The Railroad Commission met on November 30 to discuss and adopt rules relating to the designation of critical natural gas infrastructure. A video archive of the meeting can be found here. Discussions between RRC staff and Commissioners highlighted the following:
- The RRC has tightened its policies related to designating natural gas infrastructure as critical for the winter.
- Some facilities that are deemed critical cannot opt out of critical status.
- Only small and low-producing gas wells can opt out. Larger facilities will be deemed critical and expected to have weatherized for the winter.
This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Opening Comments
- Chair Wayne Christian – Clearing up securitization order from last meeting, natural gas sold as high as $900
- RRC has no jurisdiction over price of natural gas or use of natural gas, RRC has jurisdiction over utilities that provide gas to home; 99.5% of natural gas utilities provided continuous service to customers
- Utilities provided gas at same price paid without markup, illegal for utilities to profit from natural gas
- Action of RRC last meeting ensured credit rating of state is used to secure costs over a very long period of time, customer-friendly way to pay back high gas costs
Item 1. Adoption of new 16 Texas Administrative Code §3.65, relating to Critical Designation of Natural Gas Infrastructure, and amendments to §3.107, relating to Penalty Guidelines for Oil and Gas Violations. Adoption of corresponding Forms CI-D and CI-X.
Matt Garner, RRC Staff
- Implementation of HB 3648 and SB 3 from 87(R)
- Rules and amendments were published in TX Register, comment period ended on Nov 1st
- Staff recommending adoption of rule, responding to public comments concerning number of facilities designated as critical, ability of facilities to apply, and adoption of criticality tiers for load shed
- Proposed rule initially designated too many critical facilities, rule now designating critical gas supplier and critical gas customer separately; new subset of critical gas customer ensures only those needing power from a third party will be providing info, limits both volume of info needing processing and number of facilities designated as critical load
- Revised supplier designation will ensure that those not needing electricity will be included, subject to map, will ensure they are weatherized
- Low volume leases are covered, new rule recognizing marginal role of low volume producers
- Staff recommends narrowing provision to ensure certain critical facilities cannot obtain an exemption, also clarifies that exception is not automatically granted when form is filed and fee is paid
- Applicant must provide evidence and reasonable basis for exception
- $150 fee is provided by Natural Resources Code, but RRC cannot increase through rulemaking
- Regarding tiers of criticality, RRC does not have authority over entities under discussion, but concepts have been incorporated in rule to categorize certain entities critical enough that they are not allowed to apply for an exception
- Commissioner Christi Craddick – Fast rule with a lot of moving parts, appreciates staff adapting rule to what legislature intended
- Craddick – A lot of the effort can go to waste unless electric generators secure firm contracts over interruptible contracts; aware of any effort to do so?
- Garner – Gas transmission and supply contracts are private, no particular insight into changes and practices of plant operators
- Good emergency preparedness may indicate need to pursue firm gas
- Craddick – According to rule published on the PUC website requiring TSPs to provide winter readiness report, reports are due tomorrow, do you have any info?
- Garner – Aware reports are due and are supposed to include info on why TSPs are not winter ready, but have heard nothing further
- Commissioner Jim Wright – Appreciates staff effort, rulemaking is limited to critical designation of natural gas infrastructure or sources; must keep operators providing large supplies of gas online, but listing everyone as critical severely reduces electricity to families
- Wright – Rule provides a reasonable solution to this issue, needed to address how much gas is needed for homes and power generation during extreme weather, approx. 22 BCF/day; currently 140k leases in Texas, producing 28.7 BCF/day
- Wright – Highlights categories of critical providers, supercritical providing more than enough per day and not allowed to opt-out, second category do not produce in significant quantities and are good for load shed, last group is comprised of marginal wells and can opt-out with evidence
- Wright- Production does not account for gas storage, TX has 478 BCF in underground storage and room for another 78 BCF; encouraging producers to utilize these reserves
- Wright – RRC cannot require gas producers to produce, up to business decisions of individual operators, will need to buy natural gas ahead of time to be secure during shortages, not fair or accurate to cate4gorize storm issues as a result of lack of natural gas
- Wright – Firm gas and/or storage ought to be required for generation, even if just for winter months
- Christian – Major paper demanded I resign over the weekend because I refused to blame natural gas, submitted response and requesting they print the full response
- Christian – Blaming natural gas is wrong, hypocritical to attack natural gas after Biden administration has tried to kill natural gas; subsidies for wind and solar power have stifled investment into natural gas, investments in wind and solar are guaranteed to be profitable
- Christian – Not minimizing failures of O&G industry during the storm; short 50k megawatts, 6k megawatts ERCOT found due to limited natural gas
- Christian and Garner discuss the 6k megawatts, 68% of this 6k was due to weatherization issues, meaning 7% of 50k megawatts shortage was due to unprepared natural gas wells
- Christian – Media has printed that any company paying $150 would be exempt
- Garner – Not true, rule now covers the exemption & $150 fee is not an immediate exemption
- Garner provides history of the $150 fee, set by the legislature in 2001
- Christian – Not the RRC, but the legislature that has set the $150 amount; storm has been used by left to attack fossil fuels, RRC, legislature and other agencies want to do anything necessary to fix issues seen during the storm
Motion to adopt proposed rules and forms passes