Texas’ energy regulator may seat its first Democrat in 26 years

By Sergio Chapa and Kevin Crowley on 10/31/2020

(Bloomberg) --Jim Wright, a Republican seeking a seat on a board that regulates the Texas energy industry, knows the agency intimately.

He ought to. He’s paid it $181,000 in fines.

If Wright prevails on Nov. 3, he’ll join the three-member Railroad Commission of Texas with lawsuits hanging over his head from a 2014 business deal that went bad, ending with his accepting responsibility for more than 255 environmental violations at a waste recycling facility.

“People expected me to run from this situation,” Wright said in an interview. “But it’s one of the main reasons I’m running for the Railroad Commission.”

Texas hasn’t placed a Democrat on the panel for 26 years, but a victory for Wright is far from certain. His Democrat opponent, Chrysta Castañeda, has more campaign money at her disposal after a late surge in fund raising, and Texas has become competitive for her party in the closing stages of this election cycle following an unprecedented surge in early voting across the state.

Wright, a 58-year-old bullrider-turned-rancher and oil-field service company owner, is seeking a key post overseeing an industry that pumps more oil than any OPEC member except Saudi Arabia. Environmentalists support Castañeda, a 57-year-old Dallas energy attorney who once represented billionaire T. Boone Pickens. She’s running on a platform of cracking down on industry waste, strengthening regulation and tackling the flaring of natural gas.

Texas became the center of the shale boom in recent years, transforming the U.S. into the world’s biggest crude producer and establishing it as a leading exporter. Despite this year’s plunge in prices and a corresponding drop in output, the state remains a major player on international markets, one eyed warily by other oil-rich nations. That outsize role also means the commission attracts more scrutiny than any other equivalent state agency. As oil crashed amid the pandemic, some industry figures suggested it could coordinate production cuts.

While that initiative fizzled, another issue has refused to go away: The widespread practice in Texas of gas flaring. That, along with the problem of methane escaping into the atmosphere from leaky energy infrastructure, has attracted worldwide attention from groups such as the Environmental Defense Fund and fueled criticism of the commission as working for the interests of producers at the expense of the environment and people living near frack sites and oil refineries.

“Flaring is an issue that should be of concern to Texans across the political spectrum,” Castañeda said in an interview. “It wastes our resources, it’s associated with premature births, it harms the air we breathe, it deprives the state of much-needed revenue, and it contributes to climate change.”

Wright describes himself as a pro-business Trump supporter who opposes mandated production cuts. He touts himself as a defender of property rights. And he has made a point of stating he’s against illegal immigration and for a border wall—even though the commission has nothing to do with either issue.

Castañeda has degrees in engineering and law. Like Wright, she touts her energy industry experience, such as when she represented Pickens’s Mesa Petroleum in a high-profile lawsuit against J. Cleo Thompson, another legendary Texas wildcatter, as part of a dispute over assets in the Permian Basin, the oil region that straddles Texas and New Mexico. While Democratic presidential nominee Joe Biden proposes a ban on new fracking on federal land, Castañeda says almost all development subject to the Railroad Commission’s jurisdiction is on private or state-owned lands. "His federal proposal has little to do with production in the state of Texas,” she said.

Chrysta Castaneda, Wright's Democratic challenger, had a late surge in fundraising, with Texas becoming a competitive state for her party. Photographer: Sharon Steinmann/Bloomberg

Castañeda has raised more funds that Wright since their respective primaries: $4.1 million compared with his $1.3 million. Her coffers were boosted earlier this month by $2.5 million donated on Oct. 9 and $126,325 on Oct. 10 by Michael R. Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

Created in 1891 as a transportation overseer, the commission kept its name even after its role was expanded to monitor oil and gas and the U.S. deregulated railroads. Known for approving drilling permits in less than 24 hours, the commission has faced criticism for being a rubber stamp, weak on pollution and for issuing permits for toxic-waste dumps over the objections of neighbors.

In his bid to join the commission, Wright, a political newcomer, unseated a popular incumbent during the Republican primary in March with little campaigning and less than $17,000 of donations, perhaps helped by sharing a name with a late U.S. House speaker from Texas.

Since then, the oil and gas industry has poured hundreds of thousands of dollars into his campaign. Wright received contributions this summer that included more than $54,000 from political action committees for energy companies such as Ovintiv Inc., Energy Transfer LP, ConocoPhillips and Pioneer Natural Resources Co.

Wright said the main change that the commission needs is to make decisions with less deliberation. He favors creating guidance documents that would help staff apply complex rules and regulations quickly to companies big and small.

He said the commission would benefit from his expertise.

“I’ve spent most of my career sitting down and explaining to staff members - not only at the Railroad Commission but also the Texas Commission of Environmental Quality -- how those rules have been applied in the past and what they mean,” Wright said.

Some who have worked with Wright say he understands the rules only too well.

Travis McRae, who runs a Kerrville construction firm, built an oil field waste recycling facility near the South Texas town of Cuero that Wright developed, sold and later repossessed. McRae claims in a lawsuit that he was never paid and accuses Wright of transferring assets to avoid the debt. Wright denies the allegations and says that McRae did shoddy work that required him to spend another $700,000.

“I’m a hardcore conservative, straight-down-the ticket Republican,” McRae said. “But I don’t think Jim Wright should be railroad commissioner. If he doesn’t have enough respect for the office to follow its laws, how’s he going to run it?”

Wright sold DeWitt Recycable Products, the Cuero facility that he developed during the 2012 shale boom, to Florida-based Watson Energy Investments in 2014 and it opened two years later. But in January 2017 the commission shut down the facility for environmental violations after inspectors discovered it had received three times the 8,000 tons of waste it was permitted to handle. They found oil field waste piled on plastic sheets, leaking tanks and rainwater building up.

After the new owners fell behind on payments, Wright repossessed the facility. In a November 2017 settlement with the Railroad Commission, Wright agreed to accept responsibility for the environmental violations, bring the site into compliance and pay the $181,000 fine. Wright said he did it only to speed reopening and said he has spent $1.5 million on clean-up and another $4 million in new equipment.

He is seeking a permit from the Railroad Commission to reopen, but said he would step away from the project if elected.

That pledge is of little comfort to vendors who claim they were paid by neither Watson nor Wright. James McAda leased waste storage tanks to DeWitt. After the facility was shut, he said, Wright tried to get him to pay to clean them himself. “He’s shown a definite disregard for the rules of the same state agency that he’s going to be part of running,” McAda said.

The liability, Wright says, lies with the people to whom he sold DeWitt. Wright said he ultimately had to pay to have the 24,000 tons of waste at the site hauled to a landfill.

It’s unclear whether Wright’s backstory will have much impact on the race for the commission, or if Castañeda will benefit from higher campaign spending and the record early voter turnout.

“Scandals matter less in a highly polarized environment. People tend to look the other way,” said Brandon Rottinghaus, a University of Houston political science professor. “This is going to be a base-versus-base election.”

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