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Texas Oil Regulators Loosen Rules And Waive Fees, But Don't Cut Production

An oil rig outside Midland, Texas.
Gabriel C. Pérez

For months, the state agency that regulates oil and gas in Texas has considered reducing the amount of crude companies can pump from the ground. Supporters of the plan hoped it would reduce a supply glut and stabilize oil prices. But the proposal died Tuesday without a final vote.

It seemed clear two of the three members of the Railroad Commission of Texas – the agency that regulates fossil fuel extraction – opposed the idea. So, the one member who supported it, outgoing Commissioner Ryan Sitton, never put forward his motion on oil cuts.

Instead, the agency waived fees and loosened rules regulating oil and gas activity. Commissioners said relaxing those rules could help companies struggling with the oil bust.

Among other things, the agency waived the requirement for public hearings if a company plans to store crude oil in underground caves or other geologic formations. The expansion of storage space may help producers as an oversupply of oil meets plummeting demand, though it raised environmental concerns.

“I don’t want to hear a story in three months how we put oil in some sort of cave somewhere and ended up having groundwater pollution,” Sitton said.

“But sounds like you’re on top of it,” he added, after staff assured him people potentially impacted by an oil storage project would still be notified and could call for a hearing.

Sitton then voted with the other two commissioners in favor of the proposal.

The commission also extended a deadline for oil producers to plug nonoperating oil wells, another rollback that could have far-reaching consequences.

Typically, companies that shut down oil wells have one year to plug them with cement. That helps keep potentially toxic fluids and gasses from contaminating the earth or groundwater, or leaking to the surface.

Under the new rules, companies can wait two years before plugging wells that stopped operating within a certain time frame.

The motion was proposed by Commissioner Christi Craddick, who said it could help companies begin producing oil from nonoperating wells more easily once the current downturn in prices has passed.

“We’re trying to keep people around," she said. "You don’t need to plug a well today if it might be available to be operated in a year."

If a company goes bankrupt, it can be difficult to get it to plug so-called “abandoned” oil wells. At that point, the Railroad Commission would have to plug them.

At a hearing last year, commissioners testified wells are being abandoned faster than the agency can plug them.

On Tuesday, commissioners seemed to accept that extending the deadline for plugging wells may mean more wells are abandoned and eventually become its own responsibility.

Sitton said the vote was a question of balancing facts with potential benefits to oil and gas companies.

“We’re hoping this is going to have a net positive as opposed to a net negative,” he said before the commission voted unanimously for the rule change.

Some of the rule changes came at the recommendation of a “blue ribbon task force,” comprised of industry insiders. In the lead-up to the votes, environmental groups criticized the composition of that task force and demanded that the commission crack down on methane flaring – an oilfield practice that worsens air quality and warms the atmosphere.

At Tuesday's hearing, Commission Chair Wayne Christian asked the task force to come back with recommendations to combat flaring before the commission’s June 16 hearing.

The Environmental Defense Fund appeared to applaud that request in a statement after the hearing, saying: ““New data highlights the urgency to reduce what is now both a major source of local and climate pollution.”

Whatever flaring recommendations the task force may arrive at, Christian made it clear he wanted any efforts to confront the problem to be led by industry.

“I want to be clear," he said, "this is an ‘ask,' not a 'demand.'”

Got a tip? Email Mose Buchele at Follow him on Twitter @mosebuchele

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Mose Buchele focuses on energy and environmental reporting at KUT. Got a tip? Email him at Follow him on Twitter @mosebuchele.
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