From the Midland Reporter-Telegram
As oil and natural gas prices stabilize at levels higher than early in the year and more drilling rigs have gone back to work, Texas is very well-positioned to benefit from a stronger oil and gas industry.
That was the key message Railroad Commissioner Christi Craddick offered as she opened the West Texas Geological Society’s annual fall symposium Wednesday at the Horseshoe Arena.
The Midland native said there is cause for long-term optimism. She acknowledged, however, that in the short term there are concerns. Those concerns include commodity prices that have retreated in recent weeks and production levels that continue to flow into an already oversupplied market.
“I think it will be a bumpy recovery,” she said. “I think it will be a slow recovery.”
Helping pave the road to long-term success are the technological advances that companies have developed to improve efficiency and proficiency in producing oil and gas. She expects these improvements to continue even after commodity prices begin to rise.
Also helping pave that road will be the rest of the world, Craddick said. She cites the renewed ability of U.S. oil companies to export their crude anywhere in the world and the growing infrastructure to export liquefied natural gas. Craddick said that the terminals required to prepare natural gas for export — two now open in Texas, two under construction and at least six proposed — bring in billions in investment and create jobs.
Mexico will also help by serving as an increasingly important development partner, she said. Craddick told the audience she and fellow commissioners Ryan Sitton and David Porter, along with other association staff, recently spent several hours with Mexican regulators.
“They see what’s happening on this side of the border” and want to replicate that in developing their resources, she said.
“Our neighbors in Mexico are good partners that we need to cultivate,” she said.
The industry is facing challenges as it heads toward a return to growth; among the challenges is the labor force. Coming out of the Great Recession, the oil and gas industry was the only one to create jobs, and it created millions, she said. But the industry must replace the skilled workers lost as companies shed jobs during the downturn. Finding good, quality people will be a challenge and will be critical as the industry ramps up in recovery, she said. That applies to the commission as well, she said.
The most critical challenge will be regulatory burdens, particularly on the federal level, Craddick said. She cited Environmental Protection Agency’s new rules pertaining to carbon dioxide and methane emissions as an example that could essentially shut down the industry.
“We comment every time we get a chance to comment” on proposed rules, she said.
Craddick addressed several issues confronting the Railroad Commission, among them the number of abandoned wells that have to be plugged. She said that 97 percent of the state’s wells are plugged by the industry, so in reality “we have a very small portfolio” of wells to be plugged. Companies contribute to an abandoned well fund through the fees they pay the commission, and Craddick said that eliminates the need to enact a bond program or tax.
She told the audience that she opposes changing the agency’s name, in part because she thinks the $435,000 it would cost can be better spent elsewhere. She also expressed concern that a new name would eliminate the authority the commission is given by federal agencies to oversee oil and gas operations within the state.
Craddick recently launched an initiative to review and update the commission’s regulations in order to ensure the industry isn’t overburdened during the downturn. But she said that the review is also important to ensure the commission and its staff are also more efficient and effective.
“In fact, the staff just brought in another form change,” she said. “I think this is what we ought to be doing; we need to be efficient, too.”
With disposal wells being increasingly cited as the cause of earthquake activity, the commission hired a staff seismologist and updated some regulations to require companies seeking disposal well permits to research and provide information on earthquake activity around the proposed site.
The state has also increased the number of seismometers deployed around the state and acquired 30 portable seismometers that can be sent to areas experiencing a sudden upswing in activity.
“It’s a long-term project. We’re getting data and, based on that science, will make adjustments,” Craddick said. “We don’t know what we don’t know. But what’s important as regulators today is to look at the science and the facts before we rush to judgment.”
