Texas Railroad Commission budget hit by oil and gas downturn

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AUSTIN (KXAN) — The Texas oil and gas industry has been slammed by global business forces and a lack of demand due to the coronavirus pandemic. The financial slump’s effects are rippling across the state government and the halls of the industry’s own regulator, the Texas Railroad Commission.

In a Tuesday interview with The Texas Tribune, Railroad Commissioner Christi Craddick said the number of permits issued by her agency is “off by 60%.” She said the Railroad Commission, which regulates the state’s oil and gas industry — and has no oversight of railroads — gets its money from industry fees.

Those fees provide the Railroad Commission’s budget for conducting inspections and permitting, in addition to plugging wells, and safety and oversight of pipelines and mining, among other tasks.

The dip in permits “affects our budget long-term,” said Craddick, a Midland Republican. “We are in the process of making sure we are paying and have 830-plus people on our budget. We want to make sure we can keep good talent.”

The downturn could affect state budgets across the board, she said.

“We are looking and hearing back from leadership in the Capitol, ‘Look we are all going to have to take a budget cut,’” she said.

The oil industry has been battered this year by a price war between Saudi Arabia and Russia that caused oil production and supply to surge while the pandemic suppressed demand. As 2020 began, a barrel of West Texas Intermediate crude cost roughly $60. On April 20, the cost for a barrel of that oil dipped below $0, down to negative $37, for the first time in history.

Craddick said her agency is still doing inspections and permitting.

The Railroad Commission will continue to plug wells, expecting to plug at least 1,400 this year, and do cleanup, which it anticipates doing on more than 200 sites in 2020. She said the Commission’s targets are based on the agency’s budget for the second part of the biennium.

Craddick said her agency has been through downturns before. By the end of the drop in 2014 and 2015, her agency was “off 20%.” She said the Railroad Commission would look at cutting back on nonessential travel, buying new equipment and continuing to hire people.

“The challenge for us as an agency, and that is going to be an ongoing conversations, how we consistently fund us instead of being in the dips with the oil and gas industry in the short term,” Craddick said.

Craddick’s History of Power

Craddick was first elected to the Railroad Commission in November 2012. She previously served as its chair. She last won reelection to her seat on the three-member Commission in 2018. Craddick’s father, Midland Republican Tom Craddick, currently serves in the state’s House of Representatives. He is a former House Speaker and the longest serving state legislator in the state’s history.

Both Christi Craddick and her father are oil and gas investors. Craddick’s investments were the focus of a 2018 KXAN investigation that exposed possible conflicts of interest in her voting record as a Railroad Commissioner. Craddick voted hundreds of times on agenda items that could benefit companies in her, and her father’s, expansive personal oil and gas investment portfolios.

At the time of KXAN’s investigation, Craddick said she strictly follows Texas’ ethics statutes and the investments have had no bearing on her work as a Railroad Commissioner.

Though not directly tied to Craddick’s work on the Railroad Commission, KXAN has also investigated potential safety issues with the Permian Highway Pipeline.

In that report, KXAN investigator Jody Barr found segments of the pipeline sitting outside in storage yards exposed to the Texas sun and elements for months. Locals near Blanco alerted KXAN and said they were concerned the pipes’ exposure could degrade their protective coatings. The transmission line will carry natural gas 428 miles from West Texas to Katy outside Houston.

Kinder Morgan, the pipeline builder, said it abides by industry best practices and inspects the pipeline during and after the manufacturing process and during installation.

The Railroad Commission, following up on a complaint filed by a group protesting the pipeline, inspected less than a dozen of the hundreds of pipe segments piled at a stockyard near Blanco. The inspector found no issues with those pipes, and the Commission said it would inspect pipe segments at other Kinder Morgan storage yards at an unspecified time.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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