New Texas oil regulator steps down from oil firm

AUSTIN – Fulfilling a promise he was pressed to make on the campaign trail, the state’s new oil industry regulator announced plans on Tuesday to step down from the leadership of his own oil company.

The regulator, Ryan Sitton, will be sworn in next week to join the three-member board of the Texas Railroad Commission. Though he did not specify a date, he said he will resign as chief executive of the company, Pinnacle Asset Integrity Services, placing his ownership stake in a blind trust.

“These steps will make sure that the citizens of the State of Texas are confident as I go to work for them,” Sitton said in a written statement. “My time, energy, and passion will be focused on utilizing my energy experience to help the Railroad Commission be as efficient and effective as it can be, and in turn, make all Texans confident in how our state’s energy industry is operating.”

An engineer by training at Texas A&M University, Sitton founded Pinnacle in Pearland in 2006. The company, which later moved to Pasadena, provides consulting services to oil producers and refineries, including advice on dealing with regulators and preparing for inspections.

As a member of the state commission, his responsibilities will include setting statewide rules for petroleum exploration and production. The commissioners meet every month or so to make the final decision on disputed drilling permits, inspections and complaints.

In his election campaign — financed with about $1 million in loans and $345,000 in contributions, mostly from energy companies – Sitton portrayed his industry experience as a qualification. For publicity photos, he posed in the coveralls and helmet of a roughneck. He emerged from a crowded Republican primary field to face a runoff against Wayne Christian, a former state representative best known for his association with the social conservative group Eagle Forum.

Under sustained criticism from Christian, who portrayed Sitton’s industry position as a source of potential conflicts of interest, Sitton initially refused to divulge a client list or distance himself financially from Pinnacle. A group affiliated with the Tea Party movement, Grassroots America We the People PAC, turned up the pressure in a written statement, saying “the public’s interest must now take priority over his company’s interest and the private interests of his clients. If he doesn’t understand that, he’s not ready for public office in Texas.”

In April, Sitton agreed in principle to set up a blind trust for his assets in the company. He did so begrudgingly, accusing Christian of gamesmanship and arguing that his company does no business before the commission. He won the runoff, and then coasted to election victory on an overwhelmingly dominant Republican ticket.

His fellow state commissioners, Christi Craddick and David Porter, also finance their election campaigns with contributions from the petroleum industry. Craddick, a lawyer, and Porter, an accountant, each built their practices on extensive work for oil companies before taking state office.

Sitton faces a more fraught decision. Pinnacle employs 350 people. He will step away from management and into his role as a regulator at a troubled time for the industry. Crude oil prices have fallen to the lowest levels in five years, prompting companies across the state to idle rigs and lay off workers. His spokesman, Jared Craighead, he still will not disclose the client list for Pinnacle because “that became unnecessary once the blind trust was announced.”

For all its currency as a campaign issue, though, the maneuver seemed unlikely to satisfy anyone concerned about conflicts of interest on the Railroad Commission.

“He is of the industry, that’s his livelihood,” Craig McDonald, director of Texans for Public Justice, a nonprofit organization that monitors government ethics. “I don’t think this gets him a free pass. You could still make the case that he’s aligned with the industry, whether his assets are in a blind trust or in his pocket.”

Elected officials, including members of Congress, commonly use blind trusts as a way to avoid selling off assets in a self-defeating rush while still precluding the appearance of conflicts of interest. Under pressure five years ago from an investigation by the Associated Press, Lt. Gov. David Dewhurst put some of his wealth in a blind trust, naming his brother as a trustee.  Mitt Romney pledged to use a trust if he were elected president. Michael Bloomberg, the billionaire former mayor of New York, stepped away from daily leadership of his namesake financial information firm, but kept control of certain investment decisions.

“It’s obviously not a perfect solution, but it’s the most common solution,” said Robert Prentice, a corporate and regulatory law expert at the University of Texas. “If you’ve got a bunch of ABC company shares and you put them in a blind trust, you’re probably still going to have a bunch of ABC company shares six months later.”