WEBVTT

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<v ->Good morning.</v>

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I think we can still say Happy New Year.

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This meeting of the Railroad Commission of Texas

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will come to order to consider matters

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which have been duly posted with the Secretary of State

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for January 23, 2018.

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The Commission will consider the items on the agenda

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as posted on the agenda,

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except we will be taking up items 495 and 496 last.

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Under our public participation policy,

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anyone desiring to offer public testimony on any items

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that are not noticed on today's agenda

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will need to fill out a testimony form

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found in the back of the room

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and submit it to Commission Secretary Kathy Way.

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A reminder, please turn off your cell phones.

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And item number one.

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Good morning.

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How are you, Dana?

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<v ->Morning, Chairman, Commissioners.</v>

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For the record, my name is Dana Lewis,

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Administrative Law Judge with the Hearings Division.

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Item One is a motion for rehearing

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in Gas Utility Docket 10640,

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Petition for De Novo Review of the City of Dallas's

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denial of the Dallas Annual Rate Review Tariff.

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On December 5th, the Commission signed a final order

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approving the examiner's recommendations.

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The City of Dallas timely filed a motion for a hearing.

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The motion does not assert any new issues of fact or law

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not previously considered by the Commission

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before the final order was signed.

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Atmos replied to the motion for a hearing,

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maintaining its opposition

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to the points raised by the City of Dallas

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and requesting the motion be denied.

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I recommend the Commission deny the motion for a hearing,

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which will be overruled by operation of law on March 15.

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I'm available for questions.

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<v ->Thank you.</v>

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Are there any questions?

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I move we approve the examiner's recommendation.

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Is there a second?

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<v ->Second.</v>

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<v ->Second, Commissioner Sitton.</v>

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All in favor say aye.

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<v All>Aye.</v>

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<v ->Motion passes.</v>

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Item is approved.

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Thank you, Dana.

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Item number two.

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Well, you're just gonna stand up here

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for a while, aren't you?

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Morning, John.

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<v ->Morning, Commissioners.</v>

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I'm Administrative Law Judge John Dodson, Hearings Division.

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Agenda item two involves a suspension order for GUD 10679.

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A rate case filed by gas utility SiEnergy

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to increase rates in unincorporated areas

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in Central and South Texas.

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Commission staff has intervened

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and also has a coalition of cities

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comprised of Fulshear, Missouri City, and Sugarland.

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We recommend the Commission suspend

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the effective date of SiEnergy's proposed rates

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for 150 days to allow for proper evaluation of the changes.

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Otherwise, the proposed rates will

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go into effect on February 9th.

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I'm available for questions.

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<v ->Thank you.</v>

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Are there any questions?

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I move we approve the examiner's recommendation.

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Is there a second?

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<v ->Second.</v>

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<v ->Second, Commissioner Christian.</v>

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All in favor say aye.

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<v All>Aye.</v>

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<v ->Motion passes.</v>

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Item's approved.

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Item number three.

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<v ->Agenda item three is GUD 10455.</v>

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Consolidated complaints challenging

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common carrier rates of West Texas LPG Pipeline, or WTXP.

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This item was presented and discussed

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at the last conference and was continued.

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And I remain available for questions.

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<v ->Thank you.</v>

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Anybody wanna start with questions?

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I've got several.

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<v ->Go ahead.</v>

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<v ->Okay, so, John, it looks like, to me,</v>

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or the sense of it all is that

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all three of us feel like we need to

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move to some kind of market.

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Right?

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I think that's how you've written this.

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I think that's what we've kind of all said in some respect.

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When you look at the statute,

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we have a market-based method.

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Is that correct?

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That's how the statute's written.

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So it's market-based method or cost-to-service

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are the two options we have when we do a case, right?

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<v ->That's the language.</v>

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<v Christi>And it says method, correct?</v>

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So that doesn't mean...

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We don't have a method, I guess is our question.

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I mean, it's the problem.

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There's no statutory language for a method.

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Is that the way you read this?

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<v ->I think that's right.</v>

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<v Christi>Okay, and we weren't given one.</v>

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So, we're trying to figure one out.

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We're in a precedent setting case

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to try to figure out a method.

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Is that a fair statement?

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<v ->I think it's a fair statement.</v>

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Though the only issue I have is that

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resolving the old statute

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and the statute that you're talking about...

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I do think the term "competitive rates" is there.

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That's the language that the legislature

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put at the doorstep of the Commission.

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So, in some way, that should be incorporated.

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But, again, that's very vague, also.

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So how do you define that?

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<v ->Okay, alright, so the question that I've got...</v>

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And I think you did...

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Thank you.

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On your PFD is that you started on page 41.

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That's kind of where your methodology is

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of how you got to your rate.

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I think is what I've got.

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<v John>Right.</v>

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<v ->And so, in those, you looked at rates,</v>

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competitive rates, where they're competitive.

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You looked at...

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Specifically, I felt like it was interesting

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you looked at performance.

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And then you looked at geographic, right?

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And those are the three main things

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you looked at in your methodology.

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Would that be fair?

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<v ->Right.</v>

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So we looked at the rates that we could find

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that were observable that we thought

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captured the same stuff this pipeline provided in 2015

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and nothing more than that.

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So we got several rates first.

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We got rates that we didn't think

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captured a lot of recent infrastructure expenses.

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And they performed about the same level.

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And then we went to geography.

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We looked at close, nearby pipelines

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in the same neighborhood.

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And then we selected the highest rate

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among whatever was left.

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<v Christi>Okay, alright, so...</v>

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<v Ryan>May I ask a quick clarification on that?</v>

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<v Christi>Sure.</v>

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<v ->So what type of geography...</v>

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Correct me if I'm wrong,

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but one of the key points when you talked about

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this being a competitive market

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was that both at the origination

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and destination points were fungible.

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In other words, there were a number of mechanisms

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to sell the product and a number of ways

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to get that product into the final destination point.

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So that's what you mean by,

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not just locale of pipelines,

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but also the fact that there were

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a number of options in both

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the origination and destination points?

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<v John>For the finding that</v>

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competition exists in these markets,

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that was considered, yes.

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<v ->Okay, I just wanted to make sure.</v>

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<v ->And, really, that finding was</v>

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just for the pipeline activity alone.

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We mentioned that there's some other ways.

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The industry has ways of transporting stuff, for sure.

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<v Ryan>Sure.</v>

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<v ->But just looking at the pipeline activity alone,</v>

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that's how we really make that finding.

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<v Ryan>I think that's important.</v>

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Because that's not precedent setting for us.

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That's the way that other pipeline markets,

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other industries, determine if

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something's a competitive market.

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So I thought it was important that

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that was considered.

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Which you did.

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So I just wanted to make sure that we clarify that.

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<v ->So my concern is this.</v>

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When you look at this...

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And I think you did a good job.

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And I've read this five times myself.

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And I don't know how your eyes aren't crossed

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and you're still standing there, by the way.

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But I think the challenge I've got with this is,

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when I go look at...

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Because we've never done this before.

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And I wanna make sure we do it right

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because I think if we don't do it right,

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it changes the tone of the market

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for maybe the rest of the state's life, frankly.

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And the way I went and looked,

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since we've never done this before,

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is gone and looked at FERC and other places,

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because we don't know how to do it, right?

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And that's what we're trying to figure out.

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And part of the feedback we've also gotten

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is performance shouldn't be considered.

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And you may have to consider other things.

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And so, what I'd like to suggest

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and what I will have a motion for,

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after we have a discussion,

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is to send this back one more time.

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Because I would like to have a market-based study done

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as expeditiously as possible.

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I don't want this to sit here

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for the rest of my life, by the way.

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To give the parties one more opportunity

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to give information, specifically about

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the market concentration to market study.

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I think we've got to have

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the best information we have available.

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And I'm not sure it's there.

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And I'm not...

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I don't have a comfort level there

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that we have developed and have explained

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what a vibrant market is in the state.

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That's my concern.

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So I'm gonna move to send it back

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to have more additional things.

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If the parties wanna look at FERC

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or whatever other additional information

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to make sure we've got as much market,

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a vibrant market developed for us,

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if that's what's sitting there.

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So we know the answer.

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'Cause I look at this,

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and this is my personal opinion,

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how we look at regulating, too.

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It's like banking.

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So banking, to me, is, obviously...

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You can charge whatever you want in banking.

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But you also, as a regulatory body,

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they sit over there and they have usury laws.

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So I think you've got to figure out

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what that top threshold is.

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And I'm not sure we know what the top or bottom...

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I don't know we know what the thresholds are

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to make sure that we continue to have a competitive market,

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but making sure we're protecting the customer.

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And that's the balance that I'm not there yet.

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And I would like to see what else

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that market study brings to us.

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And I think that's what other regulatory bodies

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have done historically.

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And I think there's an opportunity for other people

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to bring more information into that.

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So that would be...

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That's gonna be my motion.

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But I'm gonna...

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I'll hold on my motion if anybody's got any questions first.

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Anybody else?

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<v ->Yeah, thank you.</v>

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It seems to me that the crux of this case

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is whether or not the market is competitive.

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Because, if you have a truly competitive market...

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I don't care whether it's

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pipelines or transportation or medicine.

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A truly competitive market,

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then we don't worry about rates.

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Because the market will flesh out the rates.

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<v ->I don't disagree with that.</v>

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<v ->John, you make a comment, page 40...</v>

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And we talked about this last time.

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If rates cannot be set under

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some colorable definition of competitive here,

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the Commission's market-based rate making authority

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may never leave the shelf.

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In WTXP's replies, they say that 80%

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of the capacity on this line was duly connected.

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So I'm putting your comments together

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with other pieces in this record.

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And that's an example of them.

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What would you be looking for...

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Let me say it differently. Can you walk me through...

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Give me your high points as to

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why you're convinced this...

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You seem pretty convinced this is a competitive market

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in your commentary here.

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<v ->I think my finding was that competition exists.</v>

00:10:29.590 --> 00:10:32.100
Which is you're probably saying the same thing.

00:10:32.100 --> 00:10:34.050
Before I looked at any of the evidence in the case,

00:10:34.050 --> 00:10:34.890
I really spent a lot of time

00:10:34.890 --> 00:10:36.510
trying to tack down what Texas law requires

00:10:36.510 --> 00:10:38.000
and what it does not require.

00:10:38.000 --> 00:10:38.870
This isn't the FERC.

00:10:38.870 --> 00:10:39.790
This is another jurisdiction.

00:10:39.790 --> 00:10:41.130
This is another industry in Texas.

00:10:41.130 --> 00:10:42.480
This is the common carrier industry in Texas.

00:10:42.480 --> 00:10:44.230
So I wanted to be clear on that.

00:10:44.230 --> 00:10:46.630
So when you're talking about what competition exists...

00:10:46.630 --> 00:10:47.545
<v ->Our common carrier statute,</v>

00:10:47.545 --> 00:10:48.840
and even the natural resource code,

00:10:48.840 --> 00:10:50.720
don't define exactly what a competitive market is.

00:10:50.720 --> 00:10:52.960
So, we're looking at other economic models

00:10:52.960 --> 00:10:55.460
to determine what's the economic standard out there

00:10:55.460 --> 00:10:57.070
for a competitive market, right?

00:10:59.450 --> 00:11:01.640
<v ->For competition in these markets,</v>

00:11:01.640 --> 00:11:03.124
what mattered to me was that

00:11:03.124 --> 00:11:06.100
there were options to transport.

00:11:06.100 --> 00:11:07.070
I think that was proven, really,

00:11:07.070 --> 00:11:08.240
just looking at the pipeline activity.

00:11:08.240 --> 00:11:09.190
But, when you consider other things,

00:11:09.190 --> 00:11:11.913
like trucking or other options,

00:11:11.913 --> 00:11:14.723
the industry has a lot of technology and competence

00:11:14.723 --> 00:11:16.838
to move its product.

00:11:16.838 --> 00:11:19.450
None of these are really isolated origin points.

00:11:19.450 --> 00:11:20.283
I don't think...

00:11:20.283 --> 00:11:21.350
They're either within these major markets

00:11:21.350 --> 00:11:22.620
or they're nearby.

00:11:22.620 --> 00:11:27.620
And so, the ability, if shippers feel like they want to,

00:11:28.200 --> 00:11:30.110
to build a lateral is there.

00:11:30.110 --> 00:11:31.210
They have options to get their product

00:11:31.210 --> 00:11:32.043
to where they're going.

00:11:32.043 --> 00:11:33.590
Usually, it's mobility in this case.

00:11:33.590 --> 00:11:35.900
So, really, because they had options,

00:11:37.960 --> 00:11:42.200
I didn't think that anybody was purely captive.

00:11:43.427 --> 00:11:45.466
That's really what went into it.

00:11:45.466 --> 00:11:47.670
But I tried to make a conscious decision

00:11:47.670 --> 00:11:48.849
not to import other jurisdiction's

00:11:48.849 --> 00:11:51.653
rigid requirements for market competition in here.

00:11:51.653 --> 00:11:52.770
Like the FERC.

00:11:52.770 --> 00:11:54.110
FERC has a pretty rigid one.

00:11:54.110 --> 00:11:54.943
<v Christi>They do.</v>

00:11:54.943 --> 00:11:55.950
And I'm not sure we need that rigid.

00:11:55.950 --> 00:11:58.650
That's why I think there's multiple options.

00:11:58.650 --> 00:11:59.800
<v ->So, for me, it wasn't really...</v>

00:11:59.800 --> 00:12:01.090
'Cause we didn't really have a lot of guidance

00:12:01.090 --> 00:12:01.923
in the legislature here.

00:12:01.923 --> 00:12:04.590
So, for me, it was looking at the record, the arguments.

00:12:04.590 --> 00:12:07.040
All these markets and the origin points nearby.

00:12:09.120 --> 00:12:11.805
Shippers had the technology and the availability.

00:12:11.805 --> 00:12:14.060
Maybe not next door.

00:12:14.060 --> 00:12:15.660
But there are pipelines nearby.

00:12:15.660 --> 00:12:16.960
They could have made it work.

00:12:16.960 --> 00:12:20.510
Assuming capacity and assuming infrastructure

00:12:20.510 --> 00:12:21.607
and that kind of thing.

00:12:21.607 --> 00:12:24.330
So, it wasn't a buttoned down market study,

00:12:24.330 --> 00:12:25.930
like you're talking about, Chairman.

00:12:25.930 --> 00:12:27.980
But the record, as I saw it in this case,

00:12:27.980 --> 00:12:29.990
was the shippers had options to get where they were.

00:12:29.990 --> 00:12:31.750
If they didn't like this pipeline's rates,

00:12:31.750 --> 00:12:32.583
they may have had to...

00:12:32.583 --> 00:12:34.000
If their only option was self help,

00:12:34.000 --> 00:12:35.710
which is not a regulated environment,

00:12:35.710 --> 00:12:37.870
they can come to the Commission if they need to.

00:12:37.870 --> 00:12:39.770
But, if they were going to resort to self help,

00:12:39.770 --> 00:12:41.711
they could have got their product moved.

00:12:41.711 --> 00:12:44.260
<v ->It seems like, from what I...</v>

00:12:44.260 --> 00:12:45.530
That seems like the right conclusion.

00:12:45.530 --> 00:12:47.070
Once again, I appreciate your commentary here.

00:12:47.070 --> 00:12:48.310
When you say it may never leave the shelf,

00:12:48.310 --> 00:12:50.210
that's a pretty direct...

00:12:50.210 --> 00:12:51.640
That's a pretty strong statement.

00:12:51.640 --> 00:12:52.550
And I appreciate that,

00:12:52.550 --> 00:12:54.970
because I think it's important to say,

00:12:54.970 --> 00:12:55.803
"Look, in this case..."

00:12:55.803 --> 00:12:58.980
Once again, using the comment in WTXP's replies that

00:12:58.980 --> 00:13:02.810
80% of the shippers are duly connected.

00:13:02.810 --> 00:13:03.900
That seems to indicate that

00:13:03.900 --> 00:13:05.500
most of the capacity on this line

00:13:05.500 --> 00:13:06.890
has an easy double option.

00:13:06.890 --> 00:13:07.723
It's a flip of a switch.

00:13:07.723 --> 00:13:10.350
You go to another line.

00:13:10.350 --> 00:13:13.192
So, it validates your point that

00:13:13.192 --> 00:13:15.630
this would seem to be a fairly...

00:13:17.475 --> 00:13:20.570
It seems to be a pretty competitive market.

00:13:20.570 --> 00:13:23.620
My point in this is, while I appreciate the Chairman's

00:13:26.280 --> 00:13:29.470
judiciousness in ensuring that we do this right,

00:13:29.470 --> 00:13:31.130
I'll go back to what I said last conference.

00:13:31.130 --> 00:13:34.040
If it's a competitive market, then we shouldn't get...

00:13:34.040 --> 00:13:35.890
My position, we shouldn't get involved in rate making.

00:13:35.890 --> 00:13:38.320
Now, as a regulatory body...

00:13:38.320 --> 00:13:40.780
This is not a commentary on every pipeline case out there.

00:13:40.780 --> 00:13:43.650
We have a lot of shippers, a lot of producers out there

00:13:43.650 --> 00:13:44.980
in which it is a captive market.

00:13:44.980 --> 00:13:46.370
There are not competitive situations.

00:13:46.370 --> 00:13:48.940
That's why we are empowered with the ability that we have.

00:13:48.940 --> 00:13:50.870
In this case, specifically because

00:13:50.870 --> 00:13:52.670
it is a competitive market,

00:13:52.670 --> 00:13:54.270
it seems pretty straightforward.

00:13:59.263 --> 00:14:00.880
I think what we should be doing

00:14:00.880 --> 00:14:03.520
is simply denying the complaint.

00:14:03.520 --> 00:14:04.920
And saying, look, it's a competitive market.

00:14:04.920 --> 00:14:06.310
The rates will work themselves out.

00:14:06.310 --> 00:14:07.866
It's as competitive as we're going to get.

00:14:07.866 --> 00:14:09.840
We should deny this complaint.

00:14:09.840 --> 00:14:10.950
Allow the market to work.

00:14:10.950 --> 00:14:12.420
And I think that's extremely important.

00:14:12.420 --> 00:14:16.960
And I don't see value in additional market study,

00:14:16.960 --> 00:14:18.730
because I think everything we need is here.

00:14:18.730 --> 00:14:20.280
We understand that it's a competitive market.

00:14:20.280 --> 00:14:24.110
So I believe we should be making that...

00:14:24.110 --> 00:14:26.590
That decision, I think we should be making it today.

00:14:26.590 --> 00:14:27.908
That's my opinion.

00:14:27.908 --> 00:14:29.617
<v ->Madam Chairman.</v>

00:14:29.617 --> 00:14:30.999
You know, I appreciate y'all.

00:14:30.999 --> 00:14:32.510
Last month, I'm the one that

00:14:32.510 --> 00:14:34.020
caused it to be delayed this time.

00:14:34.020 --> 00:14:36.820
So thank you for giving me time to look at this.

00:14:36.820 --> 00:14:38.320
And let me just give you a few of the things

00:14:38.320 --> 00:14:40.600
that I found in looking over this thing,

00:14:40.600 --> 00:14:42.390
because I think it's quite important.

00:14:43.460 --> 00:14:44.998
Free market's important to me,

00:14:44.998 --> 00:14:46.930
but, as a banker, I lived through

00:14:46.930 --> 00:14:50.310
the deregulation of the banking back under Ronald Reagan.

00:14:50.310 --> 00:14:52.910
The Depository Institution Deregulatory Commission

00:14:52.910 --> 00:14:55.910
was 19,000 pages.

00:14:55.910 --> 00:14:58.460
And so, when the government says deregulate,

00:14:58.460 --> 00:15:00.780
it's not exactly turn loose and go.

00:15:00.780 --> 00:15:02.430
And, from the result of that,

00:15:02.430 --> 00:15:04.740
we had a collapse in savings and loans association.

00:15:04.740 --> 00:15:08.010
It cost taxpayers across this nation significant.

00:15:08.010 --> 00:15:10.540
So that's why I'm concerned that we do it right.

00:15:10.540 --> 00:15:13.480
And that's why I'm really hesitant to just...

00:15:13.480 --> 00:15:15.550
At the last conference, I passed on this item

00:15:15.550 --> 00:15:16.810
so we'd have additional time.

00:15:16.810 --> 00:15:18.400
And I appreciate that.

00:15:18.400 --> 00:15:19.880
As a conservative businessman

00:15:19.880 --> 00:15:21.620
and an ex-banker and financial guy,

00:15:21.620 --> 00:15:25.430
I feel it's important a true competitive market exists

00:15:25.430 --> 00:15:27.231
and a market-based approach to rate making

00:15:27.231 --> 00:15:29.530
then should be used if it's proved that.

00:15:31.107 --> 00:15:33.310
To determine if a competitive market exists,

00:15:33.310 --> 00:15:36.290
at a minimum, you've got to have two or more parties

00:15:36.290 --> 00:15:39.010
acting independently to secure the business of a third party

00:15:39.010 --> 00:15:41.670
by offering the most favorable terms.

00:15:41.670 --> 00:15:45.330
In this case, producers must have at least a second pipeline

00:15:45.330 --> 00:15:47.350
as an option for transporting oil and gas

00:15:47.350 --> 00:15:48.700
to define there's a market.

00:15:49.620 --> 00:15:51.610
As evidenced by the competition,

00:15:52.483 --> 00:15:57.160
WTXP claims it has more than 80% of the interstate volumes

00:15:57.160 --> 00:15:58.340
shipped along their pipeline.

00:15:58.340 --> 00:16:00.540
Not necessarily the companies or suppliers.

00:16:00.540 --> 00:16:01.660
It's the volume.

00:16:01.660 --> 00:16:03.140
It's what I understood.

00:16:03.140 --> 00:16:04.890
Going through there.

00:16:04.890 --> 00:16:05.723
Through the argent points of

00:16:05.723 --> 00:16:07.960
more than one pipeline connection.

00:16:07.960 --> 00:16:10.200
If that's true, we can, by definition,

00:16:10.200 --> 00:16:12.180
conclude that there is a competitive market

00:16:12.180 --> 00:16:14.820
for most of the shippers along this pipeline.

00:16:14.820 --> 00:16:17.660
However, when dealing with a common carrier pipeline,

00:16:17.660 --> 00:16:19.112
as a class of pipeline for use of

00:16:19.112 --> 00:16:23.560
the eminent domain at its original time,

00:16:23.560 --> 00:16:25.180
it's important for the Railroad Commission

00:16:25.180 --> 00:16:27.510
to remember that we still have the duty to review

00:16:27.510 --> 00:16:28.928
and authority to adjust rates,

00:16:28.928 --> 00:16:31.390
even though we call it a competitive market

00:16:31.390 --> 00:16:33.490
and move toward a competitive market.

00:16:33.490 --> 00:16:35.010
To determine whether or not

00:16:35.010 --> 00:16:37.280
the Commission should adjust rates

00:16:40.010 --> 00:16:41.100
within a competitive market,

00:16:41.100 --> 00:16:43.470
we've got to determine to what extent a true market exists

00:16:43.470 --> 00:16:45.970
and a market where a true market competition exists.

00:16:45.970 --> 00:16:47.350
We might decline to exercise

00:16:47.350 --> 00:16:51.350
the market-based rate adjustment authority.

00:16:51.350 --> 00:16:53.040
True competition exists in a market

00:16:53.040 --> 00:16:55.410
where buyers and sellers are so numerous that most,

00:16:55.410 --> 00:16:59.690
if not all, of the elements of the monopoly are absent

00:16:59.690 --> 00:17:01.370
and the market price of a commodity

00:17:01.370 --> 00:17:04.710
is beyond the control of individual buyers and sellers.

00:17:04.710 --> 00:17:07.940
Unfortunately, this is not the case in this situation.

00:17:07.940 --> 00:17:09.155
According to the evidence in the record,

00:17:09.155 --> 00:17:12.590
most argent points have only one other competitor

00:17:12.590 --> 00:17:14.730
and some even have zero other competitors.

00:17:16.380 --> 00:17:20.660
Again, as a financial planner for 45 years in the industry,

00:17:20.660 --> 00:17:22.140
I think it's important we do our best

00:17:22.140 --> 00:17:24.600
to move towards a market-based approach.

00:17:24.600 --> 00:17:28.570
And to not do it thoughtfully is irresponsible of us.

00:17:28.570 --> 00:17:31.130
'Cause this is historically setting for the future.

00:17:32.400 --> 00:17:34.230
One of the first pieces of advice

00:17:34.230 --> 00:17:36.320
I received as a Railroad Commissioner

00:17:36.320 --> 00:17:38.490
was from our General Counsel.

00:17:38.490 --> 00:17:40.070
And I'll remember those words.

00:17:40.070 --> 00:17:43.420
They said that, on the dais, if we say something

00:17:43.420 --> 00:17:45.630
or we say something out in public,

00:17:45.630 --> 00:17:47.320
our actions and statements here

00:17:47.320 --> 00:17:52.320
can impact the market, both in Chicago in the options market

00:17:52.470 --> 00:17:54.930
and the stock market nationwide.

00:17:54.930 --> 00:17:57.820
And, at this sensitive time of energy in the United states,

00:17:57.820 --> 00:18:01.649
the first time we've become energy secure in decades,

00:18:01.649 --> 00:18:04.720
I just think we need to be very careful

00:18:04.720 --> 00:18:06.960
and keep these facts in mind.

00:18:06.960 --> 00:18:10.353
And that's where I'm at is I'm not solid yet

00:18:10.353 --> 00:18:14.090
on the point of exactly what we need to do.

00:18:14.090 --> 00:18:15.500
I agree we need to make a decision to do it.

00:18:15.500 --> 00:18:17.940
I'm not passing on that responsibility.

00:18:17.940 --> 00:18:20.370
But I've lived through the shakeups that

00:18:20.370 --> 00:18:23.530
occurred when you just say, "Hey, let's go to town."

00:18:23.530 --> 00:18:25.330
And I don't know if I'm there yet.

00:18:30.820 --> 00:18:33.220
<v ->I think it would be helpful for us to...</v>

00:18:33.220 --> 00:18:35.610
If I may, I think we are in agreement on a few things.

00:18:35.610 --> 00:18:38.203
I think it would be helpful to provide some guidance here.

00:18:38.203 --> 00:18:40.660
<v ->Look, I have a limited reason I want to open it.</v>

00:18:40.660 --> 00:18:42.330
So I don't wanna open this whole case again.

00:18:42.330 --> 00:18:46.400
I wanted limited reason to get market information,

00:18:46.400 --> 00:18:48.630
whether it's more information on

00:18:48.630 --> 00:18:50.230
the market concentration, I think,

00:18:50.230 --> 00:18:52.440
is what we're both concerned about.

00:18:52.440 --> 00:18:54.190
In all three of these markets, by the way.

00:18:54.190 --> 00:18:56.760
'Cause I think you've gotta go across the whole board.

00:18:56.760 --> 00:19:00.910
And, let me say, John, I think you can look at FERC.

00:19:00.910 --> 00:19:02.907
I think there are multiple things you can look at.

00:19:02.907 --> 00:19:07.570
I'm picking on FERC because it's clear.

00:19:07.570 --> 00:19:09.370
And they've got a system.

00:19:09.370 --> 00:19:11.460
And, even when you look at FERC, they didn't jump...

00:19:11.460 --> 00:19:13.840
And I think this is where we're struggling over here.

00:19:13.840 --> 00:19:15.260
They didn't jump form cost-to-service

00:19:15.260 --> 00:19:16.530
straight to free market.

00:19:16.530 --> 00:19:19.990
They had some stops in between,

00:19:19.990 --> 00:19:21.800
for lack of a better way to put it.

00:19:21.800 --> 00:19:24.120
And I think that we need to be thoughtful.

00:19:24.120 --> 00:19:25.540
If we need to have stops in between

00:19:25.540 --> 00:19:27.700
or jump all the way to free market.

00:19:27.700 --> 00:19:30.470
And I don't know that I have enough information sitting,

00:19:30.470 --> 00:19:31.700
based on the full market,

00:19:31.700 --> 00:19:33.970
to know the answer to that question today.

00:19:33.970 --> 00:19:34.977
<v ->Madam Chairman.</v>

00:19:34.977 --> 00:19:36.720
I'm sorry.

00:19:36.720 --> 00:19:37.620
<v ->No, that's okay.</v>

00:19:39.570 --> 00:19:40.403
<v ->Two concerns.</v>

00:19:40.403 --> 00:19:42.870
Number one, I'm comfortable with extending for new studies,

00:19:42.870 --> 00:19:43.880
'cause I always...

00:19:43.880 --> 00:19:44.880
Being a legislator, that was always

00:19:44.880 --> 00:19:46.380
what you got out of something.

00:19:47.480 --> 00:19:51.030
So, my question is is there any timeline estimate...

00:19:51.030 --> 00:19:52.510
'Cause I don't want to see this thing grind on forever.

00:19:52.510 --> 00:19:53.465
<v ->That's what I was going to ask.</v>

00:19:53.465 --> 00:19:55.530
So, when I say expeditiously, John,

00:19:55.530 --> 00:19:57.960
how long will it take you, realistically?

00:19:57.960 --> 00:19:58.970
I don't know the right answer.

00:19:58.970 --> 00:20:02.410
To open it back up for this limited piece of it.

00:20:02.410 --> 00:20:04.270
We're not gonna debate cost-to-service.

00:20:04.270 --> 00:20:07.630
We are debating what is included

00:20:07.630 --> 00:20:09.700
in a market concentration study

00:20:09.700 --> 00:20:12.990
and what constitutes, in my opinion, a market.

00:20:12.990 --> 00:20:15.050
So that is important to understand that.

00:20:15.050 --> 00:20:18.610
And, if that's just cost, if it's a lot of other things

00:20:18.610 --> 00:20:20.340
that are involved in that, geographics,

00:20:20.340 --> 00:20:22.545
I think that there are multiple things that

00:20:22.545 --> 00:20:24.620
all parties ought to have an opportunity

00:20:24.620 --> 00:20:27.430
to comment on that.

00:20:27.430 --> 00:20:29.460
For you to assess whether...

00:20:29.460 --> 00:20:30.680
And, look, you may come back to

00:20:30.680 --> 00:20:32.870
the exact same answer you've already got today.

00:20:32.870 --> 00:20:34.000
I don't know the right answer,

00:20:34.000 --> 00:20:36.650
but I wanna make sure we've got the right answer.

00:20:36.650 --> 00:20:39.730
Because we didn't just discern we had a market,

00:20:39.730 --> 00:20:41.220
but we also set a rate.

00:20:41.220 --> 00:20:43.320
And said, if you've got a market

00:20:43.320 --> 00:20:46.370
and you go with Commissioner Sitton's argument,

00:20:46.370 --> 00:20:47.910
then we shouldn't be setting a rate.

00:20:47.910 --> 00:20:50.480
If you go with the two of us who aren't sure,

00:20:50.480 --> 00:20:52.760
is there a top end rate that's acceptable?

00:20:52.760 --> 00:20:55.552
Should you be protecting the consumer, too?

00:20:55.552 --> 00:21:00.552
And so that's where I think I still have some clarity

00:21:00.960 --> 00:21:02.876
of what we should be doing to protect

00:21:02.876 --> 00:21:06.430
and how we move out a cost-to-service

00:21:06.430 --> 00:21:09.020
to get to market-based long term for the state.

00:21:09.870 --> 00:21:13.100
<v ->Can I ask to clarify this, just for my own sake?</v>

00:21:13.100 --> 00:21:15.470
And I'll talk philosophically here.

00:21:15.470 --> 00:21:16.680
Sounds like we're all three in agreement that,

00:21:16.680 --> 00:21:18.830
if a market is truly competitive,

00:21:18.830 --> 00:21:20.440
then we don't need to get in there.

00:21:20.440 --> 00:21:21.560
We don't need to be involved in it.

00:21:21.560 --> 00:21:22.780
<v ->Maybe or maybe not, Ryan.</v>

00:21:22.780 --> 00:21:25.630
I think you've got to look to see if there is...

00:21:25.630 --> 00:21:26.660
I mean, that's where I...

00:21:26.660 --> 00:21:29.030
The banking piece for usury, I think,

00:21:29.030 --> 00:21:30.980
is really important to look at this.

00:21:30.980 --> 00:21:32.360
I'm not saying that's occurring here,

00:21:32.360 --> 00:21:34.736
but I'm not sure what is occurring at that part...

00:21:34.736 --> 00:21:38.230
Whether we need to make sure we're protecting consumers

00:21:38.230 --> 00:21:39.680
and the customers on this line.

00:21:39.680 --> 00:21:41.480
And I think that's part of the question.

00:21:41.480 --> 00:21:43.620
I don't have answered for me yet.

00:21:43.620 --> 00:21:44.930
<v ->I'll say it again.</v>

00:21:44.930 --> 00:21:45.910
Not talking about this case.

00:21:45.910 --> 00:21:47.190
'Cause you've said, just a second ago, hey...

00:21:47.190 --> 00:21:48.930
It seemed like you agreed.

00:21:48.930 --> 00:21:50.060
If a market's really competitive,

00:21:50.060 --> 00:21:51.690
then we don't have to worry about the rates.

00:21:51.690 --> 00:21:52.850
The question I think you're asking is,

00:21:52.850 --> 00:21:54.270
"Is it really competitive?"

00:21:54.270 --> 00:21:55.690
<v ->I think that we're trying to figure out</v>

00:21:55.690 --> 00:21:57.290
what this market looks like.

00:21:58.180 --> 00:22:00.920
<v ->And I'm not sure that we...</v>

00:22:00.920 --> 00:22:02.700
I think there needs to be...

00:22:02.700 --> 00:22:05.530
I believe that maybe some type of watching it...

00:22:05.530 --> 00:22:07.520
This is the entire direction of

00:22:07.520 --> 00:22:10.670
the industry of the largest producing state in the world.

00:22:11.510 --> 00:22:13.120
And for us to just throw open the doors

00:22:13.120 --> 00:22:14.039
to a whole new system without

00:22:14.039 --> 00:22:16.750
any consideration of what the rates may do,

00:22:16.750 --> 00:22:18.764
what the markets may do...

00:22:18.764 --> 00:22:21.620
I think that needs to be considered.

00:22:21.620 --> 00:22:26.488
And so, I'm hesitant on saying just let them go

00:22:26.488 --> 00:22:28.220
free market compete.

00:22:28.220 --> 00:22:29.053
<v ->So, in other words,</v>

00:22:29.053 --> 00:22:30.071
even if it's a truly competitive market,

00:22:30.071 --> 00:22:32.460
you think we still may need to set rates,

00:22:32.460 --> 00:22:34.580
'cause we may know better than the market does

00:22:34.580 --> 00:22:36.230
where those rates need to go?

00:22:36.230 --> 00:22:37.490
<v ->Having been in the business for years,</v>

00:22:37.490 --> 00:22:40.100
I've never seen an absolutely free market.

00:22:40.100 --> 00:22:44.090
All markets have regulations, stop points, gaps, shut downs.

00:22:44.090 --> 00:22:45.530
I've lived through the Crash of '87.

00:22:45.530 --> 00:22:47.290
I've lived through the 2008.

00:22:47.290 --> 00:22:48.710
Every time the market now goes...

00:22:48.710 --> 00:22:51.140
Every time that happens, the government,

00:22:51.140 --> 00:22:54.630
the regulators come in to help the consumer

00:22:54.630 --> 00:22:58.020
and put certain calls in and stops.

00:22:58.020 --> 00:22:59.300
It moves 100 points.

00:22:59.300 --> 00:23:00.760
It pauses for two hours.

00:23:00.760 --> 00:23:02.810
It moves 500, it shuts down for the day.

00:23:02.810 --> 00:23:04.410
All kinds of things have been added,

00:23:04.410 --> 00:23:06.480
using the example that you're mentioning.

00:23:06.480 --> 00:23:07.320
And I don't know,

00:23:07.320 --> 00:23:09.750
but what we need to be very careful

00:23:09.750 --> 00:23:12.870
before we create another savings and loan type debacle.

00:23:12.870 --> 00:23:14.680
Because we just say, "Okay, turn it loose."

00:23:14.680 --> 00:23:16.110
Because, when they did that to the banks,

00:23:16.110 --> 00:23:18.890
there was 18-20% interest CDs.

00:23:18.890 --> 00:23:19.960
And everybody was just fighting with

00:23:19.960 --> 00:23:21.470
the biggest rate that they could get in all this.

00:23:21.470 --> 00:23:23.230
I remember, I lived through that.

00:23:23.230 --> 00:23:24.980
And, all of a sudden, it went bankrupt

00:23:24.980 --> 00:23:26.780
and cost the consumers and taxpayers

00:23:26.780 --> 00:23:29.100
of the United States billions of dollars.

00:23:30.070 --> 00:23:32.600
And I am just well aware of how important...

00:23:32.600 --> 00:23:33.820
As the General Counsel told me,

00:23:33.820 --> 00:23:36.000
the markets watch what we do.

00:23:36.000 --> 00:23:38.170
I wanna be very careful not to

00:23:38.170 --> 00:23:40.520
assure the markets and assure the citizens that

00:23:40.520 --> 00:23:43.430
we are not going to be here watching over

00:23:43.430 --> 00:23:45.350
what they've given us to be responsible for.

00:23:45.350 --> 00:23:47.760
And I think that's part of our responsibility.

00:23:47.760 --> 00:23:49.560
So I'm thinking there should be

00:23:49.560 --> 00:23:51.503
oversight by this Commission

00:23:51.503 --> 00:23:54.160
and not just turn loose our responsibility.

00:23:54.160 --> 00:23:57.960
I think we have a responsibility to watch that market.

00:23:57.960 --> 00:23:58.883
And, for us to just say,

00:23:58.883 --> 00:24:00.410
"Okay, we're no longer there.

00:24:00.410 --> 00:24:01.270
We no longer set anything.

00:24:01.270 --> 00:24:04.680
We no longer set limits, set reasons and rules."

00:24:04.680 --> 00:24:06.390
That's a little too far, in my book, right now.

00:24:06.390 --> 00:24:07.760
Now, we may move toward that,

00:24:07.760 --> 00:24:10.570
as we see the markets move and see how it's done

00:24:10.570 --> 00:24:12.380
and see how it walks.

00:24:12.380 --> 00:24:13.380
Maybe at some point.

00:24:13.380 --> 00:24:15.279
But to open it up just full steam ahead

00:24:15.279 --> 00:24:18.310
on Day One frightens me.

00:24:18.310 --> 00:24:21.350
Because I know what history has shown when you do that.

00:24:21.350 --> 00:24:24.160
<v ->I'm not sure your analogy's totally applicable.</v>

00:24:24.160 --> 00:24:26.200
<v ->I think, Ryan, where you're doing a skip.</v>

00:24:26.200 --> 00:24:27.620
And I think the concern...

00:24:27.620 --> 00:24:30.960
Market-based rates don't necessarily mean free market to me.

00:24:30.960 --> 00:24:31.910
I think that market...

00:24:31.910 --> 00:24:36.770
We were charged, by statute, to have a market-based method.

00:24:36.770 --> 00:24:38.580
Now, that may be free market.

00:24:38.580 --> 00:24:41.290
That may not be or be some kind of methodology.

00:24:41.290 --> 00:24:43.800
And I think that's where it's very important,

00:24:43.800 --> 00:24:45.760
in this precedent setting case,

00:24:45.760 --> 00:24:49.260
that we define, so people know going forward,

00:24:49.260 --> 00:24:51.500
what that methodology should look like

00:24:51.500 --> 00:24:52.820
and what they should come in and bring

00:24:52.820 --> 00:24:55.510
so we don't have to send a case back three and four times.

00:24:55.510 --> 00:24:57.230
That's driven me crazy, frankly.

00:24:57.230 --> 00:24:59.400
But I think we need good information.

00:24:59.400 --> 00:25:01.680
So a market-based methodology

00:25:01.680 --> 00:25:03.560
is not the same thing as a free market.

00:25:03.560 --> 00:25:05.220
I think you've defined them differently.

00:25:05.220 --> 00:25:08.830
But I don't define market-based methodology as free market.

00:25:08.830 --> 00:25:10.440
I think there are multiple ways

00:25:10.440 --> 00:25:12.150
to look at a market-based methodology

00:25:12.150 --> 00:25:13.040
depending on the market.

00:25:13.040 --> 00:25:14.660
And that's what I'd like more information

00:25:14.660 --> 00:25:16.280
about what the market is here

00:25:16.280 --> 00:25:18.880
so we know what that methodology needs to look like.

00:25:20.230 --> 00:25:23.080
<v ->The commentary here, which I think I wanna clear up,</v>

00:25:23.080 --> 00:25:25.360
is you've given examples of

00:25:25.360 --> 00:25:27.100
savings and loan and banking crises,

00:25:27.100 --> 00:25:29.370
which were a true deregulation.

00:25:29.370 --> 00:25:30.430
We don't...

00:25:30.430 --> 00:25:31.870
Most new pipelines...

00:25:31.870 --> 00:25:33.190
Almost all new pipelines that are being built,

00:25:33.190 --> 00:25:34.350
we don't regulate those rates.

00:25:34.350 --> 00:25:36.190
Those are determined by the market already.

00:25:36.190 --> 00:25:37.296
When those pipelines are being constructed,

00:25:37.296 --> 00:25:39.360
they go out and get investors.

00:25:39.360 --> 00:25:42.260
They secure rates based on what their contracts are.

00:25:42.260 --> 00:25:44.010
So, this isn't...

00:25:44.010 --> 00:25:45.480
I don't think that analogy is correct.

00:25:45.480 --> 00:25:47.640
I wanna be clear to everybody that,

00:25:47.640 --> 00:25:49.980
look, we're talking about specific cases

00:25:49.980 --> 00:25:52.690
where certain pipelines are in a market environment

00:25:52.690 --> 00:25:54.500
where there are competitive options.

00:25:54.500 --> 00:25:58.300
And those cases, based on the legislature's 2006 revision,

00:25:58.300 --> 00:26:01.420
or whatever it was, that we use a market-based approach.

00:26:01.420 --> 00:26:02.610
I don't have a problem with the fact that,

00:26:02.610 --> 00:26:04.080
yeah, there might be different ways to look at

00:26:04.080 --> 00:26:05.780
what a market-based rate is.

00:26:05.780 --> 00:26:07.827
My point, if something is truly competitive,

00:26:07.827 --> 00:26:12.800
IE, the shippers have a number of options,

00:26:12.800 --> 00:26:17.560
then that diminishes the risk of a negative situation.

00:26:17.560 --> 00:26:19.620
Because the market's gonna work itself out.

00:26:19.620 --> 00:26:21.320
There's always cost in changing business.

00:26:21.320 --> 00:26:23.390
I go out and buy a house and sell a house.

00:26:23.390 --> 00:26:25.000
I gotta pay realtor fees, transaction fees.

00:26:25.000 --> 00:26:26.760
There's cost in making changes.

00:26:26.760 --> 00:26:27.593
But that doesn't mean that

00:26:27.593 --> 00:26:30.110
the market's not competitive, the market's not free.

00:26:30.110 --> 00:26:31.265
So, this is an instance...

00:26:31.265 --> 00:26:33.090
I think, probably, on one end of the spectrum...

00:26:33.090 --> 00:26:34.240
I like the way John put it.

00:26:34.240 --> 00:26:38.650
If we can't get some colorful definition

00:26:38.650 --> 00:26:39.620
of competitive here,

00:26:39.620 --> 00:26:41.550
then the Commission's market-based rate making authority

00:26:41.550 --> 00:26:42.383
may never leave the shelf.

00:26:42.383 --> 00:26:44.443
I thought that was good commentary

00:26:44.443 --> 00:26:46.180
on this being one end of the spectrum

00:26:46.180 --> 00:26:47.130
of a truly competitive market.

00:26:47.130 --> 00:26:51.740
So I like the clarity of the situation.

00:26:51.740 --> 00:26:52.690
Competitive markets.

00:26:52.690 --> 00:26:54.780
What I was trying to do was get to clarification to John

00:26:54.780 --> 00:26:59.570
to say, "Look, I think what we're asking for..."

00:26:59.570 --> 00:27:01.750
And I'm asking if this is what,

00:27:01.750 --> 00:27:03.010
Chairman, Commissioner, you're asking for

00:27:03.010 --> 00:27:06.500
is we wanna first understand is this a competitive market?

00:27:06.500 --> 00:27:08.130
I mean, it seemed like you both asked questions

00:27:08.130 --> 00:27:10.290
about what that really means.

00:27:10.290 --> 00:27:11.380
How much cost there is.

00:27:11.380 --> 00:27:12.400
If they're building laterals.

00:27:12.400 --> 00:27:14.150
What those are relative to the difference

00:27:14.150 --> 00:27:15.470
in cost of shipping product.

00:27:15.470 --> 00:27:17.730
I mean, to me, that's the first question asked.

00:27:17.730 --> 00:27:18.563
That could be pretty fast.

00:27:18.563 --> 00:27:21.610
<v ->I think I've established there's competition there.</v>

00:27:21.610 --> 00:27:23.020
Competitive market.

00:27:23.020 --> 00:27:23.853
That's that.

00:27:23.853 --> 00:27:24.686
Now, what do we do with it?

00:27:24.686 --> 00:27:27.150
What is the responsible thing to move toward?

00:27:27.150 --> 00:27:28.540
'Cause we're not talking about private carriers.

00:27:28.540 --> 00:27:30.124
We're talking about common carriers.

00:27:30.124 --> 00:27:32.685
Which we have had regulation on.

00:27:32.685 --> 00:27:35.980
And I am for moving toward that.

00:27:35.980 --> 00:27:39.480
But I wanna do the responsible move, again,

00:27:39.480 --> 00:27:43.422
as we change this historical precedent.

00:27:43.422 --> 00:27:46.555
And make sure that we're doing the right thing.

00:27:46.555 --> 00:27:50.089
But I can't feel comfortable right now

00:27:50.089 --> 00:27:52.940
with just saying, "Okay, just turn it loose."

00:27:53.800 --> 00:27:56.520
And I'm scared of what happens to the rate payers,

00:27:56.520 --> 00:27:58.970
the citizens of the state who have empowered us,

00:27:58.970 --> 00:28:02.310
elected us, and the industry itself.

00:28:02.310 --> 00:28:03.855
That, I think, they need...

00:28:03.855 --> 00:28:06.867
Sunset tore us up for a time.

00:28:06.867 --> 00:28:08.370
Because it's uncertainty.

00:28:08.370 --> 00:28:12.140
And the market does not exist well in uncertainty.

00:28:12.140 --> 00:28:16.120
Whenever we loosen something like this,

00:28:16.120 --> 00:28:19.150
we need to, I think, establish somewhat of a road map

00:28:19.150 --> 00:28:22.290
as we're going toward a freer market.

00:28:22.290 --> 00:28:25.350
But there's never a deregulated total free market.

00:28:25.350 --> 00:28:27.930
We'll always need to have some oversight.

00:28:27.930 --> 00:28:29.796
And that's just our part.

00:28:29.796 --> 00:28:30.670
<v ->Let me say it differently.</v>

00:28:30.670 --> 00:28:33.030
I don't think we should delay this.

00:28:33.030 --> 00:28:36.180
However, if you're going to...

00:28:36.180 --> 00:28:38.040
Trying to give John some clarity.

00:28:38.040 --> 00:28:38.873
The question...

00:28:38.873 --> 00:28:40.330
It seems like the primary question is,

00:28:40.330 --> 00:28:41.880
"How competitive is the market?"

00:28:41.880 --> 00:28:43.270
Is that the first question?

00:28:43.270 --> 00:28:44.370
Is that...

00:28:44.370 --> 00:28:46.790
Am I summarizing what your point is?

00:28:46.790 --> 00:28:50.100
<v ->No, I understand it's a competitive market to an extent.</v>

00:28:50.100 --> 00:28:51.940
It is not a totally free market.

00:28:51.940 --> 00:28:54.210
You have still 20% of the volume there

00:28:54.210 --> 00:28:56.715
that does not have a lot of other options.

00:28:56.715 --> 00:28:57.855
You also have...

00:28:57.855 --> 00:29:00.010
And, when you do free it,

00:29:00.010 --> 00:29:02.129
my concern is not whether it's free or not free.

00:29:02.129 --> 00:29:05.270
I'm for moving toward that.

00:29:05.270 --> 00:29:07.710
And I think we're making an agreement here

00:29:07.710 --> 00:29:10.471
to move away from us setting every rate.

00:29:10.471 --> 00:29:13.244
I think we all three are on that page.

00:29:13.244 --> 00:29:16.868
I'm concerned that we make sure we're taking

00:29:16.868 --> 00:29:20.360
responsible first steps.

00:29:20.360 --> 00:29:22.080
And I think it should be a process,

00:29:22.080 --> 00:29:25.550
rather than just us release it.

00:29:25.550 --> 00:29:29.540
That concerns me, because I think it's

00:29:29.540 --> 00:29:34.540
too fragile a time in the nation's energy policy.

00:29:35.320 --> 00:29:39.930
We just achieved energy security in this nation.

00:29:39.930 --> 00:29:40.763
We've just...

00:29:40.763 --> 00:29:42.550
The market is going the right direction.

00:29:42.550 --> 00:29:44.060
The prices are going the right direction.

00:29:44.060 --> 00:29:46.100
We're talking about expanding like never before.

00:29:46.100 --> 00:29:47.710
All of the things that we're all aware of

00:29:47.710 --> 00:29:48.739
that's happening in our industry.

00:29:48.739 --> 00:29:51.950
And I wanna be responsible not to

00:29:51.950 --> 00:29:55.990
harm that direction that the industry is moving

00:29:55.990 --> 00:29:57.090
by throwing a kink in it.

00:29:57.090 --> 00:29:57.960
So, that's my concern.

00:29:57.960 --> 00:29:59.500
I think it needs to be...

00:29:59.500 --> 00:30:01.140
Look at what are the proper steps

00:30:01.140 --> 00:30:06.140
to move toward a freer market that has less regulation.

00:30:06.620 --> 00:30:10.590
But oversight is always a part of our responsibility.

00:30:10.590 --> 00:30:12.000
Now, I wish I had...

00:30:12.000 --> 00:30:15.870
That's why I'm looking for what are the proper steps.

00:30:15.870 --> 00:30:18.480
But I'm not comfortable right now with

00:30:18.480 --> 00:30:20.860
Ryan just saying, "Hey, it's competitive.

00:30:20.860 --> 00:30:22.329
So, just turn it loose."

00:30:22.329 --> 00:30:25.380
I'm not comfortable with that right now.

00:30:25.380 --> 00:30:26.213
<v ->Understood.</v>

00:30:26.213 --> 00:30:27.740
I'm trying to get what it is you're asking John to do.

00:30:27.740 --> 00:30:28.990
<v Christi>John, do you have any questions about</v>

00:30:28.990 --> 00:30:29.825
what we're asking you to do?

00:30:29.825 --> 00:30:31.045
(laughter)

00:30:31.045 --> 00:30:32.280
How about we just ask John?

00:30:33.758 --> 00:30:37.250
<v ->As I understand it, a limited scope remand</v>

00:30:37.250 --> 00:30:39.810
to solicit more evidence and, perhaps,

00:30:39.810 --> 00:30:44.810
argument on a market study to determine what...

00:30:49.400 --> 00:30:50.800
To address market concentration

00:30:50.800 --> 00:30:52.858
in all three of these markets.

00:30:52.858 --> 00:30:55.810
To find out a little more information about alternatives.

00:30:55.810 --> 00:30:57.230
About what's happening.

00:30:57.230 --> 00:30:58.980
Competition, whether or not these are competitive markets.

00:30:58.980 --> 00:31:00.120
We can go circle back to that, also,

00:31:00.120 --> 00:31:02.410
to see what the evidence shows.

00:31:02.410 --> 00:31:03.243
What I'm not...

00:31:04.180 --> 00:31:07.330
Is the intent to apply that kind of a study

00:31:07.330 --> 00:31:09.050
and that kind of analysis just to this case

00:31:09.050 --> 00:31:11.500
or is the intent there to apply that going forward?

00:31:11.500 --> 00:31:12.700
'Cause it may have different facts

00:31:12.700 --> 00:31:13.820
for different cases in the future.

00:31:13.820 --> 00:31:15.420
<v ->And I think, obviously,</v>

00:31:15.420 --> 00:31:18.271
we want to apply it to this case, first and foremost.

00:31:18.271 --> 00:31:20.620
If we apply it well to this case,

00:31:20.620 --> 00:31:22.630
hopefully, it becomes some good precedent

00:31:22.630 --> 00:31:24.020
for us to be able...

00:31:24.020 --> 00:31:26.570
Based on the facts of the other cases.

00:31:26.570 --> 00:31:27.940
Because there may be cases where

00:31:27.940 --> 00:31:30.518
we still are having these cost-to-service

00:31:30.518 --> 00:31:34.900
based on whatever the market shows in that particular area.

00:31:34.900 --> 00:31:36.990
And I can think of places in the state

00:31:36.990 --> 00:31:40.270
where there's one pipeline or something that services, right?

00:31:40.270 --> 00:31:42.880
And so, I think you'd have a hard time

00:31:42.880 --> 00:31:45.310
getting to a market there, potentially.

00:31:45.310 --> 00:31:47.140
So, I think it depends on the facts.

00:31:47.140 --> 00:31:49.120
And, I think, based on what

00:31:49.120 --> 00:31:50.950
Commissioner Christian is saying,

00:31:50.950 --> 00:31:54.690
if there's some steps we need to take going forward

00:31:54.690 --> 00:31:56.760
or some safeguards we need to make sure

00:31:56.760 --> 00:32:00.090
we're continuing to put in place or look at,

00:32:00.090 --> 00:32:02.150
that might be a limited part of this

00:32:02.150 --> 00:32:04.570
to go back and have some suggestions

00:32:04.570 --> 00:32:05.970
and some thoughts about that.

00:32:05.970 --> 00:32:06.803
<v ->Yes, ma'am.</v>

00:32:06.803 --> 00:32:09.180
As far as speed, we can certainly front burner this,

00:32:09.180 --> 00:32:10.789
if you'll excuse the industry...

00:32:10.789 --> 00:32:13.890
We can put this on a fast track as much as we can.

00:32:13.890 --> 00:32:15.300
It's been my practice throughout this case,

00:32:15.300 --> 00:32:16.660
because there's so many novel issues

00:32:16.660 --> 00:32:18.810
and they're all kind of intertwined and complex,

00:32:18.810 --> 00:32:20.110
to give the parties as much time

00:32:20.110 --> 00:32:23.020
as they felt reasonably necessary to bring things,

00:32:23.020 --> 00:32:25.190
to make their studies without...

00:32:25.190 --> 00:32:26.110
So, I don't know how...

00:32:26.110 --> 00:32:27.230
I couldn't...

00:32:27.230 --> 00:32:29.070
We can fast track this, definitely.

00:32:29.070 --> 00:32:30.430
But, as far as how much time the parties

00:32:30.430 --> 00:32:32.060
are going to need to do their studies

00:32:32.060 --> 00:32:33.290
and to stay within the bounds of

00:32:33.290 --> 00:32:35.100
what this remand is gonna be,

00:32:35.100 --> 00:32:37.050
I don't know if I can promise that now.

00:32:37.050 --> 00:32:39.370
I'd probably ask for the parties' input

00:32:39.370 --> 00:32:40.770
on a procedural schedule for this

00:32:40.770 --> 00:32:42.130
and see what they feel is fair.

00:32:42.130 --> 00:32:44.550
<v ->Okay, I just don't want a whole lot of delays.</v>

00:32:44.550 --> 00:32:47.350
I know this case has had a few.

00:32:47.350 --> 00:32:49.260
<v John>Understood, understood.</v>

00:32:49.260 --> 00:32:53.100
I will push to go on the faster side with that.

00:32:53.100 --> 00:32:55.651
<v ->So, I'm gonna move what we've talked about.</v>

00:32:55.651 --> 00:32:57.550
If you want me to restate it, I will.

00:32:57.550 --> 00:32:59.380
But I'm gonna move that we remand this case

00:32:59.380 --> 00:33:01.470
for the limited purpose we've discussed.

00:33:01.470 --> 00:33:02.734
Is there a second?

00:33:02.734 --> 00:33:04.200
<v ->I'll second.</v>

00:33:04.200 --> 00:33:05.870
<v ->Second, Commissioner Christian.</v>

00:33:05.870 --> 00:33:07.340
All those...

00:33:07.340 --> 00:33:08.200
Oh, I'm sorry.

00:33:08.200 --> 00:33:10.380
Before I walk off from this case,

00:33:10.380 --> 00:33:11.770
we've got some people here to testify.

00:33:11.770 --> 00:33:13.780
Does anybody want to hear anything from anybody?

00:33:13.780 --> 00:33:17.220
Okay, so, I've got a motion and a second.

00:33:17.220 --> 00:33:18.760
All those in favor, say aye.

00:33:18.760 --> 00:33:19.890
<v ->[Christi And Wayne] Aye.</v>

00:33:19.890 --> 00:33:20.723
<v ->Opposed?</v>

00:33:20.723 --> 00:33:21.556
<v ->No.</v>

00:33:21.556 --> 00:33:22.389
<v ->Two-one.</v>

00:33:22.389 --> 00:33:25.100
Thank you, John, for your work.

00:33:38.302 --> 00:33:41.080
Let the room clear for just a minute.

00:34:10.140 --> 00:34:11.380
Okay, we're on four, five, and six.

00:34:11.380 --> 00:34:12.510
Good morning.

00:34:12.510 --> 00:34:14.610
<v ->Good morning, Chairman and Commissioners.</v>

00:34:14.610 --> 00:34:17.000
I'm Jennifer Cook with the Hearings Division.

00:34:17.000 --> 00:34:20.091
Items four through six were heard at the same time

00:34:20.091 --> 00:34:22.350
and presented together in one PFD,

00:34:22.350 --> 00:34:25.410
because they have common facts, parties, and legal issues.

00:34:25.410 --> 00:34:27.700
And I plan to present them together today.

00:34:27.700 --> 00:34:29.080
And will provide one order.

00:34:30.740 --> 00:34:32.610
Ammonite Oil and Gas Corporation

00:34:32.610 --> 00:34:34.030
filed three applications under

00:34:34.030 --> 00:34:37.950
the Mineral Interest Pooling Act, also known as MIPA,

00:34:37.950 --> 00:34:39.630
each requesting the Commission to pool

00:34:39.630 --> 00:34:41.310
its leased acreage into a unit

00:34:41.310 --> 00:34:43.640
for an already drilled horizontal well

00:34:43.640 --> 00:34:46.894
on Apache Corporation's Apache Bluejay Unit.

00:34:46.894 --> 00:34:49.670
Apache requests the applications be denied.

00:34:50.560 --> 00:34:53.440
The McGary Living Trust, the McGary Family Trust,

00:34:53.440 --> 00:34:55.430
and the Mary Jane McGary Trust

00:34:55.430 --> 00:34:59.030
also participated and protest the applications.

00:34:59.030 --> 00:35:00.480
They are mineral interest owners

00:35:00.480 --> 00:35:03.030
and one of the two tracts comprising

00:35:03.030 --> 00:35:04.390
the Apache unit at issue.

00:35:05.350 --> 00:35:07.980
Ammonite asserts the proposed pooling will prevent waste

00:35:07.980 --> 00:35:10.260
and protect correlative rights.

00:35:10.260 --> 00:35:12.560
Ammonite claims it's leased riverbed tract

00:35:12.560 --> 00:35:14.876
should be pooled with the wells on the Apache unit

00:35:14.876 --> 00:35:16.810
such that the Apache unit will be

00:35:16.810 --> 00:35:19.922
divided into three approximately equal units,

00:35:19.922 --> 00:35:21.780
one for each of the wells,

00:35:21.780 --> 00:35:25.960
and each pooled with 1/3 of Ammonite's riverbed tract.

00:35:25.960 --> 00:35:27.250
The riverbed tract at issue

00:35:27.250 --> 00:35:28.890
traces the boundary of the portion

00:35:28.890 --> 00:35:31.590
of the Apache unit facing the river.

00:35:31.590 --> 00:35:35.130
It meanders and, consequently, is nonlinear.

00:35:35.130 --> 00:35:38.203
The tract begins at one side of the Pecos River riverbed

00:35:38.203 --> 00:35:40.480
and ends at the other such that

00:35:40.480 --> 00:35:42.870
the tract is relatively narrow.

00:35:42.870 --> 00:35:44.980
Ammonite argues, due to the shape of the tract,

00:35:44.980 --> 00:35:48.126
it's not technologically or economically feasible

00:35:48.126 --> 00:35:51.385
to drill a well to produce the underlying minerals

00:35:51.385 --> 00:35:53.280
and the tract must be pooled

00:35:53.280 --> 00:35:54.990
for the tract's mineral interest owners

00:35:54.990 --> 00:35:59.050
to obtain their fair share of minerals and prevent waste.

00:35:59.050 --> 00:36:02.670
Ammonite did not provide any scientific or expert testimony

00:36:02.670 --> 00:36:05.590
to support its claims or its applications.

00:36:07.220 --> 00:36:08.510
Apache asserts there should be

00:36:08.510 --> 00:36:10.250
no forced pooling in this case.

00:36:10.250 --> 00:36:12.465
Apache claims the wells do not produce minerals

00:36:12.465 --> 00:36:14.940
from Ammonite's riverbed tract.

00:36:14.940 --> 00:36:16.240
There is no drainage.

00:36:16.240 --> 00:36:17.850
And Ammonite's acreage provides

00:36:17.850 --> 00:36:20.160
no contribution to production.

00:36:20.160 --> 00:36:22.510
Apache claims Ammonite's voluntary pooling offer

00:36:22.510 --> 00:36:24.220
was not fair and reasonable.

00:36:24.220 --> 00:36:26.370
It provided no benefit to Apache,

00:36:26.370 --> 00:36:28.140
would cause Apache to incur

00:36:28.140 --> 00:36:30.690
additional costs for additional equipment,

00:36:30.690 --> 00:36:33.080
would cause lease line spacing problems,

00:36:33.080 --> 00:36:35.520
and unfairly dilute the Apache unit

00:36:35.520 --> 00:36:37.450
mineral interest owner's portion.

00:36:38.590 --> 00:36:40.000
Apache further asserts pooling

00:36:40.000 --> 00:36:42.440
will not prevent waste or protect correlative rights.

00:36:42.440 --> 00:36:44.223
Apache claims the wells are already drilled

00:36:44.223 --> 00:36:48.350
and do not drain minerals from the Ammonite tract.

00:36:48.350 --> 00:36:50.100
Pooling will not impact

00:36:50.100 --> 00:36:52.870
the amount of hydrocarbons produced or lost,

00:36:52.870 --> 00:36:54.680
so waste is not an issue.

00:36:54.680 --> 00:36:56.280
Apache also asserts pooling will not

00:36:56.280 --> 00:36:57.770
protect correlative rights,

00:36:57.770 --> 00:36:59.790
because the Ammonite tract minerals

00:36:59.790 --> 00:37:03.580
are still in place beneath the Ammonite tract

00:37:03.580 --> 00:37:05.590
and, in fact, Apache asserts pooling will

00:37:05.590 --> 00:37:07.340
negatively impact the Apache unit

00:37:07.340 --> 00:37:09.740
mineral interest's owner's correlative rights

00:37:09.740 --> 00:37:11.410
by taking minerals produced

00:37:11.410 --> 00:37:13.600
solely from under the Apache unit

00:37:13.600 --> 00:37:15.920
and giving a portion to Ammonite.

00:37:15.920 --> 00:37:18.810
The protestants express concern regarding

00:37:18.810 --> 00:37:20.200
Ammonite's proposal to split

00:37:20.200 --> 00:37:22.240
the Apache unit into three units,

00:37:22.240 --> 00:37:23.560
one for each of the wells.

00:37:23.560 --> 00:37:24.880
The protestants claim their

00:37:24.880 --> 00:37:27.640
correlative rights will be impacted.

00:37:27.640 --> 00:37:29.300
The protestants are currently being paid

00:37:29.300 --> 00:37:31.016
on production from all three wells,

00:37:31.016 --> 00:37:34.440
per an agreement of the interest owners of the unit.

00:37:34.440 --> 00:37:36.710
If the Apache unit were forcibly split

00:37:36.710 --> 00:37:37.800
into three separate units

00:37:37.800 --> 00:37:39.560
and pooled with Ammonite's tract,

00:37:39.560 --> 00:37:41.360
the protestants would not be paid on

00:37:41.360 --> 00:37:43.040
the same basis as that agreement.

00:37:43.924 --> 00:37:47.340
The Administrative Law Judge and technical examiner

00:37:47.340 --> 00:37:48.850
recommend that the Commission find

00:37:48.850 --> 00:37:51.900
insufficient evidence a fair and reasonable offer was made

00:37:51.900 --> 00:37:53.540
by Ammonite to Apache,

00:37:53.540 --> 00:37:56.170
which is required by the MIPA.

00:37:56.170 --> 00:37:57.930
Further, the examiner's recommend the Commission

00:37:57.930 --> 00:37:59.940
find Ammonite has failed to demonstrate

00:38:01.030 --> 00:38:03.170
that the proposed pooled units

00:38:03.170 --> 00:38:05.450
will prevent waste, protect correlative rights,

00:38:05.450 --> 00:38:08.710
or prevent the drilling of unnecessary wells.

00:38:08.710 --> 00:38:10.463
Finally, the examiners recommend the Commission

00:38:10.463 --> 00:38:14.050
dismiss and deny the applications.

00:38:14.050 --> 00:38:16.320
Exceptions and a reply were filed.

00:38:16.320 --> 00:38:17.970
And I am available for questions.

00:38:19.330 --> 00:38:20.163
<v Christi>Thank you, Jennifer.</v>

00:38:20.163 --> 00:38:20.996
Are there any questions?

00:38:20.996 --> 00:38:21.940
<v ->One question.</v>

00:38:21.940 --> 00:38:23.470
Jennifer, I just want to make sure, for clarity...

00:38:23.470 --> 00:38:24.303
We've talked about...

00:38:24.303 --> 00:38:26.930
We've seen a number of these types of cases come forward.

00:38:26.930 --> 00:38:29.345
Actual draining of minerals is not

00:38:29.345 --> 00:38:32.840
a requirement in the MIPA, right?

00:38:32.840 --> 00:38:35.730
We see MIPA as an incentive

00:38:35.730 --> 00:38:38.650
for people to negotiate in good faith ahead of time

00:38:38.650 --> 00:38:42.090
to prevent waste because a track is stranded.

00:38:42.090 --> 00:38:43.710
It seems like, in this case, the finding was,

00:38:43.710 --> 00:38:46.590
because of the timing of the Ammonite offer

00:38:46.590 --> 00:38:48.590
and that units were already formed,

00:38:48.590 --> 00:38:52.800
it made the offer not good, if you will,

00:38:52.800 --> 00:38:53.860
or it wasn't a good faith offer.

00:38:53.860 --> 00:38:56.740
It would have been unduly burdensome on Apache

00:38:56.740 --> 00:38:59.590
to split up the units and to redevelop.

00:38:59.590 --> 00:39:01.760
Hence the reason to deny this.

00:39:01.760 --> 00:39:02.680
I just wanted to make sure that was

00:39:02.680 --> 00:39:04.700
the key crux of the issue of the case for me.

00:39:04.700 --> 00:39:06.750
<v ->That was certainly one factor, I think.</v>

00:39:07.800 --> 00:39:09.570
The lack of drainage was another factor,

00:39:09.570 --> 00:39:13.320
because Apache wasn't getting anything.

00:39:13.320 --> 00:39:16.630
And Ammonite wasn't contributing to the wells.

00:39:16.630 --> 00:39:20.660
It was asking to benefit from the production.

00:39:20.660 --> 00:39:23.910
But I do think there were other facts in this case

00:39:23.910 --> 00:39:26.840
that were also very serious factors.

00:39:26.840 --> 00:39:28.190
Such as the one you mentioned.

00:39:28.190 --> 00:39:29.023
<v ->I wanna make sure.</v>

00:39:29.023 --> 00:39:32.190
I think, in MIPA, drainage is not a requirement.

00:39:32.190 --> 00:39:34.610
In other words, if somebody makes an offer,

00:39:34.610 --> 00:39:37.050
someone just ignores it, minerals are stranded.

00:39:37.050 --> 00:39:37.960
Even if they're not draining,

00:39:37.960 --> 00:39:42.120
they can still be forced into the pool as a result.

00:39:42.120 --> 00:39:44.470
Hence incentivizing, normally,

00:39:44.470 --> 00:39:46.110
operators to negotiate in good faith

00:39:46.110 --> 00:39:47.364
to try to capture those minerals.

00:39:47.364 --> 00:39:49.180
That's a correct statement?

00:39:49.180 --> 00:39:50.550
<v Jennifer>I agree with you that drainage</v>

00:39:50.550 --> 00:39:54.140
is not in the MIPA statutes.

00:39:54.140 --> 00:39:55.230
That word is not in there.

00:39:55.230 --> 00:39:57.740
It is not an expressed requirement.

00:39:57.740 --> 00:40:00.970
I think there's been debate in the law

00:40:00.970 --> 00:40:03.460
and among some of the Commissioners

00:40:03.460 --> 00:40:06.130
as to whether that should be an implied requirement.

00:40:06.130 --> 00:40:07.090
<v ->But, in this...</v>

00:40:07.090 --> 00:40:08.510
Like I said, in this case, it seems like,

00:40:08.510 --> 00:40:10.435
regardless of that, the timing of the offer,

00:40:10.435 --> 00:40:12.600
where they were in their development,

00:40:12.600 --> 00:40:15.250
it would have been unduly painful, if you will,

00:40:15.250 --> 00:40:16.570
to Apache to make the development.

00:40:16.570 --> 00:40:18.379
Hence the offer was...

00:40:18.379 --> 00:40:19.320
I'm not gonna say not a good faith offer,

00:40:19.320 --> 00:40:21.680
but it wasn't one that was reasonable.

00:40:21.680 --> 00:40:24.180
Hence the reason the MIPA standard shouldn't be applied.

00:40:24.180 --> 00:40:26.090
Anyway, I'm fine with your findings.

00:40:26.090 --> 00:40:29.570
I'd just like to clarify those two things are different.

00:40:29.570 --> 00:40:30.403
Thank you.

00:40:30.403 --> 00:40:32.280
<v ->Any other questions?</v>

00:40:32.280 --> 00:40:34.320
I move we approve the examiner's recommendation

00:40:34.320 --> 00:40:35.450
for all three of these items.

00:40:35.450 --> 00:40:37.590
You said you had one order, correct, Jennifer?

00:40:37.590 --> 00:40:39.000
There's one order, is that correct?

00:40:39.000 --> 00:40:39.833
<v Jennifer>There's one order, yes.</v>

00:40:39.833 --> 00:40:40.870
<v ->So, I just need one motion.</v>

00:40:40.870 --> 00:40:43.320
I move we approve the examiner's recommendation

00:40:43.320 --> 00:40:44.153
for these items.

00:40:44.153 --> 00:40:45.090
Is there a second?

00:40:45.090 --> 00:40:45.923
<v ->Second.</v>

00:40:45.923 --> 00:40:46.756
<v ->Second, Commissioner Sitton.</v>

00:40:46.756 --> 00:40:48.270
All in favor, say aye.

00:40:48.270 --> 00:40:49.103
<v All>Aye.</v>

00:40:49.103 --> 00:40:49.936
<v ->Motion passes.</v>

00:40:49.936 --> 00:40:50.769
Items are approved.

00:40:50.769 --> 00:40:51.602
Thank you.

00:40:54.900 --> 00:40:57.690
Items seven and eight together.

00:40:57.690 --> 00:40:58.560
Morning, Clayton.

00:40:58.560 --> 00:41:01.380
<v ->Good morning, Chairman and Commissioners.</v>

00:41:01.380 --> 00:41:04.040
Clayton Hoover, Administrative Law Judge.

00:41:04.040 --> 00:41:07.300
Items seven and eight are good faith claim cases

00:41:07.300 --> 00:41:09.250
in which the sole issue is

00:41:09.250 --> 00:41:11.150
whether the operator has a good faith claim

00:41:11.150 --> 00:41:13.540
to continue to operate the lease.

00:41:13.540 --> 00:41:15.320
The record evidence demonstrated that

00:41:15.320 --> 00:41:18.000
Creative did not present a good faith claim

00:41:18.000 --> 00:41:19.300
to operate the leases,

00:41:19.300 --> 00:41:21.940
because the JOAs admitted into evidence

00:41:21.940 --> 00:41:24.550
clearly show that a successor operator

00:41:24.550 --> 00:41:26.550
must be a working interest owner.

00:41:26.550 --> 00:41:28.590
And Creative owns no working interests

00:41:28.590 --> 00:41:30.920
and has never owned any working interests.

00:41:30.920 --> 00:41:33.030
While the JOAs allow name changes

00:41:33.030 --> 00:41:35.480
and transfers to affiliates,

00:41:35.480 --> 00:41:38.650
in this case, there have been no name changes

00:41:38.650 --> 00:41:40.460
or transfers of interests.

00:41:40.460 --> 00:41:42.930
The operator has never owned any working interests

00:41:42.930 --> 00:41:46.648
and is clearly prohibited from serving as operator.

00:41:46.648 --> 00:41:48.250
It is, therefore, recommended that

00:41:48.250 --> 00:41:49.330
the Commission find that

00:41:49.330 --> 00:41:51.246
Creative does not have a good faith claim

00:41:51.246 --> 00:41:53.900
to continue operating the leases.

00:41:53.900 --> 00:41:56.240
Exceptions and replies were filed.

00:41:56.240 --> 00:41:58.250
I'm available for questions.

00:41:58.250 --> 00:41:59.083
<v ->Thank you.</v>

00:41:59.083 --> 00:42:00.380
Are there any questions?

00:42:00.380 --> 00:42:02.450
We have one of the parties to the case here.

00:42:02.450 --> 00:42:05.120
Does anybody wanna hear from that person?

00:42:05.120 --> 00:42:08.920
Okay, I move we approve the examiner's recommendation for...

00:42:08.920 --> 00:42:10.040
Do you have one order or two?

00:42:10.040 --> 00:42:10.890
I'm sorry.

00:42:10.890 --> 00:42:11.723
<v Clayton>I have one order.</v>

00:42:11.723 --> 00:42:12.556
<v ->One order.</v>

00:42:12.556 --> 00:42:13.430
Okay, I move...

00:42:13.430 --> 00:42:14.263
<v Clayton>I'm sorry.</v>

00:42:14.263 --> 00:42:15.096
Two orders.

00:42:15.096 --> 00:42:15.929
<v ->So, I need two different motions?</v>

00:42:15.929 --> 00:42:16.762
<v Clayton>Yes.</v>

00:42:16.762 --> 00:42:18.180
<v ->Okay, I move we approve the examiner's recommendation</v>

00:42:18.180 --> 00:42:19.860
for item number seven.

00:42:19.860 --> 00:42:20.980
Is there a second?

00:42:20.980 --> 00:42:21.813
<v ->Second.</v>

00:42:21.813 --> 00:42:22.710
<v ->Second, Commissioner Christian.</v>

00:42:22.710 --> 00:42:23.969
All in favor, say aye.

00:42:23.969 --> 00:42:24.930
<v All>Aye.</v>

00:42:24.930 --> 00:42:25.800
<v ->Motion passes.</v>

00:42:25.800 --> 00:42:26.770
Item is approved.

00:42:26.770 --> 00:42:28.800
I move we approve the examiner's recommendation

00:42:28.800 --> 00:42:30.240
for item number eight.

00:42:30.240 --> 00:42:31.390
Is there a second?

00:42:31.390 --> 00:42:32.223
<v ->Second.</v>

00:42:32.223 --> 00:42:33.200
<v ->Second, Commissioner Sitton.</v>

00:42:33.200 --> 00:42:34.473
All in favor, say aye.

00:42:34.473 --> 00:42:35.306
<v All>Aye.</v>

00:42:35.306 --> 00:42:36.139
<v ->Motion passes.</v>

00:42:36.139 --> 00:42:37.860
That item's approved.

00:42:37.860 --> 00:42:38.693
Thank you.

00:42:38.693 --> 00:42:39.526
<v ->Thank you, Chairman.</v>

00:42:39.526 --> 00:42:43.180
Items nine through 24 are motions for rehearing

00:42:43.180 --> 00:42:45.910
on the 16 MIPA cases in which

00:42:45.910 --> 00:42:48.380
Ammonite seeks to form MIPA units

00:42:48.380 --> 00:42:51.400
using Frio River tracts leased by the state of Texas

00:42:51.400 --> 00:42:53.730
for the benefit of the Permanent School Fund

00:42:53.730 --> 00:42:57.058
and EOG acreage with 16 existing wells.

00:42:57.058 --> 00:43:00.250
At the conference on December 5, 2017,

00:43:00.250 --> 00:43:03.249
a final order dismissing these applications

00:43:03.249 --> 00:43:06.940
based on Commissioner Christian's motion was entered.

00:43:06.940 --> 00:43:09.590
Ammonite has filed the motions for rehearing.

00:43:09.590 --> 00:43:11.260
No new issues of fact or law

00:43:11.260 --> 00:43:13.690
not previously considered were raised.

00:43:13.690 --> 00:43:15.540
Denial is recommended.

00:43:15.540 --> 00:43:17.280
The motion for rehearing will be

00:43:17.280 --> 00:43:21.060
overruled by operational law on February 5, 2018.

00:43:22.129 --> 00:43:24.100
<v Christi>Are there any questions?</v>

00:43:25.060 --> 00:43:27.550
<v ->No, even though I think we got this ruling wrong,</v>

00:43:27.550 --> 00:43:30.500
I don't think there's any new issues of fact or law.

00:43:31.854 --> 00:43:33.010
<v ->Okay, do you have one order on this.</v>

00:43:33.010 --> 00:43:33.843
<v Clayton>One order on this.</v>

00:43:33.843 --> 00:43:35.028
<v ->That's good.</v>

00:43:35.028 --> 00:43:35.861
Just wanna make sure I'm doing enough motions.

00:43:35.861 --> 00:43:38.040
I move we approve the examiner's

00:43:38.040 --> 00:43:39.990
recommendation on these items.

00:43:39.990 --> 00:43:41.040
Is there a second?

00:43:41.040 --> 00:43:41.873
<v ->Second.</v>

00:43:41.873 --> 00:43:42.900
<v ->Second, Commissioner Sitton.</v>

00:43:42.900 --> 00:43:44.192
All in favor, say aye.

00:43:44.192 --> 00:43:45.025
<v All>Aye.</v>

00:43:45.025 --> 00:43:45.858
<v ->Motion passes.</v>

00:43:45.858 --> 00:43:46.720
Those items are approved.

00:43:46.720 --> 00:43:48.410
Thank you, Clayton.

00:43:48.410 --> 00:43:51.200
Alright, Oil and Gas Consent Agenda.

00:43:51.200 --> 00:43:54.000
Items 25 through 74.

00:43:54.000 --> 00:43:55.820
There are 50 items on here.

00:43:55.820 --> 00:43:58.820
Any we need to deal with individually?

00:43:58.820 --> 00:44:00.240
Alright, I'm gonna move that we approve

00:44:00.240 --> 00:44:02.300
items 25 through 74.

00:44:02.300 --> 00:44:03.380
Is there a second?

00:44:03.380 --> 00:44:04.213
<v Wayne>Second.</v>

00:44:04.213 --> 00:44:05.290
<v ->Second, Commissioner Christian.</v>

00:44:05.290 --> 00:44:06.619
All in favor, say aye.

00:44:06.619 --> 00:44:07.470
<v All>Aye.</v>

00:44:07.470 --> 00:44:08.460
<v ->Motion passes.</v>

00:44:08.460 --> 00:44:09.710
Those items are approved.

00:44:11.850 --> 00:44:14.630
Rule 15, inactive wells.

00:44:14.630 --> 00:44:16.840
There were 19 items.

00:44:16.840 --> 00:44:17.990
We're now down to 16.

00:44:17.990 --> 00:44:19.450
Apparently, some have gotten fixed.

00:44:19.450 --> 00:44:22.090
So, these are items 79 through 93.

00:44:22.090 --> 00:44:25.780
But the following three, I'm told, have been fixed.

00:44:25.780 --> 00:44:30.780
So items 81, 84, and 91, they have achieved compliance.

00:44:31.100 --> 00:44:31.933
Is that correct?

00:44:31.933 --> 00:44:32.766
Anybody else that I missed?

00:44:32.766 --> 00:44:37.250
Alright, I'm gonna move we approve items 75 through 93

00:44:37.250 --> 00:44:41.230
with the exceptions of item numbers 81, 84, and 91.

00:44:41.230 --> 00:44:42.230
Is there a second?

00:44:42.230 --> 00:44:43.063
<v Ryan>Second.</v>

00:44:43.063 --> 00:44:44.080
<v ->Second, Commissioner Sitton.</v>

00:44:44.080 --> 00:44:45.540
All in favor, say aye.

00:44:45.540 --> 00:44:46.373
<v All>Aye.</v>

00:44:46.373 --> 00:44:47.206
Motion passes.

00:44:47.206 --> 00:44:48.940
Those items are approved.

00:44:48.940 --> 00:44:50.170
Master Default items.

00:44:50.170 --> 00:44:52.297
Items 94 through 109.

00:44:52.297 --> 00:44:54.390
There's 16 of them.

00:44:54.390 --> 00:44:56.480
Again, I'm gonna move that we approve those items,

00:44:56.480 --> 00:44:58.450
items 94 through 109.

00:44:58.450 --> 00:44:59.670
Is there a second?

00:44:59.670 --> 00:45:00.503
<v Wayne>Second.</v>

00:45:00.503 --> 00:45:01.620
<v ->Second, Commissioner Christian.</v>

00:45:01.620 --> 00:45:03.280
All in favor, say aye.

00:45:03.280 --> 00:45:04.113
<v All>Aye.</v>

00:45:04.113 --> 00:45:04.946
<v ->Motion passes.</v>

00:45:04.946 --> 00:45:06.640
Those items are approved.

00:45:06.640 --> 00:45:10.960
And Agreed Enforcement Orders, items 110 through 485.

00:45:10.960 --> 00:45:15.880
There are 376 items on this docket.

00:45:15.880 --> 00:45:18.800
And I move we approve items 110 through 485.

00:45:18.800 --> 00:45:19.950
Is there a second?

00:45:19.950 --> 00:45:20.783
<v Ryan>Second.</v>

00:45:20.783 --> 00:45:21.750
<v ->Second, Commissioner Sitton.</v>

00:45:21.750 --> 00:45:23.070
All in favor, say aye.

00:45:23.070 --> 00:45:23.903
<v All>Aye.</v>

00:45:23.903 --> 00:45:24.736
<v ->Motion passes.</v>

00:45:24.736 --> 00:45:26.990
Those items are approved.

00:45:26.990 --> 00:45:28.510
This concludes the hearing section.

00:45:28.510 --> 00:45:29.970
Thank you.

00:45:29.970 --> 00:45:31.170
Alright, Administrative.

00:45:38.180 --> 00:45:39.820
Morning, Wei.

00:45:39.820 --> 00:45:41.500
<v ->Good morning Chairman, Commissioners.</v>

00:45:41.500 --> 00:45:42.850
Wei Wang, Interim Director.

00:45:44.215 --> 00:45:46.870
For the update, I'm glad to report that

00:45:46.870 --> 00:45:49.860
we're making good progress on the hiring front.

00:45:49.860 --> 00:45:52.910
Today, our head count is 708 employees

00:45:52.910 --> 00:45:56.810
comparing to 659 when we started the year.

00:45:56.810 --> 00:45:58.060
So, as the industry recovers,

00:45:58.060 --> 00:46:00.390
we're taking good measures to make sure

00:46:00.390 --> 00:46:01.510
we have adequate staffing

00:46:01.510 --> 00:46:04.930
and boots on the ground to process applications

00:46:04.930 --> 00:46:07.300
and perform inspections.

00:46:07.300 --> 00:46:08.250
Now, on the well plugging,

00:46:08.250 --> 00:46:10.050
Clay, at a later point, will provide you

00:46:10.050 --> 00:46:14.010
with the first quarter updates on the well plugging numbers.

00:46:14.010 --> 00:46:15.670
And that is my update today.

00:46:15.670 --> 00:46:16.503
<v ->Great.</v>

00:46:16.503 --> 00:46:17.336
Any questions for Wei?

00:46:18.480 --> 00:46:19.490
Okay, thank you.

00:46:21.520 --> 00:46:22.353
Morning, Alec.

00:46:22.353 --> 00:46:23.980
<v ->Good morning, Chairman, Commissioners.</v>

00:46:23.980 --> 00:46:26.150
For the record, my name is Alex Schoch.

00:46:26.150 --> 00:46:28.780
General Counsel of the Railroad Commission of Texas.

00:46:28.780 --> 00:46:32.040
Item 488 will be addressed by David Cooney

00:46:32.040 --> 00:46:33.260
and then Natalie Dubile will come up

00:46:33.260 --> 00:46:35.550
to address items 489 and 490.

00:46:35.550 --> 00:46:36.760
<v Christi>Okay, great, good morning.</v>

00:46:36.760 --> 00:46:38.860
<v ->Good morning, Commissioners, Chairman.</v>

00:46:38.860 --> 00:46:41.020
David Cooney from the Office of General Counsel.

00:46:41.020 --> 00:46:43.270
Just a brief report on the status

00:46:43.270 --> 00:46:46.530
of the Clean Power Plan Repeal Proposal.

00:46:46.530 --> 00:46:49.440
We had joined with TCEQ and the PUC

00:46:49.440 --> 00:46:53.460
to comment on the repeal of the Clean Power Plan,

00:46:53.460 --> 00:46:55.810
which was proposed by the Trump administration.

00:46:55.810 --> 00:46:57.090
Comments were originally...

00:46:57.090 --> 00:46:58.740
And we put together comments.

00:46:58.740 --> 00:47:00.890
And we're prepared to file a joint letter

00:47:00.890 --> 00:47:03.040
with the other two agencies.

00:47:03.040 --> 00:47:05.283
Comments were originally due in mid-January.

00:47:05.283 --> 00:47:09.420
The EPA extended the comment deadline to April 26.

00:47:09.420 --> 00:47:12.890
And so, on instruction from the Governor's Office,

00:47:12.890 --> 00:47:16.290
the TCEQ held back on filing those joint comments.

00:47:16.290 --> 00:47:18.420
And we're in discussion with the Governor's Office

00:47:18.420 --> 00:47:21.400
to see what areas they wanna make sure we address

00:47:21.400 --> 00:47:24.170
and we'll reapproach before the April 26 deadline.

00:47:25.150 --> 00:47:26.840
And we'll keep everyone posted.

00:47:26.840 --> 00:47:29.560
<v ->Okay, great, thank you very much for staying engaged.</v>

00:47:29.560 --> 00:47:30.820
Any questions?

00:47:30.820 --> 00:47:31.670
Thank you, David.

00:47:35.150 --> 00:47:36.650
489, good morning.

00:47:36.650 --> 00:47:37.580
How are you?

00:47:37.580 --> 00:47:38.413
<v ->Good.</v>

00:47:38.413 --> 00:47:39.460
Good morning, Chairman, Commissioners.

00:47:39.460 --> 00:47:41.250
For the record, my name is Natalie Dubile

00:47:41.250 --> 00:47:43.420
with the Office of General Counsel.

00:47:43.420 --> 00:47:46.540
Item number 489 is staff's recommendation

00:47:46.540 --> 00:47:48.220
to publish proposed amendments to

00:47:48.220 --> 00:47:52.110
16 Texas Administrative Code, Chapter Seven.

00:47:52.110 --> 00:47:54.510
Staff proposes amendments to Chapter Seven

00:47:54.510 --> 00:47:56.420
to correct outdated references,

00:47:56.420 --> 00:47:58.360
correct minor typographical errors,

00:47:58.360 --> 00:48:00.330
and reflect statutory and rule changes

00:48:00.330 --> 00:48:02.510
outside of Chapter Seven.

00:48:02.510 --> 00:48:03.920
Their proposed amendments include

00:48:03.920 --> 00:48:07.240
changing the title of Chapter Seven to Gas Services,

00:48:07.240 --> 00:48:10.250
updating Commission division and department names,

00:48:10.250 --> 00:48:12.550
correcting references to rules in Chapter One,

00:48:12.550 --> 00:48:14.640
which was recently amended,

00:48:14.640 --> 00:48:15.970
removing references to

00:48:15.970 --> 00:48:18.080
the NERU cuneiform system of accounts,

00:48:18.080 --> 00:48:19.720
as the Commission now requires use of

00:48:19.720 --> 00:48:22.590
the FERC uniform system of accounts,

00:48:22.590 --> 00:48:25.490
and amending Section 7.315 to reflect

00:48:25.490 --> 00:48:27.090
changes in industry accounting.

00:48:28.000 --> 00:48:29.820
Staff requests the Commission's approval

00:48:29.820 --> 00:48:31.290
to publish the proposal in

00:48:31.290 --> 00:48:33.760
the Texas Register for Public Comment.

00:48:33.760 --> 00:48:36.050
If approved today, the proposal will appear

00:48:36.050 --> 00:48:39.080
in the February 9th issue of the Texas Register.

00:48:39.080 --> 00:48:41.150
The proposal and an online comment form

00:48:41.150 --> 00:48:44.170
would also be made available on the Commission's website,

00:48:44.170 --> 00:48:45.720
giving interested persons more than

00:48:45.720 --> 00:48:47.430
two additional weeks to review

00:48:47.430 --> 00:48:49.620
and submit comments to the Commission.

00:48:49.620 --> 00:48:52.020
I'm available to answer any questions.

00:48:52.020 --> 00:48:52.910
<v ->Thank you, Natalie.</v>

00:48:52.910 --> 00:48:54.565
Any questions?

00:48:54.565 --> 00:48:57.180
I move we approve the staff's recommendation.

00:48:57.180 --> 00:48:58.480
Is there a second?

00:48:58.480 --> 00:48:59.313
<v ->Second.</v>

00:48:59.313 --> 00:49:00.380
<v ->Second, Commissioner Sitton.</v>

00:49:00.380 --> 00:49:02.000
All in favor, say aye.

00:49:02.000 --> 00:49:02.833
<v All>Aye.</v>

00:49:02.833 --> 00:49:03.666
<v ->Motion passes.</v>

00:49:03.666 --> 00:49:04.499
Item is approved.

00:49:04.499 --> 00:49:05.332
Next one.

00:49:05.332 --> 00:49:06.165
<v ->Thank you.</v>

00:49:06.165 --> 00:49:08.330
Item number 490 is staff's recommendation

00:49:08.330 --> 00:49:11.750
to adopt amendments to 16 Texas Administrative Code,

00:49:11.750 --> 00:49:15.360
Sections 18.1, 18.4, and 18.11.

00:49:16.530 --> 00:49:18.980
The proposed amendment to Section 18.1

00:49:18.980 --> 00:49:22.280
clarifies that, pursuant to House Bill 1818,

00:49:22.280 --> 00:49:24.730
the Commission now has damage prevention authority

00:49:24.730 --> 00:49:26.690
over interstate pipelines,

00:49:26.690 --> 00:49:28.990
as well as intrastate pipelines.

00:49:28.990 --> 00:49:30.750
Staff also recommends adoption of

00:49:30.750 --> 00:49:32.640
two amendments to bring Chapter 18

00:49:32.640 --> 00:49:35.770
into compliance with PHMSA program requirements.

00:49:35.770 --> 00:49:39.636
First, an amendment to Section 18.4 and 18.11

00:49:39.636 --> 00:49:41.540
to require an excavator to notify

00:49:41.540 --> 00:49:44.690
the pipeline operator at the earliest practical moment,

00:49:44.690 --> 00:49:47.970
but not later than one hour, after damaging a pipeline.

00:49:47.970 --> 00:49:50.680
And, second, an amendment to Section 18.11

00:49:50.680 --> 00:49:52.939
to require an excavator to call 911

00:49:52.939 --> 00:49:55.310
to report the release of any product

00:49:55.310 --> 00:49:57.300
from a damaged pipeline.

00:49:57.300 --> 00:49:59.580
Finally, staff recommends adoption of amendment

00:49:59.580 --> 00:50:02.650
to Section 18.11 to give excavators and operators

00:50:02.650 --> 00:50:06.080
30 days to report information regarding

00:50:06.080 --> 00:50:07.880
a damage incident to the Commission.

00:50:08.780 --> 00:50:11.810
On November 7, 2017, the Commission approved

00:50:11.810 --> 00:50:13.660
publication of the proposed amendments

00:50:13.660 --> 00:50:16.420
in the Texas Register for a public comment period,

00:50:16.420 --> 00:50:19.800
which ended on January 2, 2018.

00:50:19.800 --> 00:50:22.319
The Commission received three comments on the proposal,

00:50:22.319 --> 00:50:25.660
which are discussed on pages one and two of the preamble.

00:50:26.500 --> 00:50:28.820
Staff recommends that the Commission adopt the amendments

00:50:28.820 --> 00:50:30.800
without changes to the proposed texts

00:50:30.800 --> 00:50:32.770
published in the Texas Register.

00:50:32.770 --> 00:50:34.801
I'm available to answer any questions.

00:50:34.801 --> 00:50:35.634
<v Christi>Thank you.</v>

00:50:35.634 --> 00:50:36.730
Are there any questions?

00:50:36.730 --> 00:50:38.262
<v ->Just one.</v>

00:50:38.262 --> 00:50:39.095
I'm just wondering...

00:50:39.095 --> 00:50:40.500
We were given...

00:50:40.500 --> 00:50:41.980
Was it the federal government that

00:50:41.980 --> 00:50:46.350
gave us additional authority over the interstate pipelines?

00:50:46.350 --> 00:50:47.800
<v Natalie>I believe that was the legislature</v>

00:50:47.800 --> 00:50:50.190
in the last session in House Bill 1818.

00:50:50.190 --> 00:50:51.090
<v ->Okay, thank you.</v>

00:50:51.960 --> 00:50:54.700
<v ->And this also gets us into further compliance</v>

00:50:54.700 --> 00:50:56.040
with PHMSA and One Call.

00:50:56.040 --> 00:50:56.873
Is that correct, as well?

00:50:56.873 --> 00:50:57.706
<v Natalie>That's correct.</v>

00:50:57.706 --> 00:50:58.640
<v ->Okay, great.</v>

00:50:58.640 --> 00:50:59.640
Any other questions?

00:51:00.510 --> 00:51:02.490
I move we approve staff's recommendation.

00:51:02.490 --> 00:51:04.140
Is there a second?

00:51:04.140 --> 00:51:05.400
<v ->Second.</v>

00:51:05.400 --> 00:51:06.233
<v ->Second, Commissioner Christian.</v>

00:51:06.233 --> 00:51:07.270
All in favor, say aye.

00:51:07.270 --> 00:51:08.103
<v All>Aye.</v>

00:51:08.103 --> 00:51:08.936
<v ->Motion passes.</v>

00:51:08.936 --> 00:51:09.769
Item is approved.

00:51:09.769 --> 00:51:10.710
Thank you, Natalie.

00:51:20.460 --> 00:51:21.293
Morning.

00:51:21.293 --> 00:51:23.040
<v ->Good morning, Chairman, Commissioners.</v>

00:51:24.370 --> 00:51:25.600
For the record, I am Clay Whittle

00:51:25.600 --> 00:51:26.910
with the Oil and Gas Division.

00:51:26.910 --> 00:51:30.390
I will be presenting items 491 and 492.

00:51:31.910 --> 00:51:35.590
Item 491 is the Oilfield Cleanup Program annual report

00:51:35.590 --> 00:51:38.390
for Fiscal Year 2017.

00:51:38.390 --> 00:51:41.790
Texas Natural Resources Code 81.069c

00:51:41.790 --> 00:51:43.900
requires the Commission to file

00:51:43.900 --> 00:51:45.580
an annual report to the legislature

00:51:45.580 --> 00:51:48.500
for the Oil and Gas Regulation and Cleanup Fund.

00:51:48.500 --> 00:51:50.370
This report covers the period from

00:51:50.370 --> 00:51:54.700
September 1, 2016 through August 31, 2017

00:51:56.110 --> 00:51:57.730
and contains information on

00:51:57.730 --> 00:52:00.620
the state-managed plugging and cleanup programs,

00:52:00.620 --> 00:52:04.510
enforcement activities, and financial information.

00:52:04.510 --> 00:52:06.640
We recommend your approval of this report

00:52:06.640 --> 00:52:09.080
for submission to the legislature.

00:52:09.080 --> 00:52:10.430
May I answer any questions?

00:52:12.130 --> 00:52:12.963
<v ->Thank y'all.</v>

00:52:12.963 --> 00:52:13.796
We're making good progress.

00:52:13.796 --> 00:52:15.434
Any questions?

00:52:15.434 --> 00:52:18.580
I move we approve the staff's recommendation.

00:52:18.580 --> 00:52:19.700
Is there a second?

00:52:19.700 --> 00:52:20.533
<v ->Second.</v>

00:52:20.533 --> 00:52:21.560
<v ->Second, Commissioner Sitton.</v>

00:52:21.560 --> 00:52:23.147
All those in favor, say aye.

00:52:23.147 --> 00:52:24.520
<v All>Aye.</v>

00:52:24.520 --> 00:52:26.370
<v ->Thank you, Clay.</v>

00:52:26.370 --> 00:52:27.690
You're on 492, correct?

00:52:27.690 --> 00:52:28.840
<v ->492, yes, ma'am.</v>

00:52:28.840 --> 00:52:31.500
And I will present the well plugging report

00:52:31.500 --> 00:52:32.890
and Peter Pope will come up

00:52:32.890 --> 00:52:35.070
and present the site remediation report.

00:52:37.030 --> 00:52:40.780
During the first quarter, plugging operations were completed

00:52:40.780 --> 00:52:45.780
and files were closed on 221 wells at a cost of $3,573,460.

00:52:49.700 --> 00:52:52.380
This includes only those wells that were plugged,

00:52:52.380 --> 00:52:54.590
invoiced by the plugging contractor,

00:52:54.590 --> 00:52:57.580
and approved for payment by field operations.

00:52:57.580 --> 00:53:00.420
During this same period, 410 new wells

00:53:00.420 --> 00:53:03.290
were approved for plugging with state funds.

00:53:03.290 --> 00:53:06.920
I'm happy to report, as of last Friday, January 19,

00:53:06.920 --> 00:53:09.700
530 wells have been physically plugged

00:53:09.700 --> 00:53:13.220
at an estimated cost of $7.7 million.

00:53:14.360 --> 00:53:18.550
The well plugging target for Fiscal Year 2018 is 1500 wells.

00:53:20.140 --> 00:53:22.820
And I will now turn this over to Peter Pope.

00:53:22.820 --> 00:53:24.510
<v Christi>Thank you.</v>

00:53:24.510 --> 00:53:25.710
<v ->Good morning, Chairman, Commissioners.</v>

00:53:25.710 --> 00:53:28.924
I'm Peter Pope, manager of the Site Remediation Section.

00:53:28.924 --> 00:53:31.760
During the first quarter of Fiscal Year '18,

00:53:31.760 --> 00:53:35.120
site remediation completed and closed 16 activities

00:53:35.120 --> 00:53:39.420
using OGRC funds at a cost of approximately $235,000.

00:53:41.360 --> 00:53:44.320
We also authorized 72 new activities.

00:53:45.563 --> 00:53:49.700
And, for a current snapshot,

00:53:49.700 --> 00:53:54.700
as of January 22, we had completed another nine activities,

00:53:55.073 --> 00:53:58.260
which brings our total completed up to 27

00:53:58.260 --> 00:54:00.650
at a cost of approximately $272,000.

00:54:02.886 --> 00:54:04.190
And then, on top of that,

00:54:04.190 --> 00:54:06.520
we have another 21 activities that

00:54:06.520 --> 00:54:07.850
have been completed in the field

00:54:07.850 --> 00:54:10.920
and we're awaiting final payment of the invoice.

00:54:10.920 --> 00:54:12.580
May I answer any questions?

00:54:12.580 --> 00:54:15.280
<v ->Are there any questions for Clay or Peter?</v>

00:54:16.400 --> 00:54:18.170
Thank y'all for making good progress.

00:54:18.170 --> 00:54:19.420
We appreciate the report.

00:54:26.490 --> 00:54:27.620
493, good morning.

00:54:27.620 --> 00:54:28.453
How are you?

00:54:28.453 --> 00:54:29.286
<v ->I'm good.</v>

00:54:29.286 --> 00:54:30.119
Thank you.

00:54:30.119 --> 00:54:31.540
Good morning, Chairman and Commissioners.

00:54:31.540 --> 00:54:33.880
For the record, my name is Mark Everts

00:54:33.880 --> 00:54:35.700
with the Oversight and Safety Division.

00:54:35.700 --> 00:54:37.950
I'll be presenting item 493.

00:54:38.790 --> 00:54:40.440
The Oversight and Safety Division

00:54:40.440 --> 00:54:42.325
proposes two new forms,

00:54:42.325 --> 00:54:45.092
public notice of proposed rate increase

00:54:45.092 --> 00:54:48.210
and customer notice of interim rate adjustment,

00:54:48.210 --> 00:54:49.190
also known as GRIP.

00:54:50.090 --> 00:54:51.710
Each of these forms is designed

00:54:51.710 --> 00:54:53.780
to provide gas utility filers

00:54:53.780 --> 00:54:55.930
with a clear example of notice forms

00:54:55.930 --> 00:54:58.750
that comply with statute and rule,

00:54:58.750 --> 00:55:01.630
streamline this aspect of the filing process,

00:55:01.630 --> 00:55:04.400
and provide effective notice to customers.

00:55:04.400 --> 00:55:07.210
The use of these forms is recommended, not required.

00:55:08.520 --> 00:55:09.950
The Oversight and Safety Division

00:55:09.950 --> 00:55:13.730
also proposes a revised interim rate adjustment spreadsheet

00:55:13.730 --> 00:55:15.480
to streamline the filing process

00:55:15.480 --> 00:55:17.180
for gas utility applicants.

00:55:18.050 --> 00:55:21.240
This fully executable Excel spreadsheet form

00:55:21.240 --> 00:55:23.370
can be downloaded by applicants

00:55:23.370 --> 00:55:26.680
and replaces a non-interactive PDF form.

00:55:26.680 --> 00:55:29.540
The use of this form is recommended, not required.

00:55:30.657 --> 00:55:33.340
The Oversight and Safety Division also proposes

00:55:33.340 --> 00:55:35.682
changes to the form used by gas utilities

00:55:35.682 --> 00:55:38.300
to report gas utility tax.

00:55:38.300 --> 00:55:40.500
These changes are minor and are necessary

00:55:40.500 --> 00:55:43.200
to reflect industry accounting changes.

00:55:43.200 --> 00:55:44.800
Use of this form is required.

00:55:45.890 --> 00:55:47.380
The Oversight and Safety Division

00:55:47.380 --> 00:55:49.120
respectfully requests your approval

00:55:49.120 --> 00:55:51.050
to publish these proposed forms

00:55:51.050 --> 00:55:54.590
on the Commission website for a minimum of 30 days

00:55:54.590 --> 00:55:56.220
to receive informal comment.

00:55:56.220 --> 00:55:58.220
I'm available for questions.

00:55:58.220 --> 00:55:59.053
<v Christi>Thank you, Mark.</v>

00:55:59.053 --> 00:55:59.920
Are there any questions?

00:56:00.890 --> 00:56:03.190
I move we approve the staff's recommendation.

00:56:03.190 --> 00:56:04.200
Is there a second?

00:56:04.200 --> 00:56:05.033
<v Wayne>Second.</v>

00:56:05.033 --> 00:56:06.020
<v Christi>Second, Commissioner Christian.</v>

00:56:06.020 --> 00:56:07.646
All those in favor say aye.

00:56:07.646 --> 00:56:08.479
<v All>Aye.</v>

00:56:08.479 --> 00:56:09.312
<v ->Motion passes.</v>

00:56:09.312 --> 00:56:10.280
Item is approved.

00:56:10.280 --> 00:56:11.113
Thank you.

00:56:12.560 --> 00:56:14.710
494 is mine.

00:56:14.710 --> 00:56:15.543
That's where we are.

00:56:15.543 --> 00:56:16.376
Is that right, Alex?

00:56:16.376 --> 00:56:18.797
Just to make sure I didn't skip something.

00:56:18.797 --> 00:56:22.620
So, I wanted to make sure,

00:56:22.620 --> 00:56:26.380
since the Congress has actually passed

00:56:26.380 --> 00:56:29.050
Tax Cuts and Jobs Act of 2017...

00:56:29.050 --> 00:56:31.106
I think that's their official name.

00:56:31.106 --> 00:56:34.510
In doing so, they reduced the corporate tax rate

00:56:34.510 --> 00:56:38.650
from 35% to 21% as of January 1st.

00:56:38.650 --> 00:56:40.190
I think, as a prudent regulator,

00:56:40.190 --> 00:56:41.480
the Railroad Commission should

00:56:41.480 --> 00:56:44.090
proactively watch for opportunities

00:56:44.090 --> 00:56:46.310
to ensure that our gas utility rates

00:56:46.310 --> 00:56:49.330
are set at the lowest reasonable rate for consumers.

00:56:49.330 --> 00:56:51.565
And those taxes are allowed to be included

00:56:51.565 --> 00:56:56.060
in the rates that the utilities...

00:56:57.022 --> 00:57:00.050
That we set with the utilities.

00:57:00.050 --> 00:57:01.320
So, I wanna...

00:57:01.320 --> 00:57:03.210
Considering the reduced corporate tax rate...

00:57:03.210 --> 00:57:04.850
And I know we have some active cases.

00:57:04.850 --> 00:57:06.630
And I wanna make sure that,

00:57:06.630 --> 00:57:09.000
one, we are watching the active cases,

00:57:09.000 --> 00:57:11.560
but also I'd like the staff to analyze

00:57:11.560 --> 00:57:15.350
the impact of this tax act on the current rates.

00:57:15.350 --> 00:57:18.456
But also make sure that we are not overpaying

00:57:18.456 --> 00:57:21.160
on gas rates we've already done.

00:57:21.160 --> 00:57:25.790
So, I wanna make sure we're passing those savings

00:57:25.790 --> 00:57:27.710
back on to those customers.

00:57:27.710 --> 00:57:29.560
So, if y'all...

00:57:29.560 --> 00:57:31.080
This is just a direction to staff

00:57:31.080 --> 00:57:34.290
to make sure we're paying attention, readjusting.

00:57:34.290 --> 00:57:36.040
And y'all are gonna come back to us, hopefully,

00:57:36.040 --> 00:57:37.640
Mark, with some recommendations.

00:57:38.653 --> 00:57:40.770
So, if anybody's got any questions.

00:57:40.770 --> 00:57:42.040
Comments.

00:57:42.040 --> 00:57:43.840
Alright, great, thank you very much.

00:57:46.230 --> 00:57:50.600
Alright, item 497 is public participation

00:57:50.600 --> 00:57:53.260
and we don't have any additional cards.

00:57:53.260 --> 00:57:58.260
So we're at 495 and 496, our executive session.

00:57:58.266 --> 00:58:03.266
So having convened in a duly noticed open meeting,

00:58:04.040 --> 00:58:09.040
the Railroad Commission of Texas now at 10:31 on Tuesday...

00:58:09.330 --> 00:58:11.033
It's not Tuesday.

00:58:11.033 --> 00:58:14.520
It is Tuesday, January 23.

00:58:14.520 --> 00:58:16.110
Hold a closed door meeting

00:58:16.110 --> 00:58:17.290
at the Willa May Conference Room

00:58:17.290 --> 00:58:18.123
on the 12th floor of

00:58:18.123 --> 00:58:19.820
the William B. Travis state Office Building

00:58:19.820 --> 00:58:23.870
pursuant to the Texas Government Code, Chapter 551.

00:58:23.870 --> 00:58:26.360
The Commission will discuss personnel matters

00:58:26.360 --> 00:58:29.470
related to the position of the Executive Director

00:58:29.470 --> 00:58:34.060
pursuant to Section 551.074 of the code.

00:58:34.060 --> 00:58:35.670
The Commission will reconvene

00:58:35.670 --> 00:58:38.130
at an open meeting in the Willa May Conference Room

00:58:38.130 --> 00:58:39.330
on the 12th floor of the

00:58:39.330 --> 00:58:42.100
William B. Travis state Office Building.

00:58:42.100 --> 00:58:43.750
We are recessed.

00:58:43.750 --> 00:58:44.583
Thank you.