Steve August 19, 2020
the-country’s-most-important-climate-election-is-happening-in-texas

You probably haven’t heard of this year’s most important election for American climate policy. If you have, you probably didn’t realize what it was about. The Texas Railroad Commission, which will replace one of its three commissioners this year, has nothing to do with railroads. The 130-year-old regulatory body once worked with other countries to control the world’s oil markets. While it retains legal jurisdiction today over the shale boom that has seen record amounts of oil gush from West Texas, the commission has mostly ceded its enormous authority in recent decades and let oil companies self-regulate. Amid pandemic-induced turmoil in the industry, a Democratic candidate for the body hopes to reclaim that authority, slowing the bleed both of drillers’ fortunes and the methane they’re pouring into the atmosphere.

If 30-year energy industry veteran Chrysta Castañeda wins a seat on the Commission in November, it’ll mark the first time a Democrat has won statewide elected office in Texas since 1994 and the first time a Democrat has served on the Texas Railroad Commission (typically abbreviated RRC) since 1990.* Her opponent, Jim Wright, won an upset victory in the Republican primary against sitting commissioner Ryan Sitton, who currently serves alongside fellow Republicans Christi Craddick and Wayne Christian. But recent weeks haven’t been kind to Wright, who found himself at the center of a scandal when the Houston Chronicle reported he violated Railroad Commission rules more than 200 times as the owner of Dewitt Recyclable Products.

Castañeda, who lives in Dallas and formerly worked as the lawyer for the oil and gas magnate T. Boone Pickens, has focused her campaign on the issue of natural gas flaring. The practice—of burning off unwanted natural gas at the site where it’s extracted—is happening more now than at any point since the 1950s, releasing enormous amounts of methane, a greenhouse gas 84 times more potent than carbon dioxide and responsible for a quarter of all human-caused warming since 2000. The Trump administration’s rollback of Obama-era methane rules last week could release 850,000 tonnes of it into the atmosphere by 2030, according to the Environmental Protection Agency, but experts estimate the actual impact could be two to three times that.

While drillers are forbidden from flaring after their first 10 days of operations, a report last year found that the sitting commissioners issued exemptions for drillers that allowed $750 million worth of natural gas to be burned off through flaring in a single year. While flaring decreased amid Covid-19 production slowdowns, Rystad Energy found that flaring in the Permian Basin reached a high of nearly 900 million cubic feet of natural gas per day in the third quarter of 2019. Castañeda opposes that for two reasons: both the extraordinary environmental cost and the waste. “Texans deserve someone who will enforce the law and work for all of us,” she said in a video announcing her candidacy last October. “Let’s stop wasting energy.” It’s a throwback to the Commission’s earlier days. The RRC all but ended the practice of flaring when it became a major problem after World War II.

The RRC’s most powerful tool for regulation, flaring included, is known as proration—effectively setting limits on how much oil can be produced at individual wellheads. First developed in 1919, the Commission’s prorating system wasn’t unlike New Deal-era agricultural reforms intended to conserve natural resources—be that soil or oil—to keep them economically productive for years to come. After the discovery of the East Texas Oilfield in 1930, landowners eager to turn a profit began a drilling frenzy, flooding an already oversupplied market at the depths of the Great Depression. When landowners ignored a proration order in April 1931, the governor of Texas sent in the National Guard to pry them from the wells and raise fuel prices. As Texas moved to regulate its own oil, it not only stabilized production in the Lone Star State but worked with the British and U.S.-owned Seven Sisters oil companies to create a global cartel system for coordinating oil production, which would serve as a model for OPEC’s formation in 1960.

Over the past nine decades, the RRC has transformed from careful overseer of the oil and gas sector to its unconditional friend. “By the seventies the Railroad Commission no longer limited production. They basically became a lobbyist for the oil industry,” said economic historian Gabriel Mathey, noting Texas’s declining importance in export markets in that decade as other oil producing countries started to exert claims over their countries’ oil wealth. “Today there’s unrestricted flaring. They approve any application for flaring even if there’s a natural gas connection” that allows it to be transported elsewhere.

When oil prices crashed this past spring, lame duck commissioner Ryan Sitton considered reinstating proration for the first time in over 40 years to prevent flooding the market with Texas oil that no one needed, driving prices even lower. The idea split two arms of the industry. Big producers with refinery operations (think BP or ExxonMobil) that could keep buying and processing cheap oil, and with balance sheets big enough to swallow losses in drilling, argued against production controls. But independent producers—mostly smaller companies, whose main business is drilling for oil—needed higher prices just to break even with the high cost of production. For them, proration could be a lifeline.

Another commissioner Wayne Christian immediately argued that proration wasn’t actually feasible. “From a practical standpoint,” he said, “the Railroad Commission has not prorated oil in over forty years; we do not have staff at the agency with experience in this process and our I.T. capabilities to handle this process are limited at best.”

Castañeda disagrees. “You need the CDC when you have a pandemic, you need to know how to do proration controls when you have this incredible oversupply of oil,” she told me, calling Christian’s position on the matter “egregious.” The RRC, she said, stopped doing regular exercises gaming out scenarios for handling oversupply crises over a decade ago. “You ought to at least know how to do it and be running the planning exercises. About half the industry asked for proration controls,” she estimated, “and had everybody produced a little less perhaps we would not have the significant job losses we’re looking at now.”


Energy is a touchy subject in Texas, particularly for a Democrat looking to win statewide office at a time when debate over rising temperatures and fuel production has turned into a culture war. “Climate change is real and the industry acknowledges it’s real, and it is contributed to by the production of fossil fuels,” Castañeda said. “Even in the Permian they know that’s true. The real challenge in Texas is the fact that twenty percent of our state budget is funded by oil and gas extraction taxes and royalties, and a huge segment of our economy and the jobs associated with it are attached to this particular industry.”

Accordingly, Castañeda thinks oil and gas has a big role to play in the nation’s energy mix for years to come—a view out of step with many progressive members of her party. She sees the need for a transition off of fossil fuels in the coming decades, “but it also needs to be a thoughtful transition. People in the industry have got to have a place to go, and we have got to remediate the infrastructure as we transition from fossil fuels to cleaner greener energy.”

In line with politicians from other oil-producing states, Castañeda favors federal support for companies to pay oil and gas workers to plug up the state’s scores of abandoned wells now leaking methane. But the biggest contribution the Texas Railroad Commission can make to the climate fight, she said, would be for it to simply do its job: reining in methane leakages using laws already on the books.

In other words, she suggests the U.S. readopt systems that other countries have used for decades. Norway, Saudi Arabia, and other oil exporters have national oil companies that coordinate production within their borders and negotiate on the world market; their revenues play a key role in bolstering public budgets. While the U.S. government has boosted its fuel producers through trade deals and institutions like the Export-Import Bank, in recent decades it’s left production decisions almost entirely up to private companies to which it funnels billions of dollars worth of subsidies. As in the 1930s, companies’ individual drive to sell as much fuel as possible is coming back to bite the industry as a whole. Unlike the 1930s, there’s no overarching regulatory authority intervening to rationalize production.

Currently, the Trump administration is running in the opposite direction, trying to pump as quickly as possible in the midst of a historic fuel glut and low prices, whatever the long-range consequences for the industry it’s so desperate to help. In some sense, the crisis facing the U.S. fossil fuel sector comes from its flight too close to the sun of a free market. “Energy independence”—the old watchword from the days of the oil crisis in the 1970s—was always impossible.

Asked whether she’d push for the RRC to reclaim its role coordinating global oil markets, Castañeda said, “I’m certainly interested in the RRC doing its job, which does include balancing supply and demand in a worldwide market.” Most of the drilling in Texas, she observed, happens on privately rather than federally owned land, meaning the federal government has less jurisdiction than it does in places where it leases public lands out to drillers at preferential rates.

Castañeda hopes to improve data collection, too, locating over a century’s worth of abandoned wells and getting a more detailed sense for how much flaring is really happening amid chronic underreporting from drillers. She wants to change the Commission’s funding structure, which today relies on oil, land, and gas revenues. “Part of the reason the industry has held such sway is because it funds the Railroad Commission day in and day out,” she said. Among the biggest changes would be a cosmetic one, renaming the Commission so as to reflect what it actually does. “If what it’s going to continue to do is oversee oil and gas then it needs to be called the Texas Oil and Gas commission”—or, in an era of transition, “maybe we call it the Texas Energy Commission.” Based on conversations with voters, she estimates that as many as half of Texans don’t know what the Texas Railroad Commission is. Should she win this fall, that may well change.

* This piece originally misstated the year a Democrat last won a statewide election in Texas.

Read More