Corley said that compared with other state agencies, salaries at the RRC are relatively low. Workers leave the commission for better paying jobs at other agencies. "One of my personal missions is to stop that agency creep...Our salaries are anywhere from 5 to 35% less than some of the other agencies for equivalent positions."

The RRC issued a total of 573 original drilling permits in February compared to 924 in February 2015. The February total included 455 permits to drill new oil or gas wells, 19 to re-enter plugged well bores and 99 for recompletions of existing well bores. Permits were made up of those for 159 oil, 28 gas, 352 oil or gas, 26 injection, five service and three other wells.

In February commission staff processed 822 oil, 186 gas, 57 injection and one other completions compared to 1,521 oil, 210 gas, 245 injection and three other completions in February 2015. Total well completions for 2016 year to date are 2,270 down from 3,979 recorded during the same period in 2015.

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