Railroad Commission Candidates Q&A
News Article Sponsored by Arpco Valves
Twelve candidates are vying to replace Railroad Commissioner David Porter, who has opted to not seek re-election. With such a large field comprised of seven Republicans, three Democrats and two third-party candidates competing for one spot, the Reporter-Telegram asked all candidates to briefly answer questions about key issues the Railroad Commission currently contends with and those that are anticipated in the next state legislative session.
The MRT received responses from eight candidates: Republicans Wayne Christian, Gary Gates, John Greytok, Ron Hale, Doug Jeffrey and Weston Martinez; Democrat Lon Burnam; and Libertarian Mark Miller.
All responses were limited to 200 words per answer, are presented in the order in which they were received and are presented in the format in which they were received.
Early voting for the Texas primary election starts Tuesday, and Election Day is March 1.
Ron Hale: No.
Mark Miller: Free markets are most effective at generating prosperity when governments refrain from interfering. And from a practical standpoint, curbing production in Texas would likely have the adverse effect of lowering oil industry revenues during a time of severe economic stress. The modern global oil market that we enjoy today has resulted in vast amounts of oversupply, suggesting that attempts to control pricing by restricting small amounts of supply are likely to be ineffective. Fortunately, the federal government now allows oil and gas to be exported from the US, a move that should help Texas companies better compete in the global marketplace.
John Greytok: Those days are over. Today the international market sets the price of oil; any attempt by the RRC to set the price will fail.
Compare this idea to what central banks have tried to do with pushing or pulling on the market’s exchange rate for their national currency. At best, a central bank that starts with hundreds of billions of dollars in cash can have only a moderate impact for a few weeks.
Look at the current conditions in the international oil market — the falling price is based on over supply. Keeping in mind that the Commission has no authority outside our state’s borders, can the RRC restrict oil production inside Texas to a level that will reduce long term world supply below the level of long term world demand? Obviously not. If we took Texas production all the way to zero, wouldn’t Saudi (and Iran!) take up the slack? In other words, even a herculean Texas effort would have a small or temporary effect on the international price.
We would inflict massive damage on our Texas producers with nothing to show for it.
Gary Gates: I am not opposed to revisiting this topic. I am not in favor of any private entity completely dictating a private market, but the RRC does have tools at its disposal that would begin to address the current world supply. We need to begin to have conversations — with the industry, financial institutions, and other world leaders — to see what can be done to help bring oil supply and demand back into balance.
Wayne Christian: Over-regulation by government agency at any level of government — whether it is Federal or State — is bad. It’s true that several decades back the Railroad Commission could determine the price of oil by allocating production because Texas dominated the market. Today the price of oil is determined by the international supply and demand. I trust the free enterprise system and oppose any effort by government to deny operators the opportunity and responsibility to make decisions regarding the operation of their business.
Doug Jeffrey: The simple answer to that is, no. I believe in the free markets and that they will eventually work themselves out. Once the market stabilizes, oil prices will increase and we’ll have a more stabile environment in the long run.
Weston Martinez: When allowables were instituted in the past, Texas comprised a much greater share of global oil production. I think restricting Texas production at this point would hurt Texas producers and I would not be in favor of that action.
Lon Burnam: When the proration system was established by the RRC, Texas produced a large enough share of world oil production that it could, by limiting production, affect the world oil price. Today that is not the case. OPEC, and particularly Saudi Arabia, now have the ability to affect the world price by adjusting their production rates.
Q: Despite their low output (15 barrels a day or less), stripper wells contribute a fair amount to production. Should the Railroad Commission allow stripper wells to produce in the current price-and- supply environment?
Ron Hale: Yes.
Mark Miller: This policy would be ill advised. When re-opened, shut-in stripper wells often fail to return to prior producing rates. Consequently, this policy would mean both long-term and short-term revenue losses for many struggling oil and gas companies, many of which are some of the state’s smallest. Decisions about whether to produce a well or not is best left to owner/operators, not a state agency.
John Greytok: Keep stripper wells producing? Absolutely! A well that is producing is a capital asset not only for the company carrying that well on its books, but also for the citizens of Texas. Forcing operators to plug stripper wells because of a temporary price swing in a cyclical industry is short sighted and results in economic waste. The RRC has a legal duty to prevent waste whenever possible.
Gary Gates: Yes. It is not the RRC’s job to tell a producer who is abiding by their permit, whether they can or cannot operate their wells.
Wayne Christian: There are thousands of small oil and gas operators in Texas and tens of thousands of our citizens who receive monthly royalty checks. Many of these small operators and royalty owners depend on stripper wells for their income. Limiting production by stripper wells would disproportionately harm small operators. That would be wrong. Again, I trust the free enterprise system and will oppose any effort by government to deny operators the opportunity and responsibility to make decisions regarding the operation and production of their business.
Doug Jeffrey: Again, as a free market conservative, I do not believe it is the RRC’s job to shut down producing wells or make decisions in the industry that impact our oil supply that creates jobs and helps local economies.
Weston Martinez: Yes. Stripper wells provide valuable production and we need to produce more not less oil in Texas. We also need to re-evaluate financial security requirements so that stripper wells aren’t forced to be plugged prematurely.
Lon Burnam: The RRC has limited authority to dictate how stripper wells are produced. Shutting in stripper wells also risks losing the remaining reserves the well can produce, and many small operators rely on the revenue produced from these wells.
Q: Allocation wells are expected to be a big issue in 2017. Where do you stand on the issue?
Ron Hale: PSA are fine by me. The disadvantage is that production from one well serves to keep all of the leases in both units in effect for as long as it produces.The advantage is that the royalty owner will get royalties on production from a new well that might not be drilled unless a production sharing agreement is signed to allow drilling across lease or unit boundaries.
Mark Miller: The issue of allocation wells has arisen largely as a result of Railroad Commission rules and regulations that have failed to modernize to reflect current understandings of underground fluid movement and the newest production technologies. This is especially true in unconventional reservoirs. Regulations developed over decades for vertical wells in conventional reservoirs have been “patched” by the Commission to apply to horizontal wells in unconventional reservoirs. Allocation wells are just one symptom of more serious regulatory shortcomings.
Many of the rules adopted by the Railroad Commission effectively insert themselves into mineral lease agreements that should not have to be concerned with the whims of the latest governmental regulations. Important property rights issues are at stake. Commission regulations, including those for allocation wells, are in serious need of review, revision, and in some cases elimination.
Finally, my personal view is that an allocation well drilled through someone’s mineral interest without permission is a trespass. Texas law also does not permit forced pooling of mineral interests. Both trespass and pooling laws appear to be violated by permits for allocation wells without mineral owner concurrence. The Railroad Commission should not grant such permits.
John Greytok: The Railroad Commission should continue to process drilling permits under its present policy regarding allocation wells. If a drilling permit applicant represents that it has a present possessory mineral interest in one or more properties (which means it has the right to drill for and produce oil and gas) and if the permit application complies with the applicable spacing and density rules, then the Commission has no choice but to grant the drilling permit. The Commission performs a purely regulatory/conservation function when it processes drilling permits — it does not have any jurisdiction over the question of how royalties are to be paid to lessors or interest owners. Those issues are under the exclusive jurisdiction of the courts. Until such time as either the Legislature, or a court of competent jurisdiction changes the law in this area, the Commission should continue to process allocation well permits under its current policy.
Gary Gates: I know several companies supported efforts to clarify the RRC’s authority for issuing allocation well permits. While I am not opposed to those efforts, the case to me is clear. The RRC has the authority it needs to issue permits for allocation wells. If companies want to pass a bill clarifying the issue, I will work to make sure the bill does no harm to our existing authority or the current permit holders. But make no mistake, if a permit for an allocation well is on the Commission docket in January 2017 when I take office, I will be seeking a second to approve the permit.
Wayne Christian: The current process at the Railroad Commission for issuing drilling permits on allocation wells is not perfect, but is it known to all parties involved in the process. I believe the Railroad Commission should wait for the Legislature to provide additional guidance regarding how mineral interests are allocated before it makes any changes in its rules or processes.
Doug Jeffrey: Allocation wells prevent waste and increase efficiencies. By reducing the need for multiple surface locations, allocation wells reduce drilling costs and encourage development which mineral owners like. The Railroad Commission has done a good job permitting these wells and I would support their continued use. It is defiantly an issue I will be following closely.
Weston Martinez: Allocation wells are a necessary tool that allows producers to reduce drilling costs and capture the maximum amount of our natural resources. We should do everything we can to expeditiously permit allocation wells that meet the requirements for such a permit.
Lon Burnam: This is a complicated issue that I have not been able to fully research and am not prepared to take a position on yet.
Q: With falling oil prices, there is a threat some operators will simply walk away, stressing the Clean-Up Fund that is funded by the industry. Also stressing the RRC budget is falling revenues from fees since the commission is issuing a lot fewer permits. Do you have any recommendations for preserving revenues?
Ron Hale: We have to create an atmosphere that the industry can survive and be profitable.
Mark Miller: It is not the job of any state agency to “preserve revenues”. Around 85 percent of the Railroad Commission’s budget comes via fees collected from oil and gas operators. These operators have had to cut costs and reduce the size of their operations in response to low oil and gas prices. Government should not be immune to this economic reality. The Commission’s costs need to be adjusted to align with its available revenues.
I usually support user-fees as a means of funding state-run activities. In this case, however, a state agency is incentivized to promote particular activities in order to fund itself. This creates inappropriate bureaucratic incentives. At the very least, the Commission may be tempted to increase fees to avoid down-sizing. I believe a preferable way to fund the Railroad Commission is through the general fund and thus subject to adjustment by the Texas Legislature.
Texas law now requires operators to post bonds to cover the abandonment of wells “orphaned” by bankruptcy. Unless these bonds are insufficient, it seems that the Cleanup Fund should be sufficient to take care of this problem.
John Greytok: Agency revenues are based on industry activity but the industry is cyclical. This means that the funding mechanism is often out of sync (either too high or too low) with the budgetary needs. The current shortfall is not just stress on the Clean-Up fund, but also the need to continue funding for the capitol improvements in the IT systems. At a minimum this is a cash flow timing problem (if not a long term funding shortfall).
We need to start by making a serious push for increased funding from outside the industry — either a supplement from General Revenue or from the Rainy Day Fund. (Yes, it is raining in the industry and, after all, those funds came from industry activity.) We also need to backstop existing funding from GR to make sure that if we raise more funds from industry that the Legislature won’t just offset it with further GR cuts. Only after these steps can we look to raising fees from the industry.
In other words, we need to have some assurance that any additional money from industry will be spent to improve the situation and will produce concrete, positive results.
Gary Gates: The biggest funding issue facing the commission is an anticipated shortfall, which will make it more difficult to carry out its tasks. This will occur due to a slowed oil & natural gas industry. To remedy, the Commission needs to constantly re-assess and adjust its resource distribution including, but not limited to: employee reassignment (for example shifting staff to completion reports), regional office development, and technology development. This will be an issue in the next legislative session, approximately one year from now. Since most of the RRC budget comes from within (in the form of industry permits and fees) I would work to maximize RRC resources so that additional tax dollars arent requested from the Legislature to supplement any internal shortfalls.
Wayne Christian: I have long been an advocate of government operating more like a business. Operations of the Railroad Commission depends on the revenue it generates from the fees it charges the industries it regulates. Just like operators in the oil and gas industry are faced with tough decisions during this down cycle, so is the commission. The commission is going have to make tough decisions on staffing and other operational coasts just like the folks it regulates are doing. The commission generates upwards of $30 million in fines and gas utility taxes that go to the General Revenue Fund. I am not opposed to a portion of those funds being redirected to supplement the operations of the commission.
Doug Jeffrey: This is the nature of the industry. In good times, you need more physical and human resources and in slow times, that demand falls and the commission has to make the tough decisions of making cuts. Operators know that if they walk away, they will be hit with severe fines and will not be allowed to operate in Texas in the future. This is the process that is put in place to preserve revenue for this practice.
Weston Martinez: I think as the industry faces challenging budget times, the commission must do so as well. We need to figure out how to do more with less and flex with the industry by cross-training employees and reducing costs. I do believe we also need the legislature to look at providing more of our funding from general revenue so that during particularly difficult budget times, the agency can fulfill its core duties.
Lon Burnam: The declining prices are going to present a problem for the state budgets overall. I note the Commission has been criticized by past Sunset Commission reviews for failing to appropriately assess fines for rule violations.
Q: The RRC has been through sunset review the last three sessions. Why can’t it pass and how will you work with legislators to help the RRC pass sunset review?
Ron Hale: Not passing because of the abolish movement. We have to get the public more involved on how important the RRC is to our schools fund and road projects funds.
Mark Miller: The Railroad Commission has been under Sunset Review since 2011. Two Sunset Commissions made many sensible recommendations for the 82nd, 83rd, and 84th Legislatures to consider for the Railroad Commission. Another review is currently underway. Unfortunately, powerful forces within the Legislature have prevented necessary legislation from passing. There has been significant resistance to even taking the minor step of changing the Commission’s name to better reflect its actual duties.
Texas Railroad Commissioners have an obligation to publicly make their case with voters and legislators for or against any recommended Sunset Review reforms. Commissioners should be readily available to testify before relevant legislative committees, and to provide other written information and opinions needed for the legislative process. They should also actively make their case directly to the Texas citizenry in the run up to the 85th Legislature.
As a candidate for Texas Railroad Commissioner, I plan to publicly take a position on all Sunset Commission’s recommendations that will be released prior to the November election. Voters will be able to judge my suitability for office based on those positions.
The challenge is that every Sunset process triggers multiple new ideas being offered by the Sunset Commission’s staff, by citizens, by industry, and even by Railroad Commissioners. Those ideas may be important. But by far the most important goal is to avoid the disruption of a 4th consecutive round of Sunset review in 2018-2019. Including all the new ideas in the Sunset bill increases the controversy about the bill and lowers the chances that the bill will pass. Including controversial new ideas was an important reason why the bill failed in the past.
The best chance for passing the Sunset bill is to keep it simple, straightforward, short and with a minimum of controversy. Therefore my position is that any ideas that reduce the chance of passage need to be stripped out.
This doesn’t mean that I oppose all those other ideas. It means those ideas need stand on their own two feet, or be amended to something other than the Sunset bill, or considered at a later time. I oppose risking the failure of the Sunset bill by slipping in non-essential ideas.
Gary Gates: The passage of the Sunset bill is so important, in my opinion, that I am willing to discuss some of the fundraising and office-holder issues that have derailed the bill in the past. Frankly, the agency operations have never been the sticking point. The RRC has a great staff who do a great job every day. As an elected leader if I need to have a few more fundraising requirements or some additional reporting, I am willing to accept those to get the bill passed. It is that important to this industry and it is that important to me.
Wayne Christian: My legislative experience and relationships allow me to easily navigate the sunset process in the 85th Legislature. This, in my opinion, continues to be one of the biggest fights the energy sector faces. For any other candidate in this race, there would be a significant learning curve. This is truly an opportunity for us to bridge the gap between the commission and the legislature and come up with policies that will have a positive impact on Texans.
Doug Jeffrey: The RRC will pass Sunset this session. In the past political issues and personalities have bogged down the process. With new commissioners and a new focus on transparency and efficiency and effectiveness, there is no doubt in my mind that the RRC will get through sunset. My job as a commissioner will be to communicate the work the RRC is doing and respond to legislators’ requests for information in a timely and comprehensive way. I am committed to doing everything in my power to help the commission have a smooth Sunset process.
Weston Martinez: RRC has struggled in the past because commissioners weren’t always focused on the mission at hand (they were running for other offices). We will pass Sunset this session because everyone is focused on doing the best job they can for the people of Texas. I will work hard to advocate with the legislature on behalf of the agency because it is doing a better job of doing its work and being proactive and transparent.
Lon Burnam: I was there first as a legislator, then as an advocate for a public interest non-profit and was appalled at the inability of the Commission to implement positive change. As a former legislator I will be in a position to bring these discussions out in the open and address many of the Sunset recommendations.
Q: Rules regarding well integrity and disposal permits have been updated in response to indications disposal wells are contributing to seismic events. Even so, the commission’s seismologist remains noncommittal on the subject. Do you think the updated rules are enough or is there more that can be done to address public concerns oil and gas drilling is causing earthquakes?
Ron Hale: Finding more funding for the seismic activity study being done with the universities in Texas is a way to get more background information and proof.
Mark Miller: In 2014 I publicly commented on the Commission’s rules designed to address public concerns about seismic activity caused by wastewater injection. I found the rules promulgated that year to be technically ineffective, and appearing to deceive the public into thinking otherwise. Subsequent Commission actions with regard to the link between underground injection and earthquakes seem to have proven my suspicions were well-founded. The Commission has gone so far as to ignore the well-researched findings of some of the state’s most capable geoscientists.
The physical and technical ramifications and uncertainties surrounding this issue are complex and profound. I am concerned that the Railroad Commission’s staff does not have the requisite technical expertise to evaluate the issues and develop a suitable regulatory regime. It will be up to our Commissioners to remedy this shortcoming.
More details about my position on seismic activity from wastewater injection can be found on my blog at miller4tx.com and in my book on the Texas Railroad Commission published in November 2015.
John Greytok: I’ve heard it said, “if fracking caused earthquakes, Midland would never stop shaking.” Well, this may not be an issue in the Permian Basin, but that doesn’t mean it’s not an important issue in other areas with different geological formations.
The #1 duty of the RRC is to protect the health, safety and welfare of all Texans. Today we don’t have sufficient data or engineering analysis to reliably determine which wells or which geologic conditions may involve seismic risk. But we can’t be satisfied with that ignorance. We have to use our considerable knowledge, technology and other resources to gather the information we need. Once we have confidence that our actions will be effective, then we need to take action.
We cannot blindly pass new rules that have little hope of helping, but we cannot ignore the situation either. If the public concludes that they are not being protected, then the agency and the industry will face severe legislative pressures to address this issue. It is in the interest of everyone involved to address this serious concern in a responsible way.
Gary Gates: I have been very impressed with the Commission’s response to the increased seismic activity. They have hired staff, coordinated outreach, reviewed permits, increased inspections, and participated in research on the causes. They’ve been very proactive in my opinion. Under my watch, we will not rest on our laurels. We will continue to work with institutions on research and hold permit holders to the highest standards.
Wayne Christian: I think the commission has done the right thing by using science to drive their response on this issue. Texas already has some of the toughest laws on disposal wells, before we do more, Texas must continue to research the issue (which we are doing).
Doug Jeffrey: It is my understanding that there were some flaws in the study that was done. I think we need to continue to study this issue before we resort to more regulation that can potentially hurt the industry. That being said, if over time there is a direct correlation of any activity causing harm to Texans or their property, we should immediately address the problem and fix it.
Weston Martinez: Data and science needs to drive policy making at the commission. For now, these rules are sufficient. If after additional study, it is determined that more needs to be done, I would support doing more at that time.
Lon Burnam: Although it may be difficult to prove with reasonable certainty that a particular injection well is the cause of seismic activity, the link between injection wells and seismic activity is now established.
Q: What can the RRC do to prevent new federal regulations from hindering development? How would you establish a relationship with federal regulators to help craft sensible regulations?
Ron Hale: Number 1 is talking with Congress and the Senate to make sure states rights are not violated. We can design rules and regulations our self.
Mark Miller: The Railroad Commission has little actual power to prevent or modify federal regulations. Where proposed federal regulations illegitimately impinge on Texas sovereignty, the Commission can, however, provide information and opinions to the Texas Attorney General to support Texas’ assertion of its rights. That said, the Commission should always seek to work directly with federal regulators to provide them with input as they craft federal regulations. Particular attention should be given to regulations that unnecessarily impinge on the commercial interests, property rights, and personal liberties of Texas citizens. Texas is in a far better position to monitor and protect its people and its natural resources than the federal government.
In my opinion, resistance to federal regulations is not a major issue facing the Texas Railroad Commission. Railroad Commissioner candidates should focus their attention on issues where the Commission can have a more positive direct impact on Texas. I plan to do so in the coming campaign.
John Greytok: My goal is to do for the RRC what Gregg Abbott did for the office of the Attorney General. Abbott saw that federal over reach was an ever-growing problem. And Abbott took the resources available and went to work trying to curb federal abuses. While I am in favor of suing the federal government to push back against illegal or unconstitutional activities, I believe we have to do more. We need to engage before going to court. The RRC should take on an advocacy role on behalf of all Texans by intervening at the federal level before new regulations are adopted. The RRC should offer its own evidence and analysis, object to baseless proposals, file open records requests, condemn secret or improper procedures, and generally take action to influence what kinds of regulations are being adopted and what those new rules say — with the purpose of preventing the most extreme results.
And, in those cases when we cannot avoid the adoption of a new regulation, the actions of the RRC can at least put Texas in a better position for going to court.
Gary Gates: Providing an adequate system that reduces recidivist violators will help Texas maintain its independence in this field. I would be open to working out a plan that allows for stricter punishment for any habitual violators. But, any new plan needs to be well thought-out and clearly documented, so we can maintain the consistency across the board. Additionally, I would be prepared to fight alongside (and would encourage my fellow commissioners to do the same) Governor Abbott and AG Paxton in any battle that protects Texas from Government over-reach related to the oil and natural gas industry.
Wayne Christian: The Railroad Commission should work in tandem with the Attorney General and other state agencies to make sure we are doing everything we can to protect Texas’ right to regulate its own natural resources. I served in the House and have relationships with many of the statewide leaders including the Attorney General and I have been endorsed by Ag. Commissioner Sid Miller. As commissioner, I will have regular meetings with the heads of other agencies to see what we can do together to protect Texas from an out-of-control federal government.
Doug Jeffrey: The EPA has already released a report that basically says that the states do a great job of handling their natural resources and that the federal government should not be involved. However, they continue to enact burdensome regulations that hurt the industry. I would aggressively lobby our federal office holders and those at the EPA to stay out of Texas’ business and let us run our own industry.
Weston Martinez: If the RRC does its job well, that will keep federal regulators out of Texas. If our agency focuses on protecting the public and environment while encouraging development, the feds will have no need to intervene in our state. I’m hopeful that we’ll elect a Republican president, which should greatly enhance the cooperation and communication between the RRC and federal agencies.
Lon Burnam: The Commission has a long history of working with the EPA and other federal regulatory agencies, and has been delegated the responsibility for enforcing many federal laws related to the environment. The Commission can continue to use its expertise to encourage federal regulators to limit adverse impacts on the industry while achieving federal regulatory goals.
Q: Should the Railroad Commission be renamed? If so, what would you change the name to?
Ron Hale: NO.We would have to reauthorize every permit from the Texas RRC and it’s to expensive without technology. Second all federal assets will have to be reauthorized also.
Mark Miller: Transparent government requires (at minimum) that its agencies have names that accurately reflect their responsibilities. Fewer than 5 percent of Texas voters know that the Railroad Commission regulates oil and gas. An appropriate alternative name would be the Texas Energy Resources Commission. Though Texas Energy Commission has been suggested by others, this name would continue to confuse voters by suggesting that the Commission had jurisdiction over other energy sources such as wind, solar, and nuclear power generation. Texas Oil and Gas Commission has also been suggested, but would not accurately reflect the Commission’s jurisdiction over mining activities in the State.
John Greytok: Given the serious challenges that the industry faces, changing the name of the agency does not rank high on the “to do” list. Because it is a contentious issue and is not critical to the agency, I am against trying to change the name during the Sunset process in 2017 (see the answer to Question 5). If the issue is transparency, then that can easily be solved — with the current name — by expanding the RRC’s website and online presence. Also, I don’t have a new name that I would propose.
Gary Gates: Personally, I would like the name of the Commission changed to something that more accurately describes it’s functions. This will have a dual positive impact of increased transparency and more faith by the general public. One suggested name is The Texas Energy Commission.
Wayne Christian: While a name change would provide clarity for the public as to what the Railroad Commission does, it would be costly and potentially open the agency up to further regulation from the Federal Government. At this time I think we should leave the name alone. Regardless it is a legislative issue, not one that will go before the commission.
Doug Jeffrey: Personally, I can see how it would be confusing to folks that a commission that regulates oil and gas and other natural resources is named the “Railroad Commission”. That being said, I don’t think it’s necessary to waste taxpayer dollars to provide legislation to change the name, change all of the signage and everything that goes with that around the state. I believe it’s a waste of time and money.
Weston Martinez: We should only change the name if it’s done through a constitutional amendment. I do not care what the new name is as long as it accurately reflects the mission of the agency. Transparency and good government dictate that government agencies’ names should accurately reflect the mission of the agency. If we make the change constitutionally, the voters of Texas would be a part of the change and get educated on the fact that there is an energy regulatory agency in Texas — which is sorely needed.
Lon Burnam: The Railroad Commission should be renamed the Texas Energy Commission. It’s mission should be clarified such that there is no question that this is the agency in state government responsible for developing a comprehensive energy plan.
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