Regulation keeps pace with advancing technology

Established in 1891, the Railroad Commission (RRC) of Texas is the oldest regulatory agency in the state and one of the oldest of its kind in the US. As the primary regulatory board for oil and gas operations in the state, the RRC has experienced the rapid expansion of technology in unconventional developments throughout Texas.

Texas is the top oil- and natural gas-producing state in the US, representing about 40% of the oil production and almost 30% of natural gas produced in the US. Part of this experience puts Texas as a leader in energy policy and technology. With the rapid growth of unconventional technology, the RRC has kept stride with the new advances in oil and gas extraction.

"It's been a tremendous shift from basically a vertical drilling paradigm to a horizontal paradigm," said RRC commissioner David J. Porter. "The adoption of multistage fracturing was a major step forward in new technology." Elected to serve a 6-year term in November 2010, Porter is one of three Commissioners that currently head the RRC. In addition to permitting new drilling, the agency functions as one of the primary regulators for one of Texas' biggest industries.

Shortly after joining the RRC, Commissioner Porter headed up the Eagle Ford Task Force, which brought together industry, environmental groups, landowners, and local governments to understand the underlying concerns and benefits of the activity in South Texas.

The Eagle Ford Task Force was launched in 2011, and the report was published in March 2013. Covering 24 counties, the report identified economic benefits, environmental concerns, and a host of socioeconomic metrics surrounding increased oil and gas activity in South Texas. "Bringing stakeholders together was an important part of the process," Porter said. While Porter understands that there are no immediate solutions to increased road traffic and other growing pains associated with unconventional development, the conversations around those subjects are extremely valuable. "Bringing everyone to the table helped many individuals realize they weren't as far apart on certain ideas as they previously may have thought," Porter said.

The task force brought together both industry executives and officials from community and county governments. "Many of the participants discovered that small changes in some processes can alleviate bigger problems down the road," Porter said. "Sometimes it is just a matter of understanding what the issues are." While the task force was a starting point for some, Porter said the group is now being looked to as a template for how to handle rapidly developing oil and gas plays. Planning has become an essential role for communities expecting increased oil and gas activity. "Not every community will have a 5- or 10-year plan, but even a few months leeway can benefit local planning," Porter said.

With much of the activity in the Eagle Ford already under way prior to the task force involvement, some of the information gained serve as lessons learned. However, companies are relating this experience in other frontier shale plays and local communities in South Texas have laid groundwork to stay in touch with the industry as is fluctuates. "Our work on the Eagle Ford Task Force has provided many with a blueprint to understand how future developments will impact different communities when you have a substantial increase in oil and gas production," Porter said.

A number of individuals who took part in the task force also gained firsthand knowledge on the commission's role as a regulatory body. "One of our biggest functions at the RRC is to remain responsive and flexible in looking at how technology advances to ensure we are properly regulating this industry in Texas," Porter said.

With the dramatic changes in technology within the past 2 years, agencies such as the RRC have been challenged with responding to these in a regulatory framework. "I think the commission has done an excellent job of keeping up with technology and making the necessary changes to allow for continued increases in production from plays like the Eagle Ford," Porter said.

In 2011, the commission led the way in transparency by formally adopting a Chemical Disclosure Rule, which was one of the first of its kind in the US. The rule also was comprehensive and established a system for operators to report the type and amount of fluids used in hydraulic fracturing on a national public website.

Last May, the commission amended Statewide Rule 13 governing well construction requirements. The year-long effort was carried out jointly with industry stakeholders, landowners, and environmental groups. The rule, which was amended to reflect best practices already employed by operators in the state, was updated to clearly outline requirements for all wells and consolidated requirements for well control and blowout preventers. It also included updated requirements for drilling, casing, cementing, and fracture stimulation with specific regard to groundwater protection. "With Rule 13, we provided a real codification of best practices based on what the industry is doing," Porter said. The nature of compromise eliminates 100% support from all sides, but Porter said the rule has been well accepted both from the industry and from the environmental side, including groups such as the Environmental Defense Fund and the Sierra Club.

With the long tradition of the RRC, some efficiencies have been lost. Now in the digital age, the traditional computing system the commission uses for general reporting has become outdated. As a result, a recent bill has appropriated $24.7 million to update the commission's IT system. "It is going to make our personnel much more efficient," Porter said. "We're a year out from really seeing improvements in our day-to-day operations with an updated IT system." However, Porter sees potential in improving the RRC's process.

The following list consists of current updates the Texas RRC is conducting on its IT infrastructure:

• Revising outdated manual processes to obtain process efficiency.
• Developing integrated web-based applications that enable filing or exchange data.
• Integrating additional online filings with revenue or fee collection.
• Commission website redesign based on stakeholder input.
• Consolidating the compliant, inspection, violation, enforcement, and docket tracking processes and systems.
• Developing integrated web-based applications that enhance internal business (permitting) efficiency.
• Providing commission stakeholders (i.e., industry, public, interest groups) efficient access to timely and accurate data.
• Minimizing dependence on mainframe systems.
• Developing applications that can take advantage of mobile technologies in the future.

The Texas RRC continues to serve as an example for other states that are dealing with increased oil and gas development. "It's a matter of scope," Porter said. "We've been working with oil and gas production much longer than most states." In Texas, the commission permits on average 25,000 wells per year. "With this level of intensity, we in effect become the industry leader as we tend to deal with more activity sooner," Porter said. "We also have to develop policies at the same pace," he added. From a regulatory scope, Porter says the commission has set much of the groundwork for other states in the US. "They pay attention to what we do," he said.

However, one of the key features inherent to the RRC that is not attributed to other similar organizations resides in the fact that the commissioners who govern the RRC are elected officials. "In Texas, citizens can apply their own input into oil and gas policy through the voting process," Porter said. With that element in mind, Porter describes the commission as having a dual focus. "Unlike so many state agencies that have one task, the RRC has a mission to protect the health and safety of the people of Texas, but it also has to ensure and strengthen the economic future of the state of Texas," he said.

According to Porter, balancing economic and policy decisions sometimes requires hard tradeoffs. "If you have an agency that is looking at both sides of the equation, it is much more successful in fully understanding those tradeoffs," Porter said.

Looking at environmental protection or energy production from a single viewpoint can skew a final decision. "If you're not looking at these issues from both angles, the proper judgment required to make these policy decisions does not always enter into the process."