The House Committee on Energy Resources held an organizational hearing on February 27 and took up invited testimony only from the Legislative Budget Board and the Railroad Commission. During opening remarks Chair Drew Darby noted the RRC Sunset bill will be a priority and the bill will come up in committee next week. They will then move to get that bill out on the floor as soon as possible.
Legislative Budget Board Staff Presentation
- Fund 5155 provides 81% of agency funding in HB 1
- Fund 5155 revenue is heavily dependent on oil and gas
- Portion of balance of Fund 5155 is held in escrow
- Craddick – question on diverting of funds from agency
- A portion of funds collected go into its own GRD account
- For drilling permits, producers must buy bonds in case well is abandoned – those funds go into escrow and will be used if abandoned
- Agency has reported that structure for bonds does not cover all cost of abandon wells
Railroad Commissioners Panel
Commissioner Wayne Christian
- Gave brief presentation over RRC functions
- Gave an overview of what is going on in the industry
- Argues ROI is $50 to $1 appropriated on RRC
Commissioner Ryan Sitton
- Sunset process – in the past year have undergone the process. There were some recommendations that were good and some were management oriented that are being done already, etc.
- Investment – notably higher investment in Texas today
- Drivers of RRC workload – production reports, total wells to oversee, inspection, violations, etc
- Rep. Darby – deployment of TexNet, seismic studies? Do you see value in continue funding for the program?
- There is a lot of confusion in state of Texas, because of TexNet program, Texas is doing more research than any other state in regards to seismic activity in the state
- Not every seismic event is attributable to oil and gas, working on science driven discussion versus knee jerk reactions
- Yes, see value in continuing the program
Commissioner Christi Craddick
- Reviewed budgeting issues of RRC, last biennium presented budget challenge
- Mostly a fee based industry, now seeing impacts in change of funding structure as a result of the recent oil and gas downturn
- Commissioners directed to cut budget but still have a deficit – 23% and been in red since last March
- Income RRC generates from fees and penalties and they do not anticipate it to be enough to cover costs
- Without funding have and could see more reduction in employees, plugging of wells, and inability to maximize and implement inspection programs
- Funding requests for certain priority issues were reviewed
- Darby – asked about the orphan well situation, and how they impact?
- Between 5,400-5,500 orphan wells on the books and another 3,500 that come on and off the books
- Wells are prioritized between level 1-4 and today only have one Level one
- Strategy 875 wells plugged per year and goal of 1,000 in 2018
- Have prioritized safety and inspection
- Darby – asked bout challenges of agency funded model and revenue shortfall
- In 2016 expected about $15 million in permitting but they took in $4 million, not able to raise fees high enough to cover the gap
- Volume of drilling permits have gone down with the rise of technologies, reality don’t anticipate an increase of in the volume of permits in the future
- Sitton – even if they did not have one permit to work on, they still have a lot of work to do
- Christian – also there is a growth factor to consider with several recent federal changes
- Craddick – asked about salary comparisons? How much would it be to fix IT problems?
- Posting for same jobs as other agencies but underpaying them
- Roughly $100 million to fix IT program and it would be multi-year process
- Darby – points out they are asking for dedication of pipeline safety fees
- Correct
- Clardy – how were you impacted by hiring freeze?
- They were not impacted; they do have postings at this time because as elected officials they do have the ability to hire
- Darby – objective is to get agency out of Sunset process as quickly as possible