WEBVTT

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This meeting, the Rail Road Commission of
Texas will come to order to consider matters

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which have been duly
posted with the Secretary

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of State for June 18, 2019.
The Commission

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will consider items on
the agenda as posted

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on the agenda. Under our
public participation

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policy, anyone desiring
to offer public testimony

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on any items that are
not noticed on today's

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agenda will need to fill out a testimony form
found in the back of the room and submit

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it to Commission Secretary Kathy Way.
Reminder

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to turn off your cell phones.
You're already up.

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Good morning. Item
number one, Christina.

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- For the record, my name
is Christina Poole, and I'm

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with the Oversight and Safety Division.
The agenda

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item before you is Gas
Utility Docket 10830,

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the application of Texas
Gas Service for the

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Test Year 2018 Annual
Interim Rate Adjustment

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for its West Texas service area.
This is the

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third interim rate
adjustment TGS has fallen

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for this area since the company's
last rate case, GUD Number10506.

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This adjustment represents
an incremental revenue

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increase of $4,083,000
of which $325,489

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will be recovered from
the customers subject

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to the order in this docket.
Staff recommends

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approval of the interim
rate adjustment as revised.

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I can answer any questions.
- Thank you. Are there any
questions? I move we

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approve the examiners recommendation. Is there
a second? Second by Commissioner Sitton.

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All those in favor say aye. Motion
passes, item's approved. Thank you. Item

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number two. Morning, Frank. - Madam Chairman and
Commissioners. Good morning. I'm Frank Thomas with

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the Oversight and Safety division. The
next item this morning is Gas Utilities

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Docket Number 10833, which is an application
made by CenterPoint Energy Entex for a

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Test Year 2018 Annual
Interim Rate adjustment

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in incorporated areas
of municipalities with

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ceded jurisdiction in
its South Texas service

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area. This is the first
interim rate adjustment

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since the company's last rate case in GUD
Number 10669 which set the base interim rate

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adjustment components and
identified under these

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factors. The company
has determined an annual

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test year incremental rate requirement of
approximately $3,882,248, sent quickly, of

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which $1,263,266 will
be recovered from the

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environs and ceded
jurisdiction of customers

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rate adjustment. The company
did provide responses

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to staff request for information.
Staff's

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review of the filing has found it to be
compliant with provisions of the group

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statute and staff is
recommending approval.

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And I can address any
questions at this time.

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- Thank you. Are there any questions?
I move we approve the

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examiners recommendations.
Is there a second? Second by

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Commissioner Christian.
All those in favor say

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aye. Motion passes. Item's approved.
Thank

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you. Item number three.
Good morning.

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- Good morning. Good morning,
Chairman and Commissioners.

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For the record, my name is Claudia Godoy. I'm
representing the Gas Services department

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of the Oversight and Safety Division.
Before you

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today is Gas Utilities
Docket Number 10834,

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the application of CenterPoint Energy for
Test Year 2018 Annual Interim rate adjustment

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for the unincorporated
Beaumont, East Texas division

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and the cities that
have ceded jurisdiction

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to the Commission. This
is Centerpoint's sixth

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interim rate adjustment
since the company's last

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rate case, GUD Number 10182. The adjustment
represents an incremental increase

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of $3,836,876 of which
1,163,481 is allocated

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to the customers subject
to the order of this

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docket. Staff recommends
approval of interim

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rate adjustment. I'm
available for questions.

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- Thank you, Claudia. Are
there any questions?

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I move we approved the
examiners recommendation.

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Is there a second? Second
by Commissioner Sitton.

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All those in favor say aye.
Motion passes.

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Item's approved. Item number four.
- Good morning, Commissioners. For the record, my

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name is Sarah Montoya Fogelsong.
I'm representing

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the Market Oversight section
of the Oversight and

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Safety Division. Before you
today is Gas Utilities

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Docket Number 10835, the
application of CenterPoint

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Energy for the Test Year
2018 Annual Interim

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Rate adjustment for the
unincorporated portion

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of the Houston division and the cities that
have ceded jurisdiction to the Commission.

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This docket is the second
interim rate adjustment

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the company's filed for
the portion of the

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Houston Division jurisdictional
to the Commission.

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Since the final order
was issued in the most

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recent statement of intent, GUD Number 10567.
This adjustment represents an incremental

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increase of $7,749,138 of which $3,904,183
is recoverable from customers impacted

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by this order. Staff
recommends approval of

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this interim rate
adjustment as revised. I'm

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available to answer
any questions.

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- Thank you. Any questions? I move
we approve the examiner's

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recommendation. Is there a second?
Second by Commissioner Christian.

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All those in favor say aye.
Motion passes,

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item's approved. Thank you.
Item number five.

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- Morning Chairman and
Commissioners, Amy Bruce with the

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Market Oversight section of the Oversight and
Safety Division. Before you today is Gas

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Utilities Docket Number
10836, the application

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of CenterPoint Energy
in Texas for the Test

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Year 2018 Annual Interim
rate adjustment for

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the unincorporated portion
of the Texas Coast

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Division and the cities that have ceded
jurisdiction to the Commission. This docket

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is the second interim rate adjustment the
company has filed for the environs in the

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Texas Coast Division since the final order
was issued and Gas Utilities Docket Number

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10567. This adjustment
represents an incremental

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increase of $4,605,943
of which 1,617,942

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is allocated to environs customers. I recommend
approval of the interim rate adjustment

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as proposed and I'm available
to answer any questions.

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- Thank you. Are there any questions?
I move we approve

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the examiners recommendation.
Is there a second?

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Second by Commissioner Sitton.
All those in favor

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say aye. Motion passes. Item's approved.
Thank you. Item number six.

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- Good Morning, Chairman,
Commissioners. For

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the record, Veronica
Roberto, Administrative Law

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Judge with the Hearings division.
Item number

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six is an application by
Texas Municipal Power

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Agency, or TMPA,
requesting a multi phase

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release of reclamation
obligations on an aggregate

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971.2 acres within
Gibbons Creek Lignite

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Mine Five, Permit number
38D, located in Grimes

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county. The multi phase
release consists

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of 0.6 acres for Phase
One, Two, and Three, and

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970.6 acres for Phase Two and Three.
The 976

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acres were previously
granted Phase One release

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by Commission orders
in 2010 and 2018. The

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post mining land uses
within the subject area

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are pasture land and
develop water resources.

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Evidence in the record supports TMPA has
satisfied all requirements for full release

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of the subject area. After
notice, no comments or

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requests for a hearing were received.
TMPA and

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staff are the only parties
to the proceeding.

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No exceptions were filed.
No changes to the

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current bond are requested
in this docket. It

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is recommended that the
multi phase release of

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reclamation obligations for the subject 971.2
acres be approved and TMPA be eligible

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to reduce the amount of bond for the
permit. I'm available for questions.

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- Are there any questions?
I like the cows in the

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pictures. I move we approve
the examiner's recommendation.

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Is there a second? Second by Commissioner
Christian. All those in favor say aye. Motion

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passes. Item's approved. Thank you.
Item Number seven. Good morning.

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- Good morning, Chairman, Commissioners.
For the record, My

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name is Peter Buhva, Technical
Examiner with the Hearings

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division. Item number seven is the application
of OWL SWD Operating, LLC, pursuant

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to Statewide Rule 46 to inject fluid into
a reservoir productive of oil and gas for

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the Cronos SWD Lease Well Number One in the
Grice Delaware field in Loving County,

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Texas. The application is for noncommercial
new disposal well. OWL requests authority

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to dispose a maximum of
20,000 barrels per day

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of produced water into
the Delaware formation

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from a depth of 5000 feet to 6200 feet and
maximum surface injection pressure at 2500

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psiG. The application is protested by Z and
T Cattle Company LLC, who is an adjacent

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landowner and contends that
the proposed injection

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well is not in the public
interest and could

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potentially pollute the groundwater.
The applicant

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provided evidence that
the ground water would

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be protected and the injection fluid would
be contained. The protestant failed

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to show this well would be
against public interest

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or is the pollution threat.
The examiners

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recommend approval of the application.
Exceptions and

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replies have been filed. I'm
available for questions.

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- Thank you. Are there any questions?
I move we approve

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the examiners' recommendation.
Is there a second? Second

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by Commissioner Sitton. All
those in favor say aye. Motion

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passes. Item is approved. Thank you, Peter.
Number eight.

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Good morning, Commissioners.
I'm John Moore,

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Technical Examiner in
the Hearings division.

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Item eight is the application
of Western Disposal

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Systems Inc to amend the
daily injection volume

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of their existing
disposal permit from 2000

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barrels per day to 5000
barrels per day, a 250%

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increase in injection volume.
The application

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is protested by an offset
operator, CrownQuest

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Operating LLC. CrownQuest drills through
the injection formation to their target

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horizon and alleges that
increasing the injection

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volumes would impact
their drilling program

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in terms of operational
costs and risks. Protestant

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failed to show that
increasing the injection

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volume by 3000 barrels per day would harm
are injure any horizon productive of oil

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or gas. Protestant
continues to successfully

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develope their lease.
However, in the hearing

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protest that presented a prior Commission
final order from 2015, wherein the Commission

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recognized that a nearby plugged and abandoned
wellbore was a potential conduit for the

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vertical migration of fluids.
In the underlying

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proposal for decision,
Finding of Fact Number

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Five stated the Marian Number 11 Well, which
had been previously plugged and abandoned

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in 2005, may be a conduit
for migration between

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the injection interval
in the base of usable

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quality water. Pursuant to Finding of Fact
Number Five regarding the plug and abandoned

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well, the Commission ordered
a special condition:

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that a cement squeeze
be performed on the

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casing annulus and the well replugged. The
third party disposal well was never drilled,

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and there's no evidence
that the cement squeeze

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and replugging of the
nearby well ever occurred.

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There's no evidence of any material change
to the plugged an abandoned well bore, which

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would alter the circumstances supporting the
Commission's Finding of Fact Number Five

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and special conditions
adopted in 2015. With

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proper safeguards, the
amendment to Western's

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disposal application meets
statutory requirements.

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The examiner's recommend
approval of Western's

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application with the addition of a special
condition to perform a cement squeeze and

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replug the nearby plugged and abandoned well,
identical to the special condition the

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Commission ordered
previously on this well.

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Exceptions and replies were filed.
Might I answer

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any questions?

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- Thank you, John. Are there any questions?
- I have a question. John, we have

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over the last couple of
years, in fact, a lot

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of, more, probably, two
or three years ago,

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we were beginning to hear
a lot about potential

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over-pressurization of the San Andreas.
Specifically,

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as it was affecting the ability of operators
to drill through the San Andreas. The

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evidence in the record seems pretty clear
that the conclusion was, in fact, I know

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some commentary from the
representative from

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the protestant, that
there's some combination

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of natural conditions that are causing
issues as well as potential causes

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that could be from
additional disposal.

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My question is this is,
is as y'all were hearing

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this case, is there any ability to, because
we continue to hear about this concern, any

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ability to drawing in other information from
other producers, what's happening in other

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drilling operations? I'm
concerned that we're

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looking at every one of
these siloed and saying,

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in this case, it's $523,000 additional per
well to drill through this because of flow

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back issues, and there
are other issues that

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they mentioned, as opposed
to looking at the

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system is an aggregate.
So my question to you

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is, do you have any
ability or did you have

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any ability during this case to look at the
aggregate issues that we're dealing with in

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San Andreas or simply siloed
to just this one instance?

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- The simple answer would

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be no, nothing was
entered into the record.

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We'll say that when Crown
Quest started doing

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it's drilling effort,
typically in a horizontal

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program, they'll drop
a vertical well first

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to identify the horizons.
They stuck that well.

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And they stuck that well,
allegedly by CrownQuest,

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close to where the San Andreas was. But
at that point in time, this particular

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salt water well, salt water disposal well,
was only injecting on the order of 700

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barrels a day, well below its permit.
So there are inherent problems, and

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what drillers have got to contend with is
adjusting not only their drilling programs,

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but their completion programs.
In this particular

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area, you're going to
drill through what it

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could be helite and then hydrite before
you get to the San Andreas. So you can't

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necessarily drill with just clear water because
you're gonna dissolve this helite. But

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then, if you load up your mud weight, you're
gonna break through the Clear Fork because

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you want to hold back the San Andreas, so
it's always a compromise. But I do share your

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concern that these are looked at in a silo.
And I think it would probably be

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recommended that a study be done by the
Commission to understand what effect these

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injection wells are having. The people that
are in the saltwater disposal business

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are going to look for the
the formations that are

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highly porous and will
accept these volumes.

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This is a relatively small volume. We see
applications that go on the order of 20 to

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30,000 barrels a day, but you can't have
the horizontal drilling without some place

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to put the water.

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- I'm not arguing (inaudible)
as far as the wells,

00:15:32.924 --> 00:15:34.900
it was more, you answered
my question, and it

00:15:34.900 --> 00:15:40.280
is that we continue to look at these on a one
off basis, and at some point, we're gonna

00:15:40.280 --> 00:15:43.880
have to figure out how to take a look at a
more broad basis across the San Andreas to

00:15:43.880 --> 00:15:47.059
figure out if there are
issues that, when you

00:15:47.084 --> 00:15:50.100
look at the aggregate,
we see that we don't

00:15:50.100 --> 00:15:53.923
see looking siloed, but you answered
my question. Thank you, John.

00:15:53.948 --> 00:15:55.520
- Thank you, sir.

00:15:55.520 --> 00:15:58.040
- Any other questions? I move
we approve the examiners'

00:15:58.065 --> 00:16:00.650
recommendation. Is there a second?
Second by Commissioner

00:16:00.650 --> 00:16:05.991
Christian. All those in favor say aye. Motion
passes, item's approved. Thank you, John.

00:16:05.991 --> 00:16:14.660
Item number nine.
- Good morning, Chairman. Good
Morning, Commissioners. For the

00:16:14.660 --> 00:16:16.964
record, Christie Reeve,
Administrative Law Judge

00:16:16.989 --> 00:16:19.080
with the Hearings Division.
Item number nine

00:16:19.080 --> 00:16:21.684
is the application of
Exco Operating Company

00:16:21.709 --> 00:16:24.230
LP for a two year exception
to Statewide Rule

00:16:24.230 --> 00:16:26.899
32 to flare its casing
head gas due to a lack

00:16:26.924 --> 00:16:29.510
of available pipeline.
And when the pipeline

00:16:29.510 --> 00:16:33.069
becomes available, for
temporary upsets, maintenance

00:16:33.094 --> 00:16:35.890
and line pressure issues.
The application

00:16:35.890 --> 00:16:41.900
is protested by Williams MLP Operating LLC
and Mockingbird Midstream Gas Services

00:16:41.900 --> 00:16:45.909
LLC, collectively Williams,
the operator of the

00:16:45.934 --> 00:16:49.500
connected gas gathering
system. OGC America,

00:16:49.500 --> 00:16:53.045
now CNOOC Energy LLC and
U S Energy Development

00:16:53.070 --> 00:16:56.590
Corporation appeared as
interveners and aligned

00:16:56.590 --> 00:17:00.466
with Exco. Exco and
Williams do not currently

00:17:00.491 --> 00:17:04.089
have an agreement to
transport Exco's gas.

00:17:04.089 --> 00:17:06.775
Exco provided evidence
showing it is uneconomical

00:17:06.800 --> 00:17:09.139
to utilize the Williams
system at the price

00:17:09.139 --> 00:17:11.900
Williams is currently
seeking to charge. Exco

00:17:11.925 --> 00:17:14.600
stated that it's only
alternative to flaring

00:17:14.600 --> 00:17:17.351
is shutting in the wells.
Exco and Williams

00:17:17.376 --> 00:17:20.289
both agreed shutting in
the wells would result

00:17:20.289 --> 00:17:24.209
in an ultimate reduction of recovery from
the wells, as shutting in the wells would

00:17:24.209 --> 00:17:29.270
cause damage to the reservoir, which is an
unconventional reservoir. The wells produced

00:17:29.270 --> 00:17:32.794
approximately 9000
barrels of oil each day.

00:17:32.819 --> 00:17:36.399
Exco showed that
even if it is able

00:17:36.399 --> 00:17:41.110
to reach an agreement with Williams allowing
it to use the pipeline, Exco would still

00:17:41.110 --> 00:17:43.629
need an exception to
Statewide Rule 32 for

00:17:43.654 --> 00:17:46.440
temporary upsets, maintenance
and line pressure

00:17:46.440 --> 00:17:51.429
issues. As historically, Williams has been
unable to take approximately 30% of Exco's

00:17:51.429 --> 00:17:53.982
produced gas. The
examiners recommend the

00:17:54.007 --> 00:17:56.899
application be approved.
Exceptions and replies

00:17:56.899 --> 00:17:59.399
were filed. I'm available
for questions.

00:17:59.424 --> 00:18:02.570
- Thank you, Christie. Are
there any questions?

00:18:02.570 --> 00:18:09.149
- I do have some questions. In fact, first
of all, let me say, there's a bit of,

00:18:09.149 --> 00:18:11.604
this is a case of first
impression, in this

00:18:11.629 --> 00:18:14.450
instance of, as I understand,
Christie, first time

00:18:14.450 --> 00:18:18.669
we've had an operator who is mechanically
connected to a gathering system. While they

00:18:18.669 --> 00:18:20.509
don't have a contract
in place, so they can't

00:18:20.534 --> 00:18:22.309
use it today, there is
the potential, and so

00:18:22.309 --> 00:18:27.851
this really draws, I think, into the question
what exactly is waste? That seems to be

00:18:27.851 --> 00:18:33.279
the fundamental issue here. I'm ignoring or
going beyond the issues of upset conditions

00:18:33.279 --> 00:18:35.947
and the volumetric issues
that we have simply

00:18:35.972 --> 00:18:38.730
to, what's the requirement
from the Commission?

00:18:38.730 --> 00:18:42.005
So I am inclined today
to pass this case

00:18:42.030 --> 00:18:45.429
because I want to make
sure we give some real

00:18:45.429 --> 00:18:50.490
thought to how we consider waste and some
of the economic issues and everything else.

00:18:50.490 --> 00:18:52.939
However, I'd still like
to ask some questions

00:18:52.964 --> 00:18:55.600
about your logic and help
me understand. Broadly,

00:18:55.600 --> 00:18:59.416
Christie, based on your
your analysis, what do

00:18:59.441 --> 00:19:03.070
you think the Railroad
Commission is charged

00:19:03.070 --> 00:19:10.919
to do when it comes to prevent waste?
- So we kind of have two ideologies, if you will,

00:19:10.919 --> 00:19:16.480
that kind of merge in a potential conflict,
I would say. The Commission is tasked with

00:19:16.480 --> 00:19:19.594
promoting development
of the resources. And,

00:19:19.619 --> 00:19:22.639
in this case, you have
oil and you have gas

00:19:22.639 --> 00:19:26.726
and they're produced
simultaneously, and in

00:19:26.751 --> 00:19:30.999
the past, when you have
areas where you reach

00:19:30.999 --> 00:19:34.088
your development before
there's infrastructure,

00:19:34.113 --> 00:19:36.790
then we've seen flaring
in those cases so

00:19:36.790 --> 00:19:44.110
that the oil can be produced, and then, so
that the infrastructure can come in. So you

00:19:44.110 --> 00:19:47.723
could argue that the gas
that's being flared,

00:19:47.748 --> 00:19:51.179
it's being unused. To
go back to my time in

00:19:51.179 --> 00:19:56.309
Enforcement, we have the theory that if
any oil was produced and hit the ground,

00:19:56.309 --> 00:19:59.293
it was waste because it
could not be utilized.

00:19:59.318 --> 00:20:01.960
And I think that logic
could certainly be

00:20:01.960 --> 00:20:09.261
applied to this. But when you also look at
this you're in this kind of conundrum of, if

00:20:09.261 --> 00:20:12.462
not one, then not the others well.
So if there

00:20:12.487 --> 00:20:15.390
is really damaged to
the reservoir and the

00:20:15.390 --> 00:20:23.170
reservoir, and you're risking producing the
oil by not producing it all now, then you

00:20:23.170 --> 00:20:28.830
could argue that's waste. There's also an
argument here about the economics and whether

00:20:28.830 --> 00:20:34.780
or not you should include the value of the
or the revenues from the oil as well as the

00:20:34.780 --> 00:20:39.740
revenues from gas. And historically, we've
only ever looked at the revenues from the

00:20:39.740 --> 00:20:44.830
gas. But when you add in the revenues from
the oil, then there was argument in this

00:20:44.830 --> 00:20:51.940
case that you lower the or you shorten the
timeline for the life of that well because

00:20:51.940 --> 00:20:57.369
you changed the wedge of recovery. So
the well can only economically produce

00:20:57.369 --> 00:21:00.356
for so long when you're
offsetting the gas

00:21:00.381 --> 00:21:03.690
production with the oil production.
So I really

00:21:03.690 --> 00:21:10.730
think it's a conundrum, and I don't know
that there's a a clear answer either

00:21:10.730 --> 00:21:14.512
way. It's certainly conflict
I felt in listening

00:21:14.537 --> 00:21:17.909
to this and in writing this PFD.
This isn't

00:21:17.909 --> 00:21:22.610
just a first impression for connection to a
pipeline. We've never had a contested Rule

00:21:22.610 --> 00:21:26.810
32. So this is a case
from first impression

00:21:26.835 --> 00:21:31.200
on that stand as well.
And we've been issuing

00:21:31.200 --> 00:21:34.524
authorities for permits
to flare going back

00:21:34.549 --> 00:21:38.000
to 2008 or before. Really
saw a huge increase

00:21:38.000 --> 00:21:44.960
in 2011. And so this has been going on for
quite a while, so I don't, direction would

00:21:44.960 --> 00:21:47.232
be lovely, but yes,
it's it's a conundrum.

00:21:47.257 --> 00:21:49.820
- A couple points you make.
I just want to clarify.

00:21:49.820 --> 00:21:54.110
Right there at the end, you talked about the
fact that this may, by allowing that, you

00:21:54.110 --> 00:21:56.404
talked about the impact
on the oil production,

00:21:56.429 --> 00:21:58.600
first of all, may shut
in the wells, and then

00:21:58.600 --> 00:22:05.870
which would cause a negative impact on the
production of the wells. Also, it may make

00:22:05.870 --> 00:22:07.952
the wells as they decline
in production, it

00:22:07.977 --> 00:22:10.129
may make them, we shut
them in sooner because

00:22:10.129 --> 00:22:15.169
the economics of the wells, even if
they're economical today at a net

00:22:15.169 --> 00:22:17.532
$146,000,000 loss,
whatever that you wouldn't

00:22:17.557 --> 00:22:19.740
produce them is long.
So you're there's an

00:22:19.740 --> 00:22:24.269
argument, I hear what you're saying about
which which molecules do we prevent waste.

00:22:24.269 --> 00:22:28.497
The oil molecules or the
gas molecules?Ssince

00:22:28.522 --> 00:22:32.909
we're having a conversation
of philosophy here,

00:22:32.909 --> 00:22:37.940
one of the, you talked about the difference
between the economics, and as I've explored

00:22:37.940 --> 00:22:39.659
this, even looking back
through the Natural

00:22:39.684 --> 00:22:41.690
Resources Code, and then
our rules, trying to get a

00:22:41.690 --> 00:22:46.909
handle on, is waste an economic question or
is it a molecular question? Which do you

00:22:46.909 --> 00:22:56.309
believe it is?
- I look at it from a molecular
standpoint, but I think

00:22:56.309 --> 00:22:58.607
I could certainly argue
the other way as well.

00:22:58.632 --> 00:23:00.710
That's the problem with
being an attorney.

00:23:00.710 --> 00:23:06.249
We can typically argue both sides.
- Cause I might argue it's also an

00:23:06.249 --> 00:23:11.110
economic question. And it seems to
me, we're forcing which, historically,

00:23:11.110 --> 00:23:15.409
wer'e pretty free market, sitting up here,
I think, philosophically, all three of us.

00:23:15.409 --> 00:23:19.789
To me, this would be forcing a contract which
we've never done. And I think that would

00:23:19.789 --> 00:23:26.830
be new for us, although I will say I would
hope these parties get it figured out in the

00:23:26.830 --> 00:23:29.519
next timeliness. And I think that's an
opportunity we've always given parties, is

00:23:29.519 --> 00:23:32.407
to get their product to market.
And we believe

00:23:32.432 --> 00:23:35.049
the market works at
some point to which is

00:23:35.049 --> 00:23:39.570
important. So I think this is an interesting
conundrum. Do you have any questions?

00:23:39.570 --> 00:23:42.698
- No, I just want to
share my concern on this

00:23:42.723 --> 00:23:45.690
issue with staff that,
I think it's good to

00:23:45.690 --> 00:23:48.520
give this deep consideration.
I agree with the

00:23:48.545 --> 00:23:51.049
other two Commissioners
that this is, I'm

00:23:51.049 --> 00:23:56.169
concerned with the, visiting with the EPA,
current EPA director, nationally, and one of

00:23:56.169 --> 00:24:03.409
their big concerns is the escaping gas in
the environment. We're hitting that and his

00:24:03.409 --> 00:24:08.470
concern specifically was, his argument was,
well, we're going to take all these waste,

00:24:08.470 --> 00:24:14.259
as fast as possible, stop flaring, stop
this, because it becomes economic to put

00:24:14.259 --> 00:24:17.343
it in pipelines. And when
we start going against

00:24:17.368 --> 00:24:20.239
that, we start having
danger in working. So I

00:24:20.239 --> 00:24:25.789
think that's a concern I have.
- If I can speak to that, because there's

00:24:25.789 --> 00:24:30.559
a confusion. You're right when we hear a
lot today big concerns about flaring. But

00:24:30.559 --> 00:24:35.840
in the end, you know when you burn a methane
molecule, CH4 turns into C02 and water.

00:24:35.840 --> 00:24:38.370
And whether it's burned
at a flare or it's burned

00:24:38.395 --> 00:24:40.799
in a gas plant or it's
burned in a power plant,

00:24:40.799 --> 00:24:43.980
those are still the byproducts, so I think
there's a lot of confusion out in the

00:24:43.980 --> 00:24:49.450
world about whether or not a flare has any
any negative or any differential impact on

00:24:49.450 --> 00:24:53.730
the world versus capturing that molecule,
which draws into the question about what is,

00:24:53.730 --> 00:24:59.039
if there's more gas in the world today than
the world can use, and it's got no value,

00:24:59.039 --> 00:25:01.389
what's waste? And it's
the question, I agree

00:25:01.414 --> 00:25:03.739
with Christie, is an economic one.
I'd like,

00:25:03.739 --> 00:25:06.042
do we have parties here representing?
Do we have

00:25:06.067 --> 00:25:08.110
the attorneys here representing
the parties in this case?

00:25:08.110 --> 00:25:11.321
- They signed in. Hang
on, let's, so are all of

00:25:11.346 --> 00:25:14.399
y'all here? Let me make
sure everybody's here

00:25:14.399 --> 00:25:16.940
before we allow one to get up.
Because just

00:25:16.965 --> 00:25:19.539
out of fairness. One second.
Double-checking

00:25:19.539 --> 00:25:24.350
who all is listed. We have William
- You stood up really quickly. That was nice.
- Yeah, that's quick. Well, cause

00:25:24.350 --> 00:25:28.739
you realize they have
another case behind.

00:25:28.764 --> 00:25:33.740
Okay. Okay. David? Here? Yes.
Brian? Here. Okay.

00:25:33.740 --> 00:25:38.268
Yeah, they're all here if you'd
like to talk to them. Their

00:25:38.293 --> 00:25:42.419
next case starts at 11 o'clock on this.
We're gonna be

00:25:42.419 --> 00:25:46.089
finished, so y'all can start
timing me and go fix this problem.

00:25:46.114 --> 00:25:48.669
- Why don't we start
with the applicant? And

00:25:48.669 --> 00:25:53.269
the question that I'm gonna ask each of
you to address is the question of waste

00:25:53.269 --> 00:25:58.549
so as the applicant, how do we, as a
Commission, ensure that we are preventing

00:25:58.549 --> 00:26:00.363
waste? When I look at
the Natural Resources

00:26:00.388 --> 00:26:02.259
Code and what we're
charged with, specifically,

00:26:02.259 --> 00:26:05.236
our role in preventing waste.
The Commission's

00:26:05.261 --> 00:26:08.149
shall exercise its
authority to prevent waste

00:26:08.149 --> 00:26:12.529
when the presence or imminence of waste
is supported by a finding based on the

00:26:12.529 --> 00:26:17.960
evidence introduced a hearing after proper
notice. So how do we know we promote that

00:26:17.960 --> 00:26:23.909
in your mind?
- Thank you for the opportunity,
Commissioner. My name's David Nelson.

00:26:23.909 --> 00:26:25.895
- David, before you start,
look, we're not going to

00:26:25.920 --> 00:26:27.919
re-argue this, okay? So
you'll each have two minutes

00:26:27.919 --> 00:26:30.237
because, and I'm real
serious about this, you go

00:26:30.262 --> 00:26:32.460
argue the next one next.
Okay. So I appreciate

00:26:32.460 --> 00:26:37.169
all have rule opinions, but let's stick
to the question. I'm gonna give you

00:26:37.169 --> 00:26:39.625
two minutes because y'all
can go argue your next

00:26:39.650 --> 00:26:41.880
case at 11 o'clock. Okay?
- Thank you so much.

00:26:41.880 --> 00:26:44.440
- Don't run after two minutes.
I may have questions.

00:26:44.465 --> 00:26:46.799
- The issue in this case,
for us, with respect

00:26:46.799 --> 00:26:50.192
to ways to be specific,
and answering your

00:26:50.217 --> 00:26:53.900
question, goes to what Ms.
Reeve has explained

00:26:53.900 --> 00:26:56.176
to you. And that is the
fact that there is

00:26:56.201 --> 00:26:58.610
evidence in this record
to show that if these

00:26:58.610 --> 00:27:03.860
wells are shut in, if it's if that is the
option that is available, those wells are

00:27:03.860 --> 00:27:06.859
shut in, there is
potential damage to the

00:27:06.884 --> 00:27:10.500
reservoir. That damage could
result in a reduction

00:27:10.500 --> 00:27:13.510
in the total amount of
oil ultimately produced

00:27:13.535 --> 00:27:16.200
from that reservoir.
That's what we refer

00:27:16.200 --> 00:27:19.528
to as physical waste,
the waste of that oil

00:27:19.553 --> 00:27:23.159
reserve. So more than
anything, we're concerned

00:27:23.159 --> 00:27:26.164
about that happening in
this situation. That

00:27:26.189 --> 00:27:29.169
is a real problem. It's
been addressed, it's

00:27:29.169 --> 00:27:34.710
been presented and I don't think that the
record is in question there, that that

00:27:34.710 --> 00:27:40.210
can happen and if it does happen that you
would have physical waste. It's not only true

00:27:40.210 --> 00:27:42.919
in this case, I think there
are a lot of instances

00:27:42.944 --> 00:27:45.309
where reservoirs can be
damaged if the wells

00:27:45.309 --> 00:27:49.629
were shut in for an extended period of time,
which creates the conundrum we're talking

00:27:49.629 --> 00:27:54.669
about. But to answer your question, that is
the physical waste that we're addressing.

00:27:54.669 --> 00:27:57.106
- So, if I said to you,
great, you're right,

00:27:57.131 --> 00:27:59.489
I'm concerned about the
physical damage and

00:27:59.489 --> 00:28:02.752
the wasted oil, and so
therefore, you have to

00:28:02.777 --> 00:28:06.369
continue to produce. Then,
do I solve the problem?

00:28:06.369 --> 00:28:10.039
- Well, yeah, if you tell me that I have
to continue to produce, what you're also

00:28:10.039 --> 00:28:13.247
telling me is then I have
to continue to produce

00:28:13.272 --> 00:28:16.259
under terms that are
dictated by the pipeline

00:28:16.259 --> 00:28:19.204
with respect to how we
deal with the gas portion

00:28:19.229 --> 00:28:21.909
of this. And you can
appreciate the leverage

00:28:21.909 --> 00:28:27.210
the pipeline has then in dictating the terms.
If they know that the only option we have

00:28:27.210 --> 00:28:31.850
is to produce that oil along with the gas.
And that's why we're having a hearing in an

00:28:31.850 --> 00:28:34.324
hour to go and determine
what a fair and reasonable

00:28:34.349 --> 00:28:36.370
rate would be for that,
and hopefully that

00:28:36.370 --> 00:28:40.720
will resolve that issue.
- So in the end, it still comes back
to an economic issue. Yes,

00:28:40.720 --> 00:28:44.570
Commissioners, you may tell me that I can't
shut these wells, and I have to continue to

00:28:44.570 --> 00:28:46.760
maximize my oil and gas
production, the end of

00:28:46.785 --> 00:28:48.950
the day, we may lose
money, so the issue still

00:28:48.950 --> 00:28:53.149
goes back to economics. My question is,
if it's always an economic issue, then

00:28:53.149 --> 00:28:58.299
why do I regulate flaring at all?
- Well, the reason you regulate
flaring is to balance

00:28:58.299 --> 00:29:01.867
the issues between the
economic waste and the

00:29:01.892 --> 00:29:05.279
physical waste, hopefully
with the emphasis

00:29:05.279 --> 00:29:09.570
most on the physical waste to be sure that
you maximize the production of the reserves

00:29:09.570 --> 00:29:15.399
in this state. And I think that's the primary
obligation that you have.
- So if I were

00:29:15.399 --> 00:29:19.720
not to regulate flaring, do you think that
then the operators would not try to maximize

00:29:19.720 --> 00:29:24.049
the physical production of their molecules?
- Well, if you if you didn't regulate flaring,

00:29:24.049 --> 00:29:29.259
I think that to start with, nobody wants
to flare. That's not an option that

00:29:29.259 --> 00:29:32.433
people are looking for.
It's one that they have

00:29:32.458 --> 00:29:35.409
to deal with as long
as the pipeline

00:29:35.409 --> 00:29:37.839
development lags behind
the production of the

00:29:37.864 --> 00:29:40.110
oil and gas. And we're
just unfortunately,

00:29:40.110 --> 00:29:43.156
in a situation in places
where that doesn't

00:29:43.181 --> 00:29:46.340
happen simultaneously.
So you're always gonna

00:29:46.340 --> 00:29:52.320
have situations where flaring may
be necessary until that catches up.
- Because it's not economical

00:29:52.320 --> 00:29:56.080
to capture the gas without a gathering system?
- Correct.
- So I go back to, then, why do I

00:29:56.080 --> 00:30:00.389
need to regulate flaring? In other
words, if I can depend on the companies

00:30:00.389 --> 00:30:02.909
to maximize their capture
of physical resources,

00:30:02.934 --> 00:30:05.120
why do I need to regulate it?
Why not just

00:30:05.120 --> 00:30:09.919
let them flare any time that they want to?
Because we can assume that they're going to

00:30:09.919 --> 00:30:15.330
maximize their economics.
- Well, you do that on a regular basis,
the only reason that you

00:30:15.330 --> 00:30:19.779
ever allow for flaring is where it's shown
that that physical connection is not

00:30:19.779 --> 00:30:23.989
available or that the economics don't just
defy it because you don't have access to the

00:30:23.989 --> 00:30:30.639
pipeline. If you did, if you had that situation
every time, then no one would flare.

00:30:30.639 --> 00:30:32.719
Right, so I still haven't
gotten an explanation why

00:30:32.744 --> 00:30:34.759
I need to regulate that
because they're not gonna,

00:30:34.759 --> 00:30:41.441
doesn't seem like they would want flare
anyway. But we're going in circles. The issue

00:30:41.441 --> 00:30:49.779
I have in this case is if there is this much
gas, and there is, it's uneconomical.

00:30:49.779 --> 00:30:54.549
Okay. Well, what point do we need to step
in? Why would we regulate it all? And if I

00:30:54.549 --> 00:30:56.072
don't have an explanation
for that, then I

00:30:56.097 --> 00:30:57.701
feel like, well, then I
don't understand what

00:30:57.701 --> 00:31:00.592
our definition of waste is.
Because if it's

00:31:00.617 --> 00:31:03.549
an economic issue, then
do I need to include

00:31:03.549 --> 00:31:05.779
the revenues from oil?
Do I need to include

00:31:05.804 --> 00:31:08.059
the economics around all production?
Because

00:31:08.059 --> 00:31:11.860
if its basic economics, then I should include
the entire operation, right?
- Well, that's

00:31:11.860 --> 00:31:15.289
a philosophical question. I don't know if
I have a good answer for that. I would just

00:31:15.289 --> 00:31:17.313
tell you that, historically,
the Commission

00:31:17.338 --> 00:31:19.429
has never included oil
revenue in determining

00:31:19.429 --> 00:31:21.708
the economics and whether
it's necessary to

00:31:21.733 --> 00:31:24.039
include that in deciding
whether flaring can

00:31:24.039 --> 00:31:26.467
occur. That came up in this hearing.
It's been

00:31:26.492 --> 00:31:28.740
discussed, and obviously,
if the Commission

00:31:28.740 --> 00:31:33.499
is going to make a decision to include oil
revenue and deciding whether it's economic

00:31:33.499 --> 00:31:38.129
to do it, there won't be any more flaring
applications. Everybody would have enough

00:31:38.129 --> 00:31:40.500
revenue from the oil
production probably to

00:31:40.525 --> 00:31:42.979
justify that, but the
Commission's just never

00:31:42.979 --> 00:31:47.220
taken that position before.
- That's well said,
I'm not sure I agree that that's true, that

00:31:47.220 --> 00:31:50.720
there would always be enough revenue from oil
to justify any flaring. But I appreciate

00:31:50.720 --> 00:31:54.679
the point you're making.
- And let me qualify that. I would say,
 in the vast majority of the cases,

00:31:54.679 --> 00:31:59.460
that would be revenue, and certainly
in the areas in South Texas

00:31:59.460 --> 00:32:03.919
and the Eagleford and places like that. It
would eliminate a lot of flaring because the

00:32:03.919 --> 00:32:07.136
economics from the oil
would would be sufficient.

00:32:07.161 --> 00:32:09.710
This Commission's
just never done that.

00:32:09.710 --> 00:32:14.559
Okay, thank you. I don't have any other questions.
- Thank you, David, Brian. And will y'all all please

00:32:14.559 --> 00:32:17.426
fill out a form in the back
with Kathy, I'd appreciate it.

00:32:17.451 --> 00:32:20.049
- Commissioners Brian
Sullivan on behalf of CEU.

00:32:20.049 --> 00:32:26.080
We are a non-operating working interest
owner, and I support everything David

00:32:26.080 --> 00:32:32.249
says. Let me add just a couple of little
things. First economics or, excuse me, waste

00:32:32.249 --> 00:32:35.446
has always been a molecular
waste at the Commission

00:32:35.471 --> 00:32:38.029
and before the courts.
Economic waste has

00:32:38.029 --> 00:32:41.340
always been a one-off.
For example, the Exxon

00:32:41.365 --> 00:32:44.580
and Schlachter cases
that deal with existing

00:32:44.580 --> 00:32:47.785
well bores. Those are
the only economic cases

00:32:47.810 --> 00:32:50.989
where the court will
actually say, okay, this

00:32:50.989 --> 00:32:54.581
doesn't meet our ordinary
waste being molecules,

00:32:54.606 --> 00:32:57.879
its economic waste, to
drill another well at

00:32:57.879 --> 00:33:02.104
a location. So I think
waste has traditionally

00:33:02.129 --> 00:33:06.239
been just that, molecules.
Second thing, when

00:33:06.239 --> 00:33:12.870
a pipeline company builds a gas pipeline,
they do it exclusively on gas revenue. That's

00:33:12.870 --> 00:33:19.619
why the Commission historically has only
looked at gas revenue. It's never once, at

00:33:19.619 --> 00:33:22.641
least in my history here,
ever looked at oil

00:33:22.666 --> 00:33:25.730
revenue to support a pipeline.
So all of that

00:33:25.730 --> 00:33:31.479
being said, I have a solution for you that's
in the record. We asked during the hearing

00:33:31.479 --> 00:33:37.649
that you set an interim rate, and we gave
them numbers that would require the pipeline

00:33:37.649 --> 00:33:41.856
to take the gas,
essentially, to recover its

00:33:41.881 --> 00:33:45.970
OpEx, which we know is
in the 77 to 99 cent

00:33:45.970 --> 00:33:52.779
area. We asked for that interim rate, I
think the examiners appropriately said,

00:33:52.779 --> 00:33:56.195
You know, maybe that's a
little stretch for this

00:33:56.220 --> 00:33:59.471
here, but that would be a solution.
Thank you.

00:33:59.471 --> 00:34:01.781
- Brian, I have a question for you.
You said that it's

00:34:01.806 --> 00:34:04.259
always the molecules. If I go
out and drill a new oil well

00:34:04.259 --> 00:34:06.688
and there's no gathering
system installed yet,

00:34:06.713 --> 00:34:08.910
and we allow flaring,
now, I could capture

00:34:08.910 --> 00:34:10.842
all that gas without a
gathering system. I

00:34:10.867 --> 00:34:12.909
install a compressor
when I build my oil well

00:34:12.909 --> 00:34:15.730
and build a contained
facility and wait until

00:34:15.755 --> 00:34:18.490
the gas system is hooked
up and then I still

00:34:18.490 --> 00:34:22.490
send all that gas. Why don't we do that?
- Two things. In a traditional reservoir, you're

00:34:22.490 --> 00:34:24.568
exactly right. And the
Commission historically

00:34:24.593 --> 00:34:26.470
has done that because
there's no damage to

00:34:26.470 --> 00:34:29.060
a traditional reservoir
when you shut it in.

00:34:29.085 --> 00:34:31.649
You can shut it in. You
can wait, the gas is

00:34:31.649 --> 00:34:35.188
in solution, and it comes
with the oil. There's

00:34:35.213 --> 00:34:38.210
no damage, but we know,
in the Eagleford

00:34:38.210 --> 00:34:41.557
and other types of tight
gas reservoirs, that

00:34:41.582 --> 00:34:45.050
when you shut them in,
you lose oil production.

00:34:45.050 --> 00:34:50.260
You lose ultimate recovery because of the
nature of the rock and the completion. So

00:34:50.260 --> 00:34:56.319
in this case, you are actually going to cause
damage and its undisputed in this record,

00:34:56.319 --> 00:35:00.831
if you shut in those wells
to wait on the gas infrastructure
- I'm not, I mean, not even

00:35:00.831 --> 00:35:02.767
talking about shutting in the wells.
Just, as you're

00:35:02.792 --> 00:35:04.520
installing your well, if
the gas infrastructure

00:35:04.520 --> 00:35:09.150
is not there, require some other way to capture
the gas. I could build a compressor and

00:35:09.150 --> 00:35:11.465
a storage containment
facility right there on

00:35:11.490 --> 00:35:13.880
site and capture the gases
the well's operating

00:35:13.880 --> 00:35:18.290
from Day One. No one does it cause it's not
economical, right?
- If its economic to do

00:35:18.290 --> 00:35:22.079
so, yes, sir, you could do that.
- So my question is, if it's always
about the molecules, then

00:35:22.079 --> 00:35:28.510
why am I allowing people
to flare when it's not economical?
- Because you're saving

00:35:28.510 --> 00:35:35.530
the molecules of the oil. Those molecules
of oil get capture that would otherwise not

00:35:35.530 --> 00:35:40.190
get captured.
- If I build a compressor and a
self contained storage facility right next

00:35:40.190 --> 00:35:43.400
to my well, I can do that without waiting
on the gathering system and the pipleline.

00:35:43.400 --> 00:35:48.270
So I don't waste any oil molecules, it just cost
a fortune to capture that gas.
- Yes, sir.

00:35:48.270 --> 00:35:53.250
I agree with your economics.
- Okay, so then it's about economics
and not molecules?

00:35:53.250 --> 00:35:55.170
I just have to tell you,
the courts have always

00:35:55.195 --> 00:35:57.250
stressed it's about the
molecules, and I think what

00:35:57.250 --> 00:36:00.531
they've done is exactly
the same as the court

00:36:00.556 --> 00:36:03.740
has done, overall. The
analysis that you are

00:36:03.740 --> 00:36:07.833
providing, I am not sure
I've ever seen a court

00:36:07.858 --> 00:36:11.329
have that argued to them.
So I'm telling

00:36:11.329 --> 00:36:13.505
you what I believe the
courts have decided.

00:36:13.530 --> 00:36:15.829
I'm not saying you don't
have a good argument.

00:36:15.829 --> 00:36:22.089
I'm saying that arguments never been presented
to a court to give us some guidance.

00:36:22.089 --> 00:36:35.710
- Thank you, Brian. John?
- Madam Chairman and Commissioners, I am
John Hayes here, today, representing Williams

00:36:35.710 --> 00:36:44.450
Pipeline. The pipeline has been installed for
a long time. When the flaring application

00:36:44.450 --> 00:36:47.772
was made, they put on it
that it was not connected.

00:36:47.797 --> 00:36:51.030
Well, it came out at hearing,
it's very clear that

00:36:51.030 --> 00:36:57.900
it's connected. The valve is closed because
of a dispute over the price, but it's like

00:36:57.900 --> 00:37:01.060
saying that your kitchen
faucet is disconnected

00:37:01.085 --> 00:37:03.890
because you turned off the faucet.
No, and

00:37:03.890 --> 00:37:10.480
the faucet is still there. But the pipeline
was put in a cost of around $1,500,000,000

00:37:10.480 --> 00:37:14.878
to gather this gas down
in the Eagleford. Exco

00:37:14.903 --> 00:37:19.089
bought into the wells
knowing what the price

00:37:19.089 --> 00:37:21.561
was, they could have put
in their own pipeline.

00:37:21.586 --> 00:37:23.930
There's no reason they couldn't.
They haven't

00:37:23.930 --> 00:37:27.980
moved. But on the economics
question, Mr Solomon

00:37:28.005 --> 00:37:31.700
tries to minimize the
role of economics, but

00:37:31.700 --> 00:37:35.164
the whole industry is
driven by economics.

00:37:35.189 --> 00:37:38.869
We know that. And two
minimalize the flaring,

00:37:38.869 --> 00:37:41.883
to say it's about the
molecules, well, we're flaring,

00:37:41.908 --> 00:37:44.450
flaring is waste. That's
why the Legislature,

00:37:44.450 --> 00:37:50.700
so many years ago, actually with the Texas
Constitution, that was amended to give the

00:37:50.700 --> 00:37:56.140
Commission the authority to stop waste.
And we have case after case, in the early

00:37:56.140 --> 00:37:59.477
days, the Commission,
Commission saying, no, stop

00:37:59.502 --> 00:38:02.680
waste. One of the earliest,
if not the earliest

00:38:02.680 --> 00:38:05.778
US Supreme Court case from,
I believe it was 1899,

00:38:05.803 --> 00:38:08.450
dealing with oil and
gas, where they talked

00:38:08.450 --> 00:38:11.590
about the major ownership
was a flaring case

00:38:11.615 --> 00:38:15.079
coming out of believe
Indiana, where the operator

00:38:15.079 --> 00:38:17.383
tried to argue that, well,
it's confiscation if you

00:38:17.408 --> 00:38:19.510
don't let me flare because
then I can't produce

00:38:19.510 --> 00:38:22.645
oil. And the U S. Supreme
Court said No, you

00:38:22.670 --> 00:38:25.850
can wait until the
pipeline is there to drill

00:38:25.850 --> 00:38:28.747
the wells and to produce the oil.
And here,

00:38:28.772 --> 00:38:31.710
all we've tried to point
out is that, if the

00:38:31.710 --> 00:38:40.730
test is as Exco and Seen Up, Mr Sullivan's
client, would have it, namely, that if any

00:38:40.730 --> 00:38:46.656
time the revenues from
the gas alone, exceed

00:38:46.681 --> 00:38:52.450
or less than the costs,
or any time there's

00:38:52.450 --> 00:38:55.496
a negative cost to
capturing the gas, meaning

00:38:55.521 --> 00:38:58.740
that you don't get as much
as you get otherwise,

00:38:58.740 --> 00:39:01.667
then you should be able to flare.
Well, we've

00:39:01.692 --> 00:39:04.849
simply suggested that if
that were the standards,

00:39:04.849 --> 00:39:07.376
there's no need for the
flaring statue because

00:39:07.401 --> 00:39:09.850
any time revenues are
positive, the operators

00:39:09.850 --> 00:39:12.844
would have the gas gathered,
and negative, the Commission

00:39:12.869 --> 00:39:15.580
can give an exception. And
it's true, the Commission

00:39:15.580 --> 00:39:19.706
has never really grappled
with the issue framed this

00:39:19.731 --> 00:39:23.520
way. We've had thousands
of flaring applications

00:39:23.520 --> 00:39:27.199
and every single one of
them were unprotested,

00:39:27.224 --> 00:39:30.799
and we know what happens
when we tend to have

00:39:30.799 --> 00:39:33.163
unprotested case. This
is the first one that's

00:39:33.188 --> 00:39:35.930
protested, and part of the
reason for that is that the

00:39:35.930 --> 00:39:38.597
gatherers don't get notice
of the flaring application

00:39:38.622 --> 00:39:40.720
so they don't even know about it.
But what

00:39:40.720 --> 00:39:44.046
we've suggested is this
is an appropriate case

00:39:44.071 --> 00:39:47.089
for the Commission to
step back and really

00:39:47.089 --> 00:39:53.170
carefully think through these issues and what
the standard is gonna be, because it just

00:39:53.170 --> 00:39:55.241
doesn't feel right, quite
frankly, to have a

00:39:55.266 --> 00:39:57.589
standard that says any time
there's an application,

00:39:57.589 --> 00:40:02.560
you get an exception, then why have the
statute in the first place? And that's

00:40:02.560 --> 00:40:06.530
what we pointed out time and again would be
like saying that airline shouldn't handle

00:40:06.530 --> 00:40:08.950
baggage if they don't
charge baggage fees,

00:40:08.975 --> 00:40:11.539
somehow cover the cost
of handling bagge. No,

00:40:11.539 --> 00:40:17.220
it's part of the package. When you drill a
well, and these wells are drilled for oil,

00:40:17.220 --> 00:40:23.650
we know that. Not for the gas. The gas is
a byproduct, just as produced water is a

00:40:23.650 --> 00:40:30.750
byproduct and as we heard earlier today in
the injection cases, it has to be properly

00:40:30.750 --> 00:40:33.671
handled and properly taken
care of, and gas, if

00:40:33.696 --> 00:40:36.410
they want to treat it
is a byproduct, that's

00:40:36.410 --> 00:40:39.252
fine, but it has to be
handled and properly taken

00:40:39.277 --> 00:40:41.810
care of, and we suggest
that the Legislature

00:40:41.810 --> 00:40:44.377
has said, you know, you
really need to capture.

00:40:44.402 --> 00:40:46.730
We have no quarrel with
having, at all, the

00:40:46.730 --> 00:40:54.440
situation where if they're temporary upsets,
if the pipeline goes down, yeah, those

00:40:54.440 --> 00:40:58.869
are good reasons for short term plans
- I'm gonna cut you off for a minute
because I've got a question and you've exceeded

00:40:58.869 --> 00:41:01.844
your two minutes that
Christi gave you. You're

00:41:01.869 --> 00:41:04.630
making a big deal out
of the fact that it's

00:41:04.630 --> 00:41:10.210
about ensuring that we capture all the
molecules and that if we ignore the economics,

00:41:10.210 --> 00:41:12.980
or if we only use
economics, then there's no

00:41:13.005 --> 00:41:15.750
reason to have a flaring
statute and there's

00:41:15.750 --> 00:41:17.705
no reason to have flaring rules.
My question

00:41:17.730 --> 00:41:19.660
is this. If I say that,
okay, well, then our

00:41:19.660 --> 00:41:22.427
objective needs to be to
capture every molecule.

00:41:22.452 --> 00:41:24.799
Why don't I just force
every oil producer

00:41:24.799 --> 00:41:30.130
to be connected to a gathering system
before they can produce a well?
- That would

00:41:30.130 --> 00:41:34.098
be a solution. I think
there's some countervailing

00:41:34.123 --> 00:41:37.599
factors times, like if
we don't have as many

00:41:37.599 --> 00:41:41.880
wild cats these days because of the nature
of the resource plains, but if someone is

00:41:41.880 --> 00:41:48.109
drilling in an area where they don't even
know what's there and they might, that

00:41:48.109 --> 00:41:51.376
situation, probably wouldn't
pay to put in a pipeline

00:41:51.401 --> 00:41:54.099
before you drill. But
whenthere's a pipeline

00:41:54.099 --> 00:41:59.940
already there, that's a
whole different kettle of fish.
- Pipeline or gathering system?

00:41:59.940 --> 00:42:04.740
- Well, the gathering system to gather it to take it
to the transmission pipeline.
- So I've got a someone

00:42:04.740 --> 00:42:08.114
building a, drilling a new
oil well in the Permian

00:42:08.139 --> 00:42:11.290
Basin or in East Texas
or in the Eagleford, and

00:42:11.290 --> 00:42:13.422
there's a pipeline within
a couple of miles, but

00:42:13.447 --> 00:42:15.510
there's no gathering system.
Is your contention

00:42:15.510 --> 00:42:19.579
that our mission at the Railroad Commission
is to capture every molecule, so therefore,

00:42:19.579 --> 00:42:21.465
I should require everyone
to be connected to a

00:42:21.490 --> 00:42:23.270
gathering system before
they start producing

00:42:23.270 --> 00:42:28.880
their oil well?
- Not to capture every molecule, but to
capture the vast majority of them. Because

00:42:28.880 --> 00:42:33.230
we've heard, like in this case that, well,
some oil might be wasted. And I say might

00:42:33.230 --> 00:42:36.278
be because the testimony
of the record was

00:42:36.303 --> 00:42:39.609
very tenuous on that. It
was more speculation,

00:42:39.609 --> 00:42:43.563
and there's no way in
here of what's the energy

00:42:43.588 --> 00:42:47.270
value of the gas that
would be flared versus

00:42:47.270 --> 00:42:53.579
this theoretical, marginal dimunition in the
oil production. No evidence in the record

00:42:53.579 --> 00:42:55.501
and analysis of that whatsoever.
That would

00:42:55.526 --> 00:42:57.510
be another way to go about doing it.
Do it as

00:42:57.510 --> 00:43:04.029
basically an energy balance, but.
- My question is more philosophical.
If you believe,

00:43:04.029 --> 00:43:07.550
or if we were to believe, philosophically,
that our mission is to capture the molecules

00:43:07.550 --> 00:43:11.205
first and not to consider
the economics, then

00:43:11.230 --> 00:43:14.940
why do why do we allow
anybody to flare, ever,

00:43:14.940 --> 00:43:17.118
except in upset conditions?
Why not require all

00:43:17.143 --> 00:43:19.160
new oil wells to be
connected to a gathering

00:43:19.160 --> 00:43:26.900
system before they start to operate?
- Yeah, I think the answer is
practicality. In that...

00:43:26.900 --> 00:43:32.260
- Practicality sounds a whole
lot like economics to me.
- Well, there's a heavy overlap. Yes,

00:43:32.260 --> 00:43:38.850
really is, and that if, again for short term
flaring situations, for a new well that's,

00:43:38.850 --> 00:43:41.050
say, a couple of miles
from a gathering system

00:43:41.075 --> 00:43:43.109
to give them time to
get a gathering system

00:43:43.109 --> 00:43:47.720
in there where the operator can either build
to the existing gathering system or cut

00:43:47.720 --> 00:43:53.339
a deal where it comes to them, those makes
some real sense. But where you have, and

00:43:53.339 --> 00:43:58.910
that's one reason this case is unique, where
you have an existing gathering system that

00:43:58.910 --> 00:44:02.955
has been hooked up and
taking gas for years,

00:44:02.980 --> 00:44:07.180
and we're talking about,
believe it's 161 wells here,

00:44:07.180 --> 00:44:15.520
and we responded, again, to the applicants'
arguments that, well, you gotta look at the

00:44:15.520 --> 00:44:17.763
economics. And we just
said, okay, it makes

00:44:17.788 --> 00:44:20.210
some sense to look the
economics, but if you're

00:44:20.210 --> 00:44:22.633
gonna do it, you gotta
look at the full picture.

00:44:22.658 --> 00:44:24.760
You've got to consider
the oil revenues as

00:44:24.760 --> 00:44:32.809
well as the gas revenues. And we dare say
the oil revenues vastly swamp any cost

00:44:32.809 --> 00:44:37.342
of the gas.
- You answered my questions.

00:44:37.367 --> 00:44:41.690
- You have any questions?
- Madam Chairman, economics.
Looking at it, I know in this

00:44:41.690 --> 00:44:45.049
situation, you said well, they could have
built their own pipelines system or their

00:44:45.049 --> 00:44:49.890
own system, gathering system. That concerns
me in the government appropriate has always

00:44:49.890 --> 00:44:55.020
kind of watched toward monopolistic control
of anything. And while this may be a mini

00:44:55.020 --> 00:45:02.349
one case scenario here, you have the getting
system pipeline there. And so it concerns

00:45:02.349 --> 00:45:05.094
me because I don't like
for government getting

00:45:05.119 --> 00:45:07.780
the business of negotiating
dollars and cents

00:45:07.780 --> 00:45:10.695
to any large extent,
even though we do it on

00:45:10.720 --> 00:45:13.609
natural gas, here a times.
But I'm concerned

00:45:13.609 --> 00:45:16.947
about the fact that you
have the monopolistic

00:45:16.972 --> 00:45:20.140
control here in this
one situation, and are

00:45:20.140 --> 00:45:26.589
we shooting for a reasonable market price on
using your system? Or is this, my concern

00:45:26.589 --> 00:45:31.809
is, is it a closed fist thing? Hey, it's ours, and
you gotta use us. And this is our dollar amount.

00:45:31.809 --> 00:45:36.160
- That's that's part of what the case is
all about. The rate case that's going

00:45:36.160 --> 00:45:41.210
on. It's a discrimination rate case that
convenes at 11 o'clock this morning. So that's

00:45:41.210 --> 00:45:44.345
part of it. Also, in
response to something that

00:45:44.370 --> 00:45:47.480
you noted earlier in terms
of the environmental

00:45:47.480 --> 00:45:52.710
aspects. And I appreciate what Commissioner
Sitton has pointed out is natural gas is

00:45:52.710 --> 00:46:01.099
it's pure methane when it's burned, we get C02
and water. But this gas is high hydrogen

00:46:01.099 --> 00:46:06.859
sulfide content. We're talking 32,000 parts
per 1,000,000 on the average out here and

00:46:06.859 --> 00:46:09.648
the flaring and potential
incidents, and we

00:46:09.673 --> 00:46:12.500
have testimony in the
record from one of the

00:46:12.500 --> 00:46:15.957
experts about the potential
for incedents

00:46:15.982 --> 00:46:19.119
if there's a flaring
upset of the high H2S.

00:46:19.119 --> 00:46:25.190
Also changed this calculation. We've got
several things here that make this a unique

00:46:25.190 --> 00:46:31.420
situation.
- Plus, it smells special too.
Thank you, John, I appreciate it.

00:46:31.420 --> 00:46:37.190
- We got chicken houses in East Texas too.
- So David, Brian and John, before
you leave here, will

00:46:37.190 --> 00:46:41.369
you please sign a form with Kathy, so
we have it on the record. All right.
- One other

00:46:41.369 --> 00:46:46.869
note is there was no capital cost up front
to the producer for this gathering system.

00:46:46.869 --> 00:46:55.160
- Okay. Thank you. Does anybody have
any other questions for Christie?
- I'd like to pass this case.

00:46:55.160 --> 00:47:04.349
- We're gonna pass. Thank you.
- Thank you very much.
- Good morning, Chairman. Commissioners.

00:47:04.349 --> 00:47:07.855
For the record, Joe Menifee,
Paralegal, Hearings

00:47:07.880 --> 00:47:10.860
division. I'll be
presenting items 10 and

00:47:10.860 --> 00:47:15.056
11, both of which are good news.
Item 10, subsequent

00:47:15.081 --> 00:47:18.460
to filing a motion for
rehearing, Advantek

00:47:18.460 --> 00:47:24.510
Waste Management Services LLC has come into
compliance. Therefore, it's recommended the

00:47:24.510 --> 00:47:27.107
motion be granted and
the underlying docket

00:47:27.132 --> 00:47:29.940
dismissed as moot. I'm
available for questions.

00:47:29.940 --> 00:47:33.058
- Thank you. Are there any questions?
We always like

00:47:33.083 --> 00:47:35.940
good news, Joe. I move we
approve the examiners'

00:47:35.940 --> 00:47:39.660
recommendation. Is there a second? Second
by Commissioner Sitton. All those in favor

00:47:39.660 --> 00:47:47.470
say aye. Motion passes, item's approved.
Number 11.
- Item number 11 also is good news.

00:47:47.470 --> 00:47:50.994
Subsequent to filing a
motion for rehearing, Lee

00:47:51.019 --> 00:47:54.230
Walker Mineral LLC has
come into compliance.

00:47:54.230 --> 00:47:58.750
Therefore it's recommended the motion be granted
and the underlying docket dismissed as moot.

00:47:58.750 --> 00:48:03.160
I'm available for questions.
- Thank you. Are there any
questions? I move we approve the

00:48:03.160 --> 00:48:07.250
examiners' recommendation. Is there a second?
Second by Commissioner Christian. All

00:48:07.250 --> 00:48:12.460
those in favor say aye. Motion passes, that
item is approved. Thank you. All right,

00:48:12.460 --> 00:48:15.853
we're at the Oil and Gas Consent Agenda.
There are

00:48:15.878 --> 00:48:18.980
items number 12 through 61.
There are 50 items

00:48:18.980 --> 00:48:22.211
on this. I move we approve
items 12 through 61.

00:48:22.236 --> 00:48:25.039
Is there a second?
Second by Commissioner

00:48:25.039 --> 00:48:31.130
Sitton. All those in favor say aye. Motion
passes, items are approved.

00:48:31.130 --> 00:48:34.921
Rule Inactive Well items.
Items 62 through 82.

00:48:34.946 --> 00:48:38.390
But we've got, number
70 is in compliance.

00:48:38.390 --> 00:48:42.230
All right, so I move we
approve items 62 through

00:48:42.255 --> 00:48:45.599
82 with the exception of item 70.
Is there

00:48:45.599 --> 00:48:48.367
a second? Second by
Commissioner Christian. All

00:48:48.392 --> 00:48:51.309
those in favor say aye. Motion passes.
Those items

00:48:51.309 --> 00:48:58.490
are approved. Master Default Orders. There
are 36 of these. Items 83 through 118. I

00:48:58.490 --> 00:49:04.410
move we approve items 83 through 118. Is there
a second? Second by Commissioner Sitton.

00:49:04.410 --> 00:49:07.640
All those in favor say aye.
Motion passes.

00:49:07.665 --> 00:49:11.470
Items are approved. And
Agreed Enforcement Orders.

00:49:11.470 --> 00:49:19.309
There are 252 Agreed Enforcement Orders, items
119 through 370. I move we approve items 119 through

00:49:19.309 --> 00:49:23.610
370. Is there a second. Second by
Commissioner Christian. All in favor, say

00:49:23.610 --> 00:49:26.190
aye. Mission passes. Those
items are approved.

00:49:26.215 --> 00:49:28.550
Thank you. That that
concludes our Hearing

00:49:28.550 --> 00:49:34.810
section. We'll now take up
Administrative. Good morning, Wei.
- Good morning, Chairman, Commissioners.

00:49:34.810 --> 00:49:38.536
Wei Wang, Executive Director.
Glad to report today

00:49:38.561 --> 00:49:41.750
that we're making huge
progress in training

00:49:41.750 --> 00:49:45.400
and retaining, hiring
new employees, our head

00:49:45.425 --> 00:49:49.050
count today is 797. It will be
the highest it's been in years.
- Highest since I've been ever here.

00:49:49.049 --> 00:49:53.185
- Our HR department has
been very busy this

00:49:53.210 --> 00:49:57.510
month, and we have 164
Oil and Gas inspectors

00:49:57.510 --> 00:50:04.460
and 63 pipeline inspectors. And just last
week, we completed the third and final new

00:50:04.460 --> 00:50:07.305
Oil and Gas inspector
training for the year. We

00:50:07.330 --> 00:50:10.269
trained, so far, 51 Oil
and Gas inspectors. These

00:50:10.269 --> 00:50:12.321
are new inspectors, been
with the Commission for

00:50:12.346 --> 00:50:14.289
less than two years. Now,
on the well plugging

00:50:14.289 --> 00:50:15.914
front, as of last Friday,
we have physically

00:50:15.939 --> 00:50:17.720
plugged 1378 wells. So
we're making good progress

00:50:17.720 --> 00:50:27.920
on that front as well.
- Great. Thank you. Great progress.
Thank you, Wei. Any questions of Wei? All right.

00:50:27.920 --> 00:50:31.712
Thank you. 372. Good morning.

00:50:37.537 --> 00:50:42.854
- Good morning, Vanessa Burgess, Assistant
General Counsel. For the record, I'll

00:50:42.879 --> 00:50:48.237
be handling items 372 through 374. We have
nothing to report on item 372. I would

00:50:48.262 --> 00:50:53.763
request to pass item 373, and then, item
374 on the agenda pertains to Commissioner

00:50:53.788 --> 00:50:59.199
approval of certain contracts pursuant to
the Commission's delegation of authority

00:50:59.224 --> 00:51:04.207
in sections 2261.254 and 2155.088 of
the Texas Government. The Commission's

00:51:04.232 --> 00:51:09.518
internal delegation of authority requires
Commissioner approval of contracts and

00:51:09.542 --> 00:51:14.840
associated amendments greater than or equal
to $500,000. Section 2261.254 of the

00:51:14.865 --> 00:51:20.138
Government Code requires approval of
contracts and associated amendments greater

00:51:20.163 --> 00:51:25.600
than $1,000,000. And finally, Section
2155.088 requires Commissioner consideration

00:51:25.625 --> 00:51:30.578
of material changes to contracts,
including any increase is greater than 10

00:51:30.603 --> 00:51:35.765
percent. At issue today are contracts for
well plugging, site remediation, and

00:51:35.790 --> 00:51:41.058
IT services. Approval of this item today
will insure agency operations remain on

00:51:41.083 --> 00:51:46.579
schedule, and the necessary approvals will
be in place pursuant to the Commission's

00:51:46.604 --> 00:51:51.747
delegation and state law. A summary of
these agreements, including requisition

00:51:51.772 --> 00:51:57.059
numbers and amounts, were included in your
notebooks. Staff asked the Commission

00:51:57.084 --> 00:52:02.280
approve these agreements pursuant to the
Commission's delegation and state law.

00:52:02.280 --> 00:52:07.160
- Thank you. There any questions? I move
we approve the staff's recommendation.

00:52:07.160 --> 00:52:10.057
Is there a second? Second
by Commissioner Sitton.

00:52:10.082 --> 00:52:12.549
All those in favor say aye.
Motion passes.

00:52:12.549 --> 00:52:17.650
Item's approved. Thank you.
375. Good morning, Clay.

00:52:24.374 --> 00:52:27.850
- Good morning, Chairman, Commissioners.
For the record,

00:52:27.875 --> 00:52:31.387
my name is played Clay Little.
I'm the Assistant Director

00:52:31.411 --> 00:52:34.813
of Oil and Gas for Field Operations.
Item 375, for your

00:52:34.838 --> 00:52:37.972
approval, is the Commissions
Oil and Gas Monitoring

00:52:37.997 --> 00:52:41.405
Plan and Enforcement Plan for
Fiscal Year 2020. A draft

00:52:41.430 --> 00:52:44.753
of this plan was before you
on April 23rd and was then

00:52:44.778 --> 00:52:48.235
available for public comment
until May 23rd. During that

00:52:48.260 --> 00:52:51.692
period, the Commission received
a total of four comments

00:52:51.717 --> 00:52:55.060
from the public and industry groups.
The final version

00:52:55.085 --> 00:52:58.282
of the plan includes items
that support the goals of

00:52:58.307 --> 00:53:01.820
demonstrating the Commission's
oil and gas monitoring and

00:53:01.845 --> 00:53:05.394
enforcement activities and the
strategic use of Commission

00:53:05.418 --> 00:53:09.240
resources to ensure public safety
and protect the environment.

00:53:09.265 --> 00:53:12.274
This plan must be posted
through the Commission's

00:53:12.299 --> 00:53:15.805
website no later than July 1st.
That deadline will be met

00:53:15.831 --> 00:53:19.070
with your approval today.
May I answer any questions?

00:53:19.070 --> 00:53:22.309
- Thank you. Are there any questions?
I move we approve

00:53:22.309 --> 00:53:24.449
staff's recommendation.
Is there a second?

00:53:24.474 --> 00:53:26.789
Second by Commissioner Christian.
All those in

00:53:26.789 --> 00:53:34.599
favor say aye. Motion passes. Item's approved.
Thank you for your work. Item 376 is

00:53:34.599 --> 00:53:37.824
mine. So before we get too
into it, I'd like a make a

00:53:37.849 --> 00:53:40.869
few remarks, if you don't mind.
I'd appreciate it.

00:53:40.869 --> 00:53:46.719
So it's been a tremendous honor to serve as
chairman for the past two and half years

00:53:46.719 --> 00:53:51.609
as we're now beating numbers
from the 1970s in production

00:53:51.609 --> 00:53:53.745
numbers. And we're leading
the country, which

00:53:53.770 --> 00:53:55.789
I think continues to be important.
From the

00:53:55.789 --> 00:54:00.579
Permian Basin, the Gulf Coast and all every
place in between, the oil and gas industry

00:54:00.579 --> 00:54:06.360
really has roared back. And it's nice to beat
OPEC occasionally, isn't it? And when you

00:54:06.360 --> 00:54:11.460
look just on the national world, Secretary
Perry's now saying we're sending LNG,

00:54:11.460 --> 00:54:14.200
which is a lot of our
LNG, to 36 countries on

00:54:14.225 --> 00:54:16.820
five continents in the next year.
So that's

00:54:16.820 --> 00:54:19.138
amazing, I think, and
Texas is leading the way

00:54:19.163 --> 00:54:21.210
with my home area of
West Texas being the

00:54:21.210 --> 00:54:28.319
largest oil field in the entire world, I
think, at this point. So what amazing

00:54:28.319 --> 00:54:33.839
progress we've made in how amazing we've come
a long way in the last two and half years.

00:54:33.839 --> 00:54:37.930
At the Commission, we've gotten through sunset
since I've been here. Finally. Done two

00:54:37.930 --> 00:54:43.150
phases Oilfield Relief Initiative, which
is an ongoing process. And we're saving

00:54:43.150 --> 00:54:46.149
time and money for
customers and as well as

00:54:46.174 --> 00:54:49.420
saving time and money for our agency.
And we've

00:54:49.420 --> 00:54:53.700
also worked hard, and I appreciate staff's
help on this on our budget. Our budget,

00:54:53.700 --> 00:54:56.980
having consistent dollars, that we finally
get access to our own money and being able

00:54:56.980 --> 00:55:02.230
to pay our people appropriately, first and
foremost, has been important. 796, Wei, is a

00:55:02.230 --> 00:55:06.029
huge win for us. I think it's the highest
number since I've been at the Commission.

00:55:06.029 --> 00:55:10.750
So now we've got to keep 'em, right? Putting
us on track. Not just for that, but IT, so

00:55:10.750 --> 00:55:13.768
Brandon got a big, big
thing to move forward,

00:55:13.793 --> 00:55:16.589
right? But IT and getting
off of mainframe

00:55:16.589 --> 00:55:20.017
has been a big process
for us, and I'm excited

00:55:20.042 --> 00:55:23.299
to see what we do in the future.
$27,000,000

00:55:23.299 --> 00:55:25.794
is not insignificant as
we go forward for the

00:55:25.819 --> 00:55:28.180
next biennium to work
on that, and frankly,

00:55:28.180 --> 00:55:30.375
well plugging has been huge.
So Clay, you've

00:55:30.400 --> 00:55:32.619
been a great lead for that.
And I think we'll

00:55:32.619 --> 00:55:35.594
have a great project
continuing, too, which I'm

00:55:35.619 --> 00:55:38.259
excited about. But I
want to say thank you

00:55:38.259 --> 00:55:42.690
first, most importantly to the staff.
You all have done a lot, and we've

00:55:42.690 --> 00:55:47.240
brought this agency, we're slowly pulling
it into the 21st century, not just with IT,

00:55:47.240 --> 00:55:51.240
but we're training more people were keeping
people. And y'all are the front lines in

00:55:51.240 --> 00:55:53.487
our customer service, I
think is really, really

00:55:53.512 --> 00:55:55.500
important. So I'm really
proud of that and

00:55:55.500 --> 00:56:00.769
thank you for what you do and being engaged
with us and really being a customer

00:56:00.769 --> 00:56:03.550
service agency, I think
that's important for us.

00:56:03.575 --> 00:56:06.160
So I want to say thank you
to the Legislature as

00:56:06.160 --> 00:56:10.250
well. They've been nice to us. They
finally understand what we do. It's only

00:56:10.250 --> 00:56:14.819
taken seven years since we've been here on.
Hopefully, that

00:56:14.819 --> 00:56:18.980
will last. It will continue. And thank
you, my fellow Commissioners. I appreciate

00:56:18.980 --> 00:56:23.569
the support since I've been up here, and
so that being said, I move we elect Wayne

00:56:23.569 --> 00:56:30.369
Christian as the new Chairman of the
Railroad Commission. Is there a second?

00:56:30.369 --> 00:56:33.880
Second by Commissioner Sitton.
All those in favor say

00:56:33.905 --> 00:56:37.391
aye. Motion passes. Item's approved.
Congratulations.

00:56:37.390 --> 00:56:42.015
- Does this mean that I get SO12 back?
- No! Nobody has to move license plates.
They changed the rules.

00:56:42.040 --> 00:56:47.720
- That was the whole point.
-  Question. Can I get double the budget like they do--
- No! It doesn't work that way.

00:56:47.744 --> 00:56:56.995
(applause)

00:56:59.720 --> 00:57:03.807
- Wow, this is the first
time I'll speak as the

00:57:03.832 --> 00:57:07.980
chairman. And the first
thing I want you to know

00:57:07.980 --> 00:57:11.950
that the Chairman is totally dependent on
the other two Commissioners who have just

00:57:11.950 --> 00:57:18.640
as much authority, just as much speak, just
much pay as Chairman does. And Chairman

00:57:18.640 --> 00:57:20.710
Craddick has done an
outstanding job and I've

00:57:20.735 --> 00:57:22.960
been humbled to serve under
her and her knowledge

00:57:22.960 --> 00:57:26.723
and her leadership and
her friendship through

00:57:26.748 --> 00:57:30.240
this has been inspiring.
Even though I did

00:57:30.240 --> 00:57:33.866
work for a Craddick over
in the House, she's a lot

00:57:33.891 --> 00:57:37.349
better over here at the
Railroad Commission. And

00:57:37.349 --> 00:57:40.370
I've been humbled and
appreciate so much the

00:57:40.395 --> 00:57:43.391
knowledge of Commissioner
Sitton, and he has

00:57:43.390 --> 00:57:49.210
helped me to understand many issues. And his
expertise is invaluable on this Commission

00:57:49.210 --> 00:57:53.701
because he understands
things much more than a

00:57:53.726 --> 00:57:58.000
former legislator and
politician and finance

00:57:58.000 --> 00:58:00.396
guy from deep East
Texas, and I appreciate

00:58:00.421 --> 00:58:02.960
your knowledge and
listening for your remarks

00:58:02.960 --> 00:58:09.310
and respect your opinions on the different
issues. There's three things that kind of

00:58:09.310 --> 00:58:11.978
close to my heart, just
in my comments, many of

00:58:12.003 --> 00:58:14.480
you know, the employees
in this organization

00:58:14.480 --> 00:58:16.442
think that we're up in
what, Wei, the great job

00:58:16.467 --> 00:58:18.240
that he and his staff
have done and all the

00:58:18.240 --> 00:58:20.266
employees across state.
It's amazing to be in a

00:58:20.291 --> 00:58:22.250
position where you look
at Forbes Magazine, it

00:58:22.250 --> 00:58:24.882
says the most respected
regulatory agency on

00:58:24.907 --> 00:58:27.630
planet Earth is the Texas
Railroad Commission,

00:58:27.630 --> 00:58:32.369
and that's not three Commissioners. That's
all of the folks out here that Wei leads and

00:58:32.369 --> 00:58:35.410
across this state that
have respect worldwide

00:58:35.435 --> 00:58:38.450
of doing the business right.
And I appreciate

00:58:38.450 --> 00:58:42.290
and respect them and hope that we can honor
all the employees of the Commission in our

00:58:42.290 --> 00:58:47.280
service here. And trying to get employees
in this business is a major problem. I've

00:58:47.280 --> 00:58:49.578
had a task force working on that.
I appreciate

00:58:49.603 --> 00:58:51.730
the great work that
Commissioner Sitton has

00:58:51.730 --> 00:58:55.134
done inspiring young
people with encouraging

00:58:55.159 --> 00:58:58.690
them. And Commissioner
Craddick has been great

00:58:58.690 --> 00:59:01.633
as an example to young
ladies across the state that

00:59:01.658 --> 00:59:04.349
there is no discrimination
in this organization,

00:59:04.349 --> 00:59:07.639
and in the industry, and
it's humbling to work

00:59:07.664 --> 00:59:10.579
there, trying to get
people understand at

00:59:10.579 --> 00:59:12.788
Higher education, other
places, that there is

00:59:12.813 --> 00:59:14.900
a place in the booming
economy that's about

00:59:14.900 --> 00:59:16.918
to happen in this state
like none other. Two

00:59:16.943 --> 00:59:19.070
other things. The
environmental issue, I think,

00:59:19.070 --> 00:59:26.240
is a great threat to our landowners, to our
industry to the future of our nation. We

00:59:26.240 --> 00:59:29.223
have just achieved not
only energy independence

00:59:29.248 --> 00:59:32.019
but economic independence.
But it's national

00:59:32.019 --> 00:59:35.026
security, and that's important.
And we in Texas

00:59:35.051 --> 00:59:37.720
lead the fight, and
just real quickly, you

00:59:37.720 --> 00:59:43.119
look back in World War Two, East Texas, the
largest discovery of oil in the history of

00:59:43.119 --> 00:59:46.910
the world. That sound familiar? But we use
a little inter and the big incher, and we

00:59:46.910 --> 00:59:50.789
furnished two-thirds of the
oil and gas to World War

00:59:50.814 --> 00:59:54.521
2 to our troops and helped
defeat Hitler. What are

00:59:54.521 --> 00:59:58.899
we giving now? Fast forward,
the largest discovery

00:59:58.924 --> 01:00:03.020
of oil in the history of
the world, West Texas.

01:00:03.020 --> 01:00:05.419
And with that comes the
sobering responsibility, I

01:00:05.444 --> 01:00:07.770
think we in the industry
and we at the Commission

01:00:07.770 --> 01:00:10.695
need to understand. We look
back on that generation

01:00:10.720 --> 01:00:13.170
and how they handled
that gift from God and

01:00:13.170 --> 01:00:15.785
became the greatest
generation and look how

01:00:15.810 --> 01:00:18.460
they developed the largest economy.
The most

01:00:18.460 --> 01:00:21.870
successful, independent,
free market opportunity

01:00:21.895 --> 01:00:25.140
in the history of planet
Earth, and we commend

01:00:25.140 --> 01:00:27.770
them is the greatest
generation, and I feel

01:00:27.795 --> 01:00:30.580
what's our responsibility
equally now with his

01:00:30.580 --> 01:00:34.800
next gift of God? And I hope that we at the
Commission as an industry understand that

01:00:34.800 --> 01:00:38.427
responsibility and our honorable to it.
So those

01:00:38.452 --> 01:00:41.980
are my remarks. My hope,
Chairman Craddick left

01:00:41.980 --> 01:00:44.715
this here, and I only
do mine in Crayola.

01:00:44.740 --> 01:00:47.840
We may be here rest of
the day trying to figure

01:00:47.840 --> 01:00:50.255
to get out of here if I
don't understand what's

01:00:50.280 --> 01:00:52.619
going on here. But I
item 377 is our Public

01:00:52.619 --> 01:00:55.328
Participation item, and
it seems no one has

01:00:55.353 --> 01:00:58.160
turned in cards indicating
they wish to speak

01:00:58.160 --> 01:01:01.709
on these non-posted Items.
Item 378 is our Executive

01:01:01.734 --> 01:01:04.789
Session item, which we
will not be going into

01:01:04.789 --> 01:01:09.789
today on. Are there any other duly posted
matters to be brought before the Commission

01:01:09.789 --> 01:01:12.627
at this time? Hearing
none, this meeting of the

01:01:12.652 --> 01:01:15.193
Railroad Commission of
Texas is adjourned.