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Railroad Commission implements weatherization law after reports and experts raise concerns

(AP Photo/David J. Phillip)
(AP Photo/David J. Phillip)
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Less than two weeks after three separate reports raised concerns about the ability of Texas' power grid to hold up if another severe winter storm hit the state, the Railroad Commission of Texas - which is the governing body over the natural gas sector - unanimously approved new weatherization rules mandated by a new state law.

On Tuesday, the Railroad Commission of Texas approved a new state code that specifies the criteria to be considered critical infrastructure, as well as amendments listing out penalties for lack of compliance.

That "critical" designation is important because it has become a source of criticism for the new law.

The state's power grid failed during Winter Storm Uri in February, killing an estimated hundreds of Texans. The grid, itself, was less than 5 minutes away from crashing and remaining in an indefinite blackout that could have lasted weeks or months. In response, state lawmakers passed a law they believed would prevent a repeat of the statewide power outages that left so many out in the cold.

Senate Bill 3 requires all electricity generators and providers to weatherize, which means to prepare their plants in a way that would allow them to still operate during extreme weather conditions. Violations of this law could result in a penalty of $1 million per day. Facilities that experience weatherization failures will have to get a third party to assess their plans and procedures.

This law also applies to natural gas facilities that have voluntarily declared themselves to be critical infrastructure. However, if plants don't apply to be deemed critical, they do not have to weatherize. Instead, they would pay a $150 fee.

That fee has drawn the ire of critics who fear another power grid failure. However, Railroad Commission officials said there's more to this fee.

"The exemption is a provision that was included in Senate Bill 3 by the legislature. It has been addressed in our rule, and it will be handled in a responsible fashion under the rule. It is not simply a ‘get out of jail free’ card," said Matt Garner, who is with the Railroad Commission's Office of General Counsel. "The exception is not automatically granted upon filing a form and paying a fee. The option to make a bare assertion that a facility is not prepared to operate during a weather emergency is not available, an applicant must provide objective evidence demonstrating a reasonable basis and justification to support an application for an exception."

According to the Texas Oil and Gas Association, Texas has 280,000 active oil and natural gas wells total. Of those, 1,290 have filed the paperwork to apply to be considered critical. That is an increase from the 64 facilities before Winter Storm Uri in February.

Facilities have until January 15 to apply for the critical designation, meaning that 1,290 figure could grow.

Railroad commissioners were on the defensive during Tuesday's meeting after recent criticism has been directed toward the natural gas sector in recent months, including from the state lawmakers, themselves, who passed the new law with this built-in loophole.

"The insistence that natural gas producers were the primary culprit of the February blackouts is pure hyperbole," said Railroad Commission of Texas Chairman Wayne Christian. "There is nobody, I think, in the legislature, the administration, at any commission, ERCOT, PUC, or the Railroad Commission of Texas that has anything but the desire to fix every problem possible, and make sure this does not happen to the extent it did again."

Less than two weeks ago, the North America Electric Reliability Corporation, Federal Energy Regulatory Commission, and ERCOT each released their own report revealing the power grid will be able to withstand normal winter conditions, but not another severe winter storm on par with the storm that knocked out power statewide and killed hundreds of Texans.

Since then, energy experts have pointed to the new weatherization law not requiring all natural gas facilities to comply as a cause for concern Texans can suffer a repeat performance from the power grid.

However, commissioners at Tuesday's meeting said not all natural gas facilities should be considered critical.

"If we list everyone as critical and maintain their access to electrical power during peak demand, it severely reduces the amount of electricity available to residents and families who need it," said Jim Wright, a commissioner with the Railroad Commission of Texas.

Industry leaders have echoed these claims.

"Strengthening the reliability of our power grid is the Texas oil and natural gas industry’s priority and is a multi-step process our community will continue working on alongside regulators at the Public Utility Commission and Railroad Commission to achieve the Legislature’s targets. Mapping the power grid and improving the critical infrastructure identification process are key to determining which upstream assets should be weatherized, and many operators already have these measures in place. It is fundamental to understand that most natural gas production does not go toward power generation but is used in many other sectors of our state’s economy. Not every natural gas facility is a priority from a power perspective during an emergency. This is why mapping is the most crucial part of the process," said Texas Oil and Gas Association President Todd Staples in a statement.

However, the issue for energy experts is not the critical status of these facilities.

Energy experts have been pounding the table that natural gas facilities, regardless of critical designation, should be weatherized, since they power up many of the state's power plants responsible for bringing electricity to households.

"Most people experience this event through the lens of electricity. That's what went out. Because half of the power plants in the ERCOT system run off of natural gas, we need to make sure they can get fuel during this time, or they're not going to be able to produce the electricity that we want during that time, too," said Dr. Joshua Rhodes, a research associate with the Webber Energy Group at The University of Texas at Austin, in an interview last week. "We don't see the same types of laws or accountability on the gas side."

As part of the new rules passed Tuesday, the Railroad Commission has mandated certain facilities ineligible for the exemption from registering as critical. Those include facilities on the Texas electricity supply chain security map, large volume producers, underground storage facilities, pipelines that directly serve a power generation plant.

Commissioners stated this "super critical" group of suppliers produces more than the amount of gas needed in a given day.

However, they also said they were going to continue monitoring their own concerns.

Specifically, Wright said he was worried about power plants not having enough natural gas supply because they have not contracted the amount they need during peak demand.

"Public perception of who is to blame for the failures last February seem to be focused on supply shortage of available natural gas for power generation. I don't believe that to be fair or accurate. But I do believe it is important to ask the following questions of natural gas generators. Specifically, how much gas do natural gas power plants currently have in storage and ready to employ? What percentage of that storage represents the gas needs during a peak power generation event," Wright said.

At this point, the only way the new law can change so that all natural gas facilities are required to weatherize regardless of critical status is if Gov. Greg Abbott calls a 30-day special session.

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However, when asked last week about the possibility of him calling one, he did not answer that part of the question. Instead, he asserted he was confident the power grid won't fail again.

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