RRC candidate top issues are recapped

Early voting begins Monday, and up for election is the Railroad Commission seat held by David Porter, who didn’t run for re-election. The contest is largely between Republican Wayne Christian, a former Texas representative; Democrat Grady Yarbrough, a former school superintendent; and Libertarian Mark Miller, a retired petroleum engineer.

The following are responses to key questions the Reporter-Telegram asked all candidates before the primary. Only Christian’s and Miller’s responses are presented; Yarbrough did not respond to this questionnaire or to other requests for information throughout the election season.

Q: Allocation wells are expected to be a big issue in 2017. Where do you stand on the issue?

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.

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.

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?

Christian: I have long been an advocate of government operating more like a business. Operations of the Railroad Commission depend 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 costs 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.

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.

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?

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.

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.

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?

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).

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.

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?

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.

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.

Q: Should the Railroad Commission be renamed? If so, what would you change the name to?

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.

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.