June 2021 Energy News

Energy News JUNE 2021

From the Field Photo P & A / Culberson County Photo by Kathryn Ward

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FY 2022 Oil and Gas Monitoring and Enforcement Plan Approved by RRC Commissioners

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RRC Working to Implement Rate-Relief Legislation for Customers of State’s Natural Gas Utilities

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ERCOT Accepting Applications for Critical Load Serving Electric Generation and Cogeneration

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A Vision for the Future: Repurposing a Mine to Benefit East Texas City

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Transforming the Land: RRC’s Extensive Requirements for Mine Reclamation

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RRC Updates Alternative Fuels Class and Exam Cancellation Policy

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RRC Pipeline ID Numbers to Increase to Eight Characters

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RRC to Host Free Regulatory Webinars on Oil and Gas and Pipeline Safety

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Commissioners’ Corner

Upcoming Events RRC Regulatory Webinars

July 20, 2021

RRC Open Meeting

August 3, 2021

V I E W M O R E R RC E V E N T S4

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Online

V I E W O P E N M E E T I N G W E B CA S T S4

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FY 2022 Oil and Gas Monitoring and Enforcement Plan Approved by RRC Commissioners Plan Will Take Effect on Sept. 1 On June 22, RRC’s commissioners approved the agency’s Fiscal Year 2022 Oil and Gas Monitoring and Enforcement Plan, effective as of Sept. 1. The plan outlines the R ailroad Commission’s strategic priorities in its oversight of the oil and gas industry.

The industry is critical for powering the Texas economy and also necessary in many of the everyday products we depend upon: from clothes, medicines, computers and more. Through its stable regulation of oil and gas production, the RRC ensures these resources will be available for generations to come.

The plan provides an overview of regulatory procedures and a current snapshot of the agency’s progress.

For example, in April of this year, four months ahead of schedule, the RRC exceeded its FY 2021 legislative performance target for the number of completed oil and gas well and facility inspections. By mid-June, 236,466 such inspections had been conducted. The RRC had also exceeded the five-year well inspection frequency goal for the fiscal year. It did so in January, seven months ahead of the end of the fiscal year.

“RRC’s oil and gas staff deserves praise for their exemplary performance and hard work, despite recent challenges,” said Wei Wang, RRC Executive Director. “However, we always strive for even bigger successes, and the Oil and Gas Monitoring and Enforcement Plan provides a pathway for us to do just that.”

Among the goals for the agency are the continued upgrade and modernization of its computing systems away from a legacy mainframe to cloud-based software that utilizes tools to improve reporting and efficiencies.

For systems that have already been developed, the agency is refining and expanding capabilities. For instance, inspectors utilize a system called Inspection, Compliance, and Enforcement (ICE). Additional information will be added for certain types of inspections, such as well plugging and mechanical integrity tests. Also, an H2S indicator and GPS location will be integrated, alerting inspectors to potential hazards.

The agency will continue to leverage the virtual space to provide expanded educational opportunities to its regulated community, it intends to provide in-person training in FY 2022, including its annual regulatory conference in Austin, regulatory forums around the state, and presentations at industry events.

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RRC Working to Implement Rate-Relief Legislation for Customers of State’s Natural Gas Utilities With customers of the state’s gas utilities potentially facing high bills resulting from Winter Storm Uri, the Texas Legislature took action to provide relief during their recent session.

On June 16, Governor Greg Abbott signed House Bill 1520, which directs the RRC and the Texas Public Finance Authority to work together to issue customer rate-relief bonds, the proceeds of which gas utilities would use to pay for the extraordinary cost of natural gas due to high demand during February’s winter storm.

The bonds would provide rate relief to customers by allowing gas utilities to recover the extraordinary cost of gas through customer bills over a longer time period, rather than potentially through a single billing statement. The bill provides financial relief to gas utilities that choose to apply for the bonds by providing for a low-cost source of financing to fulfill outstanding obligations to natural gas suppliers.

A gas utility that chooses to participate in the process would submit information and documentation to the RRC regarding its extraordinary costs to procure natural gas during Winter Storm Uri. The agency would review the application and, if the agency determines that issuing bonds is cost-effective, direct the Texas Public Finance Authority to issue bonds. The RRC sent gas utilities a Notice to Operators providing further information related to the bill.

“Throughout my time at the Railroad Commission of Texas and especially in the aftermath of Winter ENERGY NEWS

Storm Uri, consumer protection has been a priority,” said Chairman Christi Craddick. “I am grateful to the Legislature for passing this important bill and look forward to working with my colleagues and agency staff to ensure that we prevent any undue burden on natural gas customers who might have experienced extraordinarily high gas bills otherwise.”

“High demand for energy during the storm caused gas prices to rise and utilities incurred extraordinary gas costs to procure the supply needed to maintain service,” said Commissioner Wayne Christian. “HB 1520 allows for the high cost of gas from the storm to be securitized, utilizing the creditworthiness of our state to lower interest rates. This will ensure our constituents do not receive large, unexpected bills from their natural gas utility provider in the wake of Winter Storm Uri.” “I commend the members of the Texas Legislature for getting this across the goal line,” said Commissioner Jim Wright. “Winter Storm Uri was an unprecedented event, and Texans should not have to shoulder the cost alone. Securitization will allow gas utilities to remain afloat while lessening the burden on their customers.”

House Bill 1520 was authored by Representative Chris Paddie and sponsored by Senator Kelly Hancock.

Gas supply was uninterrupted for a vast majority of Texas residents during Winter Storm Uri: 99.5 percent of customers connected to natural gas maintained service during the storm.

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ERCOT Accepting Applications for Critical Load Serving Electric Generation and Cogeneration As RRC continues to implement legislation passed by the 87th Texas Legislature, the agency anticipates issuing additional guidance regarding critical designations for oil and gas operators later this year.

RRC has been informed by ERCOT that applications for critical load serving electric generation and cogeneration are currently being accepted. RRC requests that oil and gas operators under the agency’s jurisdiction review the form and apply for critical load designation as appropriate.

RRC does not have jurisdiction over electricity generation. Questions related to this application form or critical load designation should be directed to your electric utility provider. The application is available on the ERCOT website.

VIEW THE APPLICATION ON THE ERCOT WEBSITE

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A Vision for the Future: Repurposing a Mine to Benefit East Texas City Former surface coal mines are taking on all sorts of new lives.

Many are turned into farmland and natural areas that support wildlife.

In November 2019, Luminant’s 4,857-arcre Monticello Thermo Mine, which supplied lignite coal for electric generation from the late 1970s until its closure in 2016, was given to the city of Sulphur Springs, which is in Northeast Texas.

Once Luminant is finished with the reclamation process, the city will be in the clear to create public spaces – including jogging paths, a community pond, and an amphitheater – and industrial zones to help with its economy.

“There is still a lot to be done out there before its final approval,” said Brent Elliott, Ph.D., Director of the Railroad Commission’s Surface Mining and Reclamation. “Luminant is working hard to make these things a reality to provide a resource for the community in the future.”

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Before a vision for a property can become a reality, the RRC ensures that any reclamation work done at former surface coal mines is held to the highest standards and is protective of public safety and the environment before being released from its oversight.

RRC staff is currently conducting a technical analysis of Luminant’s revised reclamation plans, which take into account the city’s intended uses for the property. Each phase of the reclamation work will be closely monitored and evaluated by RRC inspectors, and before any property is released, extensive soil testing must come back verifying its ability to support vegetation.

The city of Sulphur Springs annexed the Monticello Thermo land, valued at $8.89 million, into its city limits in March 2020.

Photo courtesy of Michael Gay

Photo courtesy of Robert MacNabb The city, through its economic development corporation, plans to take advantage of some existing infrastructure from the former mine for heavy industrial use, including two 7,000foot railroad spurs on the property, to help attract major employers, according to city documents.

A variance from the original reclamation plans is to retain at least some of what has been dubbed Mount Thermo, a 140-foot-tall mound of discarded overburden from the mining process. The city would like part of the mound to become an amphitheater; however, the difficulty is ensuring the mound is both stable and that the material left behind would not cause issues with public safety or the environment.

In March of 2020, before restrictions for COVID-19 took place, RRC, federal agencies, Luminant, and the city met at the former mine and were quickly making progress on cleanup plans, but those slowed during the pandemic.

“Luminant is nearly finished pumping water from the pit, which is tested. Eventually, Luminant plans to gently grade and cap the area of the pit with topsoil and creating a pond,” said Jason Corley, RRC Manager of Surface Mining Inspection and Enforcement.

There are still significant challenges and years of reclamation work remaining at the former Monticello Thermo Mine before RRC gives it the green light; however, there is great optimism over the vision of Luminant and the city of Sulphur Springs for the property.

“If it happens as planned, it will be a multiuse-type reclamation where parties all benefit,” Corley said.

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Transforming the Land: RRC’s Extensive Requirements for Mine Reclamation For many workers, the typical workday includes time in an office, a cubicle, a conference room or another similar but limited configuration.

For RRC Surface Mine Inspector Cade Harris, it is difficult to relate the scope of his job.

Tools of the RRC Surface Mine Inspector Inspecting hundreds and often thousands of acres is an intensive job. Tools that RRC’s inspectors utilize include: • 4x4 Truck • Polaris Ranger Utility Terrain Vehicle • GPS Equipment • DJI Enterprise Unmanned Aerial System (aka Drone) • PH meter • Electrical Conductivity Meter • Turbidity Meter • Geiger Counter • Survey Equipment • Digital Camera • ArcGIS • Global Mapper • AutoCAD • Water/Soil Sampling Equipment • Binoculars • Topographical Maps • A Sharp Eye • Empirical Knowledge

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“Some surface mine permits can range in size from 30,000 to 40,000 acres, which require multiple days of in-depth inspection,” he said. “Each permit must be inspected unannounced monthly, making turnaround time for inspection reports rather short and requires immense flexibility.”

And, as his job is often outdoors, the weather dictates when Harris and other mine inspectors can be at a site.

But work does not stop when mining ceases.

When Luminant stopped harvesting lignite from its 16,000-acre Three Oaks Mine near Elgin east of Austin in 2018, it still faced years of work to return the land to beneficial use.

“Texas coal mining regulations require lands disturbed due to mining-related activities be reclaimed to a state equal to or better than before the mine,” said Harris, who has been working at the Luminant mine.

Three Oaks, which received its RRC permit in 2003 and supplied about 6.2 million tons of lignite per year for electric power generation at the Sandow Power Plant in Rockdale, is being transformed into pastureland,

fish and wildlife habitat, developed water resources and prime farmland.

of its bond security returned. These include: • Phase I: Requires a demonstration that backfilling, regrading and drainage control have been completed in accordance with the approved reclamation plan and the applicable performance standards contained in regulations.

But before it is returned to the beneficial uses, the operator has multiple steps to go through.

In order to ensure the protection of public safety and the environment, surface and groundwater quality monitoring begins even before mining starts and continues until the mine is fully reclaimed and approved by RRC.

• Phase II: Requires that vegetation be established on regraded, mined lands in accordance with the approved reclamation plan and that applicable ground cover performance standards have been met.

Additionally, it requires that lands are not contributing suspended solids to stream flow outside the permitted area in excess of the regulatory limits.

Oxidized overburden and other unsuitable soils are covered with a minimum of four feet of soil that meets RRC requirements for soil chemistry and texture. An appropriate groundcover of approved native and/or improved species is then planted.

These performance standards must be met before and/or during a five-year extended responsibility period before the operator can apply for final release of reclamation liability.

• Phase III: Requires that the operator demonstrate successful completion of all surface coal mining and reclamation activities and that applicable vegetation productivity performance standards have been met. The RRC may release the remaining portion of the bond but not before the completion of the five-year extended responsibility period. No bond shall be fully released until all reclamation requirements are fully met.

Each mine is required to have sufficient bonding coverage to ensure reclamation costs can be covered if an operator defaults on reclamation obligations.

“Although it is not unheard of for companies to default on bonds in other regions of the country,” Harris said, “no mine has had to enter bond forfeiture in Texas since the inception of our program in 1981.”

Surface coal mine reclamation is based upon a three-tiered, incentive system. As the mine operator completes each phase for specific pieces of property, it applies to the RRC to have a proportionate amount

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Transforming the Land: continued On June 16, 2020, RRC allowed 225.8 acres of previously mined Three Oaks land to receive final release of reclamation liability.

All other mined areas of Three Oaks are in some degree of reclamation, including final grading, revegetation, extended responsibility period and phased release of reclamation liability.

Highwalls have been eliminated in two of their three mining areas within the permit.

A combined 818.28 acres have received Phase I release, and another 17.3 acres have also received final Phase III release.

As an inspector, Harris makes sure reclamation plans are followed and that offsite locations are not impacted.

When the Earth has healed and is green once again, Harris knows his job is done.

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RRC Updates Alternative Fuels Class and Exam Cancellation Policy If you are registered for a RRC alternative fuels class or exam and do not cancel your registration or show up, you will not be able to transfer the registration fees to another class or exam.

This change, which is effective immediately, includes registration for a liquefied petroleum gas (propane) class or for a compressed natural gas, liquefied natural gas or LPG exam. You will be required to pay the fee if registering for another class or exam.

RRC has a successful alternative fuels online training program, offering continuing education classes. Registration is first come, first serve.

To register for classes, visit the RRC website.

VIEW UPCOMING ALTERNATIVE FUELS CLASSES

If you have questions, contact the RRC at training-exams@rrc.texas.gov and 512-463-2682.

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RRC Pipeline ID Numbers to Increase to Eight Characters In response to a launch of the RRC Pipeline Inspection Permitting and Evaluation System (PIPES), all former Pipeline Evaluation System (PES) System ID Numbers will be replaced with a new RRC PIPES regulated entity number effective July 19.

RRC PIPES will allow for the research and upload of records associated with the RRC’s Pipeline Safety Program, including inspections, fees, incident reports and complaints.

Pipeline operators will also log in to submit and upload applications and other documents for review and approval by the RRC. RRC will provide additional information once the system launches.

To allow for future growth, the character limit will increase from six to eight characters. However, if an operator already has a six-digit SYS_ID Number, it will continue to use it. Only newly assigned SYS_IDs will be eight characters.

RRC assigns SYS_ID Numbers to regulated pipeline segments (subject to 49 Code of Federal Regulations Part 191-195 and 16 Texas Administrative Code§8.1). SYS_ID Numbers should be kept by the pipeline operator for field inspection purposes.

For future permit submittals, if a RRC PIPES regulated entity ID number has not been assigned, pipeline operators should use eight zeroes (00000000) for the SYS_ID field. The SYS_ID field is a requirement for all regulated pipeline segments that have been assigned a regulated entity ID number in RRC PIPES. For a list of RRC PIPES Entity ID Numbers, visit the RRC website and click the appropriate list. For all regulated gas gathering lines, click “Pipeline Operator Systems-Gas Transmission,” and for all regulated liquid lines, click “Pipeline Operator Systems-Hazardous Liquid.”

For help with shapefile submissions, refer to the RRC’s Guide to Shapefile Submissions available on the RRC website. This guide includes the requirements that pipeline operators must follow when submitting shape files by defining the required attribute fields within the database and explaining which codes are valid representations of those attributes.

If you have any questions, contact the RRC’s Pipeline Safety Department at tpms@rrc.texas.gov or 512-463-6802.

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RRC to Host Free Regulatory Webinars on Oil and Gas and Pipeline Safety RRC will host a series of free oil and gas and pipeline safety regulatory webinars to inform and train energy industry representatives on applicable laws, rules and procedures for hydrocarbon production in Texas. The webinars will be held from July 20-Sept. 2.

The webinars will cover a variety of topics, including: • 811 and pipeline damage reporting • Acreage designation • Code of federal regulations: gas and liquid basics • Completion filings for oil, gas and underground injection control • Drilling permitting; • Field transfers; • Groundwater protection determinations; • Inactive wells • Oil and gas waste stream management requirements • Pipeline accident and incident investigations • Pipeline permitting • Pipeline safety plan of corrections • Production reporting and commingle permit applications • Production sharing agreement and allocation wells • Public GIS viewer tool • Underground injection control permitting, testing, and monitoring requirements

VIEW WEBINAR SCHEDULE AND REGISTRATION DETAILS

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Chairman Craddick CO M M I S S I O N E R S’ CO R N E R

At the end of last month, the Texas Legislature adjourned sine die, marking the end of the regular legislative session. Chairman Craddick, alongside her fellow Commissioners and agency staff, immediately began implementing the legislation passed by the House and Senate and signed by the Governor. The agency is now fully focused on ensuring a timely and responsive implementation plan for all of the bills that impact RRC operations moving forward. We look forward to working collaboratively with our legislative counterparts, various industries, and stakeholder groups to ensure that Texas maintains its status as a global energy leader.

While making forward progress on the implementation of legislation, Chairman Craddick was honored to participate with the Texas Girls State program by kicking off their 2021 session. As a Girls State alumnus, Chairman Craddick was excited to welcome over 500 young women to this year’s session and encourage them to get involved in their communities through volunteerism and civic engagement.

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Commissioner Christian CO M M I S S I O N E R S’ CO R N E R

A couple weeks ago, I attended the West Texas Rural Summit in Lubbock. The event was organized by Congressman Jodey Arrington and featured Congressman August Pfluger, State Representative Brooks Landgraf, and Texas Alliance of Energy Producers President Jason Modglin. During the event, we had a great discussion about the future of Texas Energy and what our state can do to push back again the anti-oil and gas agenda of the Biden Administration.

During my speech, I argued that many people don’t fully understand how much good oil and gas does in the world. For example, oil and gas companies have paid more than $116 billion in taxes and royalties in the last 10 years and employ 361,271 Texans at an average salary of $132,000. Furthermore, more than half of every barrel of oil is used to make things other than gasoline, such as plastics, medicine, makeup, and synthetic rubber. So, if you like good paying jobs, government funding for schools and first responders, and consumer products like computers, phones, medicine and makeup, then you should like oil and gas!

C H E C K O U T M O R E O I L & G A S F ACT S H E R E

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Commissioner Wright CO M M I S S I O N E R S’ CO R N E R

As the Commission moves forward on directives mandated by bills passed in the Texas Legislature, Commissioner Wright has been working with his task forces on additional solutions to three big issues: energy education, regulatory transparency and market stability. Each of these task forces are in different stages of research and idea development. The regulatory task force is finalizing its first draft of recommendations for updates to Statewide Rule 8.

Additionally, Commissioner Wright and his team have visited with several business to learn more about the market for natural gas. He visited SpaceX’s Starbase facility in Boca Chica, Texas, to learn about how one of the main propellants to fuel the Starship vehicle is methane.

He also visited BP America’s Argos production platform to understand how they utilize natural gas to power their generators in addition to the natural gas and oil they extract for sale. These are two great examples of expanding the market for Texas’ natural resources and exciting advances in technology that can help us on the education front.

As we move forward into the summer, the Wright team will continue to reach out and work with individuals and stakeholders to find solutions to these and other important issues.

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Oil & Gas Production Statistics

View monthly production totals of crude oil, condensate and total oil; and of gas well gas, casinghead gas, and total natural gas.

V I E W C U R R E N T P RO D U CT I O N S TAT I S T I C S4

Enforcement Actions

The Commission has primary oversight and enforcement of the state’s oil and gas industry and intrastate pipeline safety. View RRC’s Latest Enforcement Actions here.

V I E W LAT E S T E N F O RC E M E N T ACT I O N S4

Public GIS Viewer

The Public GIS Viewer allows users to view oil, gas and pipeline data in a map view.

LA U N C H T H E P U B L I C G I S V I E W E R4