This year’s other big climate election is for a Texas oil and gas official

Rachel Adams-Heard and Kevin Crowley January 27, 2020

HOUSTON (Bloomberg) - An election held in the U.S. in 2020 could do a lot to shape global climate outcomes in the immediate future. It won’t feature Joe Biden, Bernie Sanders, or Elizabeth Warren, and the winner won’t live in the White House. It’s a race for a seat on the Texas Railroad Commission, which holds immense power over the state’s vast oil and gas industry.

Booming oil and gas production across the Permian Basin of West Texas has made this little-known regulator, with three voting members, a pivotal decision-maker for the American contribution to climate change. The reason for this comes down to natural-gas flaring. Drillers in Texas, as in other places, are allowed to burn off vast amounts of natural gas that is a by-product of oil production. This is done, in part, because of the expense involved in capturing the gas, putting it into pipelines, and moving it to processing facilities.

And it happens with permission from the Texas Railroad Commission. 

Burning off the gas prevents the unchecked release of methane, an extremely potent greenhouse gas that causes as much as 36 times more warming than carbon dioxide in the 100-year period after its release, according to the Environmental Protection Agency. But allowing Texas drillers to burn their unwanted gas—something the Railroad Commission almost always does—is a harmful solution: Tons of carbon dioxide and other pollutants enter the atmosphere, without yielding any useful energy.

Global gas flaring emits more than 350 million tons of CO2-equivalent each year, according to the World Bank. That’s equal to all the natural gas consumed in Central America and South America each year. 

“This is the most important environmental race in the country,” says Chrysta Castañeda, 56, one of four Democratic candidates vying to become the first non-Republican commissioner in more than 25 years and the first Democrat to win statewide office since the 1990s. The commission “is not enforcing the laws” on flaring. “What’s going on in Texas is one of the biggest contributors to the issue worldwide.”

Texas Railroad Commissioner Ryan Sitton said it’s “patently false” that the agency is not enforcing the rules on flaring. The state flares just 2% of its gas production, much less than most other major producing countries, according to a statement released by his office.

The Railroad Commission was set up by the state in the late 1800s to regulate private railroads. Over the years, that mandate grew to include everything from oil and gas in 1919 to buses and trucks in 1931. A few regulatory changes left the agency no longer overseeing transportation, but the name has stuck and it remains the chief regulator of the state's oil and gas industry.

The commission has never denied a flaring permit for other than administrative reasons. In one recent case, a company won permission to burn unwanted gas by arguing that connecting to a nearby pipeline would be too expensive. If the Permian Basin were a country, it would have ranked ninth for total volume of flared gas in 2018, ahead of Mexico and Angola and just behind Libya.

“It’s not an easy, black-and-white, ‘Well-why-don’t-you-just-tell-them-to-stop?’ kind of problem,” says Bobby Tudor, co-founder of Houston-based investment bank Tudor Pickering Holt & Co., which advises oil and gas companies. “But I think in general, a much firmer stand from the Railroad Commission and leadership from the most active companies can make a difference.”

Flaring is central to the campaign to unseat Sitton, and the issue is gaining more attention than ever. The race now includes Castañeda and three additional Democratic challengers: Dallas lawyers Roberto Alonzo and Mark Watson and San Marcos educator Kelly Stone. Watson and Stone both say they, too, want to crack down on flaring. Alonzo didn’t respond to requests for comment and does not appear to have a website.

“The prices paid for shale oil do not accurately reflect the true cost of production,” Watson says. “Flaring natural gas must be reduced very quickly, in a responsible manner.”

Stone takes it a step farther, siding with Democratic presidential candidates such as Warren and Sanders, who have come out in support of a ban on fracking.

“I’m a gal that wants to ban fracking,” says Stone, who taught at Texas State University until her class, Sexuality Across the Life Span, was canceled last year amid a spat with national conservative group Turning Point USA. “I realize that I’m saying that in the state of Texas, where people clutch their pearls when you say something like that.” (A spokesman for the university said it doesn’t comment on personnel matters, and Turning Point USA didn’t respond to a request for comment.)

Castañeda says such a move would risk “huge disruption to our current economy and current lifestyle.” She accuses the Republican-dominated commission of failing to enforce the commission’s existing rules by putting limits on waste.

“If we are going to extract fossil fuels from the ground, we ought to use them productively and not wastefully,” says Castañeda.

Sitton frames the issue around preventing the economic waste of leaving oil in the ground. Halting flaring would “cost billions in terms of economic impacts and taxes to the state and Federal government” as well as raising energy costs, his office said in its statement. ​​​​“The energy produced in Texas provides affordable energy for people all around the world and it is produced more cleanly and responsibly than anywhere else in the world.”

Last December, Sitton told Bloomberg Television that he’s “very confident” about his chances for reelection.

In Texas, producers are allowed to flare without limits in the first 10 days a well is operational; after that, flaring requires a permit from the Railroad Commission. In 2019, the commission granted 6,972 permits allowing companies to flare or vent natural gas, a 40-fold increase from the start of the shale boom a decade ago. Texas crude output, meanwhile, increased fivefold over that period.

Not surprisingly, flaring in the Permian Basin, which stretches across West Texas and southeastern New Mexico, has climbed to an all-time high. The basin flared 700 million cubic feet of gas each day in the third quarter of 2019, according to Oslo-based Rystad Energy. That would be more than enough to meet residential demand across the entire state of Texas.

Producers say they need to flare because natural gas pipelines haven’t kept pace with supplies. Local gas prices are so depressed that at times they’ve gone negative, meaning drillers have to pay to get someone to haul away unwanted fuel. That’s been enough to convince current Railroad Commissioners that flaring is warranted.

“The industry and the Railroad Commission has been saying, ‘We need more pipeline capacity,’” says Colin Leyden, senior manager of regulatory and legislative affairs at the Environmental Defense Fund in Texas. “They’ve been saying that for six years. I think that pipeline capacity is going to end up helping, but it’s not going to solve the issue.”

Castañeda believes there are other options. She points to on-site power generation, in which producers run natural gas through a generator, turning it into electricity that can power their own operations. Oil companies could also connect to the grid, using gas to power homes and businesses across the state. “They could put excess power into the grid so that in hot summer days, we are not pulling coal-fired power plants back online to make up that gap,” she says.

Like Sitton, who worked as an engineer for several oil companies, Castañeda touts her experience in the industry, including a high-profile case in which she represented T. Boone Pickens’s Mesa Petroleum in a lawsuit against J. Cleo Thompson, another legendary Texas wildcatter, over assets in one of the hottest parts of the Permian Basin.

Castañeda and her Democratic challengers are trying to ride a blue wave in a state that’s still mostly red. Plus, there’s the challenge of getting voters to understand what exactly the Texas Railroad Commission does in time for the November election. And not all oil producers are likely to be excited about the idea of greater regulation of their activities.

Castañeda has been making the rounds across the state, including the unofficial capital of the Permian Basin: Midland. She turned up for a recent event at the Midland Petroleum Club and got into a conversation with a small-scale local operator. “I just introduced myself as a Democrat running for the Railroad Commission,” she says, “and one of the first questions I got was, ‘What are you going to do about this flaring problem?’”

There were moments last year when it seemed that the Texas Railroad Commission was changing its permissive posture on flaring permits. In a rare split, Chairman Wayne Christian, whose seat is up for reelection in 2022, dissented from the decision to grant Exco Resources a permit, despite the fact that it could connect to a Williams Cos. pipeline nearby. Williams is now suing the commission.

“In my business, I have to pay for the local sewage, the local garbage,” Christian said at a second meeting, in which he raised concern over issuing a permit to Exco. “It’s a cost of doing business.”

Still, that was just one case in almost 7,000 from 2019. Christian and the other two Republican commissioners have otherwise voted staunchly in favor to allow producers to flare. Castañeda or any other flaring opponent successful in taking the seat would likely be outvoted.

When asked how she would deal with that, Castañeda responds: “There’s always the bully pulpit.”

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