Report: Enforcement of Texas Oil and Gas Laws Is Kind of a Joke

Categories: Biz

there will be blood.jpg
I drink your milkshake, Railroad Commission be damned!
Anybody who is at all familiar with the Texas Railroad Commission won't be surprised to learn that the almighty oil and gas regulator isn't exactly aggressive in its enforcement of the rules. The highly political commission's contradictory charges are to promote oil and gas development while holding the developers accountable. You can guess which charge usually wins out.

Earthworks, the nonprofit oil-and-gas accountability outfit, helpfully quantified the commission's lackadaisical approach to enforcement in a recent report.

It's helpful to understand the scale of oil and gas development in Texas. Between 1993 and 2011, the number of active wells increased by 24,000. Meanwhile, the number of inspectors decreased by 20. That means each inspector is responsible for inspecting, give or take, 2,700. That is, of course, not physically possible. Earthworks estimates some 300,000 oil and gas facilities weren't inspected in 2011.

And when they do make it out to a well, inspectors find more violations. In places like Pennsylvania and Ohio, home of the Marcellus and Utica shales, inspectors find about 0.1 or 0.2 violations per inspection. In Texas it's 0.6. In Pennsylvania, they take one enforcement action for every three violations. When Texas inspectors found violations, about 2 percent were referred to the enforcement section in 2012. In 2010, only 1 out of every 160 violations was referred for enforcement.

Not that the commission's penalties have that much bite. They were set in 1983 and have not been adjusted for inflation. They are so laughably low that it often makes economic sense to break the rules.

Earthworks isn't exactly hanging out on some radical limb. The Sunset Advisory Commission has said much the same thing -- that the Railroad Commission is not fulfilling its role in deterring illegal activity. In that regard, they could stand to do a little less coddling and a little more Al Armendariz-style crucifying.

Thing is, there are some easy fixes if only the state would fund the commission at the level it needs to oversee the largest mineral plays in America. For starters, Texas could hire more inspectors. And while we're at it, the state could codify criteria for enforcement actions instead of leaving it up to inspectors to interpret. Raise the penalty amounts, so that violators don't snort through their noses at the prospect of shelling out a few thousand bucks as their wells draw many barrels and cubic feet of valuable commodities worth many times that.

None of this would slow development in the slightest. But oil and gas are the brightest of bright spots in the Texas economy right now. If the state didn't step up before, it won't now.

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