Texas grapples with how to fight oil crash

By Mike Lee | 03/27/2020 07:23 AM EDT

Jim Wright, a political newcomer, won an upset victory in the Republican primary earlier this month for a seat on the influential Texas Railroad Commission, which regulates oil and gas in the state.

Jim Wright, a political newcomer, won an upset victory in the Republican primary earlier this month for a seat on the influential Texas Railroad Commission, which regulates oil and gas in the state. Wright for Texas Railroad Commission/Facebook

With the state’s oil industry in free fall, candidates for a key regulatory seat in Texas are staking out different positions on how to stabilize the price of crude.

The Texas Railroad Commission, whose members are elected statewide, regulates oil and gas production along with pipelines, mining and some natural gas utilities.

Ryan Sitton, the incumbent commissioner who lost the March 3 Republican primary, caused a stir last week when he suggested reviving pro-rationing, in which the commission could order companies to cut production to stabilize oil prices (Energywire, March 23).


Jim Wright, a business owner who defeated Sitton despite a massive funding differential, said the oil industry needs to work together to find a solution but rejected the idea of pro-rationing.

"I can encourage those people to come together, and I can facilitate that," he told E&E News in his first interview with national media since the election. "With us approaching OPEC today — even with a promise of pro-rationing — we’re still doing that from a point of weakness, and that’s not good for our industry."

Wright’s opponent won’t be determined until a Democratic primary runoff scheduled for July, but the race will likely hinge on how the commission can respond to the oil price crash, along with the GOP-dominated agency’s record on environmental issues.

Texas, the top oil-producing state, is seeing thousands of layoffs and could see far more as the crisis continues. Demand for fuel is falling because of travel restrictions, business closures and quarantines meant to slow the spread of the new coronavirus. Meanwhile, Saudi Arabia and other Middle Eastern nations are flooding the world with oil after negotiations broke down with Russia on production cuts.

The Democratic candidates — Chrysta Castañeda and Roberto Alonzo
— were scheduled to meet in a runoff election in May, but it was delayed because of the COVID-19 outbreak. Republicans have controlled state government in Texas since the early 1990s, but Democrats have said they may have a chance to win some statewide elections this year thanks to an influx of women, Latinos and younger voters (Energywire, Jan. 17).

Castañeda, an oil and gas attorney from Dallas, said the commission members should start holding hearings now on possible solutions to the oil crash, even if they ultimately reject the idea of pro-rationing.

"They can certainly open up the process, gather the information and make an informed decision," she said. "Whether it’s the pandemic or whether it’s the Railroad Commission, we need competent, functioning government."

Alonzo, also an attorney from Dallas, said it was unclear if the commission could still set limits on oil production but said the agency should use its position to show leadership.

"Even if the commission doesn’t have power, folks do listen to what a commissioner says because it deals with oil and gas," he said.

Divisions over flaring

Wright took an industry-friendly approach on another big issue that the Railroad Commission has confronted — how to control natural gas flaring in the oil field. Oil companies are wasting billions of cubic feet of gas that’s co-produced in oil fields by burning it in flares because it’s uneconomical to ship it to market.

The commission should work with pipeline companies and liquefied natural gas terminals to find ways to export more gas, Wright said.

"Us saying, ‘Let’s just do away with flaring’ — that’s not the solution," he said.

Castañeda said the commission may be able to encourage the industry to find alternatives, but it should also use its regulatory authority. Oil and gas companies need an exception to state rules to flare gas long term, and the commission could use its authority to make companies explore alternatives, she said, such as using excess gas to generate power at drilling sites.

"We need to slow down that exception process until companies can show that they’ve collected this information," she said.

Alonzo was more direct.

"My position would be, we need to stop flaring," he said.

All three candidates said they’d try to set a tougher ethical standard for the Railroad Commission. State law allows the commission’s members to receive unlimited campaign contributions from the companies they oversee. The sitting commissioners have frequently been criticized for cozy relationships with the industry (Energywire, Nov. 1, 2018).

Castañeda, who has an engineering degree from Kansas State University and a law degree from Southern Methodist University, has spent most of her career as a trial attorney. She won a $146 million verdict in a mineral rights case for Dallas oilman T. Boone Pickens in 2016, according to a news release. She said her legal experience will help her navigate any potential conflicts of interest.

"There are some conflicts that are more pointed and direct than other kinds of conflicts," she said.

Alonzo grew up doing farm work in rural Crystal City, Texas, and earned an undergraduate degree from the University of Texas and a law degree from Texas Southern University. He now works primarily as a criminal lawyer in Dallas, but he said his 20-year experience in the state Legislature will help him navigate the potential conflicts as a commissioner.

"We should have a level playing field," he said.

Wright said he’d refuse contributions from companies that have cases in front of him, or look for a way to recuse himself. Although he owns a group of energy-related businesses, he said his background is different from other politicians in the state.

He grew up near Corpus Christi in South Texas and was a high school rodeo champion. He skipped college and went to work at a hazardous waste landfill near his home because his father was ill.

He later started a group of businesses, including a firm that does waste trucking and environmental consulting. The experience gave him an affinity with rank-and-file workers when he was campaigning, he said.

"You may catch me one day sitting behind a desk, the next day I have no problem putting a shovel in my hand," he said. "People saw that in me, and then they would tell me the issues they would have, just as a worker."