Oil Empire | Conflict Concerns

Texas’ upcoming legislative session could face a renewed push for ethics reform at the state’s Railroad Commission. Transparency regarding commissioners’ business connections has come under fire in recent years — a call for change now reignited by a KXAN investigation.

New evidence has surfaced of Chairman Christi Craddick and her family’s previously undisclosed ties to oil and gas companies she regulates. KXAN traveled to her hometown of Midland and surrounding West Texas communities to dig through land and mineral records not available online and not easily acquired through public information requests.

They show the family has stakes in hundreds of oil and gas leases through a myriad of corporations, many of which have been the subject of votes Craddick has cast since 2014. A review of official commission minutes reveals no mention of those interests by Craddick — a potential conflict that concerns watchdog groups, legal experts, a state lawmaker and a fellow commissioner presented with our findings.

“If I’m voting on an item, and I own direct interest in that item then, yes, that would be a conflict of interest,” Commissioner Ryan Sitton told KXAN.

During his 2014 campaign, Sitton moved his own oil and gas engineering company into a blind trust, something typically created to prevent conflicts of interest. Sitton said he is purposefully unaware how the company’s assets are managed while he holds office.

The annual financial filings of the third commissioner, Wayne Christian, show ownership in oil and gas stock in recent years, but he told KXAN his portfolio is controlled by a third-party manager registered with the Securities and Exchange Commission and that he has never directed specific stock purchases.

Government watchdogs like Texas Public Citizen’s Adrian Shelley said commissioners generally should not cast votes “in which they have a clear bias.”

“At the least, that should require disclosure if not recusal,” Shelley said, adding that regulators who don’t adhere to that level of transparency “are probably not fit to serve in that position.”

Industry impact

To better understand the voting process, KXAN spoke with two oil and gas attorneys who requested anonymity because their work could be affected by the Commission.

One attorney explained agenda items are typically vetted by an expert engineer and an administrative law judge prior to a vote. Craddick is also just one of three votes, and a majority is needed for approval — meaning she can’t unilaterally pass an item.

Her votes have also been consistent with the other commissioners for years, as they rarely vote against enforcement orders and other rule changes already reviewed and approved by agency staff.

But those decisions do have the power to affect an operator’s ability to pump from an oil field, which could,  in turn, disrupt the wealth flowing to mineral and royalty owners. If the commission makes a move resulting in that operator pumping less, the people with a stake in that lease — which could include Craddick — might make less money, one attorney said.

No ‘wiggle room’

This issue is not lost on Texas’ neighbor to the north. Since the 1960s, Oklahoma has enforced some of the nation’s strictest rules for oil and gas regulators.

Oklahoma ethics laws forbid commissioners to have a single interest in or accept anything of value from companies they regulate. Spokesperson Matt Skinner said staff can’t even accept a ride to the airport or a cup of coffee.

The law is in place to prevent even a hint of a conflict of interest. There is no gray area, and there is no “wiggle room,” Skinner said.

“It removes all questions, and it stops even any unmeant appearance of impropriety,” he added.

‘Good government 101’

In recent years, a group at the Texas Capitol has tried, unsuccessfully, to strengthen ethics rules for railroad commissioners here. The Sunset Advisory Commission, which is a bipartisan legislative panel that reviews and recommends improvements to state agencies, pushed for reforms in 2013.

Shelley’s group was involved in that discussion and provided lawmakers with campaign finance research, showing railroad commissioners’ political campaigns were funded mostly by the oil companies they regulate. It also revealed commissioners took campaign dollars from those companies while making decisions on their applications.

Much of the Sunset Commission’s recommended improvements that year never became law, but state Rep. Rafael Anchia, D-Dallas, said he will try again in 2019.

“If you have a business interest in a company and that company is coming before you and asking you to make a determination on their behalf, you have to disclose it,” said Anchia, who sat on the Sunset Commission back then. “That is real basic. That is good government 101.”

Anchia also authored a bill in 2017 to limit when railroad commissioners could accept campaign cash from the industry they regulate. The bill unanimously passed a House committee but never made it to the full floor for a vote. He said KXAN’s findings will help lawmakers understand the severity of this problem as they consider his forthcoming legislation.

Oil Empire | Explore the Evidence

Critics call for more transparency of the Texas Railroad Commission.