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Texas Railroad Commission Gets Funding Boost

The Law Office of C. William Smalling, P.C. July 10, 2017

The state legislature recently approved a substantial budget increase for the Texas Railroad Commission.  The state’s oil and gas industry regulator is tasked with plugging over 9,000 abandoned oil and gas wells, monitoring oil and gas operations, overseeing pipelines and regulating gas utilities.

Effects of the Oil Bust

In the wake of the oil bust, the commission had been seriously underfunded because industry fees cover most of its operating expenses. Over the past year, the commission has been operating at a deficit and was forced to make drastic budget cuts, implement a hiring freeze, and scale back planned technology updates. Moreover, decades of oil and gas records are paper files, stored in boxes, waiting to be digitized

Backlogged Oil and Gas Well Inspections

These shortfalls have impeded the agency’s ability to carry out its duties, particularly inspecting thousands of oil and gas wells throughout the state.  In 2016, the commission asked lawmakers for additional funds to hire more inspectors to handle a backlog of wells that have not been inspected in years. In fact, 65 percent of the more than 400,000 inactive and active wells in the state have not been inspected within the last five years.

Railroad Commission Funding Increases

State lawmakers have boosted the commission’s budget by 46 percent from $176.5 million to $256.1 million. The funding increases will largely go to programs for well plugging, oil field cleanup and pipeline safety. The commission also intends to make needed hires and continue the long overdue process of updating its computer systems.

Although lawmakers denied the commission’s request to fund a commission has been allowed to tap the proceeds of about $40 million from a natural gas utility pipeline tax. Previously, these revenues have been transferred to the state’s general fund. Of the $40 million, $27.6 million will go toward hiring more staff and fund the data backup while $12 million will finance salary hikes for employees. The commission intends to fill vacancies for inspectors and other positions.

Finally, lawmakers provided the commission with $3 million to adopt contemporary record keeping standards and begin converting paper files to digital formats. Oil and gas companies will also be required to submit online forms instead of paper.

The Takeaway

In the end, the funding increase will help the Texas Railroad Commission make up the ground it lost in the wake of the oil bust. The agency should also begin seeing additional funds from an increase in industry fees. Whether this will lead to enhanced regulatory oversight remains to be seen. Nonetheless, industry participants should consult with an experienced health, safety and environmental attorney in any dealings with the commission or other regulatory agencies.