Investigation: Texas failed to crack down on gas after grid crisis

By Shelby Webb | 07/20/2023 07:00 AM EDT

E&E News examined state efforts to inspect natural gas facilities and prevent another massive energy emergency in Texas.

frozen gas pipelines with redacted inspection text collaged on top

POLITICO illustration/Photos by iStock

Since a deadly February 2021 freeze interrupted the flow of natural gas to power plants across Texas, state regulators have inspected gas facilities to see if they’re prepared for winter.

But an E&E News analysis of state weatherization records found that few operators have been written up for violations beyond paperwork, raising questions about how thorough and effective Texas’ efforts have been.

Data provided by the state Railroad Commission, which oversees Texas’ vast oil and gas network, shows that only 222 of more than 7,000 natural gas facilities designated as critical infrastructure last winter were cited for problems.


All but 10 of the citations went to operators that didn’t fill out weatherization forms by a December 2022 deadline. The others were for sites that failed to implement any weatherization practices. None of the violations obtained through an open records request included specific equipment issues, such as failing to insulate pipes or replace old valves, although details about most of the sites were included in inspectors’ comments.

Weatherizing critical natural gas infrastructure has become a focal point of conversations about how to prevent power outages in severe weather events across the country. It gained urgency after more than 240 people died in Texas in 2021 because of Winter Storm Uri, which caused widespread energy problems and outages. Critics say if Texas is not being thorough with inspections, it could set the state up for another crisis.

“It does make you wonder, was there anything actually implemented on these sites, or was it just really paperwork problems?” said Virginia Palacios, executive director at Commission Shift, a nonprofit advocacy group that aims to reform the Railroad Commission of Texas.

In a response to E&E News questions about the inspection data, Railroad Commission spokesperson RJ DeSilva said many factors come into weatherizing natural gas facilities — and that the agency’s mission includes protecting Texans.

“Rest assured — rule requirements and our inspections across Texas work to help ensure that gas flows for electricity and heating … as was the case during last winter’s storms,” DeSilva wrote in a statement.

Two of the three commissioners who serve on the state’s Railroad Commission — Wayne Christian and Jim Wright — did not respond to requests for comment. The third, Chair Christi Craddick, declined to comment through a spokesperson. All three are Republicans.

After Uri stuck, Texas lawmakers approved laws that required the Railroad Commission and the state Public Utility Commission, which oversees the state’s electric system, to make changes. Chief among them was S.B. 3, which passed in 2021.

That measure mandated that the Railroad Commission help identify natural gas infrastructure that’s critical to natural gas-fueled power plants. It also required the Railroad Commission to adopt rules that include “measures a gas pipeline facility operator must implement” in order to be prepared for extreme weather conditions, if those facilities serve power generation needs.

But parts of the Texas Administrative Code that dictate how critical natural gas infrastructure needs to be weatherized for winter storms are much less specific and prescriptive than other sections of the code.

Take TAC 3.13, which governs well casings, cementing, drilling and other factors. It sets out statutory requirements for the diameter of wellbores in relation to casings, how operators need to test cement casings, mandates blowout preventer systems and requires base cement to meet certain standards laid out by the American Petroleum Institute. Other code sections that relate to well plugging are similarly narrow.

The rules that required winter weatherization to be updated after the February 2021 freeze — TAC 3.65 and 3.66 — are much broader. The only specific requirement included in those rules is that operators file an attestation with the Railroad Commission, self-reporting that they have prepared for winter weather.

TAC 3.66 says weatherization of a facility must include “methods a reasonable operator would take given the type of facility, the age of the facility, the facility’s critical components, the facility’s location, and the weather data for the facility’s county or counties such as data developed for the Commission by the state climatologist.”

The Railroad Commission has published a guidance document of best practices for weatherization, which is available on its website. While that document is detailed about various efforts that operators should take, none of those are mentioned in the rules or are required to be implemented, DeSilva said in a statement.

“The purpose of the guidance document is to provide operators common practices and considerations related to weatherization,” he wrote. “Weatherization is not ‘one size fits all.’ Types of weatherization depend on factors such as geographic location of the facility, the type of facility, the volumes of product produced/transported/stored, amongst other variables.”

Additional records provided by the Railroad Commission included comments from inspectors noting weatherization measures they observed at 255 locations. But the comments didn’t cover sites on the state’s violation list.

Of the 255 entries reviewed by E&E News, 21 were blank. The others varied from paragraphs of detailed information to three-word sentences, including seven that read only “Routine inspection completed.”

It is true that every well site is different and there is variation in climates across the state, said Hugh Daigle, a petroleum engineering assistant professor with the University of Texas, Austin.

“Some of that vagueness is how it has to be, but I think it’s giving the operators a lot of leeway here to do what they want to do,” he said.

The inspector notes showed some operator shortcomings that were not written up as violations. Five of the comments indicated that no physical weatherization measures had been implemented on location — but did not give a reason as to why they were not implemented.

Inspectors for five of the sites, including four locations where inspectors said there was no physical weatherization, said the operators had attested that their flares would be upgraded. But the inspectors found that the sites did not have flares, which can be used to burn natural gas in case of high pressure or an emergency.

Eyeing electricity

The Midlothian power plant.
The Midlothian power plant, a gas-fueled facility southwest of Dallas. | Edward Klump/POLITICO’s E&E News

The vagueness of standards required for natural gas operators stands in stark contrast to what has been required of power generators that run on natural gas.

The PUC, which oversees Texas’ electric system, passed a series of winter weatherization standards in October 2021 for power generators.

Under the rules, generators were required to establish schedules for weather-testing systems that prevent freezing, protect sensors for components needed for the plant to operate in cold weather, shelter instruments from the wind, file winter readiness reports, train workers on winter-storm protocols and inspect insulations.

Generators can seek exemptions for some of the requirements, at the discretion of the PUC and the Electric Reliability Council of Texas (ERCOT), the state’s primary grid operator.

Penalties for violating weatherization rules increased to as much as $1 million per day per violation.

In a statement, PUC Chief Press Officer Ellie Breed said the weatherization standard changes have made Texas’ electric grid more reliable than ever.

“This has been proven repeatedly over the past two years, as the grid has operated without disruption or emergency during several severe weather events with record-setting winter and summer demand,” she said.

In the nearly two years since the PUC’s new rules were adopted, the commission has imposed a total $900,000 in administrative penalties on six generators, four of which were also ordered to invest $1.2 million into their operations. One pending case involving two generators, which share a common corporate parent, includes a $160,000 administrative penalty and a requirement to invest $1.1 million more in their operations.

In passing new weatherization rules, the Railroad Commission said in a press release that administrative violations could reach up to $1 million each and that “operators who intentionally disregard the weatherization rule will not get away with paying a low penalty.”

The Railroad Commission, thus far, has logged 18 violations related to rule 3.65, which requires filing paperwork, fining a total of $30,500 for the violations. DeSilva said there are nine violations that have been filed against companies for filing 3.66, which requires facility weatherization. DeSilva said that, according to statute, it is up to the state attorney general’s office to assess penalties for those violations.

Daigle said the different responses go back to how the Texas Legislature and state regulatory agencies assigned blame for the power outages that plagued the state during the 2021 freeze. Texas’ political leaders, including Gov. Greg Abbott (R) and Lt. Gov. Dan Patrick (R), blamed power generators — renewable energy sources, in particular — for the outages.

Natural gas operators have come under fire from federal agencies, attorneys general in other states, independent analysts and the federal government for allegedly nixing existing contracts with power generators so they could sell their gas on the spot market at much higher prices and alleged price gouging, on top of failing to weatherize their equipment.

But in Texas, Daigle said they escaped the same scrutiny that dogged power generators.

Politicians and Texas regulators said, “‘Well, it was the electricity producers’ fault for not providing enough electricity,’ with the subtext that [they] rely too much on wind and solar,” Daigle said. “There’s a significant political statement in that, but then you have a lot of these analyses and white papers that show the natural gas supply caused a significant amount of the disruptions.”

DeSilva with the Railroad Commission said the rules have already worked. He pointed to two storms this past winter, one in December nicknamed Winter Storm Elliott and another in late January and early February called Winter Storm Mara.

During those storms, he said, “there was more than enough gas for heating and electricity generation.”

“All the elements of gas supply — production, pipeline transportation, and underground storage — provided necessary gas,” DeSilva wrote. “And that is something we will continue to oversee throughout the years to protect residents.”

Gas production

A warning sign marks a natural gas pipeline outside a compressor station.
A warning sign marks a natural gas pipeline outside a compressor station in Dalworthington Gardens, Texas. | Martha Irvine/AP Photo

Texas differs from many states in that it has a “just-in-time” natural gas delivery system, said Joshua Rhodes, an energy systems researcher at UT Austin. That means natural gas is constantly being produced, processed, compressed, transported and sent to consumers — including power generators.

There’s some storage built into the system, but it’s small compared to the reserves seen in New England and other places, Rhodes said.

A report by UT officials after the February 2021 storm showed natural gas fell by 85 percent in the Permian Basin, which created a major snag in the electricity supply chain, according to Rhodes, who led the committee that published the post-storm report. With such a drop-off in production, and relatively little in reserves, the supply chain began to buckle.

The drop in production created problems at some power plants that were trying to generate electricity. Rhodes said there was a consistent 5,000 to 6,000 megawatts of generating capacity that was not able produce because the plants were not able to get the natural gas they needed to operate. One MW can power about 200 homes during periods of peak demand, according to Texas’ main grid operator.

More than 40 percent of ERCOT’s power generation came from natural gas last year, according to the nonprofit grid manager. ERCOT manages a region that includes about 90 percent of the electricity demand in Texas.

“We have lots of data from the electricity system where power plant operators give reasons for going offline, and we just don’t have that data in the natural gas sector,” Rhodes said. “It makes it hard to plan for these kinds of things.”

While Rhodes said it’s hard to determine how much of the natural gas production drop resulted from operators failing to weatherize, the situation did benefit some operators.

Natural gas company executives caused a firestorm of criticism by showcasing to investors the record earnings they were able to reap during shortages in the storm. And the Federal Energy Regulatory Commission said it would investigate whether some natural gas companies purposefully tightened the market to boost their profits during the emergency.

“On some level, there’s a financial incentive for them not to weatherize,” Rhodes said. “If your financial incentive is to not winterize, if we want a system resilient against that, we have to have efficient regulation and requirements. But the process so far has been extremely opaque and left up to a regulatory body that more often acts as an industry trade organization or cheerleading group than anything.”

DeSilva, the Railroad Commission spokesperson, said daily average onshore natural gas production during the Elliott and Mara winter storms showed how Texas is performing.

Production dipped to 24.65 billion cubic feet per day on average from December 2021 to March 2022. But output in Texas rose to 24.89 bcf per day during Elliott and 25.07 bcf per day during Mara.

However, temperatures during those storms did not dip as low during those events as they did during Uri in 2021, and the low temperatures did not last as long.

The Texas Oil & Gas Association did not provide a comment when asked by E&E News about any financial incentives for the industry to not weatherize facilities.

But Todd Staples, president of the oil and gas association, pushed back against concerns that the Railroad Commission’s rules are lax.

He said the natural gas supply chain undergoes extensive planning and preparation in the cast of extreme cold and hot weather. That includes installing insulation, shelters, wind walls, constant monitoring on many assets, heat tracing, and methanol injections that can induce both cold or hot temperatures.

“Even though operators already weatherize, legislation passed by Texas lawmakers last session mandated the Railroad Commission of Texas to designate the most critical natural gas assets and related systems and require weatherization of those assets, and it is clear both the RRC and the vast majority of operators are properly weatherizing and doing their part to contribute to the reliability of Texas’ power grid,” Staples said in a statement.

Daigle said the oil and gas industry has another incentive to weatherize: a need to maintain its social license to operate.

“It’s the tolerance people have to oil and gas operating in their communities,” he said. “The companies may not be worried about a $5,000 fine, but at the same time, they don’t want to be the ones whose wellheads are freezing up because it looks really bad.

“Self-policing is the biggest deterrent in the industry,” Daigle added. “It’s not perfect, but it’s something.”

If that’s the only stick to try to force natural gas companies to work to prevent another freeze, Palacios with Commission Shift and Rhodes with UT Austin said it won’t be enough to have the industry make necessary changes to avoid the issues it faced in the 2021 freeze.

“If you’re going to be going through a process of oversight and issuing violations or enforcement actions, there should be better performance that comes out the other side of that,” Palacios said. “And it’s not clear that these types of violations, or the enforcement, are going to lead to better performance.”