In this episode, I explore the controversial Texas Railroad Commission with Virginia Palacios of Commission Shift. We discuss the commission's history, its misleading name, its cozy relationship with the oil & gas industry it's meant to oversee, and its role before and after the devastating Winter Storm Uri, where lax regulation contributed to widespread power outages and deaths.
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David Roberts
Okay, everyone, hello. This is Volts for October 4, 2024, "What's the deal with the Texas Railroad Commission?" I'm your host, David Roberts. Texas is, by a wide margin, the largest producer of crude oil and methane gas among US states. It produces more than 40% of the country's total oil and around 27% of its methane gas. It has more refineries and pipelines than any other state.
It is, on its own, a substantial player in global oil and gas markets. It follows that the regulatory body that oversees the oil and gas industry in Texas is one of the world's most significant regulatory bodies.
So, surely you can name it, right?
Right?
There is a reason it doesn't come to mind, friends. It is called the Texas Railroad Commission. You might be thinking, "I thought we were talking about oil and gas?" And we are. The oil and gas industry in Texas is regulated by the Railroad Commission. Now, you might be thinking, "What reason could it have for keeping that misleading name, other than to deliberately remain obscure and operate outside of public scrutiny?" Yes. Right. Now you are getting it.
Today, I am speaking with Virginia Palacios, who runs an organization called Commission Shift, dedicated to drawing attention to, and reforming, the Railroad Commission.
We are going to talk about what the Railroad Commission does, whose interests it serves, the latest fights over its growing power, and the various ways it might be reformed. With no further ado, Virginia Palacios, welcome to Volts. Thank you so much for coming.
Virginia Palacios
Thanks for having me. That was a great intro. R eally appreciate it.
David Roberts
Yes, so I went, like I said, like I told you before, I went down a bit of a rabbit hole on this. It's some really fascinating history. I mean, we don't really have time to get into this, but people just might find it interesting that back in the 1930s and '40s, when Texas oil production was at its peak, it was really a substantial global producer. And the Railroad Commission, the head of the Railroad Commission, set prices for oil coming out of Texas, which meant that the Texas Railroad Commissioner was literally one of the most important regulators in the world.
Like OPEC was modeled on the Texas Railroad Commission. Just absolutely wild, wild stuff. Obviously, that's diminished somewhat since then, as oil production has tailed off somewhat in Texas. But, like, this is a very powerful institution with a very long history. So let's just start. I want to walk through, sort of, like, what its current responsibilities are and how well it's doing on those responsibilities. Let's start with just oil and gas. Just sort of describe what is the remit of the Texas Railroad Commission.
Virginia Palacios
Sure. So, the Railroad Commission of Texas has responsibility to oversee oil and gas extraction and production, pipeline safety, gas utility service, and coal and uranium mining in Texas. It's really the state mining agency overall. A lot of other states have what's called an oil and gas conservation commission. Some states call it a department of mineral resources, but in Texas, it's called the Railroad Commission. The other thing that makes the Railroad Commission unique as an oil and gas agency is that it does oversee gas utility service and rate making in Texas.
David Roberts
Yeah, yeah. I wanted to ask about that specifically because in other states, there's a Public Utility Commission that typically does that. And I know Texas has a Public Utility Commission. Is the Railroad Commission effectively acting as the Public Utility Commission over gas?
Virginia Palacios
Yeah, and the structure of oversight over gas utility rates in Texas is really odd because of that. So basically, in the major cities in Texas, the city councils will get to go through that rate-making process with the companies. But at the end of the day, if the companies don't like what the city's decided, they can always take it to the Railroad Commission for a final decision, and then the commissioners get to decide. In the unincorporated and rural parts of Texas, the Railroad Commission pretty much handles it. So there's not really a lot of ratepayer advocates throughout the state of Texas. There's not a lot of consumer protection because of that, on the gas side.
David Roberts
I saw that Wayne Christian, one of the commissioners, was testifying and basically said he's not interested in keeping prices low or fair. That's not his job. He says if a consumer feels like they're being screwed over by their gas company, they should just sue the gas company. So, it's like they're kind of acting like the PUC, but it sounds like they don't have the same responsibilities. Like a PUC, by law, is supposed to keep rates fair and as low as possible, but it sounds like that doesn't apply to the Railroad Commission.
Virginia Palacios
I sometimes have disagreements with the Railroad Commission about what their responsibilities actually are, and so that's something where I would love to see the citation from Commissioner Christian about why he thinks that's not under his purview.
David Roberts
Yeah, but the fact that he said it aloud to a legislature is pretty indicative of the current attitude toward gas prices, which is mainly, it's just about tending to the oil and gas industry, and it just doesn't sound like they are particularly consumer-focused, let's say.
Virginia Palacios
Overall, yes. That might be a good segue into talking about Winter Storm Uri, which is the real thing that's affecting energy burdens today in Texas and how much Texans are paying for their energy bills.
David Roberts
Yeah, so famously, you had this incredible winter storm. Much of the natural gas infrastructure kind of froze up, prices spiked, and there was a sort of outcry afterward for reform of the natural gas industry. So, what did the Railroad Commission do in response to Uri?
Virginia Palacios
So, coincidentally, Commission Shift was launching. We had just gotten ready, and we were coming out with this big report on orphaned wells. Then we got news that this big storm was coming, and we were like, "Oh, maybe we should delay the launch." And we were like, "It's going to be fine. It'll probably blow over." It turned into the largest power outage event that we had had so far. But more importantly, hundreds of people died. It was the largest carbon monoxide poisoning event in state history and the costliest natural disaster in state history. So, it was really quite significant for our state.
It was devastating. But what was interesting about it was that a similar power outage had happened about ten years prior. In 2011, about 4 million people lost power during that winter storm. And after that, FERC, the Federal Energy Regulatory Commission, wrote a report, and they made recommendations to the Railroad Commission to implement weatherization rules on the natural gas supply chain because there had been water coming up from the formations — it's called produced water, it's naturally occurring — and it was freezing at the top of the wellheads and restricting gas flow both at the wellheads and in pipelines.
And so, after that, the Railroad Commission simply chose not to pass new rules because some of the operators didn't want new rules. That was where we were in 2021, just sitting there, knowing that this could have been prevented, but it wasn't. We experienced really horrible consequences of the Railroad Commission's decision back in 2011.
David Roberts
So, you might think they would do something different this time.
Virginia Palacios
Well, and so, you know, after Winter Storm Uri, the legislature was in session that year. We only have a legislative session every other year. So, coincidentally, in 2021, it was a legislative year, and the legislature did pass laws requiring the Railroad Commission to weatherize the gas supply chain. We were a part of the rulemakings that happened at the Railroad Commission afterward. And with the help of our partners, we got 900 public comments on that rulemaking and made it much stronger in the end. I mean, if we hadn't been involved, it would have basically just been one big loophole.
There would be no weatherization requirements on the natural gas supply chain, but thankfully, now there are.
David Roberts
I mean, a bunch of costs were passed along to consumers, right? I mean, a big spike.
Virginia Palacios
Yeah, so, to get back to the energy burden question, and so in Texas, we have this market-based electric pricing system, but even though it's market-based, there's still a cap on the highest cost of electricity per megawatt hour. There was some kind of control there where even if you had a shortage of electricity supply, prices could only get so high in that situation. But on the natural gas side, there is no cap. We had just extraordinary pricing during that winter storm when gas supply was very short. That led the legislature to approve $3.8 billion in securitized bonds to pay back gas transmission pipeline companies for that extreme event.
And so, ratepayers, gas utility bill ratepayers will be paying that back for the next 30 years. That is the largest securitized bond that has ever been paid in Texas history.
David Roberts
So, the main effect in terms of the gas system was Texas ratepayers made Texas gas companies whole afterward.
Virginia Palacios
Yeah, well, and so the crazy thing about everything that happened is that a lot of people still don't realize the tremendous power that these gas pipeline companies have over our electric bills and our gas bills. And it really does come down to this question of ethics at the Railroad Commission, right? And so, the largest beneficiary of Winter Storm Uri was Energy Transfer, the transmission pipeline company. They also show up on Chairman Craddick's personal financial statement that she submits to the Texas Ethics Commission. The other thing that happened in the Texas legislature is that they formalized something called the Texas Energy Reliability Council, a body that includes state regulators, pipeline companies, electricity generating companies, and they're supposed to all kind of come together and discuss how the gas supply chain connects to the electric supply chain and how to ensure reliability.
But nothing they do is subject to the Open Meetings Act or the Public Information Act. So, you basically have these folks sitting behind closed doors with regulators. They're the only people who have access to something called the Electricity Supply Chain Map, which shows exactly how everything's connected. The heads of these agencies, the Railroad Commission, the PUC, get to appoint members to the commission. So, who do you think got appointed to the commission after Winter Storm Uri? It was representatives of Energy Transfer, Kinder Morgan, a bunch of companies that show up on Christi Craddick's personal financial statement.
So, yeah, there's a lot of questionable things happening.
David Roberts
It's a cozy little environment. Okay, so the Railroad Commission is in charge of natural gas extraction, pipelines, etcetera. It's also in charge of cleanup of orphaned wells, which are sort of abandoned old wells and old injection wells. Let's just talk a little bit about what that problem is, the problem of those wells, what it looks like and what the Railroad Commission is or isn't doing.
Virginia Palacios
So, an orphaned oil and gas well is a well that no longer has an operator in business. Usually, the operator went bankrupt, and now the well has become the Railroad Commission's responsibility to plug. And the site is the Railroad Commission's responsibility to clean up. Usually, there's some kind of pit on site that's been storing contaminants from the well. In Texas, there are now about 8,500 orphaned wells throughout the state. But more importantly, and little discussed, is that there are about 150,000 inactive, unplugged wells throughout the state that still have active operators and are not yet orphaned.
And so, there's been a lot of federal attention placed on orphaned wells because they are sources of methane. Methane is a greenhouse gas that's about 80 times more potent than carbon dioxide on a 20-year timeframe. So, if we want to do anything about climate change, we've got to plug these wells. But, these wells are also conduits for groundwater contamination. Therefore, it's important that we plug the orphan wells, but we also have to start paying attention to the broader population of inactive wells that still have a profiting company responsible for them. That company is supposed to go eventually plug that well once it becomes inactive.
But the problem that we've identified at Commission Shift is that state law is so lax about how long operators have to go back and plug those inactive wells, that we have this hundreds of thousands of inactive well pile-up. Right? And that's leading to wells eventually being orphaned.
David Roberts
And it's so easy, too, for these companies. Like a holding company, it can just shuffle itself. It can just put one sub-company out of business, thereby divesting it of responsibility for these things. And still, it's just an accounting thing for them, but voila, they're no longer responsible.
Virginia Palacios
Yeah, so in Texas, we allow operators to transfer liability for well plugging when they transfer an asset. And so, if I sell a population of my marginal wells to a smaller company that has lower overhead and can still make a profit operating these wells, I'm also selling them my plugging liability. And then, I can wash my hands of it, and it doesn't show up on my books as a liability. Not every state does it that way, but Texas does it that way. And so, that is now the status quo for how larger operators get rid of their liabilities.
David Roberts
So are these being capped in substantial numbers? And who pays for it if, if so?
Virginia Palacios
So, out of the 150,000 inactive wells that are in the state, about 35,000 of those are just shut in less than twelve months. And so, they might come back online if gas prices improve. Out of the rest of that population, around 17,000 have been inactive for 20 years or longer. And that's the population that I get really worried about. Because when I talk to people in the field who are dealing with leaking wells, they say the older the well gets, the more likely it is to kind of start caving in on itself. And then, if you do want to go back and plug it later on, you have to fish out all the little pieces so that when you cement the well in and plug it, you can get the cement down to the bottom of the hole and that it'll be even throughout.
Right. And so, you end up with technical challenges and logistical challenges with cleaning up these wells and really plugging them in a way that's going to protect groundwater the longer you wait. And so, there's a lot of solutions. Like one of the simpler things we've come up with is just limit the number of times a company can get a plugging extension. I mean, technically, in law, they're supposed to plug their well within twelve months of it being inactive. But the law also allows operators to get plugging extensions pretty much indefinitely. And so, operators are doing that.
And that's why we're having so many problems with these wells. I think beyond the methane problem, what a lot of people probably don't know is that we're seeing a lot of these wells leaking and contaminating groundwater throughout the state of Texas. We've had leaking, unplugged wells. We've had geyser-like well blowouts. There's been sinkholes forming in some parts of the state. It's a mess.
David Roberts
And if I'm not mistaken, you have petitioned, your group has petitioned to have the authority over these old wells taken away from the Railroad Commission, is that right?
Virginia Palacios
Well, that's a different issue. And so now we're getting into the question of carbon capture and storage. Orphaned wells and unplugged wells can be a complicating factor if you're also trying to inject carbon dioxide underground. The Railroad Commission is right now seeking primacy from the EPA to be the sole permitting and regulatory authority in Texas over what are called "Class VI carbon dioxide injection wells." These are wells that are intended for long-term storage of carbon dioxide. There are no Class VI wells in Texas right now, but the Railroad Commission already has primacy over the Class II injection well program.
And Class II wells are used to dispose of salt water that is produced from oil and gas wells. Again, it's naturally occurring water in the formation — it's called produced water a lot of the times — but it can contain harmful chemicals, radionuclides, obviously, high concentrations of salts that can contaminate groundwater and other heavy metals and things like that, VOCs — that gets disposed of in Class II wells. But you can also use a Class II injection well to do something that's called enhanced oil recovery, sometimes also called secondary or tertiary recovery. So if you have a spent oil well, you can inject into a nearby Class II well, and you can flood the formation with either water or another material like carbon dioxide to be able to get more oil out of that spent well.
And so, what's going on right now is that with the passage of the Inflation Reduction Act, the IRS's 45Q tax credits have increased and now make it more profitable for companies to go do enhanced oil recovery with carbon dioxide injection. Oil companies have spent, I think it's $2.5, $2.3 billion dollars lobbying for these tax credits. We just published another report with an analysis produced by an organization called Empower that estimated the net profits to companies from these tax credits could be on the order of $3 billion to $33 billion for companies that inject in Texas over the course of the tax credits' lifetimes. And so, there's a lot of money on the table for oil companies that want to go do additional oil production with these tax credits or that want to eventually do long-term carbon dioxide injection into a Class VI well.
David Roberts
Am I right in guessing that the companies that want to do this would prefer for the Railroad Commission to be in charge of it?
Virginia Palacios
Yeah, and so the argument right now is that the EPA is taking too long to approve the permits. They don't have enough capacity to process the permits. And so, if primacy was delegated to the states, the states would have more capacity to process the permits and do it faster. And certainly, that is what the Railroad Commission likes to do and is pressured to do by the Texas legislature. I mean, they boast that they process oil and gas well permits in less than three days. And so, we would likely see pressure to permit Class VI injection wells faster and faster in Texas.
It is a longer permitting process for an injection well than it is for an oil and gas well. It would likely be at least 60 days, but still, these are wells that can cause groundwater acidification, carbon dioxide. The other danger with it is that if it escapes from a pipeline, it can form a plume that sinks and can cause asphyxiation when it displaces oxygen in the air. And so, there are dangers and threats from this infrastructure. We want to make sure that there's proper oversight over the infrastructure and that it's not going to the wrong agency that isn't going to do a good job overseeing it.
David Roberts
Who would you like to be overseeing it?
Virginia Palacios
We think it should stay with the EPA.
David Roberts
The state EPA branch?
Virginia Palacios
No, we actually think that oversight of Class VI injection wells should stay with the US Environmental Protection Agency and not be delegated to the state of Texas. We don't actually see better enforcement of environmental laws at the Texas Commission on Environmental Quality. You know, there are so many complicating factors with the Railroad Commission. You were talking about our petition to the EPA earlier, which was really focused on the failures of the Railroad Commission to properly oversee the Class II injection well program. And so that's, again, where we're seeing earthquakes across the state of Texas that are caused by underground injection.
That's peer-reviewed science that's well understood. We're seeing, again, the sinkholes we believe are also linked to underground injection. And some of the leaks that we're seeing from unplugged wells, as well as the geyser-like well blowouts. And those geyser-like well blowouts that we're seeing — there was one in April 2019 that we wrote about in our first report, "Unplugged and Abandoned," and that was down on the South Texas Gulf coast. But there were a couple in the past few years out in Crane County, which is in the Permian Basin of West Texas. And so the first was in January 2022, massive geyser-like well blowout, 100ft in the air.
It took them months to get that under control.
David Roberts
What's coming out of that geyser?
Virginia Palacios
Salt water. Yeah. And it likely has radionuclides. Typically, that produced water has radionuclides. There are some photos. You can check out Texas Monthly; they reported on it pretty well. You can also look at Twitter, or X now, "Frac Sand Baroness", I believe, is Ashley Watt's handle, and she covered this extensively. She's one of the neighboring landowners. But it looks like snow on the ground. There's so much salt that came out of that well. And it was January, but that was not frost. It was salt just salting the earth from this geyser well blowout. But one of the troubling things about that blowout was that well control experts said that there's no technology on the planet that can plug that well because the pressure is so intense.
And so, that was January 2022, when the first Crane County geyser erupted. Then, just in December 2023, about a mile away, water started coming out of the ground from a neighboring landowner's ranch. The Railroad Commission did respond to that, even though the well that the fluid was coming out of was undocumented. It wasn't technically an oil or gas well or a water well, but they responded. They plugged the well. However, the landowner has said that fluids were not only coming out of the wellbore, they were coming out of the ground. The disturbing thing is that there is likely a massive underground blowout, and that fluid could come out anywhere.
This is why we're concerned. The Railroad Commission continues to permit wastewater injection wells throughout the Permian Basin in massive numbers, even into formations that have been showing problems. They're going to keep doing it with Class VI injection wells. We just don't have any confidence that they're going to make good decisions that are protective of groundwater or public safety.
David Roberts
Let's talk about methane a little bit, because they theoretically have oversight over methane leaks, methane venting, and methane flaring. From what I understand, they have not done much about that.
Virginia Palacios
Yeah, so we also just released another report on Tuesday about this. The Railroad Commission regulates venting and flaring from oil and gas wells. Venting is just straight up releasing the gas unburned into the air, and flaring is when you burn it. Typically, this is a practice that takes place at oil wells that are also producing gas as a byproduct. Oil is so much more valuable. The companies want to sell the oil, and they couldn't care less about the gas because it's not worth as much. Right. But there have been laws on the books even since the '30s.
You were talking about prorationing earlier, and part of what was going on around the same time as prorationing, and the Railroad Commission setting prices for oil was this flaring problem. We've had flaring rules on the books since then, and the flaring rules primarily limit how long an operator is allowed to flare and what volume they're allowed to flare. But what we did, we looked at all the Railroad Commission's flare permitting data, and we looked at it over the course of four decades. So going back to the eighties and comparing decade by decade, especially looking at the 2010s compared to the 2020s, which is really when hydraulic fracturing, or fracking, and horizontal drilling started this most recent boom in oil and gas development.
The Railroad Commission has been saying the past few years that they've got flaring under control. "Flaring rates are less than 2% of all gas produced, and everything's fine. There's nothing to see here." So, we looked at the permitting data, and what we found is that from the 2010s to the 2020s, we're actually projecting slightly higher volumes of gas to be flared in the 2020s. Although we're seeing the duration of flaring permits go down, we're seeing higher numbers of permits being issued, higher volumes being permitted. And we've also noticed the Railroad Commission allows these permits to be extended repeatedly. And so, there's not really a net effect of flaring permits going down or a lower volume of gas, you know, being permitted.
And even based on what the operators are self-reporting, that they've vented and flared, we're expecting slightly higher volumes. But more importantly, the thing that was really interesting at the end of the day is how they have designed their compliance system. And design is, you know, too generous of a word, because ultimately they have not designed a compliance system for this rule. The only way that we ever see companies getting a violation related to the flaring rules is if they have not submitted their paperwork. We do not see any violations for operators exceeding the volume of gas that they're allowed to vent or flare, or exceeding the duration of their venting and flaring permits, because there's no way for the Railroad Commission to actually check that.
The rules actually regulate venting and flaring on the order of days. So, it's 1000 cubic feet per day. But, operators report every month. And so, that little mismatch is, right off the bat, not going to work. Right. But beyond that, because they allow the permits to be extended and you have different start and end dates for every permit, there's no practical way for the Railroad Commission staff to check for compliance with those venting and flaring volume or duration limits. And so, it's really frustrating to see that.
David Roberts
It sounds notional, like basically, you just need to submit your paperwork and you're fine.
Virginia Palacios
Yeah, you know, "We did it. We did regulation." A friend of mine called it a "pantomime of government" one time, and I thought that was a really good word to use because it's like they're going through all the motions, but at the end of the day, there's no public benefit from the way that they're enforcing these rules because they're not really enforcing anything. And so it's unfortunate because the Permian Basin in West Texas has, I think, seven out of ten counties in the United States with the highest child asthma rates. And then there was a 2020 study in the Eagle Ford Shale in South Texas showing that women who live next to high rates of flaring have 50% higher odds of preterm birth.
David Roberts
Yikes.
Virginia Palacios
Yeah, I mean, it's really disturbing that the Commission has turned a blind eye to these health impacts, and they're kind of just washing their hands of it, saying it's not their responsibility, when even the most basic thing, which is figuring out a way to get companies to comply with your rules, has not been done.
David Roberts
I want to talk about reform ideas, but there's one last thing here. There's an oil and gas waste management rule that is up for debate or something. There's some controversy over it. Can we briefly touch on what that is?
Virginia Palacios
Sure. It's a rulemaking. And so, the Railroad Commission has rules called Statewide Rule 8. It's the water protection rule, and it primarily applies to waste pits. And so, there are different kinds of waste pits. You have what are called waste pits that are authorized by rule. And so, a company doesn't have to go through any kind of a permitting process for these. These are usually small, temporary pits at oil and gas well pads, and they'll be used to basically take drill cuttings and other kinds of solid, sediment, liquidy, sludgy waste that is coming out of the well on site.
They might be used to hold what's called flowback water, which is fluids that are initially produced at the very beginning of drilling a well. Flowback waters also contain fracking chemicals. So, some of those chemicals can be like biocides, surfactants. Some of them are designer chemicals that are not publicly disclosed. And so, the pits will be used to store all that stuff. Usually, operators will let the pit's fluid evaporate off, and then they'll take that sludge, and they have options. They can either dig it into the soil on site, they can bury the liner on site on that land and leave it there forever, or they can take all that stuff to a centralized waste pit facility.
And so, this rule governs both those big commercial facilities that take waste from all over and those little on-site temporary pits on land throughout Texas. And so, I guess I'll tell a little story: So, I'm a land and mineral owner in Texas, and my dad was one of the only board-certified oil and gas attorneys in our region. We're in, like, a very rural part of South Texas, Webb County. And he thought he wrote a pretty good lease for our property, and he thought that it was really tight when it came to the waste pits.
But at the end of the day, I went out there right after they had drilled the well, and there was this pit, and there was oily stuff in the berm. There was a bunch of water in the pit, and there was a sheen on the water. And the person that I was out there with, a well witness, and so he kind of goes out there and makes sure that things are being done properly. He was like, "Oh, that's just fresh water." And I said, "Well, why is there a sheen on the water?" And he was like, "Well..."
David Roberts
It's natural. A natural sheen.
Virginia Palacios
Yeah, and so, you know, I think at the end of the day, because the rules are not that solid, operators are going to do what they've been doing everywhere, and it doesn't matter if you have an oil and gas attorney who's really knowledgeable and writes a tight lease, they're gonna do the same thing they've done everywhere else. Right. And so, we shouldn't be relying on people to write good leases. We need to have better rules in place so that the best thing is done at every location.
David Roberts
Right.
Virginia Palacios
And so, this rulemaking is happening, and what's controversial about it is that the Railroad Commission has been meeting with waste pit companies to work on this rule for the better part of two years behind closed doors. So, we found out about this last year, and we publicized it, and the Railroad Commission ended up opening an informal comment period to allow the public to comment on the rule before they released a formal proposed draft of the rule. So, we've kind of had a bite at the apple. We met with the Railroad Commission. We suggested a lot of changes for this rule to make it better.
But now, last month, they just opened the formal comment period. So now we're, you know, this is high stakes. We're trying to make sure that the public fully participates in this one, because the Railroad Commission will have to respond to any comments that the public makes, and they will have to justify their reasoning. And so, we want to make sure that we get something good. At the end of the day, they've already made some changes based on the informal comments we made. They've increased the notice period for permitted sites. And so, landowners will have 30 days to respond to notice if they want to participate in a contested hearing.
That's an improvement. It used to be 15 days, but we're still seeing a lot of loopholes. We're seeing not a lot of requirements for liners on these pits, not a lot of monitoring requirements. And the setback standards are generally excusable. So, you would be able to get an exception to any of the setback requirements that are in this rule.
David Roberts
Okay, well, I think the portrait we've painted so far is pretty clear that this regulatory body is more or less in service of the industry that it is supposed to be regulating. I think it is sort of legendarily so. So, let's talk about reform ideas. There are three members of the commission. They're elected for six-year terms, which I want to come back to, which seems crazy to me. But of all the sort of reforms of the commission that have been proposed over the year, the one that I sort of like, you know, when I first started looking into this, I was like, "Oh, it's kind of like a funny historical quirk that it's called the Railroad Commission, and it actually oversees oil and gas."
Like, "Ha ha." But it turns out there have been several really vigorous efforts to try to get them to change the name, and they have fought really hard not to. This is like, it's not a — you know what I mean? It's not a quirk. It's not a joke. They really seem committed to keeping this name, which I assume, I know you've done some polling, which I assume, like, most of the public, you know, predictably doesn't know what the hell they do. Like, doesn't even know who they're electing or why. Like, they think they're electing railroad, you know, people to oversee railroads.
It's sort of like... So, it's almost like a joke on its face, but it's kind of not a joke. Like, they're serious about not wanting to change the name. So, just talk briefly about, like, where does that fight stand?
Virginia Palacios
Yeah, so the Railroad Commission lost all of its duties over railroads in 2011. That was when, like, the very last of its railroad commission-related duties went to the Department of Transportation, but most of them were transferred in 2005. And so it's been a while that they've really been the state oil and gas agency, and they haven't changed their name to reflect that. But, yeah, the polling you mentioned is from the University of Texas. And I think the latest number, which was maybe from 2017, was that 40% of Texas voters knew that the Railroad Commission was responsible for oil and gas development.
Which is higher than you would expect. But I can't tell you how many conversations I've had with someone where I say, "Yeah, I'm focused on accountability at the Railroad Commission. Do you know what they do?" And then they start talking about the train by their house, like, "No, no, no, that's not what we're talking about here." But a bill comes up at the Texas legislature every session to change the name. I guess the last concerted effort was during the Railroad Commission's sunset review. And so, Texas has this process where we sunset state agencies; we will not reauthorize state agencies if they are no longer needed or if it's determined that their functions are not necessary.
Right. And so, every state agency goes through this process every twelve years. The Railroad Commission came up for sunset in 2011. They did not pass. So, they came back in 2013, and in 2015, and in 2017, they finally passed a reauthorization bill for the commission. They did not solve many of the problems that came up during that sunset review. But the question of the name came up over and over again at, you know, every legislative session. And so, some of the reasons that were given for not changing the name included —
David Roberts
I wanted to ask you about this. I can't tell you, I've spent hours thinking, like, "What is the conceivable benign explanation for refusing to change this name?" I couldn't think of anything.
Virginia Palacios
None of the reasons have been good. They came up with reasons. That doesn't mean these were valid reasons, but one of the reasons was that it would cost too much to change the stationery.
David Roberts
I didn't see that one coming.
Virginia Palacios
Yeah, well, you haven't seen this other reason coming either. The other reason was that Saudi Arabia wouldn't know who we are.
David Roberts
Excuse me?
Virginia Palacios
Yeah.
David Roberts
'Cause they're like, they're familiar with the Railroad Commission now.
Virginia Palacios
I mean, you know, people who do oil and gas know who the other players are. But, yeah, I mean, you know, to be more concerned about people outside the country than your own voters says a lot.
David Roberts
Yeah, it's really hard to interpret that in any sort of charitable way. So, I mean, in terms of reform ideas, that just seems like the most obvious. But let's talk about, then, the structure of the committee. So, like a PUC, a public utility commission, typically, most of the time, are appointed by governors, which means if they do something wrong or violate ethics codes or whatever, the governor can just boot them and replace them with somebody new. But these people are in for six-year terms, and they're elected by a populace that largely doesn't know what they are or what they're doing, which says to me that you just get elected by just having more money and getting your name on more signs.
"And I'm guessing the way you get more money is from the oil and gas companies. So, who funds these elections? Am I right in thinking that it's mostly the industry paying attention?"
Virginia Palacios
Yes, you are correct. And so, we published a series of reports in 2021 called Captive Agency, and we looked at the Railroad Commissioners' personal financial statements that they submit to the Texas Ethics Commission, which includes any stock they own, any interest they have in businesses, whether they own any of these companies they're regulating, et cetera. And then we also looked at their campaign contributions, and we found that out of the three sitting commissioners, about 66% of their campaign contributions were coming from the same companies they oversee on the commission.
David Roberts
Which you might think would just, I mean, if anything, would just be obviously, straightforwardly illegal for a regulatory body. That would be baseline.
Virginia Palacios
Yeah, and so, you know, we've proposed some really conservative, like, basic boundaries for campaign finance at the Railroad Commission. The first is that you could do what is already required of statewide judicial races and limit contributions to no more than $5,000 per donor. Right? Even that would be generous. You could also limit fundraising to an 18-month period surrounding the campaign. Right now, commissioners can fundraise year-round, any time of year throughout this.
David Roberts
For six years.
Virginia Palacios
Yep.
David Roberts
And it's like, if your election is five years away and you're raising money from oil and gas companies, I mean, come on.
Virginia Palacios
Yeah. So, we, you know, we documented this in Captive Agency, where you have the commissioners receiving campaign contributions before and after key decision-making moments. And so, one of the bigger things that happened, even since we published that report — I guess it was the last campaign cycle, yeah, this happened right before Commissioner Christian's election, but he had this waste pit permit come to him.
It was for a waste pit, kind of, in the Permian Basin over the Ogallala Aquifer. It was contested. People relying on that aquifer were protesting the permit because they were really worried that this waste facility was going to affect them negatively. He approved the permit, you know, along with the votes of the other commissioners, and within three days, I believe, got a $100,000 campaign contribution from the company. And so... yeah.
David Roberts
Yeah, you don't have to squint very hard at that. You don't have to be very suspicious-minded to view that as a red flag. Has anyone, have you, has anyone proposed the idea that maybe they just shouldn't be able to accept donations from companies they regulate at all? Anytime?
Virginia Palacios
Yeah, I mean, that would, of course, be ideal. The Texas legislature is not really keen on ethics laws, so we've proposed some things that might be unquestionable, and the $5,000 limit would be one thing. But we've also proposed that there be a recusal policy related to campaign contributions. And technically, right now, commissioners are supposed to recuse themselves if they have a personal financial interest in a decision, a matter, or a proposal, but they never have. And the person who would be responsible for enforcing that is the Texas attorney general.
David Roberts
Oh, lovely, lovely, lovely man. If there's one person I think of who's just absolutely scrupulous about ethics, it's Ken Paxton. So, even kind of crazier to me, is it's not even illegal for the members of the commission not just to accept donations from companies that they regulate, but to partially own, have literal investment in companies that they regulate.
Virginia Palacios
Right. And so, earlier, we were talking about Energy Transfer, and, you know, Commissioner Chairman Craddick lists Energy Transfer as a company that she has a beneficial interest in on her personal financial statement. Then we have Commissioner Wright, who owns several oil and gas waste disposal and recycling companies. And he's really the one that has been spearheading rewriting Statewide Rule 8, that water protection rule that applies to waste pits. And so, he had a task force before he was even elected to try to reform those rules. He couldn't get things passed through the legislature, so he ran for Railroad Commissioner for that reason.
David Roberts
Wild. ERCOT, the overseer of the electrical grid on the Texas side, has what's called an Independent Market Monitor, an IMM, which is just someone who ensures that the rules of the marketplace are being followed and punishes entities that don't follow them. There's nothing like that here. Right. There's no one independent of the commission or independent of the industry watching this market. Right. Monitoring this market.
Virginia Palacios
Correct. Yeah. I mean, yeah. There's no information about what gas flows are between producers and pipeline companies, or what prices are between producers and pipeline companies, or the downstream.
David Roberts
Right. Right. Also, ERCOT has all this real-time information you can get about the flows of electricity and who's doing what. I mean, it's remarkable what you can get from ERCOT in terms of just the transparency, seeing how the system is going and what prices are where. Nothing like that.
Virginia Palacios
Yeah. It's all considered to be private contracts and private transactions. And so the Railroad Commission has said they don't want to oversee it, or at least that they have no business overseeing it. But, yeah, it has come up in the state legislature. Shouldn't we have somebody kind of monitoring what's going on, on the gas side so that we know how much gas is available for gas-fired power plants, especially because we want to put more of those on the grid? And there was a lot of pushback from Representative Tom Craddick, who is Chairman Christi Craddick's father.
Representative Craddick is the longest-serving member in the Texas Legislature, the longest-serving member in the House.
David Roberts
And runs the energy committee, too, right? Doesn't he?
Virginia Palacios
Yep. Well, he doesn't run it, but he's on it. And he used to run, but, yeah. The House Energy Resources Committee is the committee that has jurisdiction to oversee the Railroad Commission.
David Roberts
So, the commissioner's father is on the legislative commission overseeing her organization.
Virginia Palacios
Yep. First degree, family relationship. Yeah. Yeah. And so, when the idea of having a gas desk at ERCOT came up or having some kind of a monitor came up in the last session, that was shut down pretty quickly by Craddick. It was unclear if he even really knew what the proposal was, but he knew that he was supposed to shut it down. And so, we'll see what happens. I think there are a lot of people making compelling cases to have more oversight over the gas supply, with flows and pricing and everything. I don't know if things will stay the same forever.
David Roberts
I mean, you would think a series of spectacular, internationally recognized disasters that left people dead and without power for weeks might be enough to shake things up a bit.
Virginia Palacios
You would hope.
David Roberts
The other family of reforms that your organization talks about a lot is about process, as far as I can tell. For the most part, the commission just meets in private, or meets with industry in private, and does its deals and issues its edicts, and the public does not have much role in all that. So, what sorts of things are you proposing?
Virginia Palacios
Well, there are open processes, right? There's comment periods for rulemakings. There's notice given out to people about permit hearings. There's comment periods for the annual monitoring and enforcement plan the Railroad Commission produces. And so, there are avenues of public participation. I think part of the question is, like, does the public have enough leverage when they do comment? Another question is like, is the public commenting enough? Part of the reason why I started Commission Shift was because I noticed there wasn't a lot of engagement, even by environmental advocates, at the Railroad Commission. And I just thought, well, if this agency is overseeing 40% of oil production in the country and this state produces more greenhouse gas emissions than any other state, shouldn't we be doing more at this agency?
David Roberts
Why is that? You think green groups or climate groups, at least, would pay attention. Do they just not know? Do they feel like it's futile? Which I guess I could kind of understand.
Virginia Palacios
Honestly, the response I would get a lot was that the commissioners had too many financial interests in the companies they were overseeing, so we didn't stand a chance. And it's that conflict of interest that is really keeping us from having nice things. But I think I would look at these comment periods sometimes and what happened afterward, and I would see the only person other than industry that was commenting would be a representative from the Sierra Club. There would be, like, one comment representing the public or the environment. And so I think that's part of what we're trying to change at Commission Shift is just like making the public aware of the comment periods, making sure they comment.
And so, we are doing a lot of organizing, and we're working with people who have been impacted by groundwater pollution or air pollution or some kind of spill or whatever it is. And we're making sure that they know, making sure that they know what the deadlines are. And if people don't have time to write their own comments, we'll meet with them and we'll get their feedback about what they want to see in the rule, and we'll put that in our comments. And so, we're just trying to make sure that public governance includes the public. I think that's the most important thing to us.
David Roberts
Have you made enough of an impression on them yet that they now hate you and are trying to destroy you? They're very powerful and you're just like —
Virginia Palacios
They're not trying to destroy me. And I do think that I won't speak as to whether they hate me or not. But I think there's a lot of bright spots in our first four years. And so, the first was what we were able to accomplish after Winter Storm Uri. We really did get rules on the books that have teeth. And there's something there. There is a critical infrastructure division at the Railroad Commission now with 65 staff members because of what we've done. And so, beyond that, I think getting the Railroad Commission to put out that informal draft of the waste pits rulemaking was another win.
We've gotten the EPA to acknowledge our petition on Class II wells, and they said that they need to investigate. So, I think the Railroad Commission is — we're making them work. Since that Class II petition, the EPA acknowledging that an investigation is needed. The Railroad Commission launched their own investigation with the Groundwater Protection Council. And so, they're having to show their work and prove themselves to the public. And so, I think a lot of changes have been made. I mentioned the monitoring and enforcement plan the Railroad Commission has to produce every year. And in the first three years that we commented on that, the only things the Railroad Commission did was they published a Spanish version of the draft, which was good.
We had asked for that, and then they would change some of the formatting in the report.
David Roberts
Wider margins increased the font.
Virginia Palacios
Yeah, but this year it was completely different. And so, they asked for public feedback before even publishing a draft. And then, the final plan that came out included most of our recommendations. And so, it just goes to show when the public actually participates, and if you participate consistently, you can get something out of your public agencies. And so, that's what we're trying to show the public here, is that all is not lost. Yes, we need these ethics reforms. We do need to change the name. We need much more from this agency. But don't give up hope.
David Roberts
There are still good things that can happen. Even with all that, it's gone so long with virtually no scrutiny that I imagine there's some low-hanging fruit here if you just get a little, just get a little bit of involvement. Final question. These are elected positions, and this is probably a naive question on my part. So this year, this cycle, Christi Craddick, the chairperson, is up for reelection. I read an article that she's got a $9 million war chest built up compared to her Democratic opponent, who now has amassed $11,000. So, you know, she's probably going to win. Is there ever, have you ever even had the thought of, like, trying to get a legitimate reformer elected to this board?
Virginia Palacios
Well, we're a nonpartisan organization, so we're not trying to get anybody elected. We're just here to call for structural changes at the commission, and we're interested in the policy aspects and public education and all that. But we're still allowed to do get out the vote. It's still a democratic commission at the end of the day. And we do want people to pay attention to the election, to learn as much as they can about it and to go out and vote. We are going to host a candidate forum on October 16, and so we're hoping to get a bunch of folks out to that to kind of just learn about what this agency is and what it does and start to kind of get engaged and pay attention.
David Roberts
It would be cool to see, like, an actual competitive election there. Although, I guess if I were trying to talk the Democratic Party into investing in this particular, you know, this particular area, it'd be kind of tough to make a case that you're not just lighting money on fire. This is truly the belly of the beast. But it is like, I just wanted to sort of get it on the record. It is elected. There is at least out there the possibility that you could elect better people to run it. Well, Virginia, this has been eye-opening in a largely disturbing way.
Thank you for walking us through it. I sort of idly wondered about this organization for years, and, yeah, it's pretty much what I expected. Pretty much. It's as bad as I thought. But I'm so glad you're out there drawing attention to it, at least, and working on reform. I appreciate it.
Virginia Palacios
Thank you. Yeah. And I think it's important for everyone to be aware of this agency because it produces so much of the oil and gas in the country. You know, in addition to being 40% of the nation's oil, we're now exporting a ton of natural gas to other countries. And, you know, this is a state agency that has a global impact, and so that's why everyone should be paying attention.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes my guests and I sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
What's the deal with the Texas Railroad Commission?