Written by John McFarland of the Oil and Gas Lawyer Blog.
The third issue identified by the Sunset Commission in its draft report on review of Texas Railroad Commission operations was the RRC’s monitoring and enforcement of its regulations. As in previous Sunset reports on the RRC, the Sunset Commission criticized the Commission’s enforcement practices and policies.
RRC field inspections and enforcement are the areas where landowners most often come into contact with RRC operations. The RRC is responsible for enforcing rules related to oil and gas spills and contamination, including contamination of groundwater.
- The RRC employs 151 oil and gas field inspectors. In FY 2015, the RRC reported that those inspectors conducted 134,484 inspections and cited 61,189 violations. When it finds a rule violation, the RRC can fine the operator, and it can issue a “severance order,” requiring suspension of oil and gas production until the violation is remedied. In FY 2015, the RRC assessed 1,878 administrative penalties and issued 7,936 severance orders.
- In the course of Sunset Commission staff review, it came to light that the RRC’s counts of violations are not accurate. The RRC revealed to Sunset staff that its reported 61,189 reported violations “originate from 15,056 unique violations. In other words, field inspectors cited 15,056 oil and gas violations and then checked up on those violations 46,133 times.” Also, these reported violations do not include approximately 25,000 additional oil and gas violations cited by the Austin oil and gas division permitting and administrative compliance staff.
- The RRC’s enforcement policy is what it refers to as “voluntary compliance.” When a violation is found, the RRC notifies the operator, and if the violation is remedied, no fine or severance order is assessed.
- The Sunset report concludes that the RRC does not have an accurate count of major violations of its rules, and has no accurate measure of how many violations are referred for legal enforcement action.
From the draft Sunset report:
- This lack of data is concerning because certain violations pose such a thread to public safety or the environment that requiring operators to come into compliance alone is not enough. While the Railroad Commission places a strong emphasis on bringing operators into compliance with regulations, this emphasis does not always incentivize operators to comply with regulations in the first place because operators have a reasonable expectation they will likely not be penalized. Obviously, taking corrective action to come into compliance is a good thing. However, when this approach is seen to define an agency’s enforcement process, it can have the unintended effect that operators will simply wait to be told to comply with regulations. The limited reach of the commission’s field staff only makes this situation worse.
- In the 2011 Sunset review, staff found that the commission referred just 4 percent of total violations for legal enforcement. As discussed previously, this conclusion was based on inaccurate data provided by the Railroad Commission that included re-inspections of violations. However, when Sunset staff requested the same data for fiscal year 2015 to see how the percent of violations referred to enforcement had changed since the last review, a direct comparison indicates that violations referred for legal enforcement action decreased from 4 percent in 2010 to 2 percent in 2015. Since the total number of violations included re-inspections in both years, the year-to-year comparison remains valid.
The Sunset report also concludes that:
- the RRC does not accurately track repeat violations and so “cannot be certain that operators are not committing repeat violations, only to come into compliance before the Railroad Commission assesses an administrative penalty.”
- “the Railroad Commission’s enforcement actions failed to deter operators from repeatedly violating regulations that could result in groundwater contamination.” Sunset staff’s review of RRC records found that, “over the past five fiscal years, 114 operators were repeatedly among the top 100 pollution rule violators in the state. These 114 operators accounted for 3 percent of the wells in Texas but 22 percent of the pollution rule violations from 2011 to 2015.”
- lease severance orders may not be effective as a deterrent to violations because “many operators violate the lease severance order.” “In fiscal year 2015 the Railroad Commission severed 7,936 leases and caught at least 1,552 leases that continued to produce oil or gas under the severance.” Although the RRC receives production reports from operators and reports from companies that pick up and transport oil from leases, the RRC does not cross-check these reports and so does not detect violations of severance orders.
- follow-up inspections waste inspectors’ valuable time. “After issuing the initial citation, inspectors follow up on each violation an average of three more times to bring the violation into compliance.”
- citations for violations have little deterrent effect. “For example, each year inspectors cite more than 14,000 instances where operators did not have signs properly posted — signs indicating to the public, first responders, local government agencies, and the Railroad Commission the name of the operator and therefore whom to contact in case of an emergency or complaint. If the Railroad Commission incentivized compliance with this and other minor violations in the first place, inspectors could spend more of their limited time on additional well sites or overseeing high-risk activities.”
Sunset’s draft recommendations:
- Require RRC to develop a strategic plan for the oil and gas division that tracks and measures the effectiveness of monitoring and enforcement.
- Direct RRC to accurately track and report violations annually.
- Direct RRC to systematically track major violations.
- Direct RRC to develop a definition of repeat violations in rule and report the number of repeat violations on its website.
- Require RRC to develop in rule a process for issuing expedited penalties for minor violations.
- Direct RRC to audit a sample of production reports and transportation reports to ensure compliance with severance orders.
- Direct RRC to require operators to file production reports electronically, to ensure greater accuracy and allow staff to use their time more strategically.
The Sunset report does not address one aspect of the RRC’s operations that is important to landowners. In my experience, when a landowner makes a complaint against an operator, the RRC does not routinely keep the landowner informed of the status of the complaint. Repeated requests have to be made to the RRC district office to get information about inspection reports and follow-up inspections. Last year, the Colorado Oil and Gas Conservation Commission took a big step to make the complaint process more transparent by allowing landowners to file and follow the status of their complaints online. Go to http://cogcc.state.co.us/complaints.html#/complaints to see how this works. Wouldn’t it be great if the RRC did the same? In 2011, after that year’s Sunset report on the RRC made similar criticisms of its “voluntary compliance” policy, John Tintera, then executive director of the RRC, agreed that the agency should be more transparent. He said that the RRC was planning to post information on its website that would allow the public to track violations all the way through to enforcement, and that the system should be up and running in a year or two. Tintera is now executive director of the Texas Alliance of Energy Producers, which describes itself as “the largest state independent oil and gas association in the nation,” representing more than 3,350 members. Meanwhile, there is still no online tracking system for complaints at the RRC.