Chair Christian: Railroad Commission of Texas will come to order to consider
matters which have been duly posted with Secretary of State for September the
11th, 2019. Commissioners will consider the items on the agenda as posted on the
agenda. Under our public participation policy, anyone desiring to offer public
testimony on any items that are not noticed on today's agenda will need to fill
out a testimony form found in the back of the room and submit it to the deputy
Commission secretary, Sharon Walker. Please silence all your cell phones before
we begin. And before we get any further, let's go into our service awards.
Robbie Craig: Good morning, Chairman and Commissioners. My
name is Robbie Craig. I'm the Director of Human
Resources. Today, I'm here to present the 2019
4th quarter Service Awards. First up, from
our Office of General Counsel, celebrating five years of service, is Vanessa Burgess.
(crowd chatter) Next, from our Surface Mining Division, celebrating five years of service,
is Francis Calderon. (applause) (audience chatter) Next, from our ITS division, also celebrating
five years of service, is Jenny Heath. (audience chatter) Next, from our Operations
division, celebrating five years of service, is Sandra Maldonado. (applause) Also celebrating five
years of service, from our Oversight and Safety division, Blake Roadie. (applause) (audience chatter)
Next from our office of General Counsel, celebrating 20 years of service, it's Kathy Keels
(applause) (audience chatter) Finally, also celebrating 20 years of service, from our Oil and Gas division, Julie
Rickehoe. (applause) (audience chatter) This concludes today's service awards. Thank you.
Chair Christian: It's always nice to recognize those that
make the Railroad Commission what it is, and we do appreciate
all of you so much. Before we begin, I'd like
to remember in that today is the anniversary
of a horrific event 9-11, and the recent shootings
in Odessa, Texas, and we do pay respects,
and our prayers are with the families and the
memories and all that survived those horrendous
incidents, and hopefully we can make a better
country from such evil that was upon us. But
let's proceed. Item number one.
Christina Poole: Good Morning, Chairman and
Commissioners. For the record, my name is Christina
Poole, and I'm with the Oversight and Safety
Division. The agenda item before you is Gas
Utilities Docket Number 10857, the application
of Texas Gas Service Company, a division of One
Gas Incorporated. for the Test Year 2018 Annual
Interim Rate adjustment for the Gulf Coast
Service area. This is the third interim rate
adjustment TGS has fallen for this area since
the company's last rate case, GUD Number 10488.
This adjustment represents an incremental
revenue increase of $112,007 of which $2704
will be recovered from the customers subject to
the order in this docket. Staff recommends
approval of the interim readjustment as proposed.
Are there any questions? Ok. I move we approve the examiner's
recommendations. Is there a second? Commissioner Sitton
is the second. All in favor say aye. Any opposed? Motion passes. That item is
approved. Item number two.
Demarlowe Chico: Good Morning, Chairman and Commissioners. I'm to Demarlowe Chico, Administrative Law Judge with the Hearings Division. Item number two is a discrimination complaint filed by TG Barnett Resources LP against respondents Cowtown Pipeline Partners L.P. and Cowtown Gas Processing Ptrs L.P.. The parties timely filed exceptions and replies. Complainant TG Barnett also filed a motion for oral argument and Cowtown responded, urging denial of the motion. Two non-substantive clerical errors were corrected and are reflected in the final order that will be presented to you. Under the unique facts of this case, complainant failed to establish it is a similarly situated shipper based on conditions in circumstances existing at the time of agreement and negotiations between TG Barnett and Cowtown’s other shipper. Thus the examiners determined unreasonable discrimination has not occurred. The examiners recommend the Commissioner's deny and dismiss the complaint. There's no deadline for Commission action. I'm available for questions.
Chair Christian: Are there any questions? We have three that are available for any questions.
Bill Johnson, Brian Sullivan and Larry Viscela.
And if you have any questions of them, they
are available. Any discussion? Commissioner Sutton?
Commissioner Sitton: I do. Demarlowe walk through with me real
quick. In fact, in the legal principles in the
case summary, you reference, or we referenced,
both the common carrier statute. We referenced
the Natural Resources Code, and we reference
the Gas Utility Code as a gas utility.
My question is which does Bluestone-slash-Cowtown
fall under? Are they common carrier, are they common gas purchaser, or are they a gas utility?
Demarlowe Chico: Common carrier but Cowtown is the gas utility in this case.
And the discrimination, the issue
of discrimination, applies under 81. I know
Cowtown responds to with regards to seven points,
rather, 104.003, but 81.061 is what applies with regard to discrimination complaints in
this case. So as we do the analysis, we also
look under 7.003d, which is the determination
of those 13 factors that we analyze. We looked
at all 13 factors and determined based on
the specific facts of this case, that the circumstances and conditions that occurred
during the time of negotiation or agreement is what is dispositive material in this case.
Commissioner Sitton: Okay, I understand the use of the
definition of similarly situated. What I'm asking is,
before we get there, I wanna be specific because
we we don't actually say, sate in our PFD,
in our findings of fact or conclusions of law, exactly what they are. Are we treating
them as a gas utility or as a common carrier
or as a common purchaser? In fact, under the
rules in Chapter 7, just when we talk about the, in fact, Chapter 7.001, we're
specifically talking about gas purchasers. So I wanna make sure that we are being
deliberate or being specific in how we're treating Countdown, and are you saying
that we're treating them as a common carrier?
Okay, if that's the case, and I understand,
you walk through the 13 different criteria looked at, and specifically section M, which
is we looked at the timing and the conditions when negotiations were met, I'll say it
specifically what it is. It's conditions and
circumstances existing at the time of agreement
or negotiation. Correct? And so you're you're finding was, well, there was a bankruptcy
going on. Hence the negotiation for rates between Cowtown as both the producer
and the operator and the gatherer that that was a different time that when
the other rates were negotiated? Am I summarizing correctly?
Demarlowe Chico: Among other factors there was that. There
was a market conditions at the time, the fact
that they ratified these contracts at different
time frames. And there was also the fact that
these were sophisticated companies who did
their due diligence when they ratified those contracts again at those different points
in time when there were different circumstances existing.
Commissioner Sitton: Okay? And I do like the fact
that we identify a specific business or a an
economic issue at the time, i.e. bankruptcy
is something that does create different circumstances
and therefore rates determined in
a bankruptcy hearing don't necessarily apply it to other situations. I agree with that.
However, my issue is in TG Barnett's nets exceptions, they go to some specific
lengths to mention the fact that ENI gets the
same rates that Cowtown gets. Is that correct?
Demarlowe Chico: Well, the difference between
ENI and TG Barnett was that ENI,
at the time the contracts were ratified, they didn't ratify the contract
themselves. They were not a producer party, unlike TG Barnett when it ratified their
contracts with Cowtown back in 2014. ENI, at that time, chose not to be a producer
party, and it still is not a producer party.
They're just working interest owners, so they
are not similarly situated in that respect.
Commissioner Sitton: But similarly situated. If I wanted to
say that Cowtown was the one involved in the bankruptcy, but ENI is a working
interest owner with a similar percentage sitting
on the same exact pipelines
producing the virtually the same amount of gas? In other words, if I go through the 13
criteria, and ENI is getting the same rates that Cowtown is, then I'm concerned that
there is nothing that differentiates, today, ENI and TG Barnett. Once again, if they
had been involved in a bankruptcy, somehow, I get that that was a different situation,
but they were not. So while they were, there may have been different criteria or
different circumstances under which they conducted
a negotiation, if we're looking today to look
for rate discrimination, then I don't see how we see a difference between ENI
TG Barnett. They seem virtually identical to me.
Demarlowe Chico: Well, I would see the differences as
they weren't in control of the negotiations. They didn't ratify the contract. Unlike TG
Barnett, where, when they ratified their contract,
they were in control. They did their due diligence
and they chose to accept the contract terms
at that time. So that's why we looked at subsection L.
with a significant specific, facts based specific to this case.
Commissioner Sitton: So I guess, though the following to that is,
if any time we can say, well, there was a difference in standing
in a contract negotiation, then, honestly, how we'd ever find discrimination? There's
never gonna be two people that negotiated a contract in an identical fashion.
Well, when it comes to discrimination in these
cases, they're all fact-back specific. So that's why
I keep referring to the facts of this case.
So we can't say right now whether or not that
will happen in the future. It just is fact dependent.
Commissioner Sitton: My point is, I never have two people
sitting in the exact same room, negotiating
contracts and exact same time over the exact
same circumstances. There's always something
different. And so if I use the fact that they
were in different situations, simply from a contract
negotiation standpoint, then that will throw
out, we'll never find that. If all the other
criteria, A through L, are met, and M in this
case as far as ENI goes, is the only, and the only differentiator is that ENI,
what you're saying is they were unsophisticated
or they did not choose to participate actively
in negotiations but somehow got a lower rate.
TG Barnett who we don't know what their situation
was. Just that it wasn't exactly the same as ENI's, right? Like we weren't in the room
negotiating the contract.
Commissioner Craddick: Can I ask a question? Because it seems to me.
Commissioner Sitton: No, I want to finish mine first please. Just let me finish this.
Commissioner Craddick: Ok because I disagree with how you read it. So I'd like to let you finish.
Commissioner Sitton: Okay, what I'm trying understand is
if my issue is that I've got two different situations for negotiating a contract
in which we weren't present. There will always be differences in contract negotiations.
So I'm trying understand, My premise is how
would we ever find
find discrimination between two parties if we use a different situation
for negotiating contracts, as the bar.
Demarlowe Chico: I think well, the way I see it, the
issues, again going back to the fact specifics
of the case, in this case, not only do we have
the different time frame, we have the bankruptcy
that placed them in different level playing
fields, so being asked to speculate as to future contracts, there might
be a case where they did look forward as to how
to negotiate their contracts and be prepared
for it. And that would then, if the contracts
were different then yes, we can assume
that maybe they're not, they are similarly
situated. But this in this specific fact case,
they're not and those conditions or what we looked at.
Commissioner Craddick: So can I clarify? Because
it seems to me you're reading the ENI piece
and we have very little information from ENI
right because they weren't a party to the case.
It seemed, the way I read it, is that Bluestone,
make sure I said that right, is a marketer on behalf of ENI, so ENI may or may not have
its own contract. That's the perception I have. We don't know that for sure, right?
So Bluestone really is the marketer on behalf
of ENI, the way I read the very
limited information I have. So ENI may or may not have their own contract. We may
or may not know the answer to that, but Bluestone
is the marketer. Would that be a decent assessment?
Demarlowe Chico: Yes, they're not a producer party to the contract.
Commissioner Craddick: Which is where I think they're different in this respect.
Commissioner Sitton: I agree that. I agree with
the point that Commissioner Craddick is making.
The fact is, we don't know. And as I said, in fact,
it's only in the exceptions where we see where
they go to length to state that the Cowtown executive, Mark Mitchell, testified
that Bluestone and ENI are both getting the lower rates, not knowing what contract
was in place. So my concern is we don't know enough to say that Oh, definitively, there
wasn't discrimination And we've met virtually
all the criteria in our similarly situated
definition going back to the common carrier
chapter. All it says, common carrier of the Natural
Resources code, all it says is that we're looking
for people that have like or contemporaneous
service. It's our definitions where we list out these 13 criteria, and these seem awful
close to me to not find discrimination in this case.
Any further comments? Okay, and
we do have again, remind you, three that are here.
Bill Johnson, Brian Sullivan and Larry Viscella
that are available should anybody have any questions of them, if not is there a motion?
Commissioner Craddick: I'm a move we approve the examiners recommendation.
Is there a 2nd? Second. All in favor, say aye.
Aye. Any opposed?
Commissioner Sitton: Nay
Motion passes, two to one, that item is approved.Item number three.
Kyle Lubbey: Good Morning, Chairman, Commissioners. Kyle
Lubbey, Administrative Law Judge with Hearings Division.
Item three is an application by Luminant Mining
Company LLC requesting renewal, revision, and
expansion of Permit Number 50b for the Kosse mine
located Limestone and Robertston counties. In
the application, Luminant proposes to expand the existing 15,206 a permit area. Adding
approximately 1357 acres, and seeks approval of renewed and revised operations during
a five year renewal term. The application is protested
by Mr Ray Field and Mr Miss Susan Calhoun-Field
who own land adjacent to the proposed permit boundary and requested a hearing
in November 2018 following notice of application.
Public hearing was convened on June 14, 2019, in
Franklin, Texas to receive public comment and
consider requests with party status. The hearing
on the merits was held on June 17, 2019, in
the Commission's Austin offices. Protestant
gave public comment and testimony regarding its interest at setting in Franklin but did
not attend or participate in the hearing on the merits.
Staff recommends approval of the
application with the adoption of two permit provisions. Luminant has accepted staff's review,
protestant contends the application should be denied for wide variety of reasons, but
have not offered any evidence to contradict positions of the other parties.
The reclamation cost estimate to account for the proposed activities, as calculated by
staff in the amount of $200,777,829 is recommended for adoption. Luminant
currently bonds all of its statewide mining operations with a blanket collateral bond
in the amount of 975 million. The current bond exceeds the sum of estimated reclamation
costs for all of Luminant's mines, including the proposed amount attributable to the Kosse
mine. Therefore, no changes to the bond are
required as a result of this renewal. Review
by staff shows at all technical requirements
are met for approval with recommended permit
provisions set out Appendix one to the proposal
for decision and adopted in a proposed order.
Appendix 2 contains postmine soil testing plant.
The parties to the proceeding, including the
protestant, did not file exceptions to the PFD. Based on evidence in the record, it is
recommended application be approved and the renewed
and revised permit renumbered as permit number 50C
be issued to Luminant for a term of five years. I'm available for questions.
Chair Christian: Any questions? We have a one filed
person that he's here for questions. Mr Ray Field
is available. Does anybody have any questions
of Mr Field? If not, I move we approve the
examiners recommendation. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second by Commissioner Sitton. All in favor
say aye. Any opposed? Motion passes. Item is approved. Item number four.
Veronica Roberto: Good morning, Chairman Commissioners. For the record,
Veronica Roberto, Administrative Law Judge with the Hearings
division. Item number four is an application by Luminant Mining Company LLC requesting
a release of Phase 1 reclamation obligations
on 301.38 acres within Three Oaks Mine, permit
number 48C, located in Lee and Bastrop counties.
The approved post mine land uses within
the subject area are pasture land and developed
water resources. Evidence in the record supports
that Luminant has satisfied all requirements
for Phase One release of the subject area. After
notice, no comments or request for a hearing
were received. Luminant and staff are the only
parties to the proceedings. No exceptions were filed. No changes to the current bond
are requested in the docket. It is recommended
that the request for Phase One release for
the subject area be approved and that Luminant
be eligible to reduce the amount on the bond the
permit. I'm available for questions.
Chair Christian: Any questions? I move we approve
the examiners recommendation. Is there a second?
Commissioner Craddick: Second
Second by Commissioner Craddick. All in favor say aye. Any opposed? Motion
passes. That item is approved. Item number five and six.
Peter Bouva: Good morning, Chairman, Commissioners. My name is Peter Bouva,
technical examiner with the Hearings division.
I'll be presenting items number five and six
together. I have one order for both dockets, and therefore you only need to vote once.
Items number five and six are applications by
High Roller Wells LLC for two new commercial
disposal wells. The application is protested by
Frank and Gwen Legion, Legion Family Partnership
LP, Legion Management LLC, and Robert and Caroline
Sadler. Protestants do not dispute that applicant
meets the operational requirements. The protestants contend that applicant does
not have a good faith claim to operate the proposed wells and thus should be denied a
permit to operate. To drill the wells. High Roller presented evidence addressing each
of the requirements in Statewide Rule Nine. High
Roller has a written lease giving it the right
to operate the proposed injection wells. Protestants claim that there is a written oil and
gas lease that is dominant to High Rollers written lease. The protestants provided
insufficient legal authority for their claim.
The examiners find that there has been a reasonably
satisfactory showing of a good faith claim. The dispute that protestants have with High
Roller is outside of the jurisdiction of the
Commission and is insufficient to defeat High
Rollers good faith claim. The Examiner's recommend approval of the application. Exceptions and
replies have been filed. I'm available for any questions.
Chair Christian: Are there any questions? I move we approve examiners' recommendation
on items five and six. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second by Commissioner Sitton. All in favor
say aye. Any opposed? Motion passes. Those items are approved. Item number seven.
Robert Music: Good morning, Chairman, Commissioners. For
the record, my name is Robert Music, technical examiner
for the Hearings division. Item number seven is the application of NGL Water Solutions,
Permian LLC. The application is for a commercial permit to dispose of oil and gas
waste by injection into a resevoir productive
of oill and gas for Ramsey 12A Well lease,
well number two, Ford 4000 Delaware Field, Reeves County, Texas. NGL is requesting to
amend the 2012 existing injection permit for the
subject well. The current permit authorizes
a maximum injection volume of 20,000 barrels
per day of saltwater and nonhazardous oil and
gas waste into the field. NGL seeks authority to increase the maximum injection volume
to 33,800 barrels per day. The request is based on an injectivity test showing the
well has the capacity to inject the requested
volume within required wellhead pressure limits.
The application is protested by Ring Energy
Incorporated and Conoco Philips Company. The
protestants argued additional disposal capacity
is not needed and the injection fluids will
negatively impact production in the area.
Their proposed disposal well is cased, cemented,
and completed in a manner consistent with Commission rules under Statewide Rule 46.
The Examiner's recommend approval of the application
to amend the maximum injection pressure of
volume to 33,800 barrels per day for the subject
well. No exceptions were found. I'm available for questions.
Chair Christian: Are there any questions? I
move we approve the examiners' recommendation. Is there a second?
Commissioner Craddick: Second.
Chair Christian: Second Commissioner Craddick. All in favor, say aye. Any
opposed? Motion passes. That item is approved. Item Number eight.
Joe Menifee: Good morning, Chairman, Commissioners. For the
record, Joe Menifee, paralegal In the Hearings division. I'll be
presenting items eight through 10, all of which are P5 motions for rehearing filed as
a result of a final order denying renewal of the
operators P5 because of wells noncompliant
with Statewide Rule 18. Item number eight. In
its motion Banner Oil and Gas LLC states they
mistakenly believe that filing W3X
would resolve compliance issues. Staff opposes
the motion. Currently one well remains noncompliant
with Statewide rule 15. It's recommended
the motion be denied. The motion will be overruled
by Operation of Law on September 26. I'm available for questions.
Chair Christian: Any questions? I move we
approve the examiners recommendation. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second Commissioner Sitton.
All in favor, say aye. Any opposed? Motion
passes that items approved. Item 9.
Joe Menifee: Item number nine. Subsequent to filing its motion for rehearing,
Hydrogeo LLC has come into compliance with
Statewide Rule 15. Therefore, it's recommended
the motion be granted and the underlying docket
dismissed his moot. I'm available for questions.
Chair Christian: Any questions?
Commissioner Craddick: Good news.
Chair Christian: I move we approve the examiners recommendation. Is there a second?
Commissioner Craddick: Second.
Chair Christian: Second by Commissioner Craddick. All in favor say
aye. Any opposed? Motion passes. That item is approved. Item number 10.
Joe Menifee: Item number 10. Subsequent to following its motion for
rehearing White's Industrial Engines has come
into compliance. Therefore, it's recommended
the motion be granted and the underlying docket
dismissed as moot. I'm available for any questions.
Chair Christian: Any questions? I move
we approve the examiners recommendations. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second by Commissioner Sitton. All in favor say aye.
Any opposed? Motion passes. That item is approved. Items 11 through 64.
Let's move on to the Oil and Gas consent agenda. There 54 items on the agenda. I move
we approve items 11 through 64. Is there a second?
Commissioner Craddick: Second.
Chair Christian: Second by Commissioner Craddick all in favor, say
aye. Any opposed? Motion passes. Those items are approved. Items 65
through 90 on the, let's move to the Rule 15 Inactive
Well items. There're 20 items on the Rule 15
and active wells list. I move we approve out on 65 through 90 except for items 72
75, 76, and 80. Now, we have filed a person that,
if you need any questions on this before we
vote from Kinder Morgan, Bill Hynega!
I'm sorry. Hennega. Haynaga. I'll guess on that, okay?
I've butchered that good. Okay, that's somebody from
East Texas can't talk English. Okay. Any questions
of Bill? I can gGet that part. OK? If not, I
move we approve those items 65 through 90 except
for 72, 75, 76, and 80. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second by Commissioner Sitton. All in favor
say Aye. Any opposed. Motion passes. Those items are approved. Let's move to the Master
Default Orders. There's seven master default orders. I
move, we approve Items 91 through 97. Is there a second?
Commissioner Craddick: Second.
Chair Christian: Second by Commissioner Craddick. All in favor say aye. Any opposed?
Motion passes. Those items are approved. Move
the Agreed Enforcement Orders. There are 170
Agreed Enforcement Orders. I move we approve items 98 through 267. Is there a second?
Commissioner Sitton: Second.
Chair Christian: Second by Commissioner Sitton. All
in favor say aye. Any opposition? Motion passes, those
items are approved. That concludes the hearing section.
We will now take up our administrative agenda.
Wei Wang: Good morning, Chairman, Commissioners.
For the record. Wei Wang, executive director.
As state employees, we get to celebrate New Year's
wwice a year, so as we we start FY20, I thought
it's appropriate for me to provide you with
the progress update on what we achieved last
year and provide and give you a few highlights.
On the inspection front, glad to report
that we have met all of our inspection goals.
Whether it's performance measures or internal
goals, for some cases, and specifically for oil and
gas, the performance measure is 130,000 inspections
for the year. We have performed close 234,000
inspections. For pipeline safety, we had a
internal goal of 3000 standard comprehensive inspections. We completed 3108 inspections
and in addition to that, we also performed 1692 specialized inspections, which is a 70%
increase from the year before. Surface mining
completed 405 inspections exceeding our goal
off 400 inspections. And our AFS department performed 18,771 inspections, exceeding the
17,000 performance measures set by the Legislature.
We also made tremendous improvement on the
permit review turnaround time. After setting a record last year for three days for Drilling
Permit, we at a new record of two days in FY19. And our USC application review for
nonassessment review. We're able to bring that number down from over 100 days to under
45 days at year end. And when we started the year,
we had over 5000 AFS completion report.Today
we're looking at zero. It's pretty much the same day approval and review.
Another one that want to mention is our damage
prevention program. We have stepped up our
public overreach in this area. So for three years in a row, we have reduced the number
of damages per 1000 locations from close to
three to under 2.5 damages per 1000 locations.
And our IT departments also working very hard,
they were able to bring four forms online
as part of the Oil Field Relief Initiative.
We also rolled out RRC Oil seven months
ahead of schedule. At the end of the year, we met the legislative mandate
to roll out our case docket management system at the
end of the year. So also leading that target.
And as you already know, we exceeded the well
plugging number by a large margin. We finished
the year with 1724 wells, closing out the biennium him
with 3164 wells. And our site remediation program
also significantly exceeded their performance
measure of a 188 activities. They finished
a year with over 400 activities, more than
double the performance measure. So in summary,
our performance that's going up, our head count is
going up, we're gaining momentum, thanks to the
hard work off our employees, and your leadership
and vision. We had a really great year and
we're ready for FY20.
Chair Christian: Commend you, Wei, and all the people that work in this agency in
this Railroad Commission. Just recently returned
from the Interstate Oil and Gas Compact Commission.
Wei and some of the staff went, and I'm proud
to say, the Railroad Commission of Texas won
the Chairman's Stewardship Award for Energy
Education. Here it is proof. These were presented
again, and just very proud of us. And this award, of course, was from the
program that you all have introduced this year that allows our public to be able to
access information directly, anytime, night or day, 24 hours, on oil and gas and the
wells that are actually in production. So it's a real statement that you received
with all, just the 31 states that produce oil
and gas, you received the highest award this
year for that. So we commend you and are proud
of. I also want to recognize a local Texas
company, Apache, that also receive an award in
the large company category for its partnership
with Parks and Wildlife Federation in support of
Balmorhea Ray State Park Patty. Apache partnered
with the Parks and Wildlife Foundation to raise $2 million to support the repair and
restoration the iconic pool following its closure in early 2018 after years of erosion
from the flow of water from spring caused the structural collapse of the pool wall.
So it's nice to hear that a Texas company won
that award also. So very proud of our staff
and of the good folks in the industry here in
Texas. And we commend you for that. Any questions?
Commissioner Craddick: I was gonna say thank you. This
is the first time we've not only met but exceeded targets. I
think. We're definitely exceeding targets. It's
amazing what paying people a little bit more
and having some great staff. So thank y'all for
what you're doing and thank you for your leadership
and what's going on across the agency. We appreciate everybody.
Chair Christian: Thank you, Wei.
Wei Wang: Thank you, sir. I also have Paul
Deboisl with me today. Last month, Commissioners,
you asked us to look into our flaring permit, and Paul, our assistant director for Technical
Permitting, has conducted some research and
analysis, so he will provide you with an update.
Paul Debois: Morning, Chairman, Commissioners.
For the record, Paul Debois with the Oil and Gas
division. At the August 2nd conference, Chairman
Christian requested Commission staff determine
how many wells have received long term flaring
permits and are connected to gas pipelines
and are still flaring. Commissioner Sitton then asked staff to determine whether those
wells are connected to gas gathering systems and
processing plants and whether those systems
have available capacity. To begin to address
his questions, staff identified the flaring
permits and associated leases and wells that
met the following three criteria. First, the
authority to flare gas was granted for 180 days or longer, what I'll refer to as a long
term permit. Second, the producers Transportation
Authority and Certificate of Compliance Form P4
identifies a gas gatherer and purchaser, indicating the availability of a point of
transaction. And third, the lease operator reported production and flared gas in May
2019 which was the most complete production data set available to us. Staff determined
there were 234 flaring permits met these criteria.
There were 700 oil and gas leases associated
with those permits, and there were 3073 wells
on those associated leases. For context, these
3073 wells represent about 1% of the number of current producing oil and gas wells in
Texas. In May 2019, these 3073 wells produced
about 10.7 billion cubic feet of gas and flared
about 578 million cubic feet of gas, a flaring
rate of about 5.4% of the gas produced. The
state wide flaring rate for May 2019 was about
1.34%. So these 3073 wells flared about
5.5% of all gas flared statewide in May. Since
January 2014, the average monthly statewide
flaring rate has been around 1.24%, fluctuating
between about 0.82 point 2%. The question
about gathering systems of processing plants
and midstream capacity is more difficult to
answer because the Commission does not regulate
the daily capacity of those midstream system
components. However, the U. S Energy Information
Administration, EIA, maintains some
information that is helpful to understand gas processing plants. So first, we compared
the spatial distribution of the 3073 wells and gas plant location from EIA in the
year 2017. The geospatial analysis indicates that most of the 3073 wells are clustered
primarily in the Permian Basin and the Eagle
Ford Shale, and that the 373 wells associated
with long term flaring permits are noticeably
absent from traditionally gas dominant regions
such as the Panhandle, Barnett Shale, East
Texas and the Gulf Coast. Second, we compared
the EIA gas plant data and the Commission's
production data, which indicates that in the
Permian Basin, gas processing plant capacity increased about 30% between 2014 and 2017,
and the volume of gas flowing through the
plants during that time increased 40%. However,
from 2014 to 2017, gas production in the Permian
Basin increased 55%. Although the increases
in gas processing plant capacity and through
plant gas flow increased, those increases were
not as large as the increases in gas production.
According to the EIA , the number of gas producing
processing plants in the Permian Basin increased
from 61 in 2014 to 64 in 2017. That is, although
the capability to process gas increased, the
number of locations at which the processing
take place did not proportionately increase.
This suggests continued geographical constraints
on getting gas from the lease to the gas plant.
During this time, 2014 to 2017, more than 20,000
initial well completions were filed in the
Permian Basin, again, suggesting the need for
significant gathering system infrastructure
gains to connect the wells to markets. Finally,
scanning the production disposition data of
individual leases indicated wide variability
and gas production in disposition proportions over time. By disposition, I generally
mean whether the produce gases sold, flared or used on the lease for fuel or gas lift.
In some situations, sales disruptions were observed in which the gas was flared until
sales service was restored. In other situations,
varying proportions of gas were sold and flared
on a lease over time. Other factors are also likely involved. Staff's high level review
indicates both acute and chronic limitations to the gas gathering systems on
the lease level. I'm available for questions or to continue research on these issues as directed.
Chair Christian: Are there any questions? Commissioner Sitton?
Commissioner Sitton: Thank you. Paul, just want to, you went
through those numbers quick, and I made notes, so
forgive me if I didn't capture it all correctly.
The criteria you looked at in May were, if there was what you call a long term permit,
so a permit granted for longer than 180 days,
which goes beyond our administrative permit limit.
Paul Debois: That's correct.
Commissioner Sitton: And if they P4 identified as a gas gatherer, gas purchaser,
meaning that because we don't know if they're
connected, but we can assume they've identified
someone to take the gas. And then did they actually flare in May? So if they had some
flare capacity, they have a long term permit,
and they have identified a gas pressure. This
was the answer to the question. How many people
theoretically could have a way to get rid
to send their gas and might be flaring? And as you said, there's a lot of other things
that might be happening. But this was just a
way to get some numbers. Did I summarize correctly?
And so you get came up with 324 permits,
which covered 700 leases and 3000 wells and
across all of that, in the month of May, 578
million cubic feet of gas were flared, which
comes out to them doing about 18 or 19 million
cubic feet a day in the month of if I average
it out, just doing the math in my head here.
So that's and you said that constitutes
what percent? Did you did you say what that costitutes of the state's total flaring?
Paul Debois: the state wide flaring rate in May was,
May 2019, was about 1.34 of all gas produced statewide was flared
- Commissioner Sitton: 1.34? - Paul Debois: Percent.
Commissioner Sitton: But the total volume of that was?
Paul Debois: Flared statewide? I don't have number.
Commissioner Sitton: That's okay.
Paul Debois: These 3073 wells represent about 5.5% of that 1.34%.
Commissioner Sitton: Okay, I'm checking my own notes here because
I think, I want to say were flaring as a state, something like
between five and 600 million cubic feet a day.
This is across the entire state of Texas.
Paul Debois: I think that's about right.
Commissioner Sitton: So what I'm getting at here is 18
million out of somewhere between five and 600 million
cubic feet a day, in answer to Chairman Christian's
question is being flared, who on a long term
contract who have a gas purchaser identified.
So we're talking, you know, in the 3 to 4%
range of the state's flaring meets those criteria,
which I think is noteworthy. In other words,
a very small percentage have identified a gas purchaser and are on a long term flaring
permit. The other whatever would end up being 500 or million cubic feet a day
due to operational issues, new well, something
else that was not including that criteria.
That's noteworthy. Thank you for that.
Chair Christian: Any questions? Let me let me commend
you and thank you and your staff for the hard work that you did in this, and I would
apologize for the question, but I think it is
very important in this day and time, and I think
it's a positive comment on our industry in the state of Texas and across the nation.
And in point of personal privilege, I watched
as little as possible I could, of the CNN's
what I call the Chicken Little seven hour conference on the environment that they had,
and it just, I think, it behooves us to brag on
our industry and what good that our industry
and this department and regulating it has done.
Over 3000 wells out of 265,000 active wellsi n the
state have long term flaring permits that lasts
more than 180 days. That's 1.2% of wells.
In Fiscal Year 2019, you reported that the Commission issued only issued almost 7000
flaring permits, but only 234 of them were
long term. In May 2019, only 1.3% of gas well
of gas was flared of gas, okay, 1.3%.
Most of the flaring is in areas of new development
where infrastructure has not kept pace with production,
which is expected, and this is good news for
the state of Texas and for the nation. And again, I think it's important we recognize
that and be a contrast when there is good news to report that maybe our public is not
hearing. If we could be a part of getting the word out that our industry is doing a
fantastic job and if they want clean up the environment worldwide, the most efficient
best thing they could do is export Texas industries record and policies on cleaning
the environment because we've done it, proved
it. It's been there, and it's not guessing
whether it can. Our industry and our Commission,
I'm proud to say, have been on the right side
of the environmenttal issue. And I'm proud to brag about that to the citizens
and to our industry. So thank you for the work you did. I think it's important.
Commissioner Sitton: I really love the analysis on the
location of the gas plants too, Paul. It's cool. Thank you.
Chair Christian: Item 269 is our Office of General Counsel item.
Alex Schott: Good morning, Chairman Commissioners. For the
record, my name is Alex Schott, General Counsel for the Railroad
Commission of Texas. We don't have anything
new to report for item 269. I'm also covering
item 270. I'd like to report that staff respectfully
requests that Commissioners pass this item
to a future conference. Nothing further.
Chair Christian: Okay, We pass that on to the next conference.
Any objections? Then it's passed on. Item 271 is our public participation item. No one
has turned in any cards indicating they wish
to speak on any non posted items. Item 272 is our
executive session item. Having convened in a duly noticed open meeting, the Railroad
Commission of Texas will now at, what time is it,
10:20 AM, current time, on Wednesday, September
the 11, 2019, hold a closed meeting in the Kathy Way Conference room on the 12th
floor of the William B Travis State Office Building, pursuant to Texas Government Code,
Chapter 551, the Commission will discuss personnel
matters related to the position of Executive
Director, pursuant to Section 551.74 of the Code.
The Commission will reconvene the open meeting
in the Kathy Way Conference Room.