Funding for the Railroad Commission is not sufficient for the agency to do its job regulating the state’s oil and gas industry and protecting public health and safety, the commission’s chairwoman told a legislative committee Thursday.
The commission was forced cut more than $1 million from its budget every month last year, leading to staff reductions and the inability to perform crucial tasks, such as well inspections and plugging abandoned wells, Railroad Commission Chair Christi Craddick testified before the state Senate Finance Committee. Craddick and the commission are seeking an additional $45 million over the next two years to hire more staff, update outdated technology, whittle a backlog of tens of thousands of uninspected wells, and plug thousands of abandoned wells.
“My fellow commissioners and I urge that the agency must be funded at the level necessary to carry out its mission,” Craddick said.
In her remarks before the 15 member committee, Craddick painted a bleak picture of the agency’s finances The commission’s full-time staff of 690 has 130 unfilled openings; in the past few years, the agency has lost up to 20 percent of its staff to better paying jobs.
The Railroad Commission is funded by the fees it charges oil and gas companies. But those fees did not generate enough revenue to keep the agency fully funded throughout the two-year budget period, which ends August 31. The commission has had to cut an average of $1.3 million a month to balance its books. And the commission does not expect the situation to get better as oil prices hover above $50 a barrel. Oil settled at $53 a barrel in New York Thursday.
“This approach is not sustainable for the long term welfare for the agency,” said Craddick.
Senators said they understood the commission’s plight, but they offered no hope of alleviating it as they work to cut more than $1 billion to balance the state’s budget for the next biennium. The Finance Committee has proposed cutting the Railroad Commission’ $85 million biennial budget by more than $13 million or roughly 15 percent.
“We don’t have a lot of money,” Sen. Paul Bettencourt, R-Houston, told Craddick.
Since the fall, Craddick has met with every senator on the committee to plead her case. Craddick told the Finance Committee that the agency’s main funding system — industry fees — needs an update. Permit fees are based in the number of wells that companies operate, but today, technologies such as horizontal drilling mean companies can produce that same amount of oil from one well that they used to get from four. That means companies need fewer permits, which in turn means less in fees.
Changing how the commission collects fees would require legislative action, and some senators said the time may have come to revisit how the agency is funded.
Sen. Robert Nichols, R-Jacksonville, said the funding mechanism was based on the assumption that the oil and gas industry would only grow and oil prices continue to rise. But lawmakers should have considered the prices swings and ups and downs of the cyclical energy industry, Nichols said.
Sen. Kelly Hancock, R-North Richland Hills, suggested that lawmakers look at changing the commission’s funding model, but said that undertaking would likely have to wait another couple of years.
“I don’t think that we can do it this session,” he said.