Texas regulator closes gas-winterization loophole

HOUSTON (Bloomberg) --Texas’s top oil and gas regulator voted Tuesday to more clearly define who’ll be at the top of the list to keep receiving electricity during severe winter weather, closing an earlier draft loophole that critics said would’ve let any operator pay just $150 to opt-out of expensive upgrades.

The Texas Railroad Commission, which regulates the oil and gas industry with what critics often contend is a light touch, unanimously voted to adopt rules breaking the state’s 131,000 leases that produce 28.7 billion cubic feet of natural gas per day into three categories. The strictest designation—dubbed “supercritical”—means that facility won’t be allowed to opt out of coming winterization requirements. That label is expected to apply to an assortment of pipelines, processing plants, storage terminals and more than 19,000 leases that produce more than 23 billion cubic feet of natural gas per day, Commissioner Jim Wright said.

That “represents more than the amount of gas that we need in Texas on any given day to send to people’s homes and for power generation,” Wright said during the commission hearing.

A second designation includes tens of thousands of leases with older “marginal wells” that collectively produce 1% of the state’s natural gas supply; they will be exempt from the winter infrastructure rules. The third group falls somewhere between “supercritical” and “marginal.” Operators in that group seeking to opt out of the winter rules will have to pay the $150 application fee and also provide evidence of why they need to be exempt, according to the rules adopted Tuesday.

The rulemaking clears up an earlier confusion in draft text that suggested any gas operator could pay the fee to opt out of winterization rules. That apparent loophole had both elected officials and citizen groups up in arms, especially after efforts during the legislative session to beef up storm-preparation following a freak February storm that claimed more than 200 lives and left millions without electricity for days. 

“There is nobody, I think, in the legislature, the administration, at any commission, ERCOT, PUC and the Railroad Commission of Texas, that has anything but desire to fix every problem possible and make sure this does not happen to the extent it did again,” Railroad Commission Chairman Wayne Christian said.

Separately, the Public Utility Commission of Texas adopted a rule that requires critical natural gas facilities to provide information to a utility from which it receives electric service in order for power providers to prioritize service to those gas providers during an emergency.

Still, despite the changes adopted Tuesday, there’s lingering fear heading into the winter season.

“We’re glad the staff and commission listened to reason and reduced the number of companies allowed to opt out of doing their part to protect our grid. However, I worry this rule gives too many gas companies a free pass to avoid requirements,” Luke Metzger, executive director for Environment Texas, said in an emailed statement.

Now that the categorization rules has been established, a mapping process to decide which of the state’s hundreds of thousands of wells, half a million miles of pipeline and thousands of facilities fit into which of the three categories will start—a process that regulators have to complete by September 2022. And only then will actual winterization rules for those facilities be developed, a process that itself can take up to six months. That means this winter, and possibly next, still won’t have any winterization requirements in place for the gas sector, even for those “supercritical” sites.

“I think they put a lot more thought into the final rule than the draft,” Virginia Palacios, executive director of the watchdog group Commission Shift, said in a phone interview. “But we’re still in trouble this winter.”