With the Railroad Commission of Texas (RRC) this legislative session it could be a case of “the more things change, the more they stay the same.” While a recent review of the agency recommended sweeping changes, state lawmakers now appear headed for a compromise that could change the RRC’s name and make other less drastic adjustments.

The replacement of the three-member RRC with a one-member Texas Oil and Gas Commission — as approved recently by state Senate lawmakers — would politicize regulation of the energy industry, according to RRC Commissioner David Porter.

Under the legislation passed by the Senate (see NGI, April 11) Porter would be the last RRC member standing, so to speak, at least until a replacement is appointed/elected. However, last week the House Energy Resources Committee unanimously voted out substitute legislation that would retain the three-commissioner structure. It is expected to win approval in the full House, following which a compromise would be hammered out with the Senate.

Before testifying at the House hearing last week Porter told NGI that he’s not in favor of the one-commissioner model.

“…[W]hen you look at how diverse the oil and gas industry is in the state of Texas, you’ve got major oil companies, you’ve got small independents, you’ve got royalty owners, you’ve got surface owners, you’ve got the rural and the urban question. You’ve got all these different interests out there…Three people are going to represent that much better than one person,” he told NGI.

“And you’ve got checks and balances with three people. If you’ve got one commissioner that’s setting all the regulations for arguably what is the most important industry for the economy of the state of Texas, that is a tremendous amount of power to put in one person’s hands. You could get a commissioner that was strictly in bed with big oil, or you could get a commissioner that was a radical environmentalist. I think with having three divergent viewpoints there it gives us a lot more stable regulatory base and framework for our industry.”

A one-commissioner agency would be more political because his or her department heads would eventually turn into political appointees, Porter said, and the agency’s inspectors would have politics on their minds when they are making regulatory decisions.

RRC Chair Elizabeth A. Jones was among the first of about two-dozen to testify on the House Energy Resources Committee’s substitute legislation to SB 655. “If you truly had one railroad commissioner, this would be an energy czar,” Jones said. “You can’t compare [the RRC] to an agency that’s run by a single commissioner.”

However, Apache Corp.’s Obie O’Brien, vice president of government affairs, testified against the substitute, saying Apache preferred a one-member commission. “I don’t know of any business that’s effective with three CEOs…three different answers to the same question,” O’Brien said.

But that view seemed to be in the minority among producers and midstream companies as numerous representatives of these interests testified or entered an opinion in favor of the three-commissioner model. Among them was David Jackson, a lawyer who represented Range Production Co. during a recent RRC investigation of alleged contamination of water wells in the Barnett Shale by the company, a charge that Range was cleared of at the RRC last month (see NGI, March 28).

SB 655’s provision to move contested case hearings from the RRC to the State Office of Administrative Hearings (SOAH) was generally opposed by oil and gas patch interests, whose representatives at the hearing said the RRC has the necessary experience and technical expertise to handle cases in house as they couldn’t be handled at SOAH. However, natural gas utility interests generally favored moving their rate cases over to SOAH, where they would join electric utility cases.

Jackson cited “inherent checks and balances” in the three-commissioner model and said hearings should remain at the RRC rather than being transferred to SOAH.

“My point is that the Range case is a real world example of why these hearings should be heard at the Railroad Commission, why they should be heard by Railroad Commission examiners…” Jackson said. “Had this hearing been handed to SOAH, we wouldn’t have a decision, we wouldn’t have factual findings…In short, the hearing process at the commission works, and the Range case is an excellent example on why it should not be changed.”

Because the legislation passed by the Senate would abolish the RRC and create a new agency, it could open up the state to further oversight by the Environmental Protection Agency (EPA), a federal agency with which Texas has famously sparred on a number of fronts.

EPA delegated control of the state’s underground injection control program to the RRC in 1982, Porter noted. If the program is transferred to a new state agency, the new agency cannot administer the program without the approval of the EPA.

“If the [Railroad] commission is abolished, that gives the EPA another bite at deciding whether they want to approve the delegation to the new agency,” Porter said. “Considering the state of things between the state of Texas and the EPA right now, I don’t know that that’s a risk that’s worth taking.”

If Texas were to be denied the right to oversee regulation of injection wells — including those used by the natural gas industry — it “has the potential to be very disastrous for the [state’s energy] industry,” Porter said. “If you don’t have a place to put the water, it basically over time will shut down production.”

The House bill would simply rename the commission rather than abolishing the existing RRC to create a new body.

James Mann, vice chair of the Texas Pipeline Association, noted that previous recommendations from the state’s sunset panel on the RRC have called for changes similar to those currently being debated. “What we need is regulatory stability,” he said. “The committee substitute [legislation] does that. We keep the three-commissioner structure, which is incredibly important to us. There’s nothing more transparent than having three commissioners up on a bench having to explain every decision they make…There’s nothing more transparent than open meetings.”

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