The Texas Railroad Commission met on May 5 to take up a number of items. This report covers items 189 on the agenda that covers the Blue Ribbon Task Force’s waiver recommendations for the RRC, the industry and other state agencies to respond to COVID-19. Additionally, this report covers item 190 on the agenda relating to Pioneer Natural Resources USA Inc. and Parsley Energy Inc.’s motion to determine reasonable market demand for oil in the state of Texas and whether or not the RRC should prorate the production of oil. A video of the meeting in its entirety can be found here.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, 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.


Item 189: Consideration of issues and possible action related to the COVID-19 pandemic including but not limited to (1) potential waiver or suspension of applicable statutes, rules, final orders, or other regulatory requirements; and (2) analysis of potential relief or other economic development initiatives.

Those available to speak: Ed Longanecker (TIPRO), Todd Staples (TXOGA), Karr Ingham (The Alliance), all members of the Blue Ribbon Task Force on Oil Economic Recovery; Robin Schneider, Texas Campaign for the Environment; and David Rosen, Rosen Oil and Asset Trust.

Paul DuBois, Assistant Director of Oil and Gas Division

  • Christian – Requested on April 21 for staff to reach out to industry and detail the status of unfilled storage capacity for crude oil in refineries and common carrier pipelines
  • DuBois – 78% of refineries have responded; reports unfilled crude oil storage capacity is 18,414,733 barrels
  • 73% of common carriers have responded; reports unfilled crude oil storage capacity is 52, 770, 925 barrels
  • Unfilled crude oil storage capacity, in total, 71.2 million barrels
  • Staff continues to receive refineries and carriers info
  • Christian – Received Blue Ribbon Task Force report May 4 and thanked them for their quickness
  • The RRC wants to avoid making a 3rd party decision; wants the solutions to be proposed by those in the industry
  • Small operators, who produce 1,000 or less barrels a day, should be given priority on relief
  • Motions have been drafted for the recommendations that can be implemented today
  • The report will be sent to the Texas Legislature, congressional delegation and other agencies


Ed Longanecker, President TIPRO (Blue Ribbon Task Force)

  • Task force has complied a list of recommendations for companies to survive during and after COVID-19
  • Focus is to provide smaller producers with regulatory relief
  • Report includes fee relief, relaxed reporting requirements, additional deadline extensions, and mechanisms to provide additional storage capacity
  • Report includes recommendations for other state agencies, federal policy issues, includes items that will require legislative action action
  • Recommendations were not discussed in detail; are 4 dozen recommendations in their report according to Chairman Christian
  • Christian – Requests the Committee consider ideas on how the RRC can better regulate the “problem” of flaring by the RRC’s June 16 meeting
    • Issues with flaring will not go away when the industry rebounds; want to address this problem with the same quickness as the recommendations
    • Industry should come up with solutions rather than the government
  • Sitton – Agrees flaring is a challenge; noted that the RRC is to prevent physical waste and flaring (other than for emergency purposes) should not be allowed under permit because it is physical waste
  • Christian – Looks forward to hearing from the task force
    • There has been controversy that we have involved politics in this process; this is research-policy, not partisan


Two motions based upon recommendations:

  • Waive fees and surcharges associated with the following filings for the remainder of the calendar year:
  • Exception to Statewide Rule 95 to allow storage of crude oil in formations that are not salt formations; need to show that the formation is confined to prevent the escape of crude oil; no rules regarding health or safety are suspended in relation to the order; the order expires in one year and all stored oil must be removed within five years

Wei Wang, RRC Executive Director

  • Sitton – Does not have an issue with waving fees, but how will these incentivize the construction of storage facilities; notes they may need legislative support for the latter
  • Wang – Discusses the specifics to the waiving of fees under the orders
  • Sitton – These are somewhat tied to storage; clarifies this is just a financial incentive
  • Wang – Most of these are directly tied to storage; others are general incentive

Motion to adopt the first order; passes unanimously

Motion to adopt the second order

  • Sitton – Waving of the exception to SWR 95; should it still require a hearing to demonstrate the applicant has met all requirements?
  • Christian – Permits would still have to be administratively approved by RRC staff
  • Sitton – Asked about waiving the hearing; how would there be a protest if there was no notice?
  • DuBois – Explained the waiver of SWR 95 would mean that if here is no protestants, the applicant can skip the hearing to save time on final approval; aims to expedite the process
    • If there is a protest, the permit request will still have to go to a hearing
    • Applicants would still have meet technical requirements
  • Craddick – The rule is not as broad as statue; want to broaden it to provide timing relief
  • Motion on the second order; passes unanimously
  • Craddick – My office has been working on flaring rules for nine months; hopes to see recommendations for this moving forward
  • Craddick – Other rules would like to have some waivers or exceptions for:
    • SWR 8(d)(4)(H): allows operators with authorized pits to submit a notification to the appropriate district office for an extension of the deadline for dewater, backfill and compact authorized pits. Expires one year from today, unless terminated or extended.
    • SWR 13(d): extends the 180 day limitation on administrative approvals of alternative casing and tubing programs. Expires one year from today, unless terminated or extended.
    • SWR 14(b)(2): extends the 1-year deadline to plug wells to two years for wells reporting production in February 2020, and subsequently shut-in with no reported production from March 1, 2020 to March 1, 2021; will not limit authority of RRC to require plugging of leaking well. Expires one year from today, unless terminated or extended.
    • SWR 107(b): allows legal enforcement division to exercise discretion in assessment of penalties of violations of commission rules occurring between March 1, 2020 and March 1, 2021 that do not implicate health, environmental or safety concerns. Expires one year from today, unless terminated or extended.
      Sitton – Concerned about the environmental impact of these waivers; specifically with regard to plugging abandon wells and the financial impact of that action on the RRC
  • Wang – Financial security requirements are still in place;requires notification in operators intend to extend deadline; inspectors can monitor the progress of these pits
  • DuBois – The commission will take on more abandoned wells, and can manage
    • This is about providing flexibility to allow operators to keep their heads above water
    • Pits still subject to inspection, health and safety standards
  • Sitton – There may be negative financial impacts of these actions, but will allow operators to last longer… we hope the result is net positive rather than net negative
  • Motion passes unanimously


Item 190: In Re: Motion for Commission Called Hearing on the Verified Complaint of Pioneer Natural Resources USA Inc. and Parsley Energy Inc. to Determine Reasonable Market Demand for Oil in the State of Texas

Those available to speak on Item #190 include James Mann (TPA), John Arnold (TXOGA), Scott Anderson (EDF), Robin Schneider (Texas Campaign for the Environment), Professor James Coleman, Stephen Miltzer, and Chrysta Castaneda (Democratic nominee for RRC Commsissioner)

  • Christian – The RRC has heard from many Texans and stakeholders concerning the issue of proration
    • Noted his op-ed in the Houston Chronicle in which he stated he was against proration
    • A 20% cut in production for Texas producers will not have a significant impact on world supply
    • There was a stipulation that if Texas were to prorate, then it would have to be with other entities; no one else is doing this
    • Does not see how we could reach the 4 million in cuts because other states are not doing so
    • Threats to market are uncertainty; owe the market and industry certainty
    • Producers should determine for themselves what level of production is economical
    • Proration will not help the smaller producers
    • Russia and Saudi Arabia have flooded the market, but 90% of the problem is demand
  • Craddick – Agrees; smaller producers are who we aim to address today
    • Asked Alex Schoch, RRC General Counsel to acknowledge he previously answered her legal questions and to confirm that he had consulted with the AG’s office
    • Details of the questions asked and counsel given were not provided
  • Sitton – I do not have a motion for a vote this hearing; there is not one to make
    • I do not think we calculated how much waste is out there and we did not investigate if proration would/could solve that issue
    • Discussed his fear the future production loss will come out of the U.S.
    • Proration may not have been the answer; would have wanted more analytical answer rather than a philosophical one

Note: The RRC did not have a motion on the floor to take a vote on whether or not the RRC should prorate the production of oil. Rather, Pioneer Natural Resources and Parsley Energy had requested (on April 14) that the RRC determine if there is reasonable market demand for oil in Texas. A part of that discussion was determining if there was physical and economic waste occurring in the oil and gas industry due to decrease in demand. Proration was offered by the two companies as a possible solution to the physical and economic waste they claimed was, in fact, occurring.

The following motion of dismissal is not a vote against proration, but rather the RRC is moving on from the issue:

  • Christian – Moves to dismiss the Motion for Commission Called Hearing on the Verified Complaint of Pioneer Natural Resources USA Inc. and Parsley Energy Inc. to Determine Reasonable Market Demand for Oil in the State of Texas
  • Motion passes 2-1; Sitton opposed the motion because he believes they did not determine reasonable market demand
  • Christian – Noted he felt the RRC took the action necessary and fulfilled the request for discussion on the issue